Highlights Include:
* First quarter 2008 net income of $2,150,000 and earnings per share
of $0.29, increasing from the fourth quarter of 2007
* 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 weakens, gain on sale of mortgage loans strong
ALMA, Mich., April 24, 2008 (PRIME NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.29 for the first quarter of 2008 compared to $0.41 in the first quarter of 2007. Net income was $2,150,000 for the quarter ended March 31, 2008, compared to $2,658,000 for the quarter ended March 31, 2007. Returns on average assets and average equity for the first quarter of 2008 were 0.64% and 7.5%, respectively, compared with 1.01% and 11.4%, respectively, in the first quarter of 2007. All per share amounts are fully diluted.
Stress in the credit markets continued in Michigan, the Midwest, and many other areas of the country. Firstbank's provision for loan loss of $816,000 in the first quarter of 2008, while 54% lower than the level in the fourth quarter of 2007, represented a $1.5 million increase in expense compared to the first quarter of 2007 when a unique favorable event related to a specific credit resulted in a negative provision expense in the year-ago quarter. This $1.5 million swing in expense equates to approximately $0.14 in earnings per share.
Earnings in the first quarter of 2008 improved compared to the fourth quarter of 2007. Earnings per share of $0.29 in the first quarter of 2008 increased 38.1% from the $0.21 in the fourth quarter of 2007, and net income of $2,150,000 increased 37.3% from $1,566,000.
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 $231 million at March 31, 2008. Total assets of Firstbank Corporation at March 31, 2008, were $1.382 billion, an increase of 25.6% over the year-ago period. Total portfolio loans of $1.129 billion were 23.7% above the level at March 31, 2007, with 18.9% of the increase due to the addition of $173 million loans of Firstbank - West Michigan. Total deposits as of March 31, 2008, were $1.012 billion, including $164 million deposits of Firstbank - West Michigan, compared to $834 million at March 31, 2007.
Most items of revenue and expense also were affected by the inclusion of Firstbank - West Michigan. Gain on sale of mortgage loans increased in each quarter of 2007, and during the first quarter of 2008 was more than triple the amount in the first quarter of 2007. Declines in interest rates in the latter part of 2007 and sharper declines in the first months of 2008 have helped to expand mortgage activity and refinances. Service charges on deposit accounts increased 23.7% in the first quarter of 2008 compared to the first quarter of 2007. Fueled by these increases, total non-interest income increased 28.7%. Salaries and employee benefits expense was 23.6% above the level in the first quarter of 2007, and total non-interest expense increased 22.4% over the level in the first quarter of 2007, with the increases driven largely by the inclusion of the new bank.
Mr. Sullivan stated, "Margin pressure and credit costs continue to hamper earnings progress for most banks in the industry and for Firstbank Corporation. Unfortunately, many banks in Michigan have been reporting negative quarterly earnings and very large increases in troubled loans. We at Firstbank are proud that our asset quality has remained better than most so that earnings have been maintained at a respectable level. Economic conditions have and continue to require a great deal of effort and skill by our lenders and staff to protect our assets and resolve difficult situations in the most favorable way. We also are working to reduce our cost of funds in response to declines in short-term interest rates. As term deposits mature, we expect to see progress in this regard. Our strategy is to weather the current economic, interest rate, liquidity, and credit storm as well as we possibly can in order to emerge in a strong competitive position, well positioned to serve the needs of a growing economy in the future. We are hopeful that if we can maintain strong asset quality and capital, these difficult times may even present us with some unique opportunities to add value to our company for the future. We continue to invest in the future, as exemplified by the opening in the first quarter of 2008 of our seventh office of Keystone Community Bank in the Kalamazoo market area."
