Highlights Include:
* Third quarter net income of $737,000 and earnings per share of
$0.10 remain positive and improve from the second quarter
* Economic conditions in Michigan and nationally, and financial
market turmoil, continue to create credit and valuation issues
impacting earnings
* Net interest margin improves in the third quarter
* Capital remains strong and all affiliate banks continue to meet
regulatory well-capitalized requirements
ALMA, Mich., Oct. 29, 2008 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced earnings per share of $0.10 for the third quarter of 2008 compared to $0.04 in the second quarter of 2008 and to $0.33 in the third quarter of 2007. Net income was $737,000 for the quarter ended September 30, 2008, compared to $292,000 for the quarter ended June 30, 2008 and $2,415,000 for the quarter ended September 30, 2007. Net income and earnings per share remained positive in the third quarter in spite of the write down of the previously disclosed investment in a security related to the government sponsored Federal Home Loan Mortgage Company. Returns on average assets and average equity for the third quarter of 2008 were 0.21% and 2.5%, respectively. All per share amounts are fully diluted.
Earnings per share of $0.43 for the first nine months of 2008 compared to $1.01 in the first nine months of 2007. Net income was $3,179,000 for the nine months ended September 30, 2008, compared to $6,820,000 for the nine months ended September 30, 2007. Returns on average assets and average equity for the first nine months of 2008 were 0.32% and 3.7%, respectively.
In the third quarter of 2008, Firstbank's non-interest income was reduced by a $1.6 million write-down on an investment in a money market security related to the government sponsored enterprise Federal Home Loan Mortgage Company (Freddie Mac). The after tax impact reduced net income by $1.1 million. On September 7, 2008, the U.S Treasury, the Federal Reserve and the Federal Housing Finance Agency (FHFA), announced that the FHFA was placing Fannie Mae and Freddie Mac under Conservatorship and would suspend dividends on common and preferred stock.
Firstbank's loan loss provision in the third quarter of 2008 was $1,028,000, a decrease of 70% from the level in the second quarter of 2008. The level of provision expense, higher than in most quarters in recent years, reflects a variety of factors including the ongoing economic stresses impacting the Michigan and national economies, the continued deterioration in real estate values, and Firstbank's practice of immediately reserving for problem loans when they are identified. The bulk of the provision was taken at the newest affiliate bank, Firstbank - West Michigan, which was acquired with ICNB Financial Corporation on July 1, 2007. In times of less credit stress and at the time of acquisition, most of the bank's problem credits could, and were able to, perform according to their terms, but under current economic conditions additional provision for loan losses has become appropriate. In the first nine months of 2008, provision expense was $5,309,000, significantly above the year-earlier period, which had included a large negative provision that was related to the payoff of a specific loan at that time.
Total assets of Firstbank Corporation at September 30, 2008, were $1.407 billion, an increase of 3.3% over the year-ago period. Total portfolio loans of $1.154 billion were 3.4% above the level at September 30, 2007. Total deposits as of September 30, 2008, were $1.028 billion, compared to $1.004 billion at September 30, 2007. Capital levels remain strong and all affiliate banks continue to meet regulatory well-capitalized requirements.
Firstbank's net interest margin, at 3.82% in the third quarter of 2008, increased 5 basis points from 3.77% in the second quarter of 2008, and was 7 basis points below the 3.89% of the third quarter of 2007. Growth in average earning assets was modest at 1.3% compared to the second quarter of 2008 and 3.8% compared to the third quarter of 2007. Net interest income in the third quarter of 2008 was 3.3% above the level in the second quarter and 1.3% above the year-ago period.
Gain on sale of mortgage loans for the first nine months of 2008 was 80% above the year-ago period, but the increase came entirely in the first half of the year, and mostly in the first quarter. In the third quarter of 2008, gain on sale of mortgage loans was 26% below the level in the third quarter of 2007. Sharp declines in mortgage interest rates in the first months of 2008 helped to expand mortgage activity and refinances, but mortgage interest rates have moved back up in the second and third quarters, slowing activity once again.
Firstbank continues to emphasize cost control during this period of economic uncertainty and pressure on revenues. Salaries and employee benefits expense declined 7% in the third quarter of 2008 compared to the third quarter of 2007. Declines in the category of other non-interest expense more than offset increases in occupancy and equipment expenses. Total non-interest expense declined 4.7% in the third quarter of 2008 compared to the third quarter of 2007. Both quarters included the operations of the newest affiliate, Firstbank - West Michigan.
Mr. Sullivan stated, "Everyone is inundated with news about the troubled economy and problems in the financial markets, in the United States and worldwide. We have had an increase in non-performing and charge-off loans, where our customers have fallen prey to the economic stresses. Most of these problems in our company have occurred at our most newly acquired bank. Prior lending practices at this bank left it more exposed to the vagaries of economic stress than any of our other banks that have been part of our company for many years. Adding insult to injury, in the third quarter of 2008 we incurred a $1.1 million after tax write-down on an investment in a money market security related to the government sponsored enterprise Federal Home Loan Mortgage Company (Freddie Mac), which the government placed into receivership. We had purchased this investment because of its then favorable regulatory risk rating, the expected steady income provided by the preferred stock's dividend, and the favorable tax treatment afforded to these dividends.
