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Firstbank Corporation Announces First Quarter 2013 Results

Highlights Include:

  • For the first quarter of 2013, diluted earnings per share of $0.33 were 32% over the $0.25 for the first quarter of 2012
  • Increases in book value per share and tangible book value per share
  • Planned consolidation of Firstbank charters completed on schedule with little or no disruption of customer service
  • Provision expense down 4.5% from the fourth quarter of 2012 and down 49% from the year-ago first quarter
  • Non-accrual loans down 18% in the quarter and down 41% from year-ago with performing adjusted loans (TDRs) flat with prior quarter; other real estate owned 12% less than year-ago
  • Ratio of allowance for loan losses to loans at 2.17%, compared to 2.16% a year ago
  • Equity ratios remained strong with all affiliate banks continuing to exceed regulatory well-capitalized requirements

ALMA, Mich., April 22, 2013 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced net income of $2,863,000 for the first quarter of 2013, increasing 18.5% from $2,417,000 for the first quarter of 2012, with net income available to common shareholders of $2,648,000 in the first quarter of 2013 increasing 32.6% from $1,997,000 in the first quarter of 2012. Earnings per share were $0.33 in the first quarter of 2013 compared to $0.25 in the first quarter of 2012. Returns on average assets and average equity for the first quarter of 2013 were 0.77% and 7.9%, respectively, compared to 0.66% and 6.3% respectively in the first quarter of 2012.

Firstbank effected the consolidation of its four Firstbank charters into one bank charter on February 1, 2013, in accordance with previously announced plans, with Keystone Community Bank continuing as a separate charter.

Book value per share and tangible book value per share increased in the first quarter of 2013 as earnings exceeded dividends. Book value per share increased to $16.49 at March 31, 2013, from $16.26 at December 31, 2012, and $15.76 at March 31, 2012. Tangible book value per share increased to $11.96 at March 31, 2013, from $11.71 at December 31, 2012, and $11.10 at March 31, 2012.

Mr. Sullivan stated, "This quarter was important for our company, and our staff has performed admirably. The consolidation of our four Firstbank charters into one, with Keystone Community Bank remaining a separate charter, became effective as of February 1st, and the transition was very smooth. Our people in each local market continue with their same responsibilities and are taking care of customer needs with the same tradition of community banking that has always been and continues to be a hallmark of our company. Our customers hardly notice a change. We already are seeing the benefit of regulatory efficiencies, which frees up more time for our people to work with customers and prospects. Some back room changes have already been accomplished and more are on schedule, and our goal is to gain operating efficiencies without customer disruption.

"Strong mortgage refinance business and a very hard working mortgage staff have continued to provide a boost to earnings while loan demand in the Michigan economy continues to lag. We are ready, willing, and able to increase lending when quality demand materializes.

"As has become more common in the industry, we had a quarter in which our provision expense was less than our net charge-offs. This condition is created when reserves were provided in the past for loans that were previously identified as problems, and the loans then reach the point of charge-off. In the largest case of this nature for us in the first quarter, we successfully auctioned a troubled loan and received a price which did result in a charge-off; however the charge-off amount was over $600,000 less than the specific reserve that we previously had set aside.

"As we look to the future, our capital ratios continue to be strong and are building even further, and we are accumulating cash with the intention of redeeming all of the $17 million preferred series "A" stock that remains outstanding. The dividend rate on this preferred stock continues at a cost-effective 5%. Subject to regulatory approval we expect to accomplish the redemption well before the dividend steps up to 9% in February of 2014. As the timing becomes clearer, we anticipate announcing further details in the future.

"I sense a lot of enthusiasm among our staff for the outlook for our company, our state, and our communities. They are dedicated servants of our shareholders and customers, and we owe them much thanks for the progress of our earnings and stock price."

Provision for Loan Losses. The provision for loan losses, at $1,278,000 in the first quarter of 2013, was 4.5% less than the amount required in the fourth quarter of 2012 and was 49% less than the amount in the year-ago first quarter. Net charge-offs of $1,770,000 in the first quarter included $599,000 that had been specifically reserved in periods prior to the beginning of 2013, making it unnecessary to provide the full amount of net charge-offs in the quarter. The provision expense of $1,278,000 in the first quarter of 2013 did exceed the amount of net charge-offs that had not been previously reserved, which amounted to $1,171,000. The level of provision expense and other expenses related to management and collection of the loan portfolio, while coming down, continue to be the major impediments to higher levels of profitability.

