Highlights Include:
- For the third quarter of 2011, earnings per share were $0.15, up from $0.03 in the second quarter of 2011 and up from $0.12 in the third quarter of 2010, as net income and net income available to common shareholders also increased
- Earnings per share equaled $0.28 for the first nine months of 2011, up from $0.22 per share in the first nine months of 2010
- Net income of $3,473,000 in the first nine months of 2011 increased $553,000 compared to $2,920,000 in the first nine months of 2010, and net income available to common shareholders increased to $2,213,000 from $1,660,000
- Provision expense of $3.5 million in the third quarter of 2011 exceeded net charge-offs of $3.4 million and decreased $797,000 from the second quarter of 2011, but was $393,000 higher than a year ago
- Ratio of the allowance for loan losses to loans strengthened to 2.16% at September 30, 2011, compared to 1.97% a year ago
- Gain on sale of mortgages and reduced FDIC insurance expense contributed to the improved third quarter results
- Equity ratios remained strong and all affiliate banks continue to exceed all regulatory well-capitalized requirements
ALMA, Mich., Oct. 25, 2011 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced net income of $1,630,000 for the third quarter of 2011, compared to $1,324,000 for the third quarter of 2010, with net income available to common shareholders of $1,210,000 in the third quarter of 2011 compared to $904,000 in the third quarter of 2010. Earnings per share were $0.15 in the third quarter of 2011 compared to $0.12 in the third quarter of 2010. Returns on average assets and average equity for the third quarter of 2011 were 0.41% and 4.1%, respectively, compared to 0.34% and 3.4% respectively in the third quarter of 2010.
For the first nine months of 2011, net income of $3,473,000 increased 18.9% from the $2,920,000 earned in the first nine months of 2010. Net income available to common shareholders of $2,213,000 in the first nine months of 2011 increased 33.3% compared to the $1,660,000 in the first nine months of 2010. Earnings per share were $0.28 in the first nine months of 2011 compared to $0.22 in the first nine months of 2010. Returns on average assets and average equity for the first nine months of 2011 were 0.32% and 3.2%, respectively, compared to 0.27% and 2.8% respectively in the first nine months of 2010.
The provision for loan losses, at $3,459,000 in the third quarter of 2011, was 19% less than the amount required in the second quarter of 2011, but was 13% more than the amount in the year-ago third quarter. The level of provision expense and other expenses related to management and collection of the loan portfolio continue to be the major restraints to higher levels of profitability. The provision expense of $3,459,000 in the third quarter of 2011 exceeded net charge-offs in the quarter of $3,402,000. The allowance as a percentage of loans increased due to the continued shrinkage of the loan portfolio.
Net interest income, at $13,781,000 in the third quarter of 2011, increased 0.3% compared to the second quarter of 2011 and increased 5.2% over the third quarter of 2010. Although net interest income grew slightly in conjunction with modest growth in earning assets, continued reduction in funding costs was more than offset by shrinkage in the loan portfolio caused by lagging loan demand, resulting in a decline in the net interest margin.
Firstbank's net interest margin was 4.03% in the third quarter of 2011 compared to 4.08% in the second quarter of 2011 and 3.89% in the third quarter of 2010. FHLB advances and notes payable declined by $5 million in the third quarter of 2011 and were $56 million lower than the year-ago balance. Core deposits increased 1.8% in the third quarter of 2011 and were 5.3% above the year-ago level, providing a lower cost source of funding. Also, strategies employed during 2010 and throughout 2011 aimed at incorporating floors on variable rate loans and re-pricing deposits upon renewal at currently competitive rates, have resulted in improvement in net interest margin compared to the prior year.
Total non-interest income, at $2,593,000 in the third quarter of 2011, increased 29% from the second quarter of 2011, but was 21% lower than in the third quarter of 2010. Gain on sale of mortgages, at $1,040,000 in the third quarter of 2011, increased 152% compared to the second quarter of 2011 but was 49% below the year-ago level. Mortgage refinance activity surged in the third quarter of 2011, but not to the extremely high levels of year-ago. Volume compared to year-ago is tempered by more stringent and costly secondary market requirements. The category of "other" non-interest income, at $404,000 in the third quarter of 2011, was 19% more than the amount in the second quarter of 2011 and 110% more than in the third quarter of 2010. This category of other non-interest income was helped in the third quarter of 2011 by $98,000 gain on sale of other real estate while the amount of gain in the second quarter of 2011 was less than $1,000 and losses of $196,000 reduced this category of income in the year-ago third quarter.
