SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ______ to _______.
Commission file number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
MICHIGAN 38-2633910
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
311 WOODWORTH AVENUE, ALMA, MICHIGAN 48801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 463-3131
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Sections 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to filing requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock . . . 2,038,545 shares outstanding as of October 31,
1997.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (UNAUDITED)
Consolidated balance sheets . . . . September 30, 1997
and December 31, 1996 page 3
Consolidated statements of income . . . . three months
ended September 30, 1997, and September 30, 1996. page 4
Consolidated statements of income . . . . nine months
ended September 30, 1997, and September 30, 1996. page 5
Consolidated statements of changes in shareholders'
equity page 6
Consolidated statements of cash flows . . . . nine
months ended September 30, 1997, and September 30,
1996. page 7
Notes to consolidated financial statements . . . .
September 30, 1997. page 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. page 11
PART II. OTHER INFORMATION
Item 2. Changes in Securities page 15
Item 6. Exhibits and Reports on Form 8-K page 15
SIGNATURES page 16
EXHIBITS
Exhibit 27 -- Financial Data Schedule page 17
This report contains forward-looking statements that are based on
management's beliefs, assumptions, current expectations, estimates and
projections about the financial services industry, the economy, and about
Firstbank Corporation ("Firstbank" or the "Corporation"). Words such as
"anticipates," "believes," "estimates," "expects," "forecasts," "intends,"
"is likely," "plans," "product," "projects," variations of such words and
similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions ("Future Factors")
that are difficult to predict with regard to timing, extent, likelihood and
degree of occurrence. Therefore, actual results and outcomes may
materially differ from what may be expressed or forecasted in such forward-
looking statements. Firstbank undertakes no obligations to update, amend
or clarify forward-looking statements, whether as a result of new
information, future events, or otherwise.
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Future Factors include changes in interest rates and interest rate
relationships; demand for products and services; the degree of competition
by traditional and non-traditional competitors; changes in banking
regulations; changes in tax laws; changes in prices, levies, and
assessments; the impact of technological advances; governmental and
regulatory policy changes; the outcomes of pending and future litigation
and contingencies; trends in customer behavior as well as their ability to
repay loans; and the vicissitudes of the national economy. These are
representative of the Future Factors that could cause a difference between
an ultimate actual outcome and a preceding forward-looking statement.
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FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------ ------------
ASSETS
Cash and due from banks $ 20,883,700 $ 19,430,993
Short term investments 3,671,229 1,797,479
------------ ------------
Total cash and cash equivalents 24,554,929 21,228,472
Securities available for sale 81,475,809 57,561,141
Loans
Loans held for sale 3,501,062 6,755,863
Portfolio loans
Commercial 154,762,639 121,945,076
Real estate mortgage 166,544,128 115,849,643
Consumer 77,068,456 69,080,989
------------ ------------
Total loans 401,876,285 313,631,571
Less allowance for loan losses (8,284,000) (6,247,000)
------------ ------------
Net loans 393,592,285 307,384,571
Premises and equipment, net 11,091,353 8,218,954
Acquisition intangibles 12,143,411 3,847,832
Accrued interest receivable 3,620,524 2,236,870
Other assets 5,568,252 4,093,102
------------ ------------
TOTAL ASSETS $532,046,563 $404,570,942
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $ 61,520,669 $ 47,752,360
Interest bearing accounts
Demand 105,757,461 86,768,530
Savings 65,489,039 59,391,775
Time 214,032,463 164,756,724
------------ ------------
Total deposits 446,799,632 358,669,389
-4-
Securities sold under agreements to
repurchase and overnight borrowings 16,549,184 6,832,592
Notes payable 7,590,465 2,239,039
Accrued interest and other liabilities 7,941,257 3,741,861
------------ ------------
Total liabilities 478,880,538 371,482,881
SHAREHOLDERS' EQUITY
Preferred stock; no par value, 300,000
shares authorized, none issued
Common stock; 10,000,000 shares authorized,
2,036,543 shares issued and outstanding
(1,627,843 in December 1996) 41,418,585 24,228,132