Net Interest Income. Net interest income, at $13,012,000 in the first quarter of 2013 decreased 5.5%, compared to the first quarter of 2012, as a result of a 20 basis point decline in net interest margin. Firstbank's net interest margin was 3.83% in the first quarter of 2013, decreasing from 3.91% in the fourth quarter of 2012 and 4.03% in the first quarter of 2012. Loan demand remains weak, resulting in the allocation of more earning assets to the investment portfolio versus the higher-yielding loan portfolio. Also, competitive pricing pressure is forcing yields lower on some loan renewals. The cost of funds to average earning assets declined by 4 basis points, to 0.48% in the first quarter of 2013 from 0.52% in the fourth quarter of 2012, while the yield on average earning assets declined by a greater 11 basis points, to 4.31% in the first quarter of 2013 from 4.42% in the fourth quarter of 2012.

Non-interest Income. Total non-interest income, at $2,895,000 in the first quarter of 2013, was 9.9% lower than in the first quarter of 2012. Although mortgage refinance activity remains at a strong level, gain on sale of mortgages, at $1,561,000 in the first quarter of 2013, decreased 8.6% compared to the fourth quarter of 2012 and was 7.9% below the year-ago level. The category of "other" non-interest income, at $400,000 in the first quarter of 2013, was 43% less than the amount in the fourth quarter of 2012 and 26% less than in the first quarter of 2012. Included in this category of income was a $54,000 net gain on sale of other real estate owned in the first quarter of 2013, compared to a net gain of $214,000 in the fourth quarter of 2012 and a net gain of $219,000 in the first quarter of 2012. Adjustments to the fair value of loan rate and sale commitments contributed a positive $104,000 to this category of income in the fourth quarter of 2012, but a negative $19,000 in the first quarter of 2013.

Non-interest Expense. Total non-interest expense, at $10,601,000 in the first quarter of 2013, was 5.1% lower than the level in the fourth quarter of 2012 and was 4.0% lower than the level in the first quarter of 2012. Salaries and employee benefits were 4.2% higher than in the fourth quarter of 2012 and increased 4.4% compared to the year-ago first quarter. For the first quarter of 2013 compared to the prior quarter, the salary and wage component decreased 2.4%, and benefits increased 34.1% due to higher medical plan costs and taxes that are seasonally higher earlier in each year. Occupancy and equipment costs were 0.1% less than the amount in last year's first quarter. FDIC insurance premium expense, at $259,000 in the first quarter of 2013, was 31% less than the level in the first quarter of 2012 due to the timing of expense recognition related to the FDIC's change in methodology for assessing premiums based on assets rather than deposits. The category of "other" non-interest expense, totaling $2,963,000 in the first quarter of 2013, decreased 24.0% compared to the fourth quarter of 2012 and decreased 15.3% compared to the first quarter of 2012, due to several factors. Contributing to this beneficial comparison was a $600,000 one-time charge to cover the costs of closing five branches, certain adjustments to supplies inventory, and other consolidation related expenses incurred in the fourth quarter of 2012 that did not recur in the first quarter of 2013. Write-downs of valuations of other real estate owned (OREO) and expenses related to OREO also vary quarter to quarter and impact the other expense category. Write-downs of valuations of other real estate owned were $61,000 in the first quarter of 2013, decreased from $193,000 in the fourth quarter of 2012 and $326,000 in the first quarter of 2012.

Total Assets. Total assets of Firstbank Corporation at March 31, 2013, were $1.515 billion, a decrease of 1.2% from year-ago. Evidencing the weak loan demand in our markets, total portfolio loans of $961 million were down 0.3% from the level at December 31, 2012, and decreased 2.1% from March 31, 2012. Commercial and commercial real estate loans decreased 2.8% from year ago, but increased 0.5% in the first quarter of 2013, and real estate construction loans decreased 1.9% from year ago, including a 2.7% decrease in the first quarter of 2013. Residential mortgage loans decreased 2.1% from year ago, including a 0.7% decrease in the first quarter of 2013. Consumer loans were 2.9% above year ago, even though decreasing 1.6% in the first quarter of 2013. While Firstbank has ample capital and funding resources to increase loans on its balance sheet, demand for funds for new ventures by quality borrowers remains weak. Also, the strong mortgage refinance activity has resulted in many mortgage loans being financed in the secondary market rather than on the balance sheet of the company. Total deposits as of March 31, 2013, were $1.257 billion, compared to $1.253 billion at March 31, 2012, an increase of 0.3%. Core deposits at March 31, 2013, were 0.3% above the year-ago level, and they increased $15.8 million in the first quarter of 2013, mostly in interest bearing demand and savings deposits.