Total non-interest expense, at $10,745,000 in the third quarter of 2011, was 0.6% lower than the level in the second quarter of 2011 and was 1.8% lower than the level in the third quarter of 2010, as expense control efforts continued. Salaries and employee benefits increased 5.7% compared to the year-ago quarter, and occupancy and equipment costs declined by 1.1%. FDIC insurance premium expense at $162,000 in the third quarter of 2011 was 68% below the amount in the second quarter of 2011 and 69% below the level in the third quarter of 2010. Firstbank Corporation's FDIC expense in the third quarter of 2011 included an adjustment for a $167,000 overstatement of expense in the second quarter of 2011. The adjustment added approximately $0.014 to earnings per share in the third quarter of 2011. A normalized level of quarterly expense based on the new methodology for assessing premiums is approximately $330,000. The reduction in FDIC expense reflects the benefit to Firstbank's banks, and community banks throughout the nation, of the change by the FDIC to assessing premiums based on total assets rather than just total deposits. The FDIC made this change to better align premiums with risk to the insurance fund. The category of "other" non-interest expense, totaling $3,589,000 in the third quarter of 2011, decreased 2.3% compared to the second quarter of 2011 and 2.4% compared to the third quarter of 2010. The most significant factors in both comparisons were variations in write-downs of valuations of other real estate owned and expenses related to mortgage volume. Write-downs of other real estate owned were $499,000 in the third quarter of 2011 compared to $642,000 in the second quarter of 2011 and $463,000 in the third quarter of 2010.
Mr. Sullivan stated, "We again have experienced a quarter, in the third quarter of 2011, where loan charge-offs and charge-downs and the corresponding need for provision expense continue well above historical norms. These and other expenses related to managing the loan portfolio offset positive developments within our earnings profile. Our net interest margin, although declining by a small amount from the second quarter, is well above year-ago levels and our operating costs are continuing to be managed tightly. Higher than normal costs of managing credits and other real estate owned will stay with us for some time, but eventually should reduce.
"As we have stated previously, our capital, funding, and human resources remain ample to support increased lending, although our loan portfolios continue to shrink. We maintain good relationships and communications with customers who will eventually want to expand their businesses and activities and provide an increased demand for loans. We have oriented our marketing messages to communicate that we have money to lend and are willing to do so. We believe our banks are well positioned to participate in and help support a better Michigan economy as one of the major community banking organizations in the state.
"During the third quarter we commissioned an annual update of the third-party-expert valuation of goodwill on our balance sheet, to test for impairment. That valuation, which assures the proper application of accounting rules and principles, indicates that the amount of goodwill on our books is not considered impaired and requires no charge to earnings. As a result, we show a book value per share of $15.36 at September 30, 2011, which continues to be substantially above tangible book value per share of $10.64.
"Also, at the end of the third quarter, the previously announced merger of our smallest bank, Firstbank – St. Johns, with the larger Firstbank – Alma was completed without fanfare or interruption of customer service. Systems consolidations will take place in the fourth quarter, and we will begin realizing regulatory and other efficiencies as a result of the combination, without negative impact on our service to our markets."
Total assets of Firstbank Corporation at September 30, 2011, were $1.497 billion, an increase of 1.3% from the year-ago period. Total portfolio loans of $989 million were 6.0% below the year-ago level. Commercial and commercial real estate loans decreased 6.5% over this twelve month period, and real estate construction loans decreased 2.2%. Residential mortgage loans decreased 6.2% and consumer loans decreased 4.7%. While Firstbank has ample capital and funding resources to increase loans on its balance sheet, demand for funds for new ventures by quality borrowers remains weak due to uncertainty regarding the economy. Also, the strong mortgage refinance activity in 2010 resulted in mortgage loans being financed in the secondary market rather than on the balance sheet of the company. Total deposits as of September 30, 2011, were $1.240 billion, compared to $1.172 billion at September 30, 2010, an increase of 5.8%. Core deposits increased $62 million or 5.3% over the year-ago level.