Retained earnings 10,933,077 8,296,590
Unrealized gain (loss) on available for sale
securities 814,363 563,339
------------ ------------
Total shareholders' equity 53,166,025 33,088,061
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $532,046,563 $404,570,942
============ ============
See notes to consolidated financial statements
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FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
THREE MONTHS
ENDED SEPTEMBER 30,
1997 1996
----------- -----------
Interest income:
Interest and fees on loans $ 8,836,323 $ 7,021,707
Investment securities
Taxable 674,602 478,732
Exempt from Federal Income Tax 418,136 361,137
Short term investments 72,162 53,852
----------- -----------
Total interest income 10,001,223 7,915,428
Interest expense:
Deposits 4,088,239 3,159,597
Notes payable and other 268,889 185,904
----------- -----------
Total interest expense 4,357,128 3,345,501
----------- -----------
Net interest income 5,644,095 4,569,927
Provision for loan losses 364,839 709,000
----------- -----------
Net interest income after
provision for loan losses 5,279,256 3,860,927
Noninterest income:
Gain on sale of mortgage loans 204,216 166,950
Service charges on deposit accounts 335,158 259,533
Trust fees 59,604 58,725
Gain on sale of securities 1,050 (213)
Other 271,979 280,953
----------- -----------
Total noninterest income 872,007 765,948
Noninterest expense:
Salaries and employee benefits 2,092,298 1,590,879
Occupancy 538,679 470,725
FDIC Insurance premium 16,939 23,915
Michigan Single Business Tax 87,967 104,600
Other 1,303,629 786,053
----------- -----------
Total noninterest expense 4,039,512 2,976,172
----------- -----------
-6-
Income before federal income taxes 2,111,751 1,650,703
Federal income taxes 612,000 478,000
----------- -----------
NET INCOME $ 1,499,751 $ 1,172,703
=========== ===========
Per Share:
NET INCOME $ 0.80 $ 0.72
=========== ===========
DIVIDENDS $ 0.26 $ 0.21
=========== ===========
Number of common shares used to calculate
net income per share 1,867,510 1,628,796
See notes to consolidated financial statements
-7-
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
NINE MONTHS
ENDED SEPTEMBER 30,
1997 1996
----------- -----------
Interest income:
Interest and fees on loans $23,775,953 $20,170,215
Investment securities
Taxable 1,754,572 1,503,356
Exempt from Federal Income Tax 1,161,912 1,107,777
Short term investments 171,511 132,967
----------- -----------
Total interest income 26,863,948 22,914,315
Interest expense:
Deposits 11,169,325 9,321,463
Notes payable and other 605,457 531,034
----------- -----------
Total interest expense 11,774,782 9,852,497
----------- -----------
Net interest income 15,089,166 13,061,818
Provision for loan losses 1,077,839 1,541,000
----------- -----------
Net interest income after
provision for loan losses 14,011,327 11,520,818
Noninterest income:
Gain on sale of mortgage loans 480,571 485,814
Service charges on deposit accounts 864,152 757,114
Trust fees 207,105 174,581
Gain on sale of securities 610 (81)
Other 886,966 859,241
----------- -----------
Total noninterest income 2,439,404 2,276,669
Noninterest expense:
Salaries and employee benefits 5,696,822 4,870,351
Occupancy 1,475,153 1,357,549
FDIC Insurance premium 24,654 67,544
Michigan Single Business Tax 279,367 275,300
Other 3,470,846 2,606,144
----------- -----------
Total noninterest expense 10,946,842 9,176,888
----------- -----------
-8-
Income before federal income taxes 5,503,889 4,620,599
Federal income taxes 1,555,000 1,275,000
----------- -----------
NET INCOME $ 3,948,889 $ 3,345,599
=========== ===========
Per Share:
NET INCOME $ 2.30 $ 2.07
=========== ===========
DIVIDENDS $ 0.74 $ 0.59
=========== ===========
Number of common shares used to calculate
net income per share 1,714,624 1,620,123
See notes to consolidated financial statements
-9-
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
NET UNREALIZED
APPRECIATION
(DEPRECIATION) ON
COMMON RETAINED AVAILABLE FOR SALE
STOCK EARNINGS SECURITIES TOTAL
----------- ----------- --------- -----------
BALANCES AT DECEMBER 31, 1995 $21,355,293 $ 7,583,783 $ 913,577 $29,852,653
Cash dividends - $.80 per share (1,297,400) (1,297,400)
5% stock dividend - 77,060 shares 2,620,039 (2,633,181) (13,142)
Issuance of 2,128 shares of common
stock through exercise of stock
options 46,947 46,947
Issuance of 4,870 shares of common
stock through dividend reinvestment
plan 144,063 144,063
Issuance of 1,831 shares of common
stock through supplemental purchase
under dividend reinvestment plan 61,790 61,790
Net change in unrealized appreciation
(depreciation) on available for
sale securities (350,238) (350,238)
Net income for 1996 4,643,388 4,643,388
----------- ----------- --------- -----------
BALANCES AT DECEMBER 31, 1996 24,228,132 8,296,590 563,339 33,088,061
