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 MARCH 31, 1999
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...4,497,017 shares outstanding as of April 30, 1999.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (UNAUDITED) page 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. page 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk. page 15
PART II. OTHER INFORMATION
Item 2. Changes in Securities page 16
Item 6. Exhibits and Reports on Form 8-K page 16
SIGNATURES page 17
EXHIBITS
Exhibit 27 -- Financial Data Schedule page 18
Page 2
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1999, AND DECEMBER 31, 1998
March 31, December 31,
1999 1998
(unaudited)
ASSETS
Cash and due from banks $17,547,312 $22,203,430
Short term investments 7,120,071 13,288,206
------------ -----------
Total cash and cash equivalents 24,667,383 35,491,636
Securities available for sale 98,164,436 101,711,023
Loans
Loans held for sale 5,729,088 5,454,928
Portfolio loans
Commercial 195,790,713 192,212,168
Real estate mortgage 172,251,770 171,554,004
Consumer 71,650,911 71,806,822
------------ ------------
Total loans 445,422,482 441,027,922
Less allowance for loan losses (8,966,000) (9,048,000)
------------ -------------
Net loans 436,456,482 431,979,922
Premises and equipment, net 14,188,315 14,057,619
Acquisition intangibles 9,352,507 9,534,210
Accrued interest receivable 3,762,885 3,463,572
Other assets 7,489,485 6,775,852
------------ -------------
TOTAL ASSETS $594,081,493 $603,013,834
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $60,260,533 $68,887,968
Interest bearing accounts:
Demand 147,555,164 146,741,509
Savings 71,499,153 69,514,970
Time 208,850,970 208,908,518
----------- -----------
Total deposits 488,165,820 494,052,965
Securities sold under agreements to
repurchase and overnight borrowings 22,352,968 26,577,527
Notes payable 14,302,423 14,316,550
Accrued interest and other liabilities 9,112,012 8,291,848
------------- -------------
Total liabilities 533,933,223 543,238,890
SHAREHOLDERS' EQUITY
Preferred stock; no par value, 300,000
shares authorized, none issued
Common stock; 10,000,000 shares authorized, 4,513,404 shares issued and
outstanding as of March 31, 1999 (4,527,256 as of December 31, 1998) 52,303,398 52,796,743
Retained earnings 7,089,980 5,874,601
Unrealized gain on available for sale securities 754,892 1,103,600
-------------- -------------
Total shareholders' equity 60,148,270 59,774,944
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $594,081,493 $603,013,834
=========== ===========
See notes to consolidated financial statements.
Page 3
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
MARCH 31, 1999 AND 1998
Three months ended March 31,
1999 1998
Interest income:
Interest and fees on loans $9,536,995 $9,491,632
Investment securities
Taxable 898,301 809,201
Exempt from Federal Income Tax 452,579 443,866
Short term investments 120,165 119,684
------------ ------------
Total interest income 11,008,040 10,864,383
Interest expense:
Deposits 4,305,611 4,410,938
Notes payable and other 432,901 340,618
----------- -----------
Total interest expense 4,738,512 4,751,556
Net interest income 6,269,528 6,112,827
Provision for loan losses 126,000 370,000
----------- -----------
Net interest income after provision for loan losses 6,143,528 5,742,827
Noninterest income:
Gain on sale of mortgage loans 331,326 561,463
Service charges on deposit accounts 356,954 346,357
Trust fees 96,812 67,627
Gain on sale of securities 0 820
Mortgage servicing 19,707 (18,778)
Other 615,743 327,103
---------- -----------
Total noninterest income 1,420,542 1,284,592
Noninterest expense:
Salaries and employee benefits 2,528,472 2,361,215
Occupancy 764,766 673,591
Amortization of intangibles 181,703 184,716
FDIC Insurance premium 19,549 18,257
Michigan Single Business Tax 111,700 99,500
Other 1,189,057 1,200,353
---------- ----------
Total noninterest expense 4,795,247 4,537,632
Income before federal income taxes 2,768,823 2,489,787
Federal income taxes 833,000 742,000
----------- ----------
NET INCOME $ 1,935,823 $ 1,747,787
Other comprehensive income:
Change in unrealized loss on securities, net of tax (348,708) (102,463)
---------- ----------
COMPREHENSIVE INCOME $ 1,587,115 $1,645,324
========== ==========
Basic earnings per share $0.43 $0.39
==== ====
Diluted earnings per share $0.41 $0.37
==== ====
Dividends per share $0.16 $0.14
==== ====
See notes to consolidated financial statements.