Net Charge-offs. Net charge-offs were $1,770,000 in the first quarter of 2013, increasing from $1,331,000 in the fourth quarter of 2012 but decreased from $2,293,000 in the first quarter of 2012. In the first quarter of 2013, net charge-offs annualized represented 0.73% of average loans, compared to 0.55% in the fourth quarter of 2012 and 0.94% in the first quarter of 2012.

Allowance and Asset Quality. At the end of the first quarter of 2013 the ratio of the allowance for loan losses to loans was 2.17%, compared to 2.21% at December 31, 2012, and nearly the same as the 2.16% at March 31, 2012. Performing adjusted loans (troubled debt restructurings, or TDRs) were $20,898,000 at March 31, 2013, compared to $20,720,000 at December 31, 2012, and $18,115,000 at March 31, 2012. Loans past due over 90 days and accruing interest were $64,000 at March 31, 2013, compared to $37,000 at December 31, 2012, and reduced from the $1,185,000 amount at March 31, 2012. Non-accrual loans were $12,872,000 at March 31, 2013, a decrease of 17.8% from the level at December 31, 2012, and a decrease of 40.9% from the $21,782,000 amount at March 31, 2012.

Other real estate owned increased to $3,541,000 at March 31, 2013, compared to the $2,925,000 level at December 31, 2012, but was down 12% from the $4,022,000 level at March 31, 2012.

Equity to Assets Ratio. The ratio of average equity to average assets was a strong 9.8% in the first quarter of 2013, increasing 10 basis points from the prior quarter. The decline in this ratio from 10.3% in the first quarter of 2012 reflects the repurchase in 2012 of $16 million of the original $33 million outstanding of preferred stock and the repurchase and retirement of all outstanding warrants. All of Firstbank Corporation's affiliate banks continue to meet regulatory well-capitalized requirements.

Firstbank Corporation, headquartered in Alma, Michigan, is a bank holding company using a community bank local decision-making format with assets of $1.5 billion and 46 banking offices serving Michigan's Lower Peninsula.