Cash dividends - $.74 per share (1,312,402) (1,312,402)
Issuance of 4,674 shares of common
stock through exercise of stock
options 119,447 119,447
Issuance of 7,945 shares of common
stock through dividend reinvestment
plan 298,421 298,421
Issuance of 7,141 shares of common
stock through supplemental purchase
under dividend reinvestment plan 280,585 280,585
Net change in unrealized appreciation
(depreciation) on available for
sale securities 251,024 251,024
Issuance of 400,000 shares(est) for
the acquisition of Lakeview
Financial Corporation 16,492,000 16,492,000
Net income year to date 3,948,889 3,948,889
----------- ----------- --------- -----------
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BALANCES AT SEPTEMBER 30, 1997 $41,418,585 $10,933,077 $ 814,363 $53,166,025
=========== =========== ========= ===========
See notes to consolidated financial statements
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FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 AND 1996
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
1997 1996
------------- ------------
OPERATING ACTIVITIES
Net income $ 3,948,889 $ 3,345,599
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 1,077,839 1,541,000
Depreciation of premises and equipment 737,208 520,101
Net amortization of security premiums/discounts 267,416
Loss(gain) on sale of securities 81
Amortization of goodwill and other intangibles 605,082 201,175
Gain on sale of mortgage loans (480,571) (485,814)
Proceeds from sales of mortgage loans 32,583,532 32,036,281
Increase in acquisition intangibles (8,295,579)
Loans originated for sale (28,848,160) (34,907,118)
Increase in accrued interest receivable
and other assets (3,212,862) (699,152)
Increase in accrued interest payable and other liabilities 4,199,396 399,311
------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 2,314,774 2,218,880
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale (23,914,668) 2,035,359
Proceeds from maturities of securities available for sale 16,846,749
Purchases of securities available for sale (11,081,483)
Net increase in portfolio loans (90,540,354) (32,521,118)
Net purchases of premises and equipment (3,609,607) (1,060,590)
------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (118,064,629) (25,781,083)
FINANCING ACTIVITIES
Net increase in deposits 88,130,243 27,474,263
Increase in securities sold under agreements
to repurchase and other short term borrowings 9,716,592 (193,544)
Increase in note payable 5,351,426 2,239,039
Issuance of common stock for acquisition 16,492,000
Cash proceeds from issuance of common stock 698,453 (957,121)
Cash dividends (1,312,402) 115,192
------------- ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 119,076,312 28,677,829
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,326,457 5,115,626
Cash and cash equivalents at beginning of period 21,228,472 16,748,740
------------- ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 24,554,929 $ 21,864,366
============= ============
Supplemental Disclosure
Interest Paid $ 11,433,755 $ 9,769,548
Income Taxes Paid $ 1,460,000 $ 1,660,000
See notes to consolidated financial statements
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FIRSTBANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
NOTE A - FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended September 30, 1997, are not
necessarily indicative of the results that may be expected for the year
ended December 31, 1997. The balance sheet at December 31, 1996, has been
derived from the audited financial statements at that date. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Corporation's annual report on Form 10-K for the
year ended December 31, 1996.
NOTE B - SECURITIES
Individual securities held in the security portfolio are classified as
securities available for sale. Securities might be sold prior to maturity
due to changes in interest rates, prepayment risks, yield, availability of
alternate investments, liquidity needs or other factors. As required by
SFAS 115, securities classified as available for sale are reported at their
fair value and the related unrealized holding gain or loss is reported, net
of related income tax effects, as a separate component of shareholders'
equity until realized.
NOTE C - LOAN COMMITMENTS
Loan commitments (including unused lines of credit and letters of credit)
are made to accommodate the financial needs of the Banks' customers. The
commitments have credit risk essentially the same as that involved in
extending loans to customers, and are subject to the Banks' normal credit
policies and collateral requirements. Loan commitments, which are
predominately at variable rates, were approximately $58,468,000 and
$44,026,000 at September 30, 1997, and December 31, 1996, respectively.