Net charge-offs were $3,402,000 in the third quarter of 2011, compared to $4,277,000 in the second quarter of 2011 and $2,928,000 in the third quarter of 2010. In the third quarter of 2011, net charge-offs annualized represented 1.37% of average loans, compared to 1.69% in the second quarter of 2011 and 1.10% in the third quarter of 2010.
Provision expense was increased in the third quarter so that the ratio of the allowance for loan losses to loans increased to 2.16%, compared to 2.12% at June 30, 2011, and 1.97% at September 30, 2010. More stringent definitional requirements are being applied by regulators in determining what loans are to be reported on call reports as "troubled debt restructurings" (TDRs). These loans result from mutual efforts between the bank and the borrower to adjust cash flow requirements and other terms of loans to reflect new economic reality and to protect the financial interest of the bank. Restructuring allows the customer to continue to meet financial obligations while dealing with the protracted slow economy and particularly weak real estate sales. Loans in this category continue to perform according to the agreed upon terms. If they do not continue to perform, they are moved to either the past-due-more-than-90-days category or to the non-accrual category as circumstances indicate. Mostly as a result of the more stringent definitional requirements, our performing adjusted loans (TDRs) increased to $18,260,000 at September 30, 2011, compared to $17,989,000 at June 30, 2011, and compared to $1,785,000 at September 30, 2010. Conversely, loans past due over 90 days and non-accrual loans declined from the year-ago level. Loans past due over 90 days were $1,455,000 at September 30, 2011, decreased from the $1,787,000 at June 30, 2011, and $3,554,000 lower, or 71% lower, than the $5,009,000 at September 30, 2010. Non-accrual loans were $20,873,000 at September 30, 2011, an increase of 3.3% from the level at June 30, 2011, but a decrease of 26.8% from the level at September 30, 2010.
Total shareholders' equity at September 30, 2011, was 2.7% higher than at September 30, 2010. The ratio of average equity to average assets was 10.0% in the third quarter of 2011, compared to 9.8% in the third quarter of 2010. All of Firstbank Corporation's affiliate banks continue to meet regulatory well-capitalized requirements.
Firstbank Corporation, headquartered in Alma, Michigan, is a bank holding company using a multi-bank-charter format with assets of $1.5 billion and 52 banking offices serving Michigan's Lower Peninsula. Bank subsidiaries include: Firstbank – Alma; Firstbank (Mt. Pleasant); Firstbank – West Branch; 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, loan charge-off rates, demand for new loans, the performance of loans with provisions, 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 | |
| 2011 | 2011 | 2010 | 2011 | 2010 | |
| Interest income: | |||||
| Interest and fees on loans | $15,290 | $15,571 | $16,869 | $46,507 | $50,883 |
| Investment securities | |||||
| Taxable | 1,309 | 1,319 | 1,032 | 3,639 | 2,658 |
| Exempt from federal income tax | 271 | 280 | 268 | 844 | 849 |
| Short term investments | 54 | 45 | 52 | 138 | 155 |