Firstbank's net interest margin, at 3.80% in the first quarter of 2008, declined 9 basis points from 3.89% in the fourth quarter of 2007, and was 10 basis points below the 3.90% of the first quarter of 2007. Beginning on September 18th of 2007, the markets have been characterized by declines in the prime rate and other short-term rates, which have been driven by the Federal Reserve's efforts to stimulate economic activity and ease stress on liquidity in the credit markets. Reductions in the prime rate have an immediately negative impact on Firstbank's net interest margin, but the company works to reduce deposit and other funding costs as quickly as possible. While Firstbank's average earning assets increased 24.1% from the first quarter of 2007 to the first quarter of 2008, net interest income increased a smaller 20.4% due to the squeeze on net interest margin. Both growth measures are significantly affected by the addition of Firstbank - West Michigan.
As disclosed previously, 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. During the fourth quarter of 2007, Firstbank wrote this loan down to the expected valuation that can be supported by the collateral in current market conditions, requiring increased provision expense of $1.2 million in the fourth quarter and increased net charge-offs in the fourth quarter of $1.8 million. The status of this loan remains essentially unchanged. In the first quarter of 2008, Firstbank charged down the value of an unrelated loan which had already been placed in non-accrual status and added $357,000 to provision expense in order to replenish reserves following the charge-off. The real estate collateral for this commercial loan is located in the western side of Michigan.
At March 31, 2008, the ratio of the allowance for loan losses to loans remained at 1.02%, the same as at December 31, 2007, and increased from 1.00% at March 31, 2007. The ratio of allowance for loan loss to non-performing loans increased from 81% at December 31, 2007, to 82% at March 31, 2008.
Net charge-offs of $743,000 in the first quarter of 2008 were 0.26% of average loans on an annualized basis. The ratio of non-performing loans (including loans past due over 90 days) to loans was 1.27% at March 31, 2008, compared to 1.26% as of December 31, 2007. The first specific credit discussed above contributes 0.27% of the total non-performing loan ratio of 1.27% at March 31, 2008.
Shareholders' equity increased 1.0% in the first quarter of 2008, and was 22.0% above the level at March 31, 2007. The ratio of average equity to average assets stood at 8.6% in the first quarter of 2008 -- 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 first quarter of 2008.
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 - 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:
-----------------------------------
Mar 31 Dec 31 Mar 31
2008 2007 2007
-----------------------------------
Interest income:
Interest and fees on loans $19,755 $20,702 $16,798
Investment securities
Taxable 1,039 856 626
Exempt from federal income tax 353 426 270
Short term investments 91 168 311
-----------------------------------
Total interest income 21,238 22,152 18,005
Interest expense:
Deposits 7,089 7,661 6,507
Notes payable and other borrowing 2,685 2,782 1,977
-----------------------------------
Total interest expense 9,774 10,443 8,484
Net interest income 11,464 11,709 9,521
Provision for loan losses 816 1,773 (721)
-----------------------------------
Net interest income after
provision for loan losses 10,648 9,936 10,242
Noninterest income:
Gain on sale of mortgage loans 1,142 549 324
Service charges on
deposit accounts 1,168 1,237 944
Gain (loss) on trading
account securities (13) (628) 0
Gain (loss) on sale
of AFS securities 129 7 (130)
Mortgage servicing (123) 162 145
Other 628 753 995
-----------------------------------
Total noninterest income 2,931 2,080 2,278
Noninterest expense:
Salaries and employee benefits 5,847 5,322 4,730
Occupancy and equipment 1,749 1,656 1,351
