ALMA, Mich., Jan. 24, 2007 (PRIME NEWSWIRE) --
Highlights Include:
-- Net income for the full year of 2006 up 1.0% from 2005, with the
help of earnings from Keystone Community Bank
-- Earnings per share (diluted) of $0.33 for the fourth quarter of 2006
compared to $0.43 in the fourth quarter of 2005, and $1.55 for the
year 2006 compared to $1.64 in 2005, with all amounts adjusted for
the 5% stock dividend paid in December of 2006
-- Net interest margin contracts due to the flat yield curve and
increasing deposit costs
-- Capital remains strong
ALMA, Mich., Jan. 24, 2007 (PRIME NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.33 for the fourth quarter of 2006, a decrease of 23.3% compared to $0.43 for the fourth quarter of 2005. Net income was $2,168,000 for the quarter ended December 31, 2006, down 24.4% from the $2,868,000 for the quarter ended December 31, 2005. Returns on average assets and average equity for the fourth quarter of 2006 were 0.79% and 8.9%, respectively, compared with 1.09% and 12.2%, respectively, in the fourth quarter of 2005. Decline in the net interest margin was the primary cause of the decreased level of earnings. All per share amounts are fully diluted and have been adjusted to reflect the 5% stock dividend paid in December of 2006.
For the full year 2006 compared to the full year 2005, earnings per share of $1.55 in 2006 decreased 5.5% from $1.64 in 2005. Net income was $10,208,000 for 2006, up 1.0% from the $10,110,000 for 2005, including the benefit of adding Keystone Community Bank. Returns on average assets and average equity for 2006 were 0.95% and 10.7%, respectively, compared with 1.15% and 12.8%, respectively, in 2005. As required by SFAS 123R, Firstbank Corporation began expensing the fair value of stock options in 2006 as a reduction of net income rather than as a footnote item as disclosed in prior periods. This accounting change reduced earnings per share in 2006 by slightly over $0.02 per share.
In its third quarter earnings announcement and 10-Q filing, Firstbank discussed two issues with problem credits. The first was a $3.1 million credit which had been charged down in the third quarter by the amount of previously established reserves with the remaining balance transferred to other real estate owned. During the fourth quarter, this real estate collateral was sold at no material gain or loss to Firstbank. The second situation was a loan of similar size which is performing but for which a specific reserve previously had been established due to concerns regarding prospects for the business. At December 31, 2006, the borrower is negotiating the sale of a business, but the sale has not consummated. Should this sale occur, it would result in a negative provision expense to reverse the previously established reserves.
Total portfolio loans of $910 million were 0.3% below the level at September 30, 2006, reflecting the payoff of a $10.5 million group of loans late in December. Total assets at December 31, 2006, were $1.1 billion and increased 3.3% over the year-ago period. Total deposits as of December 31, 2006, were $835 million, compared to $820 million at September 30, 2006, and compared to $811 million at December 31, 2005.
Firstbank's net interest margin, at 3.98% in the fourth quarter of 2006, declined by 17 basis points from the 4.15% level for the third quarter of 2006. As the prime rate has not changed since June and the yield curve remains flat, Firstbank's yield on earning assets remained essentially unchanged. The yield on earning assets did decline 0.02% as certain amortization periods expired related to Keystone merger accounting adjustments that had provided a small benefit to the yield on earning assets. More significantly, the cost of funding earning assets increased 0.15% in the fourth quarter of 2006 compared to the third quarter of 2006. Customers continued to adjust to market interest rates, and deposit balances shifted from lower rate products to higher rate products, mostly certificates of deposit. Competitive pressures and the flat yield curve kept these deposit rates high providing only a narrow margin to rates available for making loans.
Mr. Sullivan stated, "In the fourth quarter two of the three major challenges facing banks in Michigan, and to some degree nationally, came to bear on the earnings of our company. The persistent flat yield curve combined with the cessation of interest rate increases meant that deposit costs continued to roll up while asset yields held firm. Margins were squeezed to a greater extent than we have ever seen before. Secondly, economic activity in Michigan is lagging other regions of the country. While certain areas of Michigan are more affected than the markets Firstbank serves, real estate activity is particularly slow and loan growth is modest. The third area of challenge is asset quality, and while we have had some increase in situations that require attention, for the most part our lenders have been able to resolve issues favorably and our loan structures and borrowers are proving sound. We remain confident that the capabilities of our people and the strong financial condition of our company will allow us to move through the period of challenge and remain well positioned to benefit from improving conditions."
