- Firstbank Corporation Announces Second Quarter and Year-To-Date 2007 ResultsCompany Release - 07/26/2007 08:30
Highlights Include: * Earnings per share (diluted) of $0.27 for the second quarter and $0.68 for first half of 2007, compared to $0.44 and $0.81 respectively for 2006 * Second quarter 2007 results include $500,000 provision related to a specific reserve and write-off of goodwill related to real estate brokerage * Non-performing loans increased due primarily to a single credit * Stabilized net interest margin at 3.91% * Completion of ICNB mergerALMA, Mich., July 26, 2007 (PRIME NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation, announced earnings per share of $0.27 for the second quarter of 2007 compared to $0.44 in the second quarter of 2006. Net income was $1,747,000 for the quarter ended June 30, 2007, compared to $2,899,000 for the quarter ended June 30, 2006. Returns on average assets and average equity for the second quarter of 2007 were 0.65% and 7.2%, respectively, compared with 1.10% and 12.3%, respectively, in the second quarter of 2006. Two unique factors, the establishment of a $500,000 specific reserve on a loan and the write-off of goodwill related to Firstbank's real estate brokerage company, affected second quarter results. These factors combined with a stabilized but low net interest margin and continuing weak mortgage and real estate activity to lead to the decline in earnings and profitability. All per share amounts are fully diluted and have been adjusted to reflect the 5% stock dividend paid in December of 2006.
Earnings per share of $0.68 for the first half of 2007 decreased 16.0% compared to the first half of 2006. Net income was $4,405,000 for the six months ended June 30, 2007, down 17.2% from the $5,323,000 for the six months ended June 30, 2006. Returns on average assets and average equity for the first half of 2007 were 0.83% and 9.3%, respectively, compared with 1.03% and 11.6%, respectively, in the first half of 2006. A negative provision for loan loss expense related to the pay-off of a loan which had specific reserves in the first quarter, discussed in previous news releases and filings, more than offset the $500,000 specific reserve and related provision expense booked in the second quarter of 2007, and combined with provision expense related to other loans resulted in a provision expense of $18,000 for the year-to-date period.
Total assets at June 30, 2007, were $1.1 billion and increased 2.6% over the year-ago period. Total portfolio loans of $920 million were 0.9% above the level at June 30, 2006. Total deposits as of June 30, 2007, were $826 million, compared to $810 million at June 30, 2006, an increase of 1.9%. Effective July 1, 2007, Firstbank completed the acquisition of ICNB Financial Corporation. ICNB's banking subsidiary, headquartered in Ionia, Michigan, became Firstbank - West Michigan and added a $229 million asset bank with ten branches to Firstbank's network.
Firstbank's net interest margin, at 3.91% in the second quarter of 2007, increased by 1 basis point from the 3.90% level for the first quarter of 2007 and was 30 basis points lower than the 4.21% level in the second quarter of 2006. The flat yield curve continues to result in reduced spreads between funding costs and earning asset yields. The non-accrual loan discussed below reduced the net interest margin in the second quarter of 2007 by 4 basis points.
Mr. Sullivan stated, "While it is unsettling to see our state leading the nation in terms of economic concerns, we know that Michigan's economy is a cyclical one, and better times will return. Our strategy is to take what actions we can to protect our asset values and keep our balance sheet strong, and to keep our company positioned competitively for success in the future. Our lenders continue to adhere to prudent underwriting standards, utilizing traditionally sound loan structures to protect our interests, and we continue to attempt to identify problems early and work with our borrowing customers to navigate through challenging operating conditions when they occur. While Michigan bank stocks in general are out of favor, our dividend alone provides excellent support for value, and we know the time will come when investors will begin to see opportunity. We are very pleased to welcome the shareholders, employees, and directors of ICNB Financial Corporation into the Firstbank family. Our planning for conversion of data processing systems is going very smoothly, and we wish to thank all those involved for the extremely high level of cooperation, and for their positive spirit about the future."
Firstbank's non-interest income increased modestly in the second quarter of 2007 compared to the first quarter of 2007. The increase in total non-interest income was 7.3%, but $130,000 of the $162,000 increase was related to the absence of loss on sale of securities that occurred in the first quarter. Gain on sale of mortgage loans, while still at low levels historically, did increase 15.7% in the second quarter compared to the first quarter and was 3.6% above the year-ago level.
Firstbank's 55% owned real estate brokerage company, C.A. Hanes, continued to operate near break even levels as the volume of properties sold continued at low levels. Due to the soft real estate market, earlier projections for sales volumes and earnings have not been met. As a result, Firstbank determined that the full amount of the remaining $275,000 of goodwill on the books of C.A. Hanes was impaired. The effect of the 45% minority interest reduced the negative impact on Firstbank's net income to approximately $100,000.
