Filed by Firstbank Corporation
Pursuant to Rule 425
Under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1933
Subject Company: Keystone Financial Corporation
Commission File No.: 000-00000
Firstbank Corporation
Acquisition of
Keystone Financial Corp.
Firstbank Corporation
Extending the Tradition . . . .
| • | Great asset quality |
| • | Community banking |
| • | Separately chartered banks with real local boards |
| • | Centralized operational functions for high quality and efficient support |
| • | Conservative accounting and management |
| • | Strong capital position and balance sheet |
| • | Development of growth opportunities |
Firstbank Corporation
Slogan and Mission
We’re all about you!
Firstbank Corporation preserves the benefits of community banking for its customers and communities, combining these benefits with advanced products, services and technology. Every person who walks through our door, including shareholders, customers and employees, will benefit either personally or financially.
Firstbank Corporation
Shareholder Value Enhancement
1999-2004 stock price CAGR equals 13.9%
Current dividend yield at 3.5%
Firstbank Corporation
Market Penetration
| • | Firstbank Corporation was able to augment its growth by capturing market share in the growing markets of Mt. Pleasant and West Branch. |
| • | Firstbank Corporation entered the St. Johns market with a de novo bank in 2000 as a growth opportunity. |
| • | Now Firstbank Corporation enters the $3.2 billion (deposits) Kalamazoo County market with 3.5% market share of Keystone Community Bank – creating a new growth opportunity for Firstbank Corporation |
Keystone Locations
| • | Headquartered in Kalamazoo |
| • | Operates four offices in Kalamazoo County |
| • | Office locations include: |
| Address | City | Date Opened | Deposits 06-30-04 ($000) |
|---|---|---|---|
107 W. Michigan Avenue | Kalamazoo | 07/30/97 | $74,108 |
6405 S. Westnedge Avenue | Portage | 07/30/97 | $27,413 |
235 N. Drake | Kalamazoo | 09/17/03 | $ 6,885 |
3910 W. Centre Avenue | Portage | 11/03/03 | $ 5,694 |
Market Share Analysis
Kalamazoo County
| Holding Company | 6/04 Deposits | 6/04 Market Share |
|---|---|---|
Fifth Third Bancorp | $ 565,523 | 17.4% |
| National City Corp. | $ 544,106 | 16.8% |
| LaSalle Bank Corporation | $ 318,440 | 9.8% |
| Comerica, Inc. | $ 204,694 | 6.3% |
| Capital Bancorp, Ltd. | $ 153,813 | 4.7% |
| Flagstar Bancorp, Inc. | $ 116,256 | 3.6% |
| Keystone Financial Corp. | $ 114,100 | 3.5% |
| All Others (Banks, Thrifts | ||
| and Credit Unions) | $1,224,561 | 37.9% |
| TOTAL | $3,241,493 | 100.0% |
Firstbank Corporation
Asset Growth ($Millions)
| 1994 | 2004 | CAGR | |
|---|---|---|---|
Firstbank Corporation | $310 | $806 | 10.0% |
| Firstbank-Lakeview(1) | $ 73 | $113 | 4.5% |
| Firstbank-West Branch | $ 83 | $214 | 9.9% |
| Firstbank-Alma | $159 | $232 | 3.8% |
| Firstbank - Mt. Pleasant | $ 66 | $184 | 10.9% |
| 2000 | 2004 | CAGR | |
Firstbank-St. Johns(2) | $ 22 | $ 52 | 23.8% |
| Keystone | $ 66 | $142 | 21.1% |
(1)Acquired by Firstbank in 1997 (2)Established in 2000
Firstbank and Keystone
Office Map
FBMI Locations (in Red)
Keystone Locations (in Blue)
Keystone Detailed Office Map
Firstbank and Keystone
Market Demographic Characteristics
| Keystone HQ Location | Current Population | Median Household Income | Per Capita Income | 2000 - 2004 Population Growth | Estimated 5 Year Growth In Population |
|---|---|---|---|---|---|
Kalamazoo County | 243,599 | $44,900 | $23,729 | 2.1% | 2.4% |