The addition of the Bank of Lakeview accounts for $7,465,000 or 52% of the
total increase in loan commitments of $14,442,000 during the nine month
period ending September 30, 1997.
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NOTE D - NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES
NONPERFORMING LOANS AND ASSETS
The following table summarizes nonaccrual and past due loans at the dates
indicated:
SEPTEMBER 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1997 1996
------------------------------- ------------- ------------
Nonperforming loans:
Nonaccrual loans $ 820 $ 218
Loans 90 days or more past due 618 689
Renegotiated loans 126 150
------ ------
Total nonperforming loans $1,564 $1,057
====== ======
Property from defaulted loans $ 734 $ 130
====== ======
Nonperforming loans as a percent of:
Total loans .39% .34%
====== ======
Allowance for loan losses 18.9% 16.9%
====== ======
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following table summarizes changes in the allowance for loan losses
arising from loans charged off, recoveries on loans previously charged off,
and additions to the allowance which have been charged to expense.
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NINE NINE TWELVE
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
(DOLLARS IN THOUSANDS) 1997 1996 1996
- ----------------------------------- ------------- ------------- ------------
Balance at beginning of period $ 7,573<F*> $ 4,876 $ 4,876
Charge-offs (688) (548) (780)
Recoveries 321 207 313
-------- -------- --------
Net charge-offs (367) (341) (467)
Additions to allowance for
loan losses 1,078 1,541 1,838
-------- -------- --------
Balance at end of period $ 8,284 $ 6,076 $ 6,247
======== ======== ========
Average loans outstanding
during the period $337,126 $284,554 $289,332
======== ======== ========
Loans outstanding at end of period $401,876 $300,384 $313,632
======== ======== ========
Allowance as a percent of:
Total loans at end of period 2.06% 2.02% 1.99%
==== ==== ====
Nonperforming loans at end of period 530% 823% 591%
=== === ===
Net charge-offs as a percent of:
Average loans outstanding .11% .12% .16%
=== === ===
Average Allowance for loan losses 5.44% 6.55% 8.59%
==== ==== ====
<FN>
<F*>Adjusted for beginning balance of Bank of Lakeview
</FN>
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NOTE E - RECLASSIFICATION
Certain 1996 amounts have been reclassified to conform to the 1997
presentation.
NOTE F - ACQUISITION
On August 8, 1997, the Corporation consummated a merger with an unrelated
bank holding company with assets of $88 million and deposits of $75
million. The Corporation is in the process of issuing approximately
400,000 shares of stock and $660,000 in cash to the shareholders of the
acquired holding company. The details of this transaction were fully
disclosed in the 8-K.
NOTE G - ACCOUNTING STANDARDS
In August 1996, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 125, ACCOUNTING FOR
TRANSFERS AND SERVICING OF FINANCIAL ASSETS AND EXTINGUISHMENTS OF
LIABILITIES. The Statement is effective for transfers and servicing of
financial assets and extinguishments of liabilities for some transactions
in 1997 and others in 1998, and is to be applied prospectively. Example
transactions covered by SFAS No. 125 include asset securitizations,
repurchase agreements, wash sales, loan participations, transfers of loans
with recourse and servicing of loans. The standard is based on a
consistent application of a financial-components approach that focuses on
control. Under this Statement, after a transfer of financial assets, an
entity recognizes the financial and servicing assets it controls and the
liabilities it has incurred, derecognizes financial assets when control has
been surrendered, and derecognizes liabilities when extinguished. The
Statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings.
SFAS No. 125 supersedes SFAS No. 122, ACCOUNTING FOR MORTGAGE SERVICING
RIGHTS, and supersedes SFAS No. 76, EXTINGUISHMENT OF DEBT and SFAS No. 77,
REPORTING BY TRANSFERORS FOR TRANSFERS OF RECEIVABLES WITH RECOURSE.
Retroactive application is not permitted. The Corporation has adopted SFAS
125 according to the statement's effective dates, and its adoption has had
no material impact on the Corporation's financial position or results of
operations.
In February 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, EARNINGS PER SHARE. Adoption of the provisions of this
statement are required for the annual period ending December 31, 1997.
SFAS No. 128 specifies computational methods for determining basic and
diluted earnings per share. The adoption of SFAS No. 128 by the
Corporation is not expected to cause materially different results for
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earnings per share from earnings per share results as currently calculated.