Page 4
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, 1997 $46,223,949 $7,420,886 $887,059 $54,531,894
Cash dividends - $.55 per share (2,494,909) (2,494,909)
Issuance of 14,395 shares of common stock
through exercise of stock options 251,492 251,492
Issuance of 21,997 shares of common stock
through dividend reinvestment plan 635,966 635,966
Issuance of 16,747 shares of common stock
through supplemental purchase under
dividend reinvestment plan 482,354 482,354
5% stock dividend - 215,388 shares 6,353,282 (6,353,946) (664)
Net change in unrealized appreciation
(depreciation) on available for
sale securities 216,541 216,541
Purchase of 34,990 shares of stock (1,213,670) (1,213,670)
Issuance of 1,509 shares of stock 63,370 63,370
Net income for 1998 7,302,570 7,302,570
BALANCES AT DECEMBER 31, 1998 $52,796,743 $5,874,601 $1,103,600 $59,774,944
----------- ---------- ----------- -----------
Cash dividends - $.16 per share (720,444) (720,444)
Issuance of 5,073 shares of common stock
through exercise of stock options 84,312 84,312
Issuance of 9,863 shares of common stock
through dividend reinvestment plan 274,088 274,088
Issuance of 6,107 shares of common stock
through supplemental purchase under
dividend reinvestment plan 177,845 177,845
Net change in unrealized appreciation
(depreciation) on available for
sale securities (348,708) (348,708)
Purchase of 35,980 shares of stock (1,061,308) (1,061,308)
Issuance of 1,085 shares of stock 31,718 31,718
Net income year to date 1,935,823 1,935,823
----------- ---------- ---------- -----------
BALANCES AT MARCH 31, 1999 $52,303,398 $7,089,980 $754,892 $60,148,270
=========== ========== ========== ===========
See notes to consolidated financial statements.
Page 5
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
(UNAUDITED)
Three months ended March 31,
1999 1998
OPERATING ACTIVITIES
Net income $1,935,823 $1,747,787
Adjustments to reconcile net income to net cash provided
by operating activities
Provision for loan losses 126,000 370,000
Depreciation of premises and equipment 319,784 320,419
Net amortization (accretion) of security premiums/discounts 86,202 (11,500)
Gain on sale of securities (820)
Amortization of goodwill and other intangibles 181,703 186,216
Gain on sale of mortgage loans (331,326) (561,463)
Proceeds from sales of mortgage loans 19,156,051 37,802,164
Loans originated for sale (19,098,885) (37,921,674)
Increase in accrued interest receivable and other assets (833,311) (1,003,642)
Increase in accrued interest payable and other liabilities 820,164 1,479,817
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 2,362,205 2,407,304
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 350,000 610,235
Proceeds from maturities of securities available for sale 8,923,988 7,822,353
Purchases of securities available for sale (6,341,946) (16,853,995)
Net (increase) decrease in portfolio loans (4,328,400) 1,832,579
Net purchases of premises and equipment (450,480) (296,456)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,846,838) (6,885,284)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (5,887,145) 10,739,553
Decrease in securities sold under agreements
to repurchase and other short term borrowings (4,224,559) (3,052,441)
Increase (decrease) of note payable (14,127) 1,486,673
Cash proceeds from issuance of common stock 567,963 495,829
Purchase of common stock (1,061,308)
Cash dividends (720,444) (623,157)
------------ ------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (11,339,620) 9,046,457
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (10,824,253) 4,568,477
Cash and cash equivalents at beginning of period 35,491,636 24,115,503
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,667,383 $ 28,683,980
============ ============
Supplemental Disclosure
Interest Paid $4,700,188 $4,609,350
Income Taxes Paid $0 $0
See notes to consolidated financial statements.