"While we are not happy to have incurred these loan and investment losses, we are gratified that the underlying earnings power of our company is strong enough to have enabled us to absorb them without reporting negative net income in any quarter -- and this at a time when many banking companies in Michigan and other states are reporting very large quarterly net losses.
"We are pleased that our federal government is acting quickly to address the systemic risks -- risks that have the potential to envelop all financial, and many non-financial, companies. We are currently evaluating to what extent utilizing these programs would be beneficial to our company and our shareholders. We also are keeping our lenders and customer service personnel focused on the business of banking, serving our customers and communities in quality ways and helping them through the challenges they face during these times. We maintain our strong cultural emphasis on asset quality, and we have made significant progress in spreading that culture to our newest affiliate. We are all looking forward to the time when helping people with their challenges transitions back to helping people with their opportunities."
At September 30, 2008, the ratio of the allowance for loan losses to loans increased to 1.11% from 1.07% at June 30, 2008, and increased from 1.06% at September 30, 2007. The ratio of allowance for loan loss to non-performing loans stood at 61% at September 30, 2008.
Net charge-offs of $590,000 in the third quarter of 2008 were 0.20% of average loans on an annualized basis, and net charge-offs of $4,020,000 for the first nine months of 2008 were 0.47% of average loans on an annualized basis. The ratio of non-performing loans (including loans past due over 90 days) to loans was 1.81% at September 30, 2008, compared to 1.56% as of June 30, 2008, and 1.00% at September 30, 2007.
Shareholders' equity decreased 0.5% in the third quarter of 2008, and was 0.3% below the level at September 30, 2007. The ratio of average equity to average assets was 8.4% in the third quarter of 2008 -- similar to levels over past years. Firstbank did not repurchase its common stock in the first nine months of 2008. All of Firstbank Corporation's affiliate banks continue to meet the regulatory well-capitalized 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 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
Three Months Ended: Nine Months Ended:
--------------------------- -----------------
Sep 30 Jun 30 Sep 30 Sep 30 Sep 30
2008 2008 2007 2008 2007
--------------------------- -----------------
Interest income:
Interest and fees
on loans $19,136 $19,031 $20,822 $57,922 $54,662
Investment
securities
Taxable 918 945 921 2,902 2,234
Exempt from
federal income
tax 357 349 363 1,059 900
Short term
investments 91 86 334 268 914
--------------------------- -----------------
Total interest
income 20,502 20,411 22,440 62,151 58,710
Interest expense:
Deposits 6,164 6,431 7,892 19,684 20,988
Notes payable and
other borrowing 2,443 2,463 2,808 7,591 6,786
--------------------------- -----------------
Total interest
expense 8,607 8,894 10,700 27,275 27,774
Net interest income 11,895 11,517 11,740 34,876 30,936
Provision for loan
losses 1,028 3,465 223 5,309 241
--------------------------- -----------------
Net interest income
after provision for
loan losses 10,867 8,052 11,517 29,567 30,695
Noninterest income:
Gain on sale of
mortgage loans 317 565 428 2,024 1,127
Service charges on
deposit accounts 1,218 1,256 1,300 3,642 3,238
Gain (loss) on
trading account
securities (200) (160) 0 (373) 0
Gain (loss) on sale
of AFS securities (1,674) (67) 0 (1,612) (130)
Mortgage servicing 180 131 118 188 393
Other 690 647 1,121 1,965 3,012
--------------------------- -----------------
Total noninterest
income 531 2,372 2,967 5,834 7,640
Noninterest expense:
Salaries and
employee benefits 5,342 5,523 5,743 16,712 15,299
Occupancy and
equipment 1,728 1,740 1,629 5,217 4,306
Amortization of
intangibles 264 281 332 826 929
FDIC insurance
premium 166 103 61 382 110
Other 3,116 2,697 3,369 8,531 8,206
--------------------------- -----------------
Total noninterest
expense 10,616 10,344 11,134 31,668 28,850
Income before federal
income taxes 782 80 3,350 3,733 9,485
Federal income taxes 45 (212) 935 554 2,665
--------------------------- -----------------