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 redemption of preferred stock, future business growth, changes in interest rates, loan charge-off rates, demand for new loans, future profitability, 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, regulatory 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:
Mar 31 Dec 31 Mar 31
2013 2012 2012
Interest income:
Interest and fees on loans $13,284 $13,769 $14,568
Investment securities
Taxable 962 1,004 1,221
Exempt from federal income tax 371 324 283
Short term investments 55 49 54
Total interest income 14,672 15,146 16,126
Interest expense:
Deposits 1,350 1,428 1,892
Notes payable and other borrowing 310 374 467
Total interest expense 1,660 1,802 2,359
Net interest income 13,012 13,344 13,767
Provision for loan losses 1,278 1,338 2,494
Net interest income after provision for loan losses 11,734 12,006 11,273
Noninterest income:
Gain on sale of mortgage loans 1,561 1,707 1,695
Service charges on deposit accounts 1,020 1,053 1,058
Gain on trading account securities 0 3 1
Gain on sale of AFS securities 50 2 13
Mortgage servicing (136) (57) (94)
Other 400 703 541
Total noninterest income 2,895 3,411 3,214
Noninterest expense:
Salaries and employee benefits 5,918 5,677 5,670
Occupancy and equipment 1,359 1,240 1,361
Amortization of intangibles 102 102 145
FDIC insurance premium 259 256 374
Other 2,963 3,899 3,497
Total noninterest expense 10,601 11,174 11,047
Income before federal income taxes 4,028 4,243 3,440
Federal income taxes 1,165 1,245 1,023
Net Income 2,863 2,998 2,417
Preferred Stock Dividends 215 215 420
Net Income available to Common Shareholders $2,648 $2,783 $1,997
Fully Tax Equivalent Net Interest Income $13,232 $13,538 $13,896
Per Share Data:
Basic Earnings $0.33 $0.35 $0.25
Diluted Earnings $0.33 $0.35 $0.25
Dividends Paid $0.06 $0.21 $0.06
Performance Ratios:
Return on Average Assets (a) 0.77% 0.79% 0.66%
Return on Average Equity (a) 7.9% 8.1% 6.3%
Net Interest Margin (FTE) (a) 3.83% 3.91% 4.03%
Book Value Per Share (b) $16.49 $16.26 $15.76
Tangible Book Value per Share (b) $11.96 $11.71 $11.10
Average Equity/Average Assets 9.8% 9.7% 10.3%
Net Charge-offs $1,770 $1,331 $2,293
Net Charge-offs as a % of Average Loans (c)(a) 0.73% 0.55% 0.94%
(a) Annualized
(b) Period End
(c) Total loans less loans held for sale
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
UNAUDITED
Mar 31 Dec 31 Mar 31
2013 2012 2012
ASSETS
Cash and cash equivalents:
Cash and due from banks $23,275 $38,544 $26,452
Short term investments 90,419 63,984 85,863
Total cash and cash equivalents 113,694 102,528 112,315
Securities available for sale 360,942 353,684 357,970
Federal Home Loan Bank stock 7,266 7,266 7,266
Loans:
Loans held for sale 3,022 2,921 5,417
Portfolio loans:
Commercial 150,845 149,265 156,294
Commercial real estate 358,957 357,831 367,972
Residential mortgage 329,428 331,896 336,658
Real estate construction 56,940 58,530 58,062
Consumer 65,148 66,240 63,326
Total portfolio loans 961,318 963,762 982,312
Less allowance for loan losses (20,848) (21,340) (21,220)
Net portfolio loans 940,470 942,422 961,092
Premises and equipment, net 24,499 24,356 24,845
Goodwill 35,513 35,513 35,513
Other intangibles 863 965 1,302
Other assets 29,234 29,107 27,831
TOTAL ASSETS $1,515,503 $1,498,762 $1,533,551
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $243,126 $251,109 $220,653
Interest bearing accounts:
Demand 371,929 348,598 354,889
Savings 281,043 265,323 262,734
Time 343,495 358,791 397,463
Wholesale CD's 17,285 17,580 17,563
Total deposits 1,256,878 1,241,401 1,253,302
Securities sold under agreements to repurchase and overnight borrowings 43,065 42,785 55,047
FHLB Advances and notes payable 19,959 22,493 24,426
Subordinated Debt 36,084 36,084 36,084
Accrued interest and other liabilities 10,150 8,941 7,236
Total liabilities 1,366,136 1,351,704 1,376,095
SHAREHOLDERS' EQUITY
Preferred stock; no par value, 300,000 shares authorized, 33,000 outstanding 16,912 16,908 32,800
Common stock; 20,000,000 shares authorized 115,861 115,621 115,888
Retained earnings 13,085 10,921 5,485
Accumulated other comprehensive income 3,509 3,608 3,283
Total shareholders' equity 149,367 147,058 157,456
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,515,503 $1,498,762 $1,533,551
Common stock shares issued and outstanding 8,032,661 8,001,903 7,911,209
Principal Balance of Loans Serviced for Others ($mil) $606.7 $608.2 $593.2
Asset Quality Information:
Performing Adjusted Loans (TDRs) (b) 20,898 20,720 18,115
Loans Past Due over 90 Days 64 37 1,185
Non-Accrual Loans 12,872 15,668 21,782
Other Real Estate Owned 3,541 2,925 4,022
Allowance for Loan Loss as a % of Loans (a) 2.17% 2.21% 2.16%
Quarterly Average Balances:
Total Portfolio Loans (a) $963,994 $968,509 $980,115
Total Earning Assets 1,396,999 1,381,004 1,384,056
Total Shareholders' Equity 147,386 145,186 156,218
Total Assets 1,508,084 1,496,135 1,509,777
Diluted Shares Outstanding 8,063,604 7,994,996 7,902,624
(a) Total Loans less loans held for sale
(b) Troubled Debt Restructurings in Call Reports

CONTACT: Samuel G. Stone Executive Vice President and Chief Financial Officer (989) 466-7325Source:Firstbank Corporation