Page 6
FIRSTBANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
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 three month period ended March 31,
1999, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1999. The balance sheet at December 31, 1998, 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, 1998.
Under a new accounting standard, comprehensive income is now reported for all
periods. Comprehensive income includes both net income and other comprehensive
income. Other comprehensive income includes the change in unrealized gains and
losses on securities available for sale.
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. 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 $66,663,234 and $64,674,655 at March 31, 1999, and December 31,
1998, respectively.
Page 7
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:
March 31, December 31,
(Dollars in thousands) 1999 1998
-------------------------------------------------- ----------- ------------
Nonperforming loans:
Nonaccrual loans $708 $ 790
Loans 90 days or more past due 303 621
Renegotiated loans 79 86
------ ------
Total nonperforming loans $1,090 $1,497
===== =====
Property from defaulted loans $ 704 $ 527
===== ======
Nonperforming loans as a percent of:
Total loans .24% .34%
==== ====
Allowance for loan losses 12.16% 16.55%
====== ======
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.
Three Twelve Three
months months months
ended ended ended
March 31, December 31, March 31,
(Dollars in thousands) 1999 1998 1998
- ----------------------------------------------------- ---------------- --------------- --------------
Balance at beginning of period $ 9,048 $ 8,114 $ 8,114
Charge-offs (324) (712) (160)
Recoveries 116 469 95
------- ------- ------
Net charge-offs (208) (243) (65)
Additions to allowance for
loan losses 126 1,177 370
------- ------- ------
Balance at end of period $ 8,966 $ 9,048 $8,419
======= ======= ======
Average loans outstanding
during the period $443,071 $414,322 $403,195
======== ======= =======
Loans outstanding at end of period $445,422 $441,028 $403,591
======== ======= =======
Allowance as a percent of:
Total loans at end of period 2.01% 2.05% 2.09%
==== ==== ====
Nonperforming loans at end of period 822% 604% 597%
=== === ===
Net charge-offs as a percent of:
Average loans outstanding .05% .06% .02%
=== === ===
Average Allowance for loan losses 2.29% 1.67% .79%
==== ==== ====
Page 8
NOTE E - RECLASSIFICATION
Certain 1998 amounts have been reclassified to conform to the 1999 presentation.
Page 9
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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
Total assets of the Corporation decreased by $8.9 million, or 1.5%, during the
first quarter of 1999.
During the first three months of 1999, cash and cash equivalents decreased $10.8
million, or 30.5%, and securities available for sale declined 3.49% or $3.5
million. This decrease is the result of maturing investment securities that were
short term investments used to offset municipal deposits.
Net loans grew $4.5 million or 1.04% during the first quarter of 1999. The
allowance for loan losses decreased $82,000 or .91% during the first three
months of 1999. At March 31, 1999, the allowance as a percent of outstanding
loans was 2.01%, compared to 2.05% at December 31, 1998. The allowance as a
percent of nonperforming loans was 822% at the end of the first quarter of 1999
compared to 604% at year end 1998. During the first quarter of 1999, the
allowance was decreased by net charge offs of $208,000 and increased by a
provision of $126,000. 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.