In the second quarter of 2007, total non-interest expense showed an increase of $273,000 from the first quarter, but this increase included the $275,000 charge for goodwill impairment at C.A. Hanes. Firstbank continues to scale back expenses in non-bank subsidiaries and to emphasize expense control in all areas as appropriate. Balanced with the expense control efforts, Firstbank continues to invest in technology, training, and branch expansion. Firstbank - West Michigan opened a new branch office in Hastings, Michigan, in late June, and Keystone Community Bank is building and will open a new office in Paw Paw, Michigan, in the second half of 2007.
In the second quarter of 2007, Firstbank designated as non-accrual a $4.7 million loan on an apartment complex in southeast Michigan. While this apartment complex is currently experiencing cash flow problems, there are certain unique factors that may potentially affect this credit favorably. Nevertheless, due to the uncertainties surrounding the project and current real estate values, Firstbank determined it prudent to establish a $500,000 specific reserve at this time. Firstbank's involvement in this credit was the result of participating in a loan originated by another bank. Loan participations are a common practice in the industry, and Firstbank has approximately $60 million of exposure related to participation loans from diverse sources and geographies within Michigan. Firstbank's exposure to properties in southeast Michigan is relatively small. Provision expense in the second quarter was increased by $500,000 from what it otherwise would have been as a result of establishing the specific reserve. At June 30, 2007, the ratio of the allowance for loan losses to loans was 1.03%, up from 1.00% at March 31, 2007.
Net charge-offs were $319,000 in the second quarter of 2007, or 0.14% of average loans on an annualized basis. For the year-to-date, net charge-offs of $483,000 annualized to 0.11% of average loans. The ratio of non-performing loans (including loans past due over 90 days) to loans rose to 0.97% at June 30, 2007, with the increase driven by the one large loan moved to non-accrual status in the second quarter. In the second quarter of 2007, provision expense of $739,000 exceeded net charge-offs, and, excluding the negative component of provision expense of $971,000 related to a loan pay-off in the first quarter, provision expense exceeded net charge-offs year-to-date.
Shareholders' equity increased 0.8% in the second quarter of 2007, and was 3.5% above the level at June 30, 2006. The ratio of average equity to average assets stood at 9.0% in the second quarter of 2007 - a level consistent over the past two years - indicating that strong equity capital has been maintained. Firstbank did not repurchase shares in the second quarter of 2007.
Firstbank Corporation, headquartered in Alma, Michigan, including the July 1, 2007, acquisition of ICNB Financial Corporation, is a seven bank financial services company with assets of $1.3 billion and 51 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 STATEMENTS OF INCOME (Dollars in thousands except per share data) UNAUDITED Three Months Ended: Six Months Ended: ----------------------------- ---------------- Jun 30 Mar 31 Jun 30 Jun 30 Jun 30 2007 2007 2006 2007 2006 ----------------------------- ---------------- Interest income: Interest and fees on loans $17,042 $ 16,798 $16,688 $ 33,840 $32,531 Investment securities Taxable 686 626 540 1,312 1,053 Exempt from federal income tax 267 270 241 537 489 Short term investments 269 311 76 580 187 ----------------------------- ---------------- Total interest income 18,264 18,005 17,545 36,269 34,260 Interest expense: Deposits 6,589 6,507 5,463 13,096 10,407 Notes payable and other borrowing 2,001 1,977 1,957 3,978 3,786 ----------------------------- ---------------- Total interest expense 8,590 8,484 7,420 17,074 14,193 Net interest income 9,674 9,521 10,125 19,195 20,067 Provision for loan losses 739 (721) 200 18 385 ----------------------------- ---------------- Net interest income after provision for loan losses 8,935 10,242 9,925 19,177 19,682 Noninterest income: Gain on sale of mortgage loans 375 324 362 699 610 Service charges on deposit accounts 994 944 1,016 1,938 1,938 Gain (loss) on sale of securities 0 (130) 1 (130) 7 Mortgage servicing 130 145 120 275 204 Other 895 949 1,499 1,844 2,522 ----------------------------- ---------------- Total noninterest income 2,394 2,232 2,998 4,626 5,281 Noninterest expense: Salaries and employee benefits 4,827 4,730 4,627 9,557 9,185 Occupancy and equipment 1,326 1,351 1,231 2,677 2,503 Amortization of intangibles 436 161 168 597 336 FDIC insurance premium 25 24 25 49 53 Other 2,354 2,429 2,693 4,783 5,159 ----------------------------- ---------------- Total