In October of 2006, Firstbank's new captive insurance company known as FBMI Risk Management Services, Inc., began operations. This unit provides risk management and insurance services to Firstbank Corporation affiliates and is expected to provide improved management of risks not otherwise covered by externally provided insurance, in a cost effective way. There has been no related reduction in externally provided insurance coverage, although greater reliance on self-insurance may be considered in the future.
Non-interest income declined 4.6% in the fourth quarter of 2006 and was 0.7% higher than the level in the fourth quarter of 2005, primarily due to low activity in the real estate markets in Michigan. The low real estate volumes affected gain on sale of mortgages, which was off 10.4% in the fourth quarter of 2006 compared to the third quarter and was 14.4% below the year-ago level. Title insurance, appraisal, and brokerage revenues generated through non-bank subsidiaries and reported as part of other non-interest income were also impacted. During the year, Firstbank sold its interest in its appraisal subsidiary and reduced its interest in its title insurance subsidiary to slightly below 55%, as previously announced.
Shareholders' equity decreased 0.2% in the fourth quarter of 2006, and was 2.4% above the level at December 31, 2005, as share repurchase continued to be used to maintain appropriate capital levels. Firstbank Corporation repurchased 66,000 shares in the fourth quarter of 2006, bringing the total number of shares repurchased in 2006 to 222,500, or $5.25 million. The ratio of average equity to average assets stood at 8.8% in the fourth quarter of 2006 - a level consistent over the past two years - indicating that strong equity capital has been maintained.
Provision for loan loss expense was $169,000 in the fourth quarter of 2006 and $767,000 for full year 2006, compared to $141,000 and $295,000 respectively in 2005. Net charge-offs were $892,000 in the fourth quarter of 2006 and $2,359,000 for full year 2006. Provision expense in 2006 exceeded net charge-offs excluding amounts charged off against specific reserves. Annualized as a percentage of average loans, net charge-offs were 0.39% in the fourth quarter of 2006 and 0.26% for full year 2006. The ratio of non-performing loans (including loans past due over 90 days) to loans was 0.47% at December 31, 2006, improving from 0.82% at December 31, 2005.
Firstbank Corporation, headquartered in Alma, Michigan, is a six bank financial services company with assets of $1.1 billion and 41 banking offices serving Michigan's Lower Peninsula. Bank subsidiaries include: Firstbank -- Alma; Firstbank (Mt. Pleasant); Firstbank -- West Branch; Firstbank -- Lakeview; Firstbank -- St. Johns; and Keystone Community Bank.
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: Twelve Months Ended:
--------------------------- -----------------
Dec 31 Sep 30 Dec 31 Dec 31 Dec 31
2006 2006 2005 2006 2005
--------------------------- -----------------
Interest income:
Interest and fees
on loans $17,303 $17,366 $15,631 $67,200 $50,030
Investment
securities
Taxable 534 552 501 2,139 1,952
Exempt from
federal income
tax 266 245 244 1,000 956
Short term
investments 150 110 88 447 192
--------------------------- -----------------
Total interest
income 18,253 18,273 16,464 70,786 53,130
Interest expense:
Deposits 6,469 6,066 4,536 22,942 12,368
Notes payable and
other borrowing 1,992 2,000 1,670 7,779 5,446
--------------------------- -----------------
Total interest
expense 8,461 8,066 6,206 30,721 17,814
Net interest
income 9,792 10,207 10,258 40,065 35,316
Provision for loan
losses 169 213 141 767 295
--------------------------- -----------------
Net interest
income after
provision for
loan losses 9,623 9,994 10,117 39,298 35,021
Noninterest income:
Gain on sale of
mortgage loans 309 346 362 1,265 1,686
Service charges
on deposit
accounts 935 955 856 3,828 3,137
Gain on sale of
securities 0 0 0 7 34
Mortgage
servicing 194 128 79 526 205
Other 930 1,055 1,055 4,507 4,670
--------------------------- -----------------
Total noninterest
income 2,368 2,484 2,352 10,133 9,732
Noninterest
expense:
Salaries and
employee
benefits 4,817 4,589 4,481 18,591 16,100