SFAS No. 128 is effective for financial statements issued for periods
ending after December 15, 1997, including interim periods; earlier
application is not permitted. It requires the restatement of all prior
period earnings per share data presented.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
On August 8, 1997, Firstbank Corporation acquired an unrelated bank holding
company with assets of $88 million. The acquired holding company was
dissolved and the bank is functioning as a wholly owned subsidiary of
Firstbank Corporation. Accordingly, the assets and operating results of
Bank of Lakeview are included in the consolidated financial statements for
periods after August 8, 1997. The purchase method of accounting was used
for this transaction.
The consolidated financial information presented is for Firstbank
Corporation ("Corporation") and its wholly owned subsidiaries, Bank of
Alma, Firstbank (Mt. Pleasant), 1st Bank (West Branch), and Bank of
Lakeview (Lakeview) (collectively the "Banks").
FINANCIAL CONDITION
Over the first nine months of 1997, total assets of the Corporation grew
31.5%, or $127 million. Of this increase, 72%, or $92 million, is
attributable to the Lakeview acquisition and Lakeview's subsequent growth.
Investment securities were $24 million, or 41.6%, higher at September 30,
1997, than at the end of 1996. The bank acquisition added $13 million, or
54.2%, of this growth. The additional investment security increase is the
result of deploying growth in deposit dollars in excess of loan demand.
Approximately $4 million of the investment security increase is due to the
investment in short term instruments which will mature in the fourth
quarter. All securities are classified as available for sale.
Total loans have increased $88 million, or 28.1%, during the first three
quarters of 1997. Over 80%, or $71 million, of this increase was due to
the acquisition. Both commercial loans and real estate mortgage loans have
grown during this period. Loans held for sale have decreased by $3
million, or 48.2%, as a result of transferring many of these loans to the
held to maturity classification. The market value of all loans transferred
exceeded their book value.
Premises and equipment increased $2.9 million, primarily from the addition
of Lakeview fixed assets. In recording the acquisition using the purchase
method of accounting, fixed assets, primarily land and buildings, will be
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recorded at their market value at the time of closing. As of the date of
this report, the appraisals for the Lakeview land and buildings had not
been completed, and some subsequent adjustment may be made to premises and
equipment during the fourth quarter of 1997.
The change in acquisition intangibles of $8 million is the net result of
recognizing intangibles from the Lakeview acquisition of $8.8 million and
amortization expense of $605,000. As final adjustments are recorded for
the market value of fixed assets, adjustments will also be necessary to the
acquisition intangible account.
The increase in accrued interest receivable and other assets of $1 million
each are explained by the addition of Lakeview.
The allowance for loan losses increased over $2 million, or 32.6%, during
the first three quarters of 1997. Nearly 67% of this increase is
attributable to the acquired bank. The allowance is 2.06% of outstanding
loans at September 30, 1997, compared to 1.99% at December 31, 1996.
Management continues to maintain the allowance for loan losses at a level
considered appropriate to absorb losses in the portfolio. The allowance
balance is established after considering past loan loss experience, current
economic conditions, volume, growth and composition of the loan portfolio,
delinquencies, and other relevant factors.
Deposits have grown $88 million, or 24.6%, during the first nine months of
1997. Of this increase, 83.0%, or $73 million, is due to the acquisition.
The additional deposit increases have occurred in all deposit categories.
The increase in securities sold under agreement to repurchase and overnight
borrowings of $10 million, or 142% during the first nine months of 1997,
results from Lakeview increases of $2 million, securities sold under
agreement to repurchase increases of $7 million and overnight borrowing
increases of $1 million.
Notes payable have increased $5 million during the first nine months of
1997. The acquired bank accounts for 80% of this increase, with the
remainder a loan from an unrelated financial institution used to fund a
specific loan to a bank's customer.
Accrued interest and other liabilities have grown both with the acquisition
of a new bank as well as related payable accounts to recognize the interest
liabilities for growth of borrowings and deposit and deposit equivalent
products.
Total shareholders' equity has increased 60.7%, or $20 million, in the
period from December 31, 1996, to September 30, 1997. Common stock has
grown $17 million due to stock transactions, $16 million of which is for
shares issued pursuant to the acquisition. Net income of $3,949,000 has
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increased retained earnings while dividends of $1,312,000 have reduced it.