noninterest expense 8,968 8,695 8,744 17,663 17,236 Income before federal income taxes 2,361 3,779 4,179 6,140 7,727 Federal income taxes 614 1,121 1,280 1,735 2,404 ----------------------------- ---------------- Net Income $ 1,747 $ 2,658 $ 2,899 $4,405 $5,323 ============================= ================ Fully Tax Equivalent Net Interest Income $ 9,855 $ 9,698 $10,290 $ 19,553 $20,374 Per Share Data: Basic Earnings $ 0.27 $ 0.41 $ 0.44 $ 0.68 $ 0.81 Diluted Earnings $ 0.27 $ 0.41 $ 0.44 $ 0.68 $ 0.81 Dividends Paid $ 0.225 $ 0.225 $ 0.214 $ 0.450 $ 0.424 Performance Ratios: Return on Average Assets(a) 0.65% 1.01% 1.10% 0.83% 1.03% Return on Average Equity(a) 7.2% 11.4% 12.3% 9.3% 11.6% Net Interest Margin (FTE)(a) 3.91% 3.90% 4.21% 3.90% 4.20% Book Value Per Share(b) $ 15.15 $ 15.05 $ 14.52 $ 15.15 $ 14.52 Average Equity/ Average Assets 9.0% 8.9% 8.9% 8.9% 8.9% Net Charge-offs $ 319 $ 164 $ 141 $ 483 $ 323 Net Charge-offs as a % of Average Loans(c)(a) 0.14% 0.07% 0.06% 0.11% 0.07% (a) Annualized (b) Period End (c) Total loans less loans held for sale FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands) UNAUDITED Jun 30 Mar 31 Dec 31 Jun 30 2007 2007 2006 2006 ---------------------------------------------------- ASSETS Cash and cash equivalents: Cash and due from banks $ 31,305 $ 28,091 $ 32,084 $ 30,065 Short term investments 16,192 32,739 24,853 4,141 ---------------------------------------------------- Total cash and cash equivalents 47,497 60,830 56,937 34,206 Securities available for sale 73,407 68,651 69,125 68,916 Federal Home Loan Bank stock 6,061 5,924 5,924 6,506 Loans: Loans held for sale 628 283 1,120 468 Portfolio loans: Commercial 198,637 199,067 194,810 196,789 Commercial real estate 267,474 266,084 286,249 302,307 Residential mortgage 299,456 295,385 284,137 282,264 Real estate construction 89,173 89,844 81,218 67,933 Consumer 64,840 62,201 63,106 62,403 ---------------------------------------------------- Total portfolio loans 919,580 912,581 909,520 911,696 Less allowance for loan losses (9,501) (9,081) (9,966) (11,621) ---------------------------------------------------- Net portfolio loans 910,079 903,500 899,554 900,075 Premises and equipment, net 20,179 20,251 20,232 19,992 Goodwill 19,819 20,094 20,094 19,888 Other intangibles 2,723 2,884 3,045 3,374 Other assets 19,055 18,684 19,061 18,230 ---------------------------------------------------- TOTAL ASSETS $1,099,448 $1,101,101 $1,095,092 $1,071,655 ==================================================== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing accounts $ 128,651 $ 120,295 $ 131,942 $ 130,940 Interest bearing accounts: Demand 155,085 167,082 161,228 163,988 Savings 137,263 134,484 127,301 134,691 Time 363,673 359,556 350,710 310,805 Wholesale CD's 41,074 52,195 64,245 69,881 ---------------------------------------------------- Total deposits 825,746 833,612 835,426 810,305 Securities sold under agreements to repurchase and overnight borrowings 42,897 38,170 35,179 40,452 FHLB Advances and notes payable 97,370 94,146 94,177 91,706 Subordinated Debt 20,620 20,620 20,620 20,620 Accrued interest and other liabilities 13,894 16,423 13,617 13,033 ---------------------------------------------------- Total liabilities 1,000,527 1,002,971 999,019 976,116 SHAREHOLDERS' EQUITY Preferred stock; no par value, 300,000 shares authorized, none issued -- -- -- -- Common stock; 20,000,000 shares authorized 93,119 92,373 91,652 87,276 Retained earnings 6,026 5,749 4,552 8,734 Accumulated other comprehensive income/(loss) (224) 8 (131) (471) ---------------------------------------------------- Total shareholders' equity 98,921 98,130 96,073 95,539 ---------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $1,099,448 $1,101,101 $1,095,092 $1,071,655 ==================================================== Common stock shares issued and outstanding 6,555,767 6,518,143 6,484,202 6,579,340 Principal Balance of Loans Serviced for Others ($mil) $ 471.5 $ 470.5 $ 472.0 $ 473.5 Asset Quality Ratios: Non-Performing Loans / Loans(a) 0.97% 0.34% 0.47% 0.81% Non-Perf. Loans + OREO / Loans(a) + OREO 1.17% 0.48% 0.65% 0.96% Non-Performing Assets / Total Assets 0.98% 0.40% 0.54% 0.81% Allowance for Loan Loss as a % of Loans(a) 1.03% 1.00% 1.10% 1.27% Allowance / Non-Performing Loans 106% 293% 234% 157% Quarterly Average Balances: Total Portfolio Loans(a) $ 916,775 $ 903,807 $ 915,191 $ 900,802 Total Earning Assets 1,012,900 990,838 999,225 980,713 Total Shareholders' Equity 98,466 96,590 95,761 95,242 Total Assets 1,097,395 1,087,428 1,083,518 1,065,125 Diluted Shares Outstanding 6,545,229 6,516,568 6,543,831 6,623,638 (a) Total Loans less loans held for saleCONTACT: Firstbank CorporationSamuel G. Stone, Executive Vice President and Chief Financial Officer (989) 466-7325