Occupancy and
equipment 1,339 1,290 1,244 5,132 4,240
Amortization of
intangibles 161 168 168 665 394
FDIC insurance
premium 25 24 22 102 84
Other 2,677 2,496 2,405 10,331 9,122
--------------------------- -----------------
Total noninterest
expense 9,019 8,567 8,320 34,821 29,940
Income before
federal income
taxes 2,972 3,911 4,149 14,610 14,813
Federal income
taxes 804 1,194 1,281 4,402 4,703
--------------------------- -----------------
Net Income $ 2,168 $ 2,717 $ 2,868 $10,208 $10,110
=========================== =================
Fully Tax
Equivalent Net
Interest Income $ 9,971 $10,354 $10,427 $40,699 $35,898
Per Share Data:
Basic Earnings $ 0.33 $ 0.41 $ 0.44 $ 1.56 $ 1.67
Diluted Earnings $ 0.33 $ 0.41 $ 0.43 $ 1.55 $ 1.64
Dividends Paid $ 0.214 $ 0.214 $ 0.200 $ 0.852 $ 0.789
Performance Ratios:
Return on Average
Assets (a) 0.79% 0.99% 1.09% 0.95% 1.15%
Return on Average
Equity (a) 8.9% 11.2% 12.2% 10.7% 12.8%
Net Interest
Margin (FTE) (a) 3.98% 4.15% 4.34% 4.13% 4.40%
Book Value Per
Share (b) $ 14.77 $ 14.70 $ 14.20 $ 14.77 $ 14.20
Average Equity/
Average Assets 8.8% 8.9% 8.9% 8.9% 9.0%
Net Charge-offs $ 892 $ 1,144 $ 618 $ 2,359 $ 1,265
Net Charge-offs
as a % of
Average
Loans (c) (a) 0.39% 0.50% 0.28% 0.26% 0.17%
(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
2006 2006 2005
-----------------------------------
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 32,084 $ 29,194 $ 36,037
Short term investments 24,853 6,703 17,295
-----------------------------------
Total cash and cash equivalents 56,937 35,897 53,332
Securities available for sale 69,125 71,900 73,811
Federal Home Loan Bank stock 5,924 6,137 6,309
Loans:
Loans held for sale 1,120 1,236 293
Portfolio loans:
Commercial 194,810 205,424 183,473
Commercial real estate 286,249 295,172 302,471
Residential mortgage 284,137 279,883 272,402
Real estate construction 81,218 67,743 61,067
Consumer 63,106 64,142 59,211
-----------------------------------
Total portfolio loans 909,520 912,364 878,624
Less allowance for loan losses (9,966) (10,689) (11,559)
-----------------------------------
Net portfolio loans 899,554 901,675 867,065
Premises and equipment, net 20,232 19,916 19,477
Goodwill 20,094 20,094 19,888
Other intangibles 3,045 3,206 3,710
Other assets 19,954 20,600 17,233
-----------------------------------
TOTAL ASSETS $ 1,095,985 $ 1,080,661 $ 1,061,118
===================================
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $ 131,942 $ 121,320 $ 130,556
Interest bearing accounts:
Demand 161,228 168,597 187,398
Savings 127,301 129,578 133,584
Time 350,710 332,849 275,773
Wholesale CD's 64,245 67,554 83,794
-----------------------------------
Total deposits 835,426 819,898 811,105
Securities sold under
agreements to repurchase
and overnight borrowings 35,179 36,350 43,311
FHLB Advances and notes
payable 94,177 93,703 90,634
Subordinated Debt 20,620 20,620 10,310
Accrued interest and other
liabilities 14,803 14,075 12,181
-----------------------------------
Total liabilities 1,000,205 984,646 967,541
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized, none
issued
Common stock; 20,000,000 shares
authorized 91,652 86,108 87,634
Retained earnings 4,259 10,047 6,198
Accumulated other comprehensive
income/(loss) (131) (140) (255)
-----------------------------------
Total shareholders' equity 95,780 96,015 93,577
-----------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,095,985 $ 1,080,661 $ 1,061,118
===================================
Common stock shares issued and
outstanding 6,484,202 6,529,662 6,591,937
Principal Balance of
Loans Serviced
for Others ($mil) $ 472.0 $ 472.3 $ 473.3
Asset Quality Ratios:
Non-Performing Loans / Loans (a) 0.47% 0.43% 0.82%
Non-Perf. Loans + OREO / Loans (a)
+ OREO 0.65% 0.85% 0.94%
Non-Performing Assets / Total
Assets 0.54% 0.72% 0.78%
Allowance for Loan Loss as a % of
Loans (a) 1.10% 1.17% 1.32%
Allowance / Non-Performing Loans 234% 271% 160%
Quarterly Average Balances:
Total Portfolio Loans (a) $ 915,191 $ 914,979 $ 868,701
Total Earning Assets 999,225 995,226 957,246
Total Shareholders' Equity 95,761 95,844 92,547
Total Assets 1,083,518 1,082,031 1,037,354
Diluted Shares Outstanding 6,543,831 6,593,801 6,600,591
(a) Total Loans less loans held for sale