Amortization of intangibles 281 206 161
FDIC insurance premium 113 160 24
Other 2,718 2,880 2,480
-----------------------------------
Total noninterest expense 10,708 10,224 8,746
Income before federal income taxes 2,871 1,792 3,774
Federal income taxes 721 226 1,116
-----------------------------------
Net Income $2,150 $1,566 $2,658
===================================
Fully Tax Equivalent
Net Interest Income $11,751 $11,961 $9,698
Per Share Data:
Basic Earnings $0.29 $0.21 $0.41
Diluted Earnings $0.29 $0.21 $0.41
Dividends Paid $0.225 $0.225 $0.225
Performance Ratios:
Return on Average Assets (a) 0.64% 0.45% 1.01%
Return on Average Equity (a) 7.5% 5.2% 11.4%
Net Interest Margin (FTE) (a) 3.79% 3.89% 3.90%
Book Value Per Share (b) $16.09 $16.01 $15.05
Average Equity/Average Assets 8.6% 8.7% 8.9%
Net Charge-offs $743 $2,116 $164
Net Charge-offs as
a % of Average Loans (c)(a) 0.26% 0.76% 0.07%
(a) Annualized
(b) Period End
(c) Total loans less loans held for sale
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
Mar 31 Dec 31 Mar 31
2008 2007 2007
-----------------------------------
ASSETS
Cash and cash equivalents:
Cash and due from banks $40,057 $42,198 $28,091
Short term investments 12,553 3,331 32,739
-----------------------------------
Total cash and cash equivalents 52,610 45,529 60,830
Securities available for sale 107,866 105,130 68,651
Federal Home Loan Bank stock 8,481 8,007 5,924
Loans:
Loans held for sale 238 1,725 283
Portfolio loans:
Commercial 216,458 219,080 199,067
Commercial real estate 312,012 311,494 266,084
Residential mortgage 391,568 387,222 295,385
Real estate construction 130,942 126,027 89,844
Consumer 77,827 78,106 62,201
-----------------------------------
Total portfolio loans 1,128,807 1,121,929 912,581
Less allowance for loan losses (11,550) (11,477) (9,081)
-----------------------------------
Net portfolio loans 1,117,257 1,110,452 903,500
Premises and equipment, net 28,027 27,554 20,251
Goodwill 35,345 34,421 20,094
Other intangibles 4,670 5,832 2,884
Other assets 27,993 27,089 18,684
-----------------------------------
TOTAL ASSETS $1,382,487 $1,365,739 $1,101,101
===================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $143,246 $152,126 $120,295
Interest bearing accounts:
Demand 224,998 222,371 167,082
Savings 155,628 147,654 134,484
Time 454,797 453,864 359,556
Wholesale CD's 33,018 35,377 52,195
-----------------------------------
Total deposits 1,011,687 1,011,392 833,612
Securities sold under agreements
to repurchase and overnight
borrowings 49,280 42,791 38,170
FHLB Advances and notes payable 147,572 139,035 94,146
Subordinated Debt 36,084 36,084 20,620
Accrued interest and
other liabilities 18,097 17,826 16,423
-----------------------------------
Total liabilities 1,262,720 1,247,128 1,002,971
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized,
none issued
Common stock; 20,000,000 shares
authorized 111,914 111,436 92,373
Retained earnings 7,174 6,692 5,749
Accumulated other comprehensive
income/(loss) 679 483 8
-----------------------------------
Total shareholders' equity 119,767 118,611 98,130
-----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $1,382,487 $1,365,739 $1,101,101
===================================
Common stock shares issued
and outstanding 7,441,342 7,407,198 6,518,143
Principal Balance of Loans
Serviced for Others ($mil) $516.8 $515.1 $470.5
Asset Quality Ratios:
Non-Performing Loans / Loans (a) 1.27% 1.26% 0.34%
Non-Perf. Loans + OREO /
Loans (a) + OREO 1.51% 1.54% 0.48%
Non-Performing Assets /
Total Assets 1.23% 1.27% 0.40%
Allowance for Loan Loss as a %
of Loans (a) 1.02% 1.02% 1.00%
Allowance / Non-Performing Loans 81% 81% 293%
Quarterly Average Balances:
Total Portfolio Loans (a) $1,129,710 $1,118,551 $903,807
Total Earning Assets 1,247,604 1,228,740 1,005,151
Total Shareholders' Equity 118,609 117,960 96,620
Total Assets 1,377,329 1,356,106 1,087,655
Diluted Shares Outstanding 7,417,187 7,378,262 6,516,568
(a) Total Loans less loans held for sale