Total deposits decreased 1.19%, or $5.9 million, in the period from December 31,
1998, to March 31, 1999. Each of the Corporation's affiliate banks has
experienced a reduction in balances in noninterest bearing accounts. The total
decline in noninterest bearing accounts of $8.6 million represents a 12.52%
reduction during the first quarter of 1999. A portion of the reduction,
approximately 50%, is explained by municipal deposits that were in accounts for
only a short period at the end of 1998. Interest bearing demand deposits and
savings have grown during the first quarter, while time deposits have
experienced a slight decline.
Securities sold under agreements to repurchase increased 3.3%, or $625,000,
during the first quarter of 1999 while overnight borrowings have decreased by
61% or $4.9 million.
Total shareholders' equity increased $373,000, or .62%, in the first quarter of
1999. Net income of $1,936,000 and stock issuances of $567,000 have increased
shareholders' equity while stock repurchases of $1,061,000, dividends of
$720,000 and net unrealized loss on available for sale securities of $349,000
have decreased shareholders' equity. In January 1999, the Board of Directors
authorized a stock repurchase plan to acquire up to 200,000 shares of Firstbank
Corporation stock. At March 31, 1999, the Corporation had acquired 35,571 shares
as a result of this repurchase plan. Book value was $13.28 per share at March
31, 1999, and $12.98 per share at December 31, 1998.
Page 10
On April 1, 1999, one of the affiliate banks sold their 100% interest in a
general insurance agency to an unrelated party. The affiliate bank financed the
transaction. The $224,000 gain from the transaction will be recognized over the
10 year financing period.
The following table discloses compliance with current regulatory capital
requirements on a consolidated basis:
Total
Tier 1 Risk-based
(Dollars in thousands) Leverage Capital Capital
Capital balances at March 31, 1999 $49,923 $49,923 $55,445
Required Regulatory Capital 23,385 17,534 35,067
Capital in excess of regulatory minimums 26,538 32,389 20,378
Capital ratios at March 31, 1999 8.54% 11.39% 12.65%
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
For the first quarter of 1999, net income was $1,936,000, basic earnings per
share was $.43 and diluted earnings per share was $.41, compared to $1,748,000,
$.39 and $.37 for the first quarter of 1998. Average earning assets increased
$53 million, or 10.67%, for the quarter ended March 31, 1999 compared to the
first quarter of 1998. The yield on earning assets was 8.27% for the first
quarter of 1999 compared to 9.02% for the same period in 1998, a reduction of 75
basis points. The cost of funding rate related liabilities decreased 37 basis
points in the comparable periods, a cost of 3.66% for the first quarter of 1999
compared to 4.03% for the first quarter of 1998. Net interest margin for the
first quarter of 1999 was 4.76% compared to 5.13% for the comparable period in
1998, a decrease of 37 basis points.
The provision for loan losses was $126,000 in the first quarter of 1999 compared
to $370,000 for the same period in 1998.
Total noninterest income increased $136,000, or 10.58%, in the first quarter of
1999 compared to the same period in 1998. The Corporation has experienced a net
decrease in gain on sale of mortgage loans and mortgage servicing of $192,000.
As mortgage rates have risen or stabilized, mortgage activity has decreased
substantially. Trust fees have increased 43.16%, or $29,000, when comparing the
first quarters of 1999 and 1998. The increase resulted from offering employee
benefit record keeping services and a fee increase to market rates have created
this change. The majority of the increase in other income, offset by an
identical entry in other expense, is the recognition of an increase in market
value of $117,000 in deferred compensation assets. These entries have no effect
on net income.
Page 11
Noninterest expense increased a modest 5.68%, or $258,000, when comparing the
first quarter of 1999 with the same period in 1998. The increase in salaries and
employee benefits reflects the annual salary adjustments and the addition of
staff. Occupancy expenses rose 13.54%, or $91,000, when comparing the first
three months of 1999 and 1998. Since the first quarter of 1998, the Corporation
has added an updated communication system, updated its mainframe computer and
completed and occupied a new operations center. Depreciation on these items will
continue to increase the 1999 costs in comparison to the 1998 results.