Net Income $ 737 $ 292 $ 2,415 $ 3,179 $ 6,820
=========================== =================
Fully Tax Equivalent
Net Interest Income $12,160 $11,791 $11,969 35,702 31,522
Per Share Data:
Basic Earnings $ 0.10 $ 0.04 $ 0.33 $ 0.43 $ 1.01
Diluted Earnings $ 0.10 $ 0.04 $ 0.33 $ 0.43 $ 1.01
Dividends Paid $ 0.225 $ 0.225 $ 0.225 $ 0.675 $ 0.675
Performance Ratios:
Return on Average
Assets (a) 0.21% 0.10% 0.71% 0.32% 0.78%
Return on Average
Equity (a) 2.5% 1.2% 8.2% 3.7% 8.9%
Net Interest
Margin (FTE) (a) 3.82% 3.77% 3.89% 3.79% 3.90%
Book Value Per
Share (b) $ 15.61 $ 15.78 $ 15.98 $ 15.61 $ 15.98
Average Equity/
Average Assets 8.4% 8.6% 8.7% 8.5% 8.8%
Net Charge-offs $ 590 $ 2,687 $ 249 $ 4,020 $ 732
Net Charge-offs as
a % of Average
Loans (c)(a) 0.20% 0.94% 0.09% 0.47% 0.10%
(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
2008 2008 2007 2007
----------------------------------------------
ASSETS
Cash and cash
equivalents:
Cash and due from
banks $ 35,589 $ 40,283 $ 42,198 $ 33,713
Short term
investments 3,873 6,281 3,331 20,695
----------------------------------------------
Total cash and cash
equivalents 39,462 46,564 45,529 54,408
Securities available
for sale 119,756 96,991 105,130 97,832
Federal Home Loan
Bank stock 8,760 8,666 8,007 7,684
Loans:
Loans held for sale 757 191 1,725 311
Portfolio loans:
Commercial 206,274 214,185 219,080 222,249
Commercial real
estate 341,550 334,903 311,494 329,638
Residential
mortgage 398,963 393,293 387,222 391,845
Real estate
construction 130,405 132,896 126,027 93,278
Consumer 77,018 77,559 78,106 79,506
----------------------------------------------
Total portfolio loans 1,154,210 1,152,836 1,121,929 1,116,516
Less allowance for
loan losses (12,767) (12,328) (11,477) (11,821)
----------------------------------------------
Net portfolio loans 1,141,443 1,140,508 1,110,452 1,104,695
Premises and
equipment, net 27,565 27,959 27,554 27,412
Goodwill 35,603 35,553 34,421 35,193
Other intangibles 4,126 4,390 5,832 5,988
Other assets 29,581 28,336 27,089 28,471
----------------------------------------------
TOTAL ASSETS $1,407,053 $1,389,158 $1,365,739 $1,361,994
==============================================
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing
accounts $ 148,762 $ 148,385 $ 152,126 $ 148,682
Interest bearing
accounts:
Demand 216,894 219,161 222,371 217,678
Savings 157,681 160,862 147,654 153,214
Time 463,193 449,517 453,864 447,690
Wholesale CD's 41,512 35,783 35,377 37,223
----------------------------------------------
Total deposits 1,028,042 1,013,708 1,011,392 1,004,487
Securities sold under
agreements to
repurchase and
overnight borrowings 55,877 48,718 42,791 53,155
FHLB Advances and
notes payable 153,865 156,923 139,035 130,982
Subordinated Debt 36,084 36,084 36,084 36,084
Accrued interest and
other liabilities 15,669 15,605 17,826 19,449
----------------------------------------------
Total liabilities 1,289,537 1,271,038 1,247,128 1,244,157
SHAREHOLDERS' EQUITY
Preferred stock; no
par value, 300,000
shares authorized,
none issued
Common stock;
20,000,000 shares
authorized 112,970 112,491 111,436 110,862
Retained earnings 4,842 5,790 6,692 6,764
Accumulated other
comprehensive income/
(loss) (296) (161) 483 211
----------------------------------------------
Total shareholders'
equity 117,516 118,120 118,611 117,837
----------------------------------------------
TOTAL LIABILITIES
AND SHAREHOLDERS'
EQUITY $1,407,053 $1,389,158 $1,365,739 $1,361,994
==============================================
Common stock
shares issued and
outstanding 7,530,235 7,484,368 7,407,198 7,374,060
Principal Balance of
Loans Serviced for
Others ($mil) $ 514.5 $ 517.3 $ 515.1 $ 516.0
Asset Quality Ratios:
Non-Performing
Loans / Loans (a) 1.81% 1.56% 1.26% 1.00%
Non-Perf. Loans +
OREO / Loans (a) +
OREO 2.24% 1.89% 1.54% 1.30%
Non-Performing
Assets / Total
Assets 1.84% 1.58% 1.27% 1.07%
Allowance for Loan
Loss as a % of
Loans (a) 1.11% 1.07% 1.02% 1.06%
Allowance /
Non-Performing Loans 61% 69% 81% 106%
Quarterly Average
Balances:
Total Portfolio
Loans (a) $1,156,041 $1,142,047 $1,118,551 $1,102,696
Total Earning
Assets 1,273,716 1,257,478 1,228,740 1,227,061
Total Shareholders'
Equity 118,437 118,846 117,960 117,158
Total Assets 1,408,393 1,389,391 1,356,106 1,352,024
Diluted Shares
Outstanding 7,498,223 7,451,664 7,378,262 7,391,851
(a) Total Loans less loans held for sale