| Total interest income | 16,924 | 17,215 | 18,221 | 51,128 | 54,545 |
| Interest expense: | |||||
| Deposits | 2,691 | 2,945 | 3,871 | 8,685 | 12,347 |
| Notes payable and other borrowing | 452 | 529 | 1,254 | 1,629 | 4,110 |
| Total interest expense | 3,143 | 3,474 | 5,125 | 10,314 | 16,457 |
| Net interest income | 13,781 | 13,741 | 13,096 | 40,814 | 38,088 |
| Provision for loan losses | 3,459 | 4,256 | 3,066 | 10,726 | 8,623 |
| Net interest income after provision for loan losses | 10,322 | 9,485 | 10,030 | 30,088 | 29,465 |
| Noninterest income: | |||||
| Gain on sale of mortgage loans | 1,040 | 413 | 2,054 | 2,021 | 3,150 |
| Service charges on deposit accounts | 1,123 | 1,182 | 1,144 | 3,397 | 3,421 |
| Gain (loss) on trading account securities | 0 | 2 | (10) | 8 | 13 |
| Gain (loss) on sale of AFS securities | 9 | (2) | 1 | (1) | 10 |
| Mortgage servicing | 17 | 76 | (98) | 121 | 91 |
| Other | 404 | 340 | 192 | 1,103 | 1,227 |
| Total noninterest income | 2,593 | 2,011 | 3,283 | 6,649 | 7,912 |
| Noninterest expense: | |||||
| Salaries and employee benefits | 5,480 | 5,170 | 5,186 | 15,920 | 15,895 |
| Occupancy and equipment | 1,346 | 1,284 | 1,361 | 4,054 | 4,220 |
| Amortization of intangibles | 168 | 185 | 191 | 538 | 611 |
| FDIC insurance premium | 162 | 499 | 525 | 1,204 | 1,555 |
| Other | 3,589 | 3,672 | 3,678 | 10,601 | 10,806 |
| Total noninterest expense | 10,745 | 10,810 | 10,941 | 32,317 | 33,087 |
| Income before federal income taxes | 2,170 | 686 | 2,372 | 4,420 | 4,290 |
| Federal income taxes | 540 | 58 | 1,048 | 947 | 1,370 |
| Net Income | 1,630 | 628 | 1,324 | 3,473 | 2,920 |
| Preferred Stock Dividends | 420 | 420 | 420 | 1,260 | 1,260 |
| Net Income available to Common Shareholders | $1,210 | $208 | $904 | $2,213 | $1,660 |
| Fully Tax Equivalent Net Interest Income | $13,949 | $13,915 | $13,274 | $41,328 | $38,677 |
| Per Share Data: | |||||
| Basic Earnings | $0.15 | $0.03 | $0.12 | $0.28 | $0.22 |
| Diluted Earnings | $0.15 | $0.03 | $0.12 | $0.28 | $0.22 |
| Dividends Paid | $0.01 | $0.01 | $0.01 | $0.03 | $0.07 |
| Performance Ratios: | |||||
| Return on Average Assets (a) | 0.41% | 0.18% | 0.34% | 0.32% | 0.27% |
| Return on Average Equity (a) | 4.1% | 1.8% | 3.4% | 3.2% | 2.8% |
| Net Interest Margin (FTE) (a) | 4.03% | 4.08% | 3.89% | 4.06% | 3.83% |
| Book Value Per Share (b) | $15.36 | $15.14 | $15.01 | $15.36 | $15.01 |
| Average Equity/Average Assets | 10.0% | 10.0% | 9.8% | 10.1% | 9.9% |
| Net Charge-offs | $3,402 | $4,277 | $2,928 | $10,774 | $7,011 |
| Net Charge-offs as a % of Average Loans (c)(a) | 1.37% | 1.69% | 1.10% | 1.42% | 0.88% |
| (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 | |
| 2011 | 2011 | 2010 | 2010 | |
| ASSETS | ||||
| Cash and cash equivalents: | ||||
| Cash and due from banks | $24,086 | $28,124 | $25,322 | $25,791 |
| Short term investments | 77,477 | 68,594 | 48,216 | 68,657 |
| Total cash and cash equivalents | 101,563 | 96,718 | 73,538 | 94,448 |
| Securities available for sale | 323,245 | 296,003 | 266,121 | 242,971 |
| Federal Home Loan Bank stock | 7,266 | 7,266 | 8,203 | 9,084 |
| Loans: | ||||
| Loans held for sale | 2,207 | 434 | 1,355 | 1,932 |
| Portfolio loans: | ||||
| Commercial | 157,155 | 162,685 | 164,413 | 169,652 |
