| FOR IMMEDIATE RELEASE Date Submitted: April 24, 2008 NASDAQ Symbol: FBMI | NEWS RELEASE Contact: Samuel G. Stone Executive Vice President and Chief Financial Officer (989) 466-7325 |
FIRSTBANK CORPORATION ANNOUNCES
FIRST QUARTER 2008 RESULTS
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, Michigan (FBMI) —Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation, 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 tripple 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 BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
| Mar 31 2008 | Dec 31 2007 | Mar 31 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
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands except per share data)
UNAUDITED
| Three Months Ended: | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Mar 31 2008 | Dec 31 2007 | Mar 31 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