The $251,000 increase in net unrealized gain on available for sale
securities has increased shareholders' equity. Book value per share at
December 31, 1996, was $20.33 compared to $26.11 at September 30, 1997.
The following table discloses compliance with current regulatory
requirements on a consolidated basis:
TOTAL
TIER 1 RISK-BASED
(DOLLARS IN THOUSANDS) LEVERAGE CAPITAL CAPITAL
----------------------------------------- -------- ------- -------
Capital balances at September 30, 1997 $40,975 $40,975 $45,783
Required Regulatory Capital 20,489 15,248 30,496
------- ------- -------
Capital in excess of regulatory minimums $20,486 $25,727 $15,287
======= ======= =======
Capital ratios at September 30, 1997 8.00% 10.75% 12.01%
Regulatory capital ratios -- "well capitalized" 5.00% 6.00% 10.00%
definition
Regulatory capital ratios -- minimum requirement 4.00% 4.00% 8.00%
RESULTS OF OPERATIONS
Net income for the third quarter of 1997 was $1,500,000, or $.80 per share,
compared to $1,173,000, or $.72 per share, for the same period in 1996.
For the period August 9, 1997, to September 30, 1997, earnings of $135,000
were contributed to this total from the newly acquired bank. For the nine
months ending September 30, 1997, net income was $3,949,000, or $2.30 per
share, while results were $3,346,000 and $2.07 for the corresponding period
in 1996. All per share data have been restated to reflect the 1996 5%
stock dividend.
Average yields on earning assets for the first three quarters of 1997 were
9.01% compared to 9.04% for the same period in 1996. For the same nine
month periods in 1997 and 1996, average costs for rate related liabilities
were 4.00% and 3.94% respectively.
The provision for loan losses was $365,000 for the three months and
$1,078,000 for the nine months ending September 30, 1997, as compared to
$709,000 and $1,541,000 for the same time periods of 1996.
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Noninterest expense for the third quarter of 1997 was $4,040,000 compared
to $2,967,000 for the first nine months of 1996. For the first nine months
of 1997, noninterest expense increased $1,770,000, or 19.3%, to $10,947,000
from $9,177,000 for the period through September 30, 1996.
Salaries and benefits have increased 17.0% for the first nine months of
1997 when compared to the same period of 1996. Salary increments account
for approximately one third of this increase. Two branches were added in
December of 1996 in addition to the acquisition of Bank of Lakeview with
approximately 50 FTEs. The personnel increases necessary to operate these
additional locations account for the remaining increase in salary expense.
Similarly, occupancy expense increases of $118,000, or 8.7%, for the year
to date periods of 1997 and 1996 are due to operating eight new locations,
two for the entire year and six since August 9, 1997. None of the
occupancy expense for these locations was included in the occupancy expense
total for 1996.
Other noninterest expense rose $865,000, or 33.2% during the first three
quarters of 1997 when compared to 1996. Nearly half of this increase,
$404,000 was the result of increased amortization expenses of goodwill and
other intangibles. The remainder of the increase is due to operating
additional facilities.
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PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
At various times in the third quarter of 1997, the Corporation
issued unregistered shares of its common stock totaling 680
shares to members of the board of directors of the Corporation
and the Corporation's subsidiary banks. The shares were issued
as retainers and/or director fees for the directors' services on
the Boards. The Corporation claims an exemption from
registration for the issuances under Section 4(2) of the
Securities Act of 1933, as amended, which exempts transactions by
an issuer not involving any public offering. The shares were
issued in accordance with the Corporation's Board compensation
policy. The issuance did not involve any general solicitation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27 -- Financial Data Schedule
(b) The following reports on Form 8-K were filed during the
quarter:
DATE OF EVENT FINANCIAL STATEMENTS
REPORTED ITEMS REPORTED FILED
------------- -------------- --------------------
August 8, 1997 2,7
August 8, 1997 7 Yes
(amendment)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
FIRSTBANK CORPORATION
(Registrant)
Date: NOVEMBER 13, 1997 \S\ JOHN MCCORMACK
John McCormack
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: NOVEMBER 13, 1997 \S\ MARY D. DECI
Mary D. Deci
Vice President and Chief Financial
Officer (Principal Accounting Officer)
-23-
EXHIBIT INDEX
EXHIBIT
NUMBER DOCUMENTS
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27 Financial Data Schedule