| Commercial real estate | 352,156 | 365,803 | 373,996 | 374,866 |
| Residential mortgage | 344,700 | 344,853 | 352,652 | 367,617 |
| Real estate construction | 74,561 | 73,019 | 81,016 | 76,255 |
| Consumer | 60,481 | 59,601 | 59,543 | 63,455 |
| Total portfolio loans | 989,053 | 1,005,961 | 1,031,620 | 1,051,845 |
| Less allowance for loan losses | (21,383) | (21,327) | (21,431) | (20,725) |
| Net portfolio loans | 967,670 | 984,634 | 1,010,189 | 1,031,120 |
| Premises and equipment, net | 25,454 | 25,557 | 25,431 | 24,846 |
| Goodwill | 35,513 | 35,513 | 35,513 | 35,513 |
| Other intangibles | 1,607 | 1,775 | 2,145 | 2,329 |
| Other assets | 32,421 | 33,493 | 35,848 | 35,597 |
| TOTAL ASSETS | $1,496,946 | $1,481,393 | $1,458,343 | $1,477,840 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| LIABILITIES | ||||
| Deposits: | ||||
| Noninterest bearing accounts | $204,604 | $194,795 | $185,191 | $172,416 |
| Interest bearing accounts: | ||||
| Demand | 331,007 | 310,250 | 293,900 | 284,520 |
| Savings | 243,724 | 237,008 | 210,239 | 202,816 |
| Time | 443,417 | 459,489 | 486,506 | 501,059 |
| Wholesale CD's | 17,417 | 16,778 | 7,947 | 11,440 |
| Total deposits | 1,240,169 | 1,218,320 | 1,183,783 | 1,172,251 |
| Securities sold under agreements to | ||||
| repurchase and overnight borrowings | 42,839 | 46,304 | 41,328 | 39,617 |
| FHLB Advances and notes payable | 16,517 | 21,543 | 40,658 | 72,100 |
| Subordinated Debt | 36,084 | 36,084 | 36,084 | 36,084 |
| Accrued interest and other liabilities | 7,754 | 7,480 | 8,062 | 8,173 |
| Total liabilities | 1,343,363 | 1,329,731 | 1,309,915 | 1,328,225 |
| SHAREHOLDERS' EQUITY | ||||
| Preferred stock; no par value, 300,000 | ||||
| shares authorized, 33,000 outstanding | 32,785 | 32,778 | 32,763 | 32,756 |
| Common stock; 20,000,000 shares authorized | 115,663 | 115,571 | 115,224 | 115,132 |
| Retained earnings | 2,296 | 1,157 | 295 | (57) |
| Accumulated other comprehensive income/(loss) | 2,839 | 2,156 | 146 | 1,784 |
| Total shareholders' equity | 153,583 | 151,662 | 148,428 | 149,615 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $1,496,946 | $1,481,393 | $1,458,343 | $1,477,840 |
| Common stock shares issued and outstanding | 7,865,166 | 7,853,295 | 7,803,816 | 7,786,405 |
| Principal Balance of Loans Serviced for Others ($mil) | $601.6 | $604.4 | $616.9 | $605.2 |
| Asset Quality Information: | ||||
| Performing Adjusted Loans (TDRs) (b) | 18,260 | 17,989 | 10,056 | 1,785 |
| Loans Past Due over 90 Days | 1,455 | 1,787 | 606 | 5,009 |
| Non-Accrual Loans | 20,873 | 20,205 | 26,362 | 28,511 |
| Other Real Estate Owned | 7,367 | 8,469 | 8,315 | 9,020 |
| Allowance for Loan Loss as a % of Loans (a) | 2.16% | 2.12% | 2.08% | 1.97% |
| Quarterly Average Balances: | ||||
| Total Portfolio Loans (a) | $996,234 | $1,009,646 | $1,041,986 | $1,065,850 |
| Total Earning Assets | 1,376,072 | 1,367,013 | 1,355,226 | 1,358,914 |
| Total Shareholders' Equity | 150,092 | 149,599 | 148,043 | 147,273 |
| Total Assets | 1,499,707 | 1,490,020 | 1,484,854 | 1,497,943 |
| Diluted Shares Outstanding | 7,859,159 | 7,835,123 | 7,796,168 | 7,776,438 |
| (a) Total Loans less loans held for sale | ||||
| (b) Troubled Debt Restructurings in Call Reports | ||||