YEAR 2000 READINESS DISCLOSURE
The Corporation is currently in the process of addressing a potential problem
that is facing all users of automated information systems. The problem is that
many computer systems that process transactions based on two digits representing
the year of transaction may recognize a date using "00" as the year 1900 rather
than the year 2000. The problem could affect a wide variety of automated
information systems, such as mainframe applications, personal computers, and
communication systems, in the form of software failure, errors, or
miscalculations. By nature, the banking and financial services industries are
highly dependent upon computer systems because of significant transaction
volumes and a date dependency for interest measurements on financial instruments
such as loans and deposits. The Corporation's business is also dependent upon
the error free operation of computer systems of its telecommunications
providers, operators of electronic payment systems, and vendors who provide a
variety of products and services needed by the Corporation and its subsidiaries
to conduct their businesses. Data processing system failures, errors or
miscalculations could affect the ability of some borrowers to make timely
payment of amounts due, and could affect the long term financial viability of
some borrowers.
The Corporation developed a plan to prepare for the year 2000 in 1997. This plan
began with the performance of an inventory of software applications,
communicating with third party vendors and suppliers, and obtaining
certification of compliance with third party providers. The Corporation has a
comprehensive, written plan, which is regularly updated and monitored by
technical personnel. Plan status is regularly reviewed by management of the
Corporation. As of March 31, 1999, it is estimated that this plan is
approximately 85% complete. The Corporation's subsidiaries have also initiated a
program of informing relevant customers of the Year 2000 issue and encouraging
them to address it in their own businesses.
The Corporation will continue to assess the impact of the Year 2000 issue on the
remainder of its computer based systems and applications. The Corporation's goal
is to have all systems and applications compliant with the century change by mid
1999, allowing the rest of 1999 to be used for full validation and testing.
The Corporation estimates it will spend approximately $330,000 during 1998 and
1999 to remediate its Year 2000 issues. These costs will primarily consist of
personnel expense for staff dedicated to the effort and professional fees paid
to third party providers of remedial services. Costs to date associated with
Year 2000 issues total $278,000 which include expenditures of $21,000 and
projected salary costs of $257,000. It is the Corporation's policy to expense
such costs as incurred. The Corporation may also invest in new or upgraded
technology which has definable value lasting beyond 2000. In these instances,
where Year
Page 12
2000 compliance is merely ancillary, the Corporation may capitalize and
depreciate such an asset over its estimated useful life. In addition to
reviewing its own computer operating systems and applications, the Corporation
has initiated formal communications with its significant suppliers and large
customers to determine the extent to which the Corporation's interface systems
are vulnerable to those third parties' failure to resolve their own Year 2000
issues. There is no assurance that the systems of other companies on which the
Corporation's systems rely will be timely converted. If such modifications and
conversions are not made, or are not completed timely, the Year 2000 issue could
have an adverse impact on the operations of the Corporation. The Corporation has
identified its critical systems that are dependent on outside providers. For
each critical system, extensive testing has either been scheduled or has been
completed. To date, all tested systems have been able to accommodate dates
subsequent to January 1, 2000. The Corporation has contracted with an offsite
location to provide a backup site for its core application processing in the
event the Corporation's hardware of software should not function. Based on
testing of the Corporation's core processing hardware and software management
believes that both are Year 2000 compliant.
Based on currently available information, management does not presently
anticipate that the costs to address the Year 2000 issues will have a materially
adverse impact on the Corporation's financial conditions, results of operations,
or liquidity. Nevertheless, the inability of the Corporation to successfully
address Year 2000 issues could result in interruptions of the Corporation's
business and could have a materially adverse effect on the Corporation's results
of operations.
The costs of the project and the date on which the Corporation believes it will
complete the Year 2000 modifications are based on management's best estimates.
There can be no guarantee that these estimates will be achieved and actual
results could differ from those anticipated. Specific factors that might cause
differences include, but are not limited to, the ability of other companies on
which the Corporation's systems rely to modify or convert their systems to be
Year 2000 compliant, the ability to locate and correct all relevant computer
codes, and similar uncertainties.
This Year 2000 Readiness Disclosure is based upon and partially repeats
information provided by the Corporation's outside consultants, vendors and
others regarding the Year 2000 readiness of the Corporation and its customers,
vendors, and other parties. Although the Corporation believes this information
to be accurate, it has not in each case independently verified such information.
FORWARD LOOKING STATEMENTS
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 the Corporation itself.
Words such as "anticipate," "believe," "determine," "estimate," "expect,"
"forecast," "intend," "is likely," "plan," "project," "opinion," variations of
such terms, and similar expressions are intended to identify such
forward-looking statements. The Year 2000 Readiness Disclosure, the
presentations and discussions of the provision and allowance for loan losses,
and determinations as to the need for other allowances presented in this report
are inherently forward-looking statements in that they involve judgements and
statements of belief as to the outcome of future events. These statements are
not guarantees of future performance and involve certain risks, uncertainties,
and assumptions that are difficult to predict with regard to timing, extent,
Page 13
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. Internal and external factors that may cause such a
difference 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 and
customer ability to repay loans; software failure, errors or miscalculations;
the ability of other companies on which the Corporation relies to be Year 2000
compliant; the ability of the Corporation to locate and correct all data
sensitive computer code; and the vicissitudes of the national economy. The
Corporation undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events, or otherwise.
Page 14
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information under the headings, "Liquidity and Interest Rate Sensitivity" on
pages 8 and 9 and "Quantitative and Qualitative Disclosure About Market Risk" on
pages 9 through 11 in the registrant's annual report to shareholders for the
year ended December 31, 1998, is here incorporated by reference. Firstbank's
annual report is filed as Exhibit 13 to its Form 10-K annual report for its
fiscal year ended December 31, 1998.
Firstbank faces market risk to the extent that both earnings and the fair values
of its financial instruments are affected by changes in interest rates. The
Corporation manages this risk with static GAP analysis and simulation modeling.
Throughout the first quarter of 1999, the results of these measurement
techniques were within the Corporation's policy guidelines. The Corporation does
not believe that there has been a material change in the nature of the
Corporation's primary market risk exposures, including the categories of market
risk to which the Corporation is exposed and the particular markets that present
the primary risk of loss to the Corporation. As of the date of this Form 10-Q
Quarterly Report, the Corporation does not know of or expect there to be any
material change in the general nature of its primary market risk exposure in the
near term.
The methods by which the Corporation manages its primary market risk exposures,
as described in the sections of its Form 10-K Annual Report incorporated by
reference in response to this item, have not changed materially during the
current year. As of the date of this Form 10-Q quarterly report, the Corporation
does not expect to change those methods in the near term. However, the
Corporation may change those methods in the future to adapt to changes in
circumstances or to implement new techniques.
The Corporation's market risk exposure is mainly comprised of its vulnerability
to interest rate risk. Prevailing interest rates and interest rate relationships
in the future will be primarily determined by market factors which are outside
of Firstbank's control. All information provided in response to this item
consists of forward looking statements. Reference is made to the section
captioned "Forward Looking Statements" on page 13 of this Form 10-Q quarterly
report for a discussion of the limitations on Firstbank's responsibility for
such statements.
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PART II. OTHER INFORMATION
Item 2. Changes in Securities
At various times in the first quarter of 1999, the Corporation issued
unregistered shares of its common stock totaling 880 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
issuance did not involve any general solicitation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 -- Financial Data Schedule
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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: May 12, 1999 \s\ John McCormack
John McCormack
President, Chief Executive Officer and
Director (Principal Executive Officer)
Date: May 12, 1999 \s\ Mary D. Deci
Mary D. Deci
Vice President and Chief Financial Officer
(Principal Accounting Officer)
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