Firstbank Subsidiary HQ Locations | |||||
Clinton County | 67,998 | $59,640 | $26,015 | 5.0% | 5.8% |
| Gratiot County | 42,364 | $39,447 | $17,655 | 0.2% | 0.0% |
| Isabella County | 65,334 | $37,187 | $18,264 | 3.1% | 3.6% |
| Montcalm County | 63,122 | $40,469 | $17,838 | 3.0% | 3.5% |
| Ogemaw County | 21,645 | $33,016 | $17,753 | 0.7% | 0.7% |
State of Michigan | 10,109,402 | $48,188 | $24,471 | 1.7% | 1.9% |
Strategic Rationale
| • | Leverage capital base of FBMI |
| • | FBMI will expand its footprint |
| • | Enhanced growth prospects in Kalamazoo |
| • | Keystone represents a quality franchise |
| • | Strong Management Team |
Keystone Total Assets
($Millions)
CAGR = 16.9%
Keystone Net Income
($000s)
(1) Midpoint of $1.0-$1.2 million range provided by Keystone
Keystone
Return on Average Assets
Keystone Community Bank
Quarterly Performance
| 1Q - 04 | 2Q - 04 | 3Q - 04 | 4Q - 04 | 1Q - 05 | |
|---|---|---|---|---|---|
Assets ($ Mil.) | $131 | $136 | $139 | $142 | $151 |
| Loans ($ Mil.) | $122 | $122 | $130 | $134 | $144 |
| Deposits ($ Mil.) | $110 | $114 | $116 | $119 | $127 |
| Net Interest Margin | 3.73% | 3.56% | 3.85% | 4.10% | 4.00% |
| Efficiency Ratio | 76.5% | 78.8% | 71.7% | 66.4% | 66.6% |
| Net Income ($000) | $ 98 | $181 | $226 | $316 | $248 |
| • | At March 31, 2005, Keystone reported over $40 million in loan participations sold. FBMI anticipates $18 million will be brought back to the resulting company on a post transaction basis. Including participations, Keystone’s total loans increased 27% or $39 million from 1Q-04 to 1Q-05. |
Key Financial Terms
| • | Consideration includes 1.0-for-1.0 exchange ratio in common stock of FBMI and $19.35 per share in cash |
| • | Aggregate value equals $26.6 million including in-the-money value of options as of May 11, 2005 |
| • | 232% of December 31, 2004 Keystone Financial Corporation total equity |
| • | 33.6 times Keystone’s 2004 net income |
| • | 24.2 times Keystone’s 2005 estimated net income |
Resulting Management
Structure of Keystone
| • | Chairman –Ford Kieft |
| • | Pres./CEO – Tom Schlueter |
| • | SVP – Darin Caranci |
| • | Tom Sullivan to be added to Keystone board of Directors |
Guideline Transactions
All Bank Transactions Announced
Since December 31, 2003
| Quarter | # of Deals | Price/Book | Price/Earnings |
|---|---|---|---|
1Q 05 | 30 | 222% | 23.6 |
| 4Q 04 | 45 | 231% | 26.3 |
| 3Q 04 | 68 | 229% | 21.6 |
| 2Q 04 | 48 | 223% | 21.6 |
| 1Q 04 | 54 | 223% | 24.4 |
FBMI/Keystone | 232% | 33.6(1) | |
| 24.2(2) |
(1) Multiple based on 2004 Stated Net Income
(2) Multiple based on 2005 Estimated Net Income
Pro Forma FBMI
Projected Earnings Per Share Effect
Adjusted for Keystone Transaction
- Assumes Year-End 2005 Closing
- Includes Estimated Cost Savings and Loan Participation Revenue
- No Other Revenue Enhancements Included
| 2006 | 2007 | |
|---|---|---|
$ Earnings Accretion Per Share | $ 0.02 | $ 0.06 |
| Loan Participation Net Revenue (P-T) | $ 405 | $ 405 |
| Cost Savings ($000) (P-T) | $ 863 | $ 924 |
| Cost Savings (%) | 19.5% | 19.8% |
P-T = Pre-Tax
Cautionary Statement: This presentation contains certain forward-looking statements that involve risks and uncertainties. Forward-looking statements include statements concerning future earnings, loan participation net revenue, cost savings and the expected accretive nature of the transaction. 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. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation.