-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OvKy3pwxsJusmxR1nqk14SZ3x7qIdwlzalEla5MyxFvMGNwWvSu7BUlYWkxIK67K rWD428Xl85XFFEIMbstDdQ== 0000905729-99-000066.txt : 19990330 0000905729-99-000066.hdr.sgml : 19990330 ACCESSION NUMBER: 0000905729-99-000066 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTBANK CORP CENTRAL INDEX KEY: 0000778972 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 382633910 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14209 FILM NUMBER: 99576144 BUSINESS ADDRESS: STREET 1: 311 WOODWORTH AVE STREET 2: PO BOX 1029 CITY: ALMA STATE: MI ZIP: 48801 BUSINESS PHONE: 2087469610 MAIL ADDRESS: STREET 1: 311 WOODWORTH AVE CITY: ALMA STATE: MI ZIP: 48801 10-K405 1 =============================================================================== U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 1998 [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [No Fee Required] For the transition period from ______________ to _______________ Commission File Number: 0-14209 FIRSTBANK CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-2633910 (State of Incorporation) (I.R.S. Employer Identification No.) 311 Woodworth Avenue Alma, Michigan 48801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (517) 463-3131 Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the 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 such filing requirements for the past 90 days. Yes __X__ No _____ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting stock held by nonaffiliates of the registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. Aggregate Market Value as of March 8, 1999: $133,050,200 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common stock outstanding at March 8, 1999: 4,500,641 shares DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's annual report to shareholders for the year ended December 31, 1998, are incorporated by reference in Part II. Portions of the definitive proxy statement for the registrant's annual shareholders' meeting to be held April 26, 1999, are incorporated by reference in Part III. =============================================================================== -2- FORWARD LOOKING STATEMENTS This annual report on Form 10-K including, without limitation, management's discussion and analysis of financial conditions and results of operations and other sections of the Corporation's Annual Report to Shareholders which are incorporated by reference in this report contain 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 or incorporated by reference in this report are inherently forward-looking statements in that they involve judgments 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, 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 date sensitive computer codes; 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. PART I ITEM 1. BUSINESS. Firstbank Corporation (the "Corporation") is a bank holding company. The Corporation owns all of the outstanding stock of Bank of Alma, Firstbank (Mount Pleasant), 1st Bank (West Branch), and Bank of Lakeview. The Corporation's business is concentrated in a single industry segment--commercial banking. Each subsidiary bank of the Corporation is a full-service, community bank. The subsidiary banks offer all customary banking services, including the acceptance of checking, savings, and time deposits, and the making of commercial, mortgage (principally single family), home improvement, automobile, and other consumer loans. Bank of Alma also offers trust services. Bank of Alma owns Niles Agency, Incorporated, which offers general insurance agency services. 1st Bank owns 1st Armored, Incorporated, an armored car service provider and 1st Collections, Incorporated, a collection service. Each of the three subsidiary banks also offers securities brokerage services at their main offices through arrangements with third party brokerage firms. The principal sources of revenues for the Corporation and its subsidiaries are interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for approximately 76 percent of total revenues in 1998, 80 percent of total revenues in 1997 and 1996. In addition, interest income from investment securities accounted for approximately 12 percent of total revenues on a consolidated basis in 1998, 11 percent of total revenues on a consolidated basis in 1997, and 10 percent in 1996. No other single source of revenue accounted for 15 percent or more of the Corporation's total revenues in any of the last three years. The Corporation has no foreign assets and no income from foreign sources. The business of the subsidiary banks of the Corporation is not seasonal to any material extent. Bank of Alma is a Michigan state-chartered bank. It and its predecessors have operated continuously in Alma, Michigan, since 1880. Its main office and one branch are located in Alma. Bank of Alma also has one full service branch located in each of the following communities near Alma: Ashley, Auburn, Ithaca, Merrill, Pine River Township, Riverdale, St. Charles, St. Louis, and Vestaburg. Firstbank is a Michigan state-chartered bank which was incorporated in 1894. Its main office and one branch are located in Mount Pleasant, Michigan. Firstbank also has one full service branch located in each of the following communities near Mount Pleasant: Clare, Shepherd, Union Township, and Winn. 1st Bank is a Michigan state-chartered bank which was incorporated in 1980. Its main office and one branch are located in West Branch, Michigan. 1st Bank also has one full service branch located in each of the following communities near West Branch: Fairview, Hale, Higgins Lake, Rose City, St. Helen, and West Branch Township. -2- Bank of Lakeview is a Michigan state-chartered bank which was established in 1904. Its main office and one branch are located in Lakeview, and it has branches in Howard City, Morley, Remus, and Canadian Lakes (Morton Township). The following table shows comparative information concerning the Corporation's subsidiary banks:
DECEMBER 31, 1998 ---------------------------------------------------------------- BANK OF ALMA FIRSTBANK 1ST BANK BANK OF LAKEVIEW ------------ ---------- --------- ---------------- (In thousands of Dollars) Assets $223,076 $ 111,740 $156,785 $104,939 Deposits 181,005 94,238 141,022 80,026 Loans 146,735 92,701 118,640 82,952
As of December 31, 1998, the Corporation and its subsidiaries employed 294 persons on a full-time equivalent basis. Banking in the Corporation's market areas and in the State of Michigan is highly competitive. In addition to competition from other commercial banks, banks face significant competition from nonbank financial institutions. Savings and loan associations are able to compete aggressively with commercial banks for deposits and loans. Credit unions and finance companies are also significant factors in the consumer loan market. Insurance companies, investment firms, and retailers are significant competitors for investment products. Banks compete for deposits with a broad spectrum of other types of investments such as mutual funds, debt securities of corporations, and debt securities of the federal government, state governments, and their respective agencies. The principal methods of competition for financial services are price (interest rates paid on deposits, interest rates charged on loans, and fees charged for services) and service (the convenience and quality of services rendered to customers). The Corporation's subsidiary banks compete directly with other banks, thrift institutions, credit unions and other nondepository financial institutions in four geographic banking markets where their offices are located. Bank of Alma primarily competes in Gratiot, Midland, Montcalm, and Saginaw Counties; Firstbank primarily in Isabella and Clare Counties; 1st Bank primarily in Iosco, Oscoda, Ogemaw, and Roscommon Counties; and Bank of Lakeview primarily in Mecosta and Montcalm Counties. -3- Banks and bank holding companies are extensively regulated. The Corporation is a bank holding company that is regulated by the Federal Reserve System. Bank of Alma, Firstbank, 1st Bank, and Bank of Lakeview are chartered under state law and are supervised, examined, and regulated by the Federal Deposit Insurance Corporation and the Financial Institutions Bureau of the Michigan Department of Consumer and Industry Services. Laws that govern banks significantly limit their business activities in a number of respects. Prior approval of the Federal Reserve Board, and in some cases various other governing agencies, is required for the Corporation to acquire control of any additional banks or branches. The business activities of the Corporation and its subsidiaries are limited to banking and to other activities which are determined by the Federal Reserve Board to be closely related to banking. Transactions among the Corporation and the Corporation's subsidiary banks are significantly restricted. In addition, bank regulations govern the ability of the subsidiary banks to pay dividends or make other distributions to the Corporation. In addition to laws that affect businesses in general, banks are subject to a number of federal and state laws and regulations which have a material impact on their business. These include, among others, state usury laws, state laws relating to fiduciaries, the Truth In Lending Act, the Truth in Savings Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds Availability Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Bank Secrecy Act, the Community Development and Regulatory Improvement Act, the Financial Institutions Reform, Recovery and Enforcement Act, the FDIC Improvement Act of 1991 (the "FDIC Improvement Act"), electronic funds transfer laws, redlining laws, antitrust laws, environmental laws, and privacy laws. The instruments of government monetary policy, as determined by the Federal Reserve Board, may influence the growth and distribution of bank loans, investments, and deposits, and may also affect interest rates on loans and deposits. These policies have a significant effect on the operating results of banks. Under applicable laws, regulations, and policies, the Corporation is expected to act as a source of financial strength to each subsidiary bank and to commit resources to support each subsidiary bank. Any insured depository institution owned by the Corporation may be assessed for losses incurred by the Federal Deposit Insurance Corporation (the "FDIC") in connection with assistance provided to, or the failure of, any other insured depository institution owned by the Corporation. -4- The FDIC has authority to impose special assessments on insured depository institutions to repay FDIC borrowings from the United States Treasury or other sources and to establish periodic assessment rates on Bank Insurance Fund ("BIF") member banks so as to maintain the BIF at the designated reserve ratio defined in the FDIC Improvement Act. Bank of Alma and Firstbank also hold deposits that are insured by the Savings Association Insurance Fund ("SAIF") administered by the FDIC. Deposit insurance premiums on those deposits are paid to the SAIF at rates applicable to that fund. The FDIC has implemented a system of risk-based premiums for deposit insurance pursuant to which the premiums paid by a depository institution will be based on the perceived probability that the insurance funds will incur a loss in respect of that institution. Federal law allows bank holding companies to acquire banks located in any state in the United States without regard to geographic restrictions or reciprocity requirements imposed by state law and to establish interstate branch networks through acquisitions of other banks. Michigan and federal law permits both U.S. and non-U.S. banks to establish branch offices in Michigan. The Michigan Banking Code permits, in appropriate circumstances and with the approval of the Commissioner, (i) acquisition of Michigan banks by FDIC-insured banks, savings banks, or savings and loan associations located in other states, (ii) sale by a Michigan bank of branches to an FDIC-insured bank, savings bank, or savings and loan association located in a state in which a Michigan bank could purchase branches of the purchasing entity, (iii) consolidation of Michigan banks and FDIC-insured banks, savings banks, or savings and loan associations located in other states having laws permitting such consolidation, (iv) establishment of branches in Michigan by FDIC-insured banks located in other states, the District of Columbia, or U.S. territories or protectorates having laws permitting a Michigan bank to establish a branch in such jurisdiction, and (v) establishment by foreign banks of branches located in Michigan. Risk-based capital and leverage standards apply to all banks under federal regulations. The risk-based capital ratio standards establish a systematic analytical framework that is intended to make regulatory capital requirements sensitive to differences in risk profiles among banking organizations, take off-balance sheet liability exposures into explicit account in assessing capital adequacy, and minimize disincentives to hold liquid, low-risk assets. Risk-based capital ratios are determined by allocating assets and specified off- balance sheet commitments into risk-weighting categories. Higher levels of capital are required for categories perceived as representing greater risk. -5- Failure to meet minimum capital ratio standards could subject a bank to a variety of enforcement remedies available to the federal regulatory authorities, including restrictions on certain kinds of activities, restrictions on asset growth, limitations on the ability to pay dividends, the issuance of a directive to increase capital, and the termination of deposit insurance by the FDIC. Maintaining capital at "well capitalized" levels is one condition to the assessment of federal deposit insurance premiums at the lowest available rate. Each of the Corporation's subsidiary banks, and the Corporation itself on a consolidated basis, maintains capital at levels which exceed both the minimum and well capitalized levels under currently applicable regulatory requirements. The following table summarizes compliance with regulatory capital ratios by the Corporation and each of its subsidiary banks at December 31, 1998.
TIER 1 LEVERAGE TIER 1 TOTAL RISK-BASED RATIO CAPITAL RATIO CAPITAL RATIO ----- ------------- ------------- Minimum regulatory requirement 4% 4% 8% Well capitalized regulatory level 5% 6% 10% Firstbank Corporation-Consolidated 8.33% 11.21% 12.47% Bank of Alma 7.94% 10.09% 11.35% Firstbank 8.75% 10.66% 11.91% 1st Bank 7.31% 10.69% 11.96% Bank of Lakeview 10.01% 13.83% 15.09%
The following table shows the amounts by which the Corporation's capital (on a consolidated basis) exceeds current regulatory requirements on a dollar amount basis: -6-
TOTAL TIER 1 TIER 1 RISK-BASED LEVERAGE CAPITAL CAPITAL -------- ------- ------- (In Thousands of Dollars) Capital balances at December 31, 1998 $49,025 $ 49,025 $54,534 Required regulatory capital 23,534 17,487 34,975 -------- ------- ------- Capital in excess of regulatory minimums $ 25,491 $ 31,538 $ 19,559 ======== ======= =======
The nature of the business of the Corporation's subsidiaries is such that they hold title, on a temporary or permanent basis, to a number of parcels of real property. These include property owned for branch offices and other business purposes as well as properties taken in or in lieu of foreclosures to satisfy loans in default. Under current state and federal laws, present and past owners of real property may be exposed to liability for the cost of remediation of contamination on or originating from such properties, even though they are wholly innocent of the actions which caused the contamination. Such liabilities can be material and can exceed the value of the contaminated property. The following tables provide information concerning the business of the registrant. -7- DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 --------------------------- -------------------------- -------------------------- AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE ------- -------- ---- ------- -------- ---- ------- -------- ---- AVERAGE ASSETS: (Dollars in Thousands) Interest earning assets: Securities available for sale Taxable Securities $ 55,861 $ 3,431 6.15 $ 40,255 $ 2,546 5.90 $ 30,687 $ 1,922 6.27% Tax-exempt securities 33,455 2,589 7.74 29,123 2,352 8.07 26,570 2,136 8.04 --------- --------- ---- --------- -------- ---- -------- ------- ---- Total Securities 89,316 6,020 6.74 69,378 4,898 7.05 57,257 4,058 7.09 Loans 412,884 38,768 9.39 352,539 33,412 9.04 290,006 27,472 9.47 Federal funds sold 13,446 728 5.41 5,414 289 5.37 3,032 161 5.31 Interest-bearing deposits 809 42 5.20 309 22 7.17 205 14 6.86 --------- --------- ---- --------- -------- ---- -------- ------- ---- Total earning assets 516,455 45,558 8.82 427,640 38,621 9.02 350,500 31,705 9.04 Nonaccrual loans 1,432 519 141 Less allowance for loan loss (8,543) (7,142) (5,436) Cash and due from banks 19,173 16,413 13,744 Other nonearning assets 32,421 23,009 13,880 --------- --------- ------- Total assets $ 560,938 $ 460,439 $372,829 ========= ========= ======== AVERAGE LIABILITIES: Interest-bearing deposits: Demand 126,030 4,440 3.52 $ 95,572 $ 3,393 3.55% $ 71,710 $ 2,476 3.45% Savings 67,085 1,734 2.58 61,286 1,664 2.71 58,282 1,643 2.82 Time 211,243 11,718 5.55 188,378 10,571 5.61 151,622 8,463 5.58 Federal funds purchased and repurchase agreements 17,601 757 4.30 13,468 624 4.62 13,279 650 4.90 Notes payable 11,464 704 6.14 4,480 278 6.08 866 49 5.70 --------- --------- ---- --------- -------- ---- -------- ------- ---- Total interest- bearing liabilities 433,423 19,353 4.47 363,184 16,530 4.49 295,759 13,281 4.47% -8- Demand deposits 63,257 50,647 42,521 --------- --------- ------- Total funds 496,680 413,831 338,280 Other liabilities 8,000 5,368 3,909 --------- --------- ------- Total liabilities 504,680 419,199 342,189 Average Shareholders' Equity 56,258 41,240 30,640 --------- --------- ------- Total liabilities and shareholders' equity $ 560,938 $ 460,439 $372,829 ========= ========= ======== NET INTEREST INCOME $ 26,205 $ 22,091 $ 18,424 ========= ======== ======== RATE SPREAD 4.35% 4.53% 4.57% ==== ==== ==== NET INTEREST MARGIN (PERCENT OF AVERAGE EARNING ASSETS) 5.06% 5.16% 5.26% ==== ==== ==== Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. Including loan fees of $1,726,000, $1,387,000, and $1,327,000, respectively. Interest on nonaccrual loans is not included.
-9- VOLUME/RATE ANALYSIS
1998/1997 1997/1996 --------- --------- CHANGE IN INTEREST DUE TO: CHANGE IN INTEREST DUE TO: ------------------------- -------------------------- AVERAGE AVERAGE NET AVERAGE AVERAGE NET VOLUME RATE CHANGE VOLUME RATE CHANGE ------ ---- ------ ------ ---- ------ (In Thousands of Dollars) INTEREST INCOME: Securities available for sale Taxable securities $ 974 $ (48) $ 926 $ 605 $ 19 $ 624 Tax-exempt Securities 458 (96) 362 206 10 216 -------- ------- ------- ------- ------- -------- Total securities 1,432 (144) 1,288 811 29 840 Loans 5,468 (247) 5,221 5,866 12 5,878 Federal funds sold 435 4 439 127 1 128 Interest-bearing deposit 17 5 22 7 1 8 Loan fees 339 0 339 60 0 60 -------- ------- ------- ------- ------- -------- Total interest- earning assets 7,691 (382) 7,309 6,871 43 6,914 INTEREST EXPENSE: Interest-paying demand 1,073 (26) 1,047 847 70 917 Savings deposits 150 (80) 70 81 (60) 21 Time deposits 1,235 (87) 1,148 2,061 47 2,108 -------- ------- ------- ------- ------- -------- Total interest- paying deposits 2,458 (193) 2,265 2,989 57 3,046 Federal funds purchased and securities sold under agreements to repurchase 163 (29) 134 9 (35) (26) Notes payable 424 2 426 224 5 229 -------- ------- ------- ------- ------- -------- Total interest- bearing liabilities 3,045 (220) 2,825 3,222 27 3,249 -------- ------- ------- ------- ------- -------- NET INTEREST INCOME $ 4,646 $ (162) $ 4,484 $ 3,649 $ 16 $ 3,665 ======== ======= ======= ======= ======= ======= -10- Changes in volume/rate have been allocated between the volume and rate variances on the basis of the ratio that the volume and rate variances bear to each other. Interest is presented on a fully taxable equivalent basis using a federal income tax rate of 34%.
-11- INVESTMENT PORTFOLIO The carrying values of investment securities as of the dates indicated are summarized as follows:
DECEMBER 31, -------------------------------------- 1998 1997 1996 ---- ---- ---- (In Thousands of Dollars) TAXABLE ------- U.S. Treasury $ 9,250 $ 11,083 $ 7,509 U.S. Government agencies 22,932 15,388 13,565 States and political subdivisions 4,839 2,196 662 Mortgage Backed Securities 3,614 4,550 872 Corporate and other 24,819 16,237 7,013 --------- --------- -------- Total taxable 65,454 49,454 29,621 TAX-EXEMPT ---------- States and political subdivisions 36,257 33,124 26,951 --------- --------- -------- Total $ 101,711 $ 82,578 $ 56,572 ========= ========= ========
-12- ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO The following table shows, by class of maturities at December 31, 1998, the amounts and weighted average yields of such investment securities:
CARRYING AVERAGE VALUE YIELD ----- --------- (Dollars in Thousands) U.S. Treasury One year or less $ 501,718 5.8750% Over one through five years 8,748,075 6.3599 -------------- Total $ 9,249,793 6.336% U.S. Agencies One year or less $ 2,068,891 5.0858% Over one through five years 7,206,980 6.2289 Over five through ten years 3,515,005 7.0506 Over ten years 10,141,156 6.9156 -------------- ------ Total $ 22,932,032 6.5554% States and Political subdivisions: One year or less $ 6,796,578 9.1193% Over one through five years 14,592,144 9.3931 Over five through ten years 16,945,221 8.1206 Over ten years 2,762,227 8.6491 -------------- ------ Total $ 41,096,170 8.7731% Corporate and Other: One year or less $ 12,190,605 6.4512% Over one through five years 12,628,623 6.5622 -------------- ------ Total $ 24,819,228 6.5077% -13- Collateralized Mortgage Obligations Over one through five years Over five through ten years $ 1,922,065 5.7613 Over ten years 1,691,735 6.2012 -------------- ------ Total $ 3,613,800 5.9672% -------------- ------ Total $ 101,711,023 7.3987% ============== ====== NOTES: Calculated on the basis of the cost and effective yields weighted for the scheduled maturity of each security. Weighted average yield has been computed on a fully taxable equivalent basis. The rates shown on securities issued by states and political subdivisions have been presented, assuming a 34% tax rate. The amount of the adjustment, due to the fully tax equivalent basis of presentation, is as follows:
-14- ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO (CON'T)
RATE ON TAXABLE TAX-EXEMPT EQUIVALENT RATE ADJUSTMENT BASIS ---- ---------- ----- One year or less 5.89% 3.03% 8.92% Over 1 through 5 years 6.19 3.19 9.38 Over 5 through 10 years 5.34 2.75 8.09 Over 10 years 6.30 3.24 9.54 Total 5.79% 2.98% 8.77%
The aggregate book value of the securities of no single issuer except the U.S. Government or agencies exceeded ten percent of the Corporation's consolidated shareholders' equity as of December 31, 1998. -15- LOAN PORTFOLIO The following table presents the loans outstanding at the indicated dates according to the type of loan:
DECEMBER 31 ----------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (In Thousands of Dollars) Loan categories: Commercial and agricultural $ 192,212 $ 158,219 $ 122,934 $ 115,779 $ 99,307 Real estate mortgages 177,009 171,848 122,605 90,753 73,760 Consumer 71,807 74,741 69,081 58,315 50,324 ---------- --------- ----------- ---------- ----------- Total $ 441,028 $ 404,808 $ 314,620 $ 264,847 $ 223,391 ========== ========= =========== ========== ===========
The following table shows the maturity of commercial and agricultural and real estate construction loans outstanding at December 31, 1998. Also provided are the amounts due after one year classified according to their sensitivity to changes in interest rates.
ONE YEAR ONE YEAR TO AFTER OR LESS FIVE YEARS FIVE YEARS TOTAL ---------- ------------ ---------- ----- (In Thousands of Dollars) Commercial and agricultural $ 95,805 $ 83,035 $ 13,372 $ 192,212 Real Estate Construction 15,675 2,300 626 18,601 --------- ----------- --------- ---------- Total $ 111,480 $ 85,335 $ 13,998 $ 210,813 ========= =========== ========= ========== Loans due after one year: With pre-determined rate $ 84,987 $ 13,998 $ 98,985 With adjustable rates 348 348 ----------- --------- ---------- Total $ 85,335 $ 13,998 $ 99,333 =========== ========= ==========
-16- NONPERFORMING LOANS AND ASSETS
DECEMBER 31, -------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (In Thousands of Dollars) Nonperforming loans: Nonaccrual loans: Commercial and agricultural $ 584 $ 447 $ 127 $ 47 $ 110 Real estate mortgages 186 800 79 0 10 Consumer 20 27 12 0 0 ------- ------- ------- ------- ------- Total 790 1,274 218 47 120 Accruing Loans 90 days or more past due: Commercial and agricultural 359 752 178 0 49 Real estate mortgages 241 426 475 319 123 Consumer 21 37 36 67 92 ------- ------- ------- ------- ------- Total 621 1,215 689 386 264 Renegotiated loans: Commercial and agricultural 86 121 150 182 0 Real estate mortgages 0 0 0 0 213 ------- ------- ------- ------- ------- Total 86 121 150 182 213 Total nonperforming loans 1,497 2,610 1,057 615 597 Property from defaulted loans 527 663 130 0 86 ------- ------- ------- ------- ------- Total nonperforming assets $ 2,024 $ 3,273 $ 1,187 $ 615 $ 683 Nonperforming assets are defined as nonaccrual loans, loans 90 days or more past due, property from defaulted loans, and renegotiated loans.
-17- The gross interest income that would have been recorded for the year ended December 31, 1998, if the nonaccrual and renegotiated loans had performed in accordance with their original terms and had been outstanding throughout the period, or since origination if held for part of the period, was $37,000. The amount of interest income on those loans that was included in net income for the period was $157,000. Loan performance is reviewed regularly by external loan review specialists, loan officers, and senior management. When reasonable doubt exists concerning collectibility of interest or principal, the loan is placed in nonaccrual status. Any interest previously accrued but not collected at that time is reversed and charged against current earnings. At December 31, 1998, the Corporation had $19,339,000 in commercial and mortgage loans for which payments are presently current although the borrowers are experiencing financial difficulties. Those loans are subject to constant attention and their status is reviewed on a monthly basis. As of December 31, 1998, there were no concentrations of loans exceeding 10% of total loans which are not otherwise disclosed as a category of loans in the consolidated balance sheets of the Corporation contained in the Corporation's annual report to shareholders for the year ended December 31, 1998. -18- ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES The following table summarizes changes in the allowance for loan losses arising from loans charged off and recoveries on loans previously charged off by loan category and additions to the allowance which were charged to expense.
DECEMBER 31, ------------------------------------------------------------- 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (Dollars in Thousands) Balance at beginning of period $ 8,114 $ 6,247 $ 4,876 $ 4,100 $ 3,254 Charge-offs: Commercial and agricultural 71 211 110 164 113 Real estate mortgages 60 79 45 81 0 Consumer 581 980 625 493 386 -------- -------- -------- -------- -------- Total charge-offs 712 1,270 780 738 499 Recoveries: Commercial and agricultural 97 97 83 97 143 Real estate mortgages 47 7 28 63 30 Consumer 325 309 202 269 172 -------- -------- -------- -------- -------- Total recoveries 469 413 313 429 345 Net charge-offs 243 857 467 309 154 -------- -------- -------- -------- -------- Additions to allowance for loan losses 1,177 2,724 1,838 1,085 1,000 -------- -------- -------- -------- -------- Balance at end of period $ 9,048 $ 8,114 $ 6,247 $ 4,876 $ 4,100 ======== ======== ======== ======== ======== Net charge-offs as a percent of average loans .06% 0.24% 0.16% 0.13% 0.08% Includes the allowance of Bank of Lakeview at date of acquisition of $1,326.
The allowance for loan losses is based on management's evaluation of the portfolio, past loan loss experience, current economic conditions, volume, growth, and composition of the loan portfolio, and other relevant factors. The allowance is increased by provisions for loan losses that have been charged to expense and reduced by net charge-offs. -19- ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES The allowance for loan losses was allocated to provide for possible losses within the following loan categories at the dates indicated:
December 31, ---------------------------------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------------- ------------------ ----------------- ----------------- ------------------ ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS ------ ----- ------- ----- ------- ----- ------- ----- -------- ----- (Dollars in Thousands) Commercial & agricultural $ 4,758 44% $ 3,806 39% $ 2,763 39% $ 2,232 44% $ 2,069 44% Real estate mortgages 476 40 516 42 364 39 880 34 492 33 Consumer 1,690 16 1,621 19 1,576 22 1,050 22 927 23 Unallocated 2,124 2,171 1,544 714 612 -------- --- ------- --- ------- --- ------- --- -------- --- Total $ 9,048 100% $ 8,114 100% $ 6,247 100% $ 4,876 100% $ 4,100 100% ======== === ======= === ======= === ======= === ======== ===
-20- AVERAGE DEPOSITS The daily average deposits and rates paid on such deposits for the periods indicated were:
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- 1998 1997 1996 ----- ---- ---- AMOUNT RATE AMOUNT RATE AMOUNT RATE ------ ---- ------ ---- ------ ---- (Dollars in Thousands) Average Balance: Noninterest-bearing demand deposits $ 63,257 $ 50,647 $ 42,521 Interest-bearing demand deposits 126,030 3.52% 95,572 3.55% 71,710 3.45% Other savings deposits 67,085 2.58% 61,286 2.71% 58,282 2.82% Other time deposits 211,243 5.55% 188,378 5.61% 151,622 5.58% ---------- ----- --------- ---- --------- ----- Total average deposits $ 467,615 3.83% $ 395,883 3.95% $ 324,135 3.88% ========== ===== ========= ==== ========= =====
The time remaining until maturity of time certificates of deposit and other time deposits of $100,000 or more at December 31, 1998, was as follows (Dollars in Thousands):
Three months or less $ 16,067 Over three through six months 7,216 Over six through twelve months 9,292 Over twelve months 7,223 -------- Total $ 39,798 ========
-21- RETURN ON EQUITY AND ASSETS The following table sets forth certain financial ratios for the years ended:
1998 1997 1996 ---- ---- ---- Financial ratios: Return on average total assets 1.30 % 1.21 % 1.25 % Return on average equity 12.98 13.48 15.15 Average equity to average total assets 10.03 8.96 8.22 Dividend payout ratio 34.16 33.51 27.94
-22- SHORT-TERM BORROWED FUNDS Included in short-term borrowed funds are repurchase agreements as described in Note J to the consolidated financial statements in the Corporation's annual report to shareholders for the year ended December 31, 1998, which consist of the following:
1998 1997 1996 ---- ---- ---- (Dollars in Thousands) Amounts outstanding at the end of the year $ 18,678 $ 12,932 $ 5,933 Weighted average interest rate at the end of the year 3.88% 4.23% 4.40% Longest maturity 01-20-99 02-20-98 05-22-97 Maximum amount outstanding at any month-end during year $ 18,678 $ 13,911 $ 14,290 Approximate average amounts outstanding during the year $ 15,618 $ 10,894 $ 10,527 Approximate weighted average interest rate for the year 4.15% 4.36% 4.73% The weighted average interest rates are derived by dividing the interest expense for the period by the daily average balance during the period.
-23- ITEM 2. PROPERTIES. The offices of the Corporation and the main office of Bank of Alma are located at 311 Woodworth Avenue, Alma, Michigan. Bank of Alma occupies approximately 24,000 square feet of this brick building. The remaining 900 square feet are rented as office space to an unrelated business. Bank of Alma owns this property, as well as a parcel of real estate adjacent to the main office which is presently being used as a parking lot. Bank of Alma also owns a parcel of vacant land at 218 East Center Street, Alma, Michigan, which is currently available for sale. Bank of Alma owns and operates one 3-lane drive-up branch in Alma, Michigan. Also located on the Alma branch property is a garage used to house the bank's vehicles and for general storage. A 960 square foot building owned by Bank of Alma in Pine River Township has three inside tellers in addition to the three outside stations. Bank of Alma owns and operates the facility for the St. Louis branch. This facility is approximately 900 square feet consisting of wood frame construction. Bank of Alma owns and operates a branch located in Merrill, Michigan. The branch occupies approximately 2,000 square feet of a 4,000 square foot wood and brick building. The remainder of the building is available for community use. The bank operates a two-lane drive-up facility which is attached to the building and covered by a canopy. Bank of Alma also owns the property adjacent to the office which is used for parking. Bank of Alma also owns the facilities for six other full-service branches. Each of the Ashley, Auburn, Ithaca, Riverdale, St. Charles, and Vestaburg branches is owned by Bank of Alma and housed in buildings having slightly less than 2,000 square feet. In December, 1998, Bank of Alma completed construction and occupied a newly constructed 14,800 square foot operations center, located in Alma. The main office of Firstbank is located at 102 South Main, Mt. Pleasant, Michigan. The 5,600 square foot facility is leased. The lease will expire in 2001. Firstbank has an option to extend the term for an additional five years. Firstbank operates a branch located in Shepherd, Michigan. The bank owns the approximately 5,800 square foot brick building. Approximately half the building is used for bank purposes and the other half is leased to other tenants for office purposes. The bank -24- operates a two-lane drive-up facility that is attached to the building and covered by a canopy. Firstbank also owns a parcel that is adjacent to the office which is used as a parking lot. Firstbank operates a branch located in Clare, Michigan. The branch is housed in a brick building containing approximately 4,800 square feet of space. The bank owns the building and adjacent real estate used for parking. The bank also operates a two-lane drive-up facility that is attached to the building and covered by a canopy. Firstbank operates a branch located in Mt. Pleasant, Michigan. The branch is housed in a brick building containing approximately 1,600 square feet of space. The bank owns the building and adjacent real estate used for parking and operates a two-lane drive-up facility attached to the building. Firstbank operates a branch located in Winn, Michigan. This branch facility is housed in a wood frame structure having approximately 1,000 square feet. Firstbank owns the building. Firstbank also owns the parcel of real estate which is adjacent to the Winn branch site. Firstbank also operates a branch located in Union Township, Michigan. The branch located in Union Township is housed in a 3,200 square foot building. The building is owned by Firstbank. The Union Township property houses a three-lane drive-up service. Firstbank has purchased a vacant lot in Union Township near Mt. Pleasant. The property is located at 1900 Remus Road, Mt. Pleasant, Michigan. Firstbank began construction of an 1,800 square foot branch in late 1998 and expects to occupy the branch in the second quarter of 1999. The main office of 1st Bank is located at 502 West Houghton Avenue, West Branch, Michigan. The bank occupies approximately 3,565 square feet of office space. 1st Bank owns this property, as well as a lot adjacent to the main office. The lot has a 1,800 square foot single family residence and separate garage. The house is currently rented but is available for future expansion of the bank and for parking needs. The executive office of 1st Bank and a full service branch are located in a 10,000 square foot building at 601 W. Houghton Avenue, West Branch, Michigan. 1st Bank occupies approximately 3,000 square feet of this building, with the remaining 7,000 square feet leased to unrelated businesses. Also located on this property are separate buildings of approximately 3,700 square feet which are leased as retail space to unrelated businesses. -25- 1st Bank owns and operates branches located in Fairview, Higgins Lake, and Rose City containing approximately 1,500 to 2,300 square feet. 1st Bank owns each of those branches. Each of those branches occupies a wood frame building. 1st Bank also owns and operates branches located in St. Helen and West Branch, Michigan. Each branch occupies a wood frame building having approximately 900 square feet. 1st Bank operates a branch located in Hale, Michigan. The leased branch occupies a wood frame building containing approximately 2,000 square feet and sublets approximately 800 square feet to an unrelated business. 1st Bank operates an armored car service from an 8,500 square foot brick and steel building. 1st Bank owns the building. Approximately 2,000 square feet of the building are leased to unrelated businesses. In addition, 1st Bank leases approximately 1,600 square feet in a brick and steel building as an additional site for its armored car service. The lease expires in July of 2002. 1st Bank has the option to extend the lease for an additional five-year term. 1st Bank acquired a building of approximately 4,700 square feet adjacent to its main office. About 600 square feet of this single story frame structure is used for 1st Bank's Investment Center and proof operations. The remaining 4,100 square feet is leased to an unrelated business. The main office of the Bank of Lakeview is located at 506 S. Lincoln Avenue, Lakeview, Michigan. The bank occupies a brick and block frame building of approximately 16,000 square feet and owns a vacant parcel of land directly across South Lincoln Avenue which is used for parking. Bank of Lakeview owns and operates one 3 lane drive-up branch in Lakeview, Michigan. The 700 square foot building which also offers ATM service is of brick construction. Bank of Lakeview owns and operates three full service branches located in Howard City, Remus and Morley, Michigan containing from 1,200 to 2,300 square feet. Each of these branches occupies a brick building. Bank of Lakeview leases property for the Canadian Lakes branch located in Morton Township, Michigan. The facility is approximately 2,000 square feet of wood construction. The lease -26- expires August 31, 2000. Bank of Lakeview has the option to extend the lease for two additional five year periods. Management considers the properties and equipment of the Corporation and its subsidiaries to be well maintained, in good operating condition, and adequate for their operations. ITEM 3. LEGAL PROCEEDINGS. The Corporation and its subsidiaries are parties, as plaintiff or as defendant, to routine litigation arising in the normal course of their business. In the opinion of management, the liabilities arising from these proceedings, if any, will not be material to the Corporation's consolidated financial condition. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT. The following information concerning executive officers of the Corporation who are not directors has been omitted from the registrant's proxy statement pursuant to Instruction 3 to Regulation S-K, Item 401(b). Officers of the Corporation are appointed annually by the Board of Directors of the Corporation and serve at the pleasure of the Board of Directors. Information concerning the executive officers of the Corporation who are not also directors or nominees for election to the Board of Directors of the Corporation is given below. Except as otherwise indicated, all existing officers have had the same principal employment for over 5 years. MARY D. DECI (age 52) has been Chief Financial Officer, Secretary, and Treasurer of the Corporation since 1994. Ms. Deci has been Senior Vice President of Bank of Alma since 1994, and Controller of Bank of Alma since 1988. Ms. Deci has been Vice President of the Corporation and of Bank of Alma since 1989 and has been an officer of Bank of Alma since 1988. RICHARD L. JARVIS (age 61) has been Executive Vice President of Firstbank since 1991 and has been Vice President of the Corporation and an officer of Firstbank since 1987. Mr. Jarvis served as a director of Firstbank from 1987 to 1991. -27- DALE A. PETERS (age 56) has been Vice President of the Corporation and President, Chief Executive Officer, and a director of 1st Bank since 1987. He has been Chairman of the Board of 1st Bank since 1988. RICHARD J. SCHURTZ (age 62) has been Vice President of the Corporation since the acquisition of Bank of Lakeview in August of 1997. Mr. Schurtz has been President and Chief Executive Officer and a director of Bank of Lakeview since 1994. THOMAS R. SULLIVAN (age 48) has been Executive Vice President of the Corporation since 1996 and has been President, Chief Executive Officer and a director of Firstbank since 1991. Mr. Sullivan served as Vice President of the Corporation from 1991 to 1996. JAMES E. WHEELER, II (age 39), has been Vice President of the Corporation and Senior Vice President and Chief Loan Officer of Bank of Alma since 1989. -28- PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS. The information under the caption "Common Stock Data" on page 14 in the registrant's annual report to shareholders for the year ended December 31, 1998, is here incorporated by reference. At various times in 1998, the Corporation issued unregistered shares of its common stock totaling 5,147 shares to members of the boards of directors of the Corporation and the Corporation's subsidiary banks, Firstbank and 1st Bank. The shares were issued as retainers and directors 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. SELECTED FINANCIAL DATA. The information under the heading "Selected Financial Data" on page 3 in the registrant's annual report to shareholders for the year ended December 31, 1998, is here incorporated by reference. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 13 in the registrant's annual report to shareholders for the year ended December 31, 1998, is here incorporated by reference. ITEM 7A. 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. -29- ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The report of independent auditors and the consolidated financial statements on pages 15 through 32 and the quarterly results of operations on page 14 in the registrant's annual report to shareholders for the year ended December 31, 1998, are here incorporated by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The information under the captions "Board of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the registrant's definitive proxy statement for its annual meeting of shareholders to be held April 26, 1999, is here incorporated by reference. ITEM 11. EXECUTIVE COMPENSATION. Information contained under the captions "Compensation of Directors and Executive Officers" and "Compensation Committee Interlocks and Insider Participation" in the registrant's definitive proxy statement for its annual meeting of shareholders to be held April 26, 1999, is here incorporated by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information under the caption "Voting Securities" in the registrant's definitive proxy statement for its annual meeting of shareholders to be held April 26, 1999, is here incorporated by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information under the caption "Compensation Committee Interlocks and Insider Participation" in the registrant's definitive proxy statement for its annual meeting of shareholders to be held April 26, 1999, is here incorporated by reference. -30- PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a)(1) FINANCIAL STATEMENTS. The following consolidated financial statements of the Corporation and its subsidiaries and report of independent auditors are incorporated by reference from the registrant's annual report to shareholders for the year ended December 31, 1998, in Item 8: PAGE NUMBER IN STATEMENT OR REPORT ANNUAL REPORT Report of Independent Auditors 15 Consolidated Balance Sheets as of December 31, 1998, 16 and 1997 Consolidated Statements of Income and Comprehensive Income 17 for the years ended December 31, 1998, 1997, and 1996 Consolidated Statements of Changes in Shareholders' 18 Equity for the years ended December 31, 1998, 1997, and 1996 Consolidated Statements of Cash Flows for the years ended 19 December 31, 1998, 1997, and 1996 Notes to Consolidated Financial Statements 20 The consolidated financial statements, notes to consolidated financial statements, and report of independent auditors listed above are incorporated by reference in Item 8 of this report from the corresponding portions of the registrant's annual report to shareholders for the year ended December 31, 1998. (2) Schedules to the consolidated financial statements required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted. (3) The following exhibits are filed as part of this report: NUMBER EXHIBIT 3(a) ARTICLES OF INCORPORATION. Previously filed as an exhibit to registrant's Form 10-Q for the quarter ended March 31, 1997. Here incorporated by reference. 3(b) BYLAWS. Previously filed as an exhibit to the registrant's Registration Statement on Form S-2 (Registration No. 33-68432) filed on September 3, 1993. Here incorporated by reference. -31- NUMBER EXHIBIT 10(a) FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND OFFICERS. Previously filed as an exhibit to the registrant's Registration Statement on Form S-2 (Registration No. 33-68432) filed on September 3, 1993. Here incorporated by reference. 10(b) DEFERRED COMPENSATION PLAN. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference. 10(c) TRUST UNDER DEFERRED COMPENSATION PLAN. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference. 10(d) STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993. Previously filed as an appendix to the registrant's definitive proxy statement for its annual meeting of shareholders held April 26, 1993. Here incorporated by reference. 10(e) STOCK OPTION AND RESTRICTED STOCK PLAN OF 1997. Previously filed as an appendix to the registrant's definitive proxy statement for its annual meeting of shareholders on April 28, 1997. Here incorporated by reference. 13 1998 ANNUAL REPORT TO SHAREHOLDERS. (This report, except for those portions which are expressly incorporated by reference in this filing, is furnished for the information of the Securities and Exchange Commission and is not deemed "filed" as part of this filing.) 21 SUBSIDIARIES OF REGISTRANT. 23 CONSENT OF CROWE, CHIZEK AND COMPANY LLP. 24 POWERS OF ATTORNEY. 27(a) FINANCIAL DATA SCHEDULE FOR YEAR ENDED DECEMBER 31, 1998. 99 FIRSTBANK CORPORATION 401(K) PLAN PERFORMANCE TABLE. Management contract or compensatory plan. -32- The registrant will furnish a copy of any exhibit listed above to any shareholder of the registrant without charge upon written request to Mary D. Deci, Secretary, Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan 48801. (b) REPORTS ON FORM 8-K. The registrant filed no Current Reports on Form 8-K during the last quarter of the period covered by this report. -33- SIGNATURES Pursuant to the requirements of Section 13 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. Dated: March 29, 1999 FIRSTBANK CORPORATION By /S/ MARY D. DECI Mary D. Deci Vice President, Secretary, Treasurer and Chief Financial Officer -34- Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. March 29, 1999 JOHN MCCORMACK * John McCormack President, Chief Executive Officer, and Director (Principal executive officer) March 29, 1999 MARY D. DECI * Mary D. Deci Vice President, Secretary, and Treasurer (Principal financial and accounting officer) March 29, 1999 DUANE A. CARR * Duane A. Carr Director March 29, 1999 WILLIAM E. GOGGIN * William E. Goggin Director March 29, 1999 EDWARD B. GRANT * Edward B. Grant Director March 29, 1999 CHARLES W. JENNINGS * Charles W. Jennings Director March 29, 1999 PHILLIP G. PEASLEY * Phillip G. Peasley Director March 29, 1999 DAVID D. ROSLUND * David D. Roslund Director *By /S/ MARY D. DECI Mary D. Deci (Attorney in Fact) -35- INDEX TO EXHIBITS NUMBER EXHIBIT PAGE 3(a) ARTICLES OF INCORPORATION. Previously filed as an exhibit to registrant's Form 10-Q for the quarter ended March 31, 1997. Here incorporated by reference. 3(b) BYLAWS. Previously filed as an exhibit to the registrant's Registration Statement on Form S-2 (Registration No. 33-68432) filed on September 3, 1993. Here incorporated by reference. 10(a) FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND OFFICERS. Previously filed as an exhibit to the registrant's Registration Statement on Form S-2 (Registration No. 33-68432) filed on September 3, 1993. Here incorporated by reference. 10(b) DEFERRED COMPENSATION PLAN. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference. 10(c) TRUST UNDER DEFERRED COMPENSATION PLAN. Previously filed as an exhibit to the registrant's Form 10-K for the year ended December 31, 1995. Here incorporated by reference. 10(d) STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993. Previously filed as an appendix to the registrant's definitive proxy statement for its annual meeting of shareholders held April 26, 1993. Here incorporated by reference. 10(e) STOCK OPTION AND RESTRICTED STOCK PLAN OF 1997. Previously filed as an appendix to the registrant's definitive proxy statement for its annual meeting of shareholders on April 28, 1997. Here incorporated by reference. 13 1998 ANNUAL REPORT TO SHAREHOLDERS. (This report, except for those portions which are expressly incorporated by reference in this filing, is furnished for the information of the Securities and Exchange Commission and is not deemed "filed" as part of this filing.) 21 SUBSIDIARIES OF REGISTRANT. 23 CONSENT OF CROWE, CHIZEK AND COMPANY LLP. 24 POWERS OF ATTORNEY. -36- NUMBER EXHIBIT 27(a) FINANCIAL DATA SCHEDULE FOR YEAR ENDED DECEMBER 31, 1998. 99 FIRSTBANK CORPORATION 401(K) PLAN PERFORMANCE TABLE. Management contract or compensatory plan. EX-13 2 EXHIBIT 13 FIRSTBANK CORPORATION 1998 Annual Report This 1998 Annual Report contains audited financial statements and a detailed financial review. This is Firstbank Corporation's 1998 annual report to shareholders. Although attached to our proxy statement, this report is not part of our proxy statement, is not deemed to be soliciting material, and is not deemed to be filed with the Securities and Exchange Commission (the "SEC") except to the extent that it is expressly incorporated by reference in a document filed with the SEC. The 1998 Report to Shareholders accompanies this proxy statement. That report presents information concerning the business and financial results of Firstbank Corporation in a format and level of detail that we believe shareholders will find useful and informative. Shareholders who would like to receive even more detailed information than that contained in this 1998 Annual Report are invited to request our Annual Report on Form 10-K. FIRSTBANK CORPORATION'S FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION WILL BE PROVIDED TO ANY SHAREHOLDER WITHOUT CHARGE UPON WRITTEN REQUEST. REQUESTS SHOULD BE ADDRESSED TO MARY D. DECI, CHIEF FINANCIAL OFFICER, FIRSTBANK CORPORATION, 311 WOODWORTH AVENUE, P.O. BOX 1029, ALMA, MICHIGAN 48801-6029. =========================================================================== PRESIDENT'S MESSAGE COMMITMENT TO OUR SHAREHOLDERS: By nearly every measurement, our commitment to our shareholders, customers, employees, and the communities we serve resulted in 1998 being another very successful year. The highlights of 1998 were record earnings, the highest level of total assets, excellent asset quality, and strong market performance by Firstbank Corporation stock. Net income increased 31% to $7,303,000 when compared to $5,558,000 in 1997. Our net income has increased an average of 24% per year over the past six years. Another historical high was reached when total assets exceeded $600 million and ended the year at $603 million, a 12% increase over 1997. We are pleased with the quality of our earning assets, and were able to decrease our provision for loan losses once again this year. Total loans increased 9% to $441 million as a result of the strong economies in the markets we serve. The allowance for loan losses increased 12% to $9 million to accommodate the loan growth. The allowance now equals 2.05% of total loans and 604% of non-performing loans. Non-performing loans were only $1.5 million, a decrease from $2.6 million at the end of 1997. Basic earnings per share were $1.62 for 1998, a 16% increase over $1.40 in 1997. These financial results assisted the market performance of Firstbank Corporation stock. Market price increased 30% from a closing bid in 1997 of $22.38 to $29.00 at the end of 1998. Per share data has been adjusted for a 5% stock dividend and a two for one stock split issued in 1998. The financial results are highlighted throughout this report to shareholders, and we encourage your review of the information. Shareholders should also know of several new initiatives in 1998 and 1999 that we believe will have a positive impact on the future of Firstbank Corporation. The Board of Directors has approved a 16% increase in quarterly cash dividends for the first quarter of 1999 by increasing the quarterly dividend to $0.16 per share from $0.138 per share in 1998. This is the sixth consecutive year the cash dividend has been raised. It has increased an average of 18% during that period. Cash dividends have also increased as a result of 5% stock dividends in each of those years. The Board of Directors has also approved a stock repurchase plan of up to 200,000 shares of the Corporation's stock during 1999. The Board approved the plan based on its belief that the repurchase of shares is a prudent investment of shareholder capital. Shares will be repurchased from time to time in the open market or in privately negotiated transactions. ======================================================================== 1 =========================================================================== An issue we have been hearing a lot about lately is commonly referred to as the "millennium bug." Our staff has diligently examined our mission critical systems to determine our ability to perform business as usual in January 2000. By mid-year we are confident we will be able to announce that all of our systems will be year 2000 compliant. We have a public relations plan ready to communicate to our customers that their insured deposits are safe and will be readily accessible. Firstbank Corporation now has a presence on the world wide web that provides information about our company and its subsidiary bank services. Check us out at WWW.FIRSTBANK-ALMA.COM. You are encouraged to access the web-site to review the latest press releases, our latest stock price and trading activity, and other pertinent information. Shareholders may also reach our Shareholder Services Department via a toll free number: 1-888- 637-0590. This "hotline" was established STRICTLY for shareholders to receive stock information. Feel free to contact us with your questions about cash and stock dividends, dividend reinvestment plan, supplemental share purchase plan, stock repurchase plan, or any other Firstbank Corporation shareholder matters. A telephone banking center was opened in 1998 to serve customers from all subsidiary banks. The center has an automated voice response unit that allows customers access to account information, balance transfers, and the amounts of recent deposits and checks, 24 hours every day of the year, simply by following the voice commands given. Customer service agents are also available from 8:00 a.m. to 5:00 p.m., Monday through Friday. We expect to begin selling products and services through the center in the very near future. Brokerage services are also available to customers in most of the communities we serve. This business has exceeded our forecasts and offers our customers alternative investment opportunities. It has also allowed our subsidiary banks to maintain current customer relationships rather than lose customers to other financial service providers. A new 14,800 square foot operations center was opened in December 1998. The center accommodates accounting, audit, data processing, proof, call center, and other services for all subsidiaries. The center was previously located at Bank of Alma's main office in 6,500 square feet. The new expanded facility will accommodate future growth and has improved productivity. 1st Bank, West Branch, directors, employees, and customers were saddened by the untimely death in January 1999 of a long-standing member of their Board, Milford Scott. Mr. Scott was a great asset to the bank and his guidance and counsel will be deeply missed. Firstbank Corporation has achieved many of our strategic goals over the past 12 years which would not have been possible without dedicated and competent personnel at all levels. Our successes have been achieved because of our operating philosophy of placing decision makers in the communities they serve and working toward a common goal to be the best. Nearly all of our full-time employees are shareholders and they stay focused on shareholder values. We appreciate the support of our shareholders whose commitment to Firstbank Corporation is vital to our success. We always welcome your comments and suggestions. Respectfully submitted, /s/ John McCormack John McCormack President & Chief Executive Officer 2 ======================================================================== =========================================================================== FINANCIAL HIGHLIGHTS FIRSTBANK CORPORATION
FOR THE YEAR: 1998 1997 1996 1995 1994 ---- ---- ---- ---- ---- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Interest income $44,484 $37,864 $31,016 $27,394 $20,496 Net interest income 25,131 21,334 17,735 15,593 12,941 Provision for loan losses 1,177 1,398 1,838 1,085 1,000 Noninterest income 5,868 3,697 3,297 2,471 2,547 Noninterest expense 19,402 15,825 12,790 11,813 10,328 Net income 7,303 5,558 4,643 3,865 3,221 AT YEAR END: Total assets 603,014 536,322 404,571 352,943 309,722 Total earning assets 555,254 486,949 372,777 327,232 286,956 Loans 441,028 404,808 314,620 264,847 223,391 Deposits 494,053 445,666 358,669 307,007 266,894 Shareholders' equity 59,775 54,532 33,088 29,853 25,596 AVERAGE BALANCES: Total assets 560,938 460,439 372,829 330,079 268,399 Total earning assets 516,455 427,640 350,500 308,797 250,984 Loans 414,322 353,061 290,181 243,806 191,682 Deposits 467,615 395,883 324,135 288,692 234,546 Shareholders' equity 56,253 41,240 30,640 27,569 24,787 PER SHARE: Basic earnings 1.62 1.40 1.30 1.09 0.91 Diluted earnings 1.56 1.37 1.28 1.08 0.91 Cash dividends 0.55 0.45 0.36 0.29 0.23 Shareholders' equity 13.20 12.10 9.22 8.36 7.24 FINANCIAL RATIOS: Return on average assets 1.30% 1.21% 1.25% 1.17% 1.20% Return on average equity 12.98% 13.48% 15.15% 14.02% 12.99% Average equity to average assets 10.03% 8.96% 8.22% 8.35% 9.24% Dividend payout ratio 34.16% 33.51% 27.94% 26.23% 26.09% BANK OF LAKEVIEW RESULTS ARE INCLUDED FROM AUGUST 8, 1997, THE DATE OF ACQUISITION. All per share amounts adjusted for stock dividends and stock split
======================================================================== 3 =========================================================================== MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The purpose of this section of the annual report is to provide a narrative discussion about Firstbank Corporation's financial condition and results of operations. Please refer to the consolidated financial statements and the selected financial data presented in this report in addition to the Following discussion and analysis. RESULTS OF OPERATIONS HIGHLIGHTS Record earnings for 1998 once again headline the Company's performance. net income of $7,303,000 for 1998 exceeded 1997 results of $5,558,000 by 31%. The Company has set record earnings levels for the last seven consecutive years. Net income has increased an average of 21% annually for the past five years. Contributing to these strong results were an exceptionally active mortgage market and the inclusion of the results of the Company's 1997 acquisition of Bank of Lakeview for the entire year. It is important to note that the robust performance in 1998 was the consequence of strength in the core banking sectors as opposed to the effect of unusual or nonrecurring factors. Standard performance indicators help management evaluate the Company's performance. The Company's return on average assets was 1.30%, 1.21%, and 1.25% for 1998, 1997, and 1996 respectively. Total average assets increased $101 million in 1998, $88 million in 1997, and $43 million in 1996. Return on average equity was 12.98% in 1998, 13.48% in 1997, and 15.15% in 1996. Average equity increased $15 million in 1998. The equity of the affiliate acquired in August 1997 was included for the entire year, representing about half of this increase. Basic earnings per share were $1.62, $1.40, and $1.30 for 1998, 1997, and 1996. Diluted earnings per share were $1.56, $1.37, and $1.28 for the same periods. NET INTEREST INCOME Strong net interest income is the heart of the Company's earnings. Successful management of interest income and expense has produced an increase in net interest income of $3.8 million or 18% in 1998 when compared to the previous year. The Company's net interest margin of 5.06% has declined from 5.16% in 1997 and 5.26% in 1996, but remains above peer performance. In both 1998 and 1997 the Company's loan to deposit ratio, using average balances, was 87%, compared to 88% in 1996. Ending loans grew $36 million during 1998. This entire growth was generated from the markets served by the Company. A critical task of management is to price assets and liabilities so that the spread between the interest earned on assets and the interest paid on liabilities is maximized without unacceptable risks. While interest rates on earning assets and interest bearing liabilities are subject to market forces, in general the Company can exert more control over deposit costs than earning asset rates. Loan products carry either fixed rates of interest or rates tied to market indices determined independently. The Company sets its own rates on deposits, providing management with some flexibility in determining the timing and proportion of rate changes for the cost of its deposits. 4 ======================================================================== =========================================================================== SUMMARY OF CONSOLIDATED NET INTEREST INCOME
YEAR ENDED YEAR ENDED YEAR ENDED DECEMBER 31, 1998 DECEMBER 31, 1997 DECEMBER 31, 1996 ----------------- ----------------- ----------------- Average Average Average Average Average Average (Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate Average Assets Interest earning assets: Taxable securities $ 55,861 $ 3,431 6.15% $ 40,255 $ 2,546 5.90% $ 30,687 $ 1,922 6.27% Tax exempt securities 33,455 2,589 7.74 29,123 2,352 8.07 26,570 2,136 8.04 -------- ------- ---- -------- ------- ---- -------- ------- ---- Total securities 89,316 6,020 6.74 69,378 4,898 7.05 57,257 4,058 7.09 Loans 412,884 38,768 9.39 352,539 33,412 9.46 290,006 27,472 9.47 Federal funds sold 13,446 728 5.41 5,414 289 5.37 3,032 161 5.31 Interest bearing deposits 809 42 5.20 309 22 7.17 205 14 6.86 -------- ------- ---- -------- ------- ---- -------- ------- ---- Total earning assets 516,455 45,558 8.82 427,640 38,621 9.02 350,500 31,705 9.04 Nonaccrual loans 1,432 519 141 Less allowance for loan loss (8,543) (7,142) (5,436) Cash and due from banks 19,173 16,413 13,744 Other non earning assets 32,421 23,009 13,880 -------- -------- -------- Total assets $560,938 $460,439 $372,829 ======== ======== ======== Average Liabilities Interest bearing liabilities: Demand $126,030 $4,440 3.52% $ 95,572 $ 3,393 3.55% $ 71,710 $ 2,476 3.45% Savings 67,085 1,734 2.58 61,286 1,664 2.71 58,282 1,643 2.82 Time 211,243 11,718 5.55 188,378 10,571 5.61 151,622 8,463 5.58 Federal funds purchased and repurchase agreements 17,601 757 4.30 13,468 624 4.62 13,279 650 4.90 Notes payable 11,464 704 6.14 4,480 278 6.08 866 49 5.70 -------- ------- ---- -------- ------- ---- -------- ------- ---- Total interest bearing liabilities 433,423 19,353 4.47 363,184 16,530 4.49 295,759 13,281 4.47 Demand deposits 63,257 50,647 42,521 -------- -------- -------- Total funds 496,680 413,831 338,280 Other non interest bearing liabilities 8,000 5,368 3,909 -------- -------- -------- Total liabilities 504,680 419,199 342,189 Average shareholders' equity 56,258 41,240 30,640 -------- -------- -------- Total liabilities and shareholders' equity $560,938 $460,439 $372,829 ======== ======== ======== Net interest income $26,205 $22,091 $18,424 ======= ======= ======= Rate spread 4.35% 4.53% 4.57% ===== ===== ===== Net interest margin (percent of average earning assets) 5.06% 5.16% 5.26% ===== ===== ===== Presented on a fully taxable equivalent basis using a federal income tax rate of 34%. Interest income includes loan fees of $1,726,000, $1,387,300, and $1,327,000 respectively. Interest on nonaccrual loans is not included.
======================================================================== 5 =========================================================================== The table on the preceding page presents a summary of net interest income for 1998, 1997, and 1996. In 1998, the average rate realized on earning assets was 8.82%, a decrease of 20 basis points from the 1997 results of 9.02%. The earnings rate for 1996 was 9.04%. In early 1996, the prime rate underwent a decrease of 25 basis points, while in the first quarter of 1997 the prime increased 25 basis points and remained steady throughout the remainder of the year. After two years of relative stability in the prime rate, 1998 experienced three decreases in this indicator. Reductions of 25 basis points each three times during the fourth quarter led the prime rate from 8.50% at the beginning of the year to 7.75% at year end 1998. With 22% of the Company's average loans in variable rate products, the decrease in prime had an immediate effect on return of those assets. The lower rate environment also affected the yield on investment securities. As higher yielding securities matured, the Company replaced them with lower yielding issues. The average rate earned on securities in 1998 was 6.74% compared to 7.05% in 1997 and 7.09% in 1996. The average rate paid on interest bearing liabilities was 4.47% in 1998, 4.49% in 1997, and 4.47% in 1996. All deposit and deposit equivalent product yields have shown substantial decreases over the past year. A portion of 1998's loan growth has been funded with increased borrowings from the Federal Home Loan Bank. While an economical source of funding, the cost of these dollars is higher than that of deposits, and has had the effect of maintaining the rate paid on interest bearing liabilities near the 1997 levels. In the past twelve months average deposit and deposit equivalent balances have increased $72 million, and notes payable have grown over $7 million. In 1998, the rate spread decreased 18 basis points from 4.53% in 1997 to 4.35% in 1998. Tax equivalent net interest income increased $4 million in 1998 when compared to 1997 as total average earning assets grew $89 million. Net interest margin of 5.06% for 1998 was 10 basis points less than the 1997 results of 5.16%. Decreases in both net interest margin and rate spread are the result of average earning rates on assets decreasing 20 basis points while the average cost of interest bearing liabilities dropping only two basis points. Average earning assets represent 92% of total assets in 1998 compared to 93% in 1997. PROVISION FOR LOAN LOSSES The provision for loan losses was $1.2 million in 1998, compared to $1.4 million in 1997 and $1.8 million in 1996. The decreases in the provision for loan losses in 1997 and 1998 were the result of management's confidence in the quality of the loan portfolio. At December 31, 1998, the allowance for losses as a percent of total loans was 2.05% compared to 2.00% at December 31, 1997, and 1.99% at December 31, 1996. Net charge off loans were $243,000 in 1998 compared to $857,000 in 1997 and $467,000 in 1996. During 1998, nearly $500,000 of recoveries were realized contributing to the year's auspicious result. Recoveries of this magnitude are not usual for the Company. Net charge offs as a percent of average loans were .06% in 1998 compared to .24% and .16% in 1997 and 1996. Total nonperforming assets were .46% of total loans at December 31, 1998 compared to .81% and .34% at the two previous year ends. Nonperforming assets were unusually high at December 31, 1997, due in part to the August 1997 acquisition. Management has worked the nonperforming credits diligently to bring them more in line with pre-acquisition results. 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. NONINTEREST INCOME Noninterest income saw a surge in 1998, growing 59% or $2,200,000 to $5,900,000 compared to $3,700,000 in 1997 and $3,300,000 in 1996. Leading the increase is the gain on sale of mortgage loans. With mortgage rates at their recent lows, mortgage activity has been booming at all of the affiliate banks. The gains on sale of mortgage loans increased $1,300,000 when compared to 1997, a 176% increase. Offsetting this gain is a reduction of mortgage servicing income of $262,000 or 106%. Mortgage servicing income actually posted a loss in 1998 of $15,000 compared to 1997 income of $248,000. The reduction is the result of a recapture of the mortgage servicing assets created by active refinancing activity. Service charges on deposit accounts grew $272,000 or 22% to a 1998 level of $1,499,000 compared to $1,228,000 in 1997. Of the total increase, 94% or $256,000 is the result of including the results of the affiliate acquired in August 1997 for the entire year. Other noninterest income increased $733,000 or 60% in 1998 when compared to 1997. Approximately half of this increase may be explained by the inclusion of the affiliate acquired in 1997 for the entire 1998 year. Brokerage income for 1998 exceeded the 1997 results by over $100,000. In addition, an experience payment to the affiliate banks for credit life insurance totaled nearly $80,000 more than 1997. 6 ======================================================================== =========================================================================== NONINTEREST EXPENSE During 1998, salary and employee benefits increased 22%, or $1,736,000, to $9,768,000 compared to $8,033,000 in 1997. Several factors help explain this change. Roughly one-third of this increase is the result of normal increments and merit raises. Another $815,000 or nearly 50% of the growth can be attributed to the difference in running the 1997 acquisition for a full year instead of five months. Leased employees and upgrades of jobs account for the remainder of the increase. Occupancy and equipment costs rose $842,000 or 40% during 1998 to a total of $2,971,000 compared to $2,129,000 in 1997. Over half of this increase was generated from recognizing the full year expenses of the August 1997 acquisition. Additional depreciation expense of nearly $140,000 was recognized as the mainframe computer and the phone system were upgraded during 1998. The additional depreciation expense allowed the Company to write off the remaining value of replaced assets. Amortization of intangibles actually decreased $71,000 or 9% in 1998 to $756,000 compared to $827,000 in 1997. In early 1997, the Company adjusted the value of two assets to their fair values. No such adjustments were recognized during 1998. Other noninterest expense rose to $5,446,000, a 23% increase of $1,013,000 compared to the 1997 result of $4,434,000. The majority of this increase, $788,000 or 78% of the growth is from operating the new affiliate the full 12 months in 1998 as opposed to the five months included in the 1997 results. FEDERAL INCOME TAX The Company's effective tax rates were 30%, 29%, and 27% for 1998, 1997, and 1996. The principal difference between the effective tax rates and the statutory tax rate of 34% is the Company's investment in securities and loans which provide income exempt from federal income tax. FINANCIAL CONDITION Total assets at December 31, 1998, were $603 million, exceeding the December 31, 1997, footings of $536 million by $67 million or 12%. With no acquisitions in 1998, all of this growth was generated from markets existing at December 1997. Loans grew $36 million or 9% during 1998 with commercial loans leading the advance by $34 million. Consumer loans showed a decrease of $3 million or 4% during the same period. The following table provides information on the changes in loan balances during 1998:
(Dollars in Thousands) 1998 1997 CHANGE % CHANGE ---- ---- ------ -------- Commercial $192,212 $158,219 $33,993 21.48 % Real Estate Mortgages 177,009 171,848 5,161 3.00 % Consumer 71,807 74,741 (2,934) (3.93)% -------- -------- ------- ----- Total $441,028 $404,808 $36,220 8.95 % Mortgages serviced for others $215,308 $167,295 $48,013 28.70 %
Premises and equipment increased $641,000 after depreciation expense of $1,481,000. A new mainframe computer and a new operations center represent much of this change. Core deposits categories all experienced a rise in their year end totals, ending the year $52,974,000 above the 1997 year end results. Time deposit accounts shrunk $4,587,000, for a net growth in deposits of $48,387,000. Securities sold under agreement to repurchase and overnight borrowings rose $5,344,000 since December 31, 1997. The net change of almost $54 million was used to fund growth in investment securities and loans. Notes payable grew $6.7 million during 1998. The proceeds from the increase in notes payable were used to support loan and investment security increases. For a more complete discussion on borrowings, please refer to Note J to the consolidated financial statements. ======================================================================== 7 =========================================================================== ASSET QUALITY Management continues to follow a conservative course in the recognition of problem loans. In most cases, when a loan reaches 90 days past due, all income earned but not collected is deducted from current income. Loans are carried at an amount which management believes will be collected. A balance considered not collectible is charged against (reduction to) the allowance for loan losses. In 1998, net charged off loans were $243,000 compared to $857,000 in 1997. Net charged off loans as a percentage of average loans were .06% and .24% in 1998 and 1997. Nonperforming loans are defined as nonaccrual loans, loans 90 days or more past due, and any loans where the terms have been renegotiated. Total nonperforming loans were $1,497,000 and $2,610,000 at December 31, 1998 and 1997. The investment in impaired loans was $1,606,000 at December 31, 1998, compared to $933,000 at the same time in 1997. Please refer to Note F to the consolidated financial statements for more information on impaired loans. Total nonaccrual loans were $790,000 at December 31, 1998, compared to $1,274,000 at the end of 1997. The allowance for loan losses increased $934,000 or 12% during 1998. The allowance for loan losses represents 2.05% of outstanding loans at the end of 1998 as compared to 2.00% at December 31, 1997. Management maintains the allowance at a level which they believe adequately provides for losses inherent in the loan portfolio. Such losses are estimated by a variety of factors, including specific examination of certain borrowing relationships and consideration of historical losses incurred on certain types of credits. Management focuses on early identification of problem credits through ongoing review by management, loan personnel and an outside loan review specialist. LIQUIDITY AND INTEREST RATE SENSITIVITY Asset liability management aids the Company in achieving reasonable and predictable earnings and liquidity while maintaining a balance between interest earning assets and interest bearing liabilities. Liquidity management involves the ability to meet the cash flow requirements of the Company's customers. These customers may be either borrowers needing to meet their credit needs or depositors wanting to withdraw funds. Management of interest rate sensitivity attempts to avoid widely varying net interest margins and to achieve consistent net interest income through periods of changing interest rates. The net interest margin was 5.06% in 1998 compared to 5.16% in 1997. Loan yields were 9.34% in 1998 compared to 9.46% in 1997. Deposit costs decreased 12 basis points from 3.95% in 1997 to 3.83% in 1998. A decrease in deposit rates affects most rates currently paid and, therefore, has an immediate positive impact on net interest margin. With the exception of variable rate loans, a decrease in loan rates does not affect the yield until a new loan is made. The prime rate was stable until the fourth quarter of 1998 when it experienced three 25 basis point decreases. Competition for both loans and deposits has caused margins to shrink in 1998. The principal sources of liquidity for the Company are maturing securities, federal funds sold, loan payments by borrowers, investment securities, loans held for sale and deposit or deposit equivalent growth. Securities maturing within one year at December 31, 1998, are $20 million compared to $18 million at December 31, 1997. 8 ======================================================================== =========================================================================== The following table shows the interest sensitivity gaps for five different intervals as of December 31, 1998:
MATURITY OR REPRICING FREQUENCY ------------------------------- (Dollars in millions) 2 days 4 mos. 13 mos. through through through 1 day 3 mos. 12 mos. 5 yrs. 5+ yrs. Interest earning assets: Loans $88.6 $45.6 $67.6 $204.3 $34.9 Investment securities 0.2 8.7 11.4 39.6 41.8 Other earning assets 10.9 2.4 0.0 0.0 0.0 ------- ------- ------- ------ ----- Total 99.7 56.7 79.0 243.9 76.7 Interest bearing liabilities: Deposits 216.2 79.5 83.1 46.2 0.2 Other bearing liabilities 7.9 2.0 4.7 11.2 15.1 ------- ------- ------- ------ ----- Total 224.1 81.5 87.8 57.4 15.3 ------- ------- ------- ------ ----- Interest sensitivity gap $(124.4) $(24.8) $ (8.8) $186.5 $61.4 ======= ======= ======= ====== ===== Cumulative gap $(124.4) $(149.2) $(158.0) $28.5 $89.9 ======= ======= ======= ====== =====
For the one day interval, maturities of interest bearing liabilities exceed those of interest earning assets by $124 million. Included in the one day maturity classification are $216 million of savings and checking accounts which are contractually available to the Company's customers immediately, but in fact function as core deposits with considerably longer maturities. The pattern of interest sensitive liability maturities exceeding interest sensitive assets continues through the one year time frame resulting in a cumulative excess of $158 million through one year. For the time periods more than one year, the trend reverses so that for the period one to five years, interest sensitive assets exceed interest sensitive liabilities by $29 million. Interest sensitive assets exceed interest sensitive liabilities by $90 million for the time period exceeding five years. Interest rate sensitivity varies with different types of interest earning assets and interest bearing liabilities. Overnight investments, on which rates change daily, and loans tied to the prime rate, differ considerably from long term investment securities and fixed rate loans. Time deposits over $100,000 and money market accounts are more interest sensitive than regular savings accounts. Comparison of the repricing intervals of interest earning assets to interest bearing liabilities is a measure of the interest sensitivity gap. Balancing this gap is a continual challenge in a changing rate environment. The Company uses a sophisticated computer program to perform analysis of interest rate risk, assist with its asset liability management, and model and measure interest rate sensitivity. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 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 1998, 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, or in how those exposures are managed in 1998 as compared to 1997. As of the date of this annual 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 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 the Corporation's control. All information provided in this section consists of forward looking statements. Reference is made to the section captioned "Forward Looking Statements" in this annual report for a discussion of the limitations on the Corporation's responsibility for such statements. ======================================================================== 9 =========================================================================== The following tables provide information about the Company's financial instruments that are sensitive to changes in interest rates as of December 31, 1998 and 1997. They show expected cash flows from market sensitive instruments for each of the next five years and thereafter. The expected maturity date values for loans and investment securities were calculated without adjusting the instruments' contractual maturity dates for expected prepayments. Maturity date values for interest bearing core deposits were not based on estimates of the period over which the deposits would be outstanding, but rather the opportunity for repricing. The Company believes that repricing dates, as opposed to expected maturity dates may be more relevant in analyzing the value of such instruments and are reported as such in the following tables. Fair value is computed as the present value of expected cash flows at rates in effect at the date indicated.
REPRICING DATE --------------------------------------------------------------- DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) FAIR VALUE 1999 2000 2001 2002 2003 THEREAFTER TOTAL 12/31/98 ---- ---- ---- ---- ---- ---------- ----- -------- Rate sensitive assets: Fixed interest rate loans $ 84,243 $61,918 $67,912 $41,793 $50,546 $48,097 $354,509 $360,114 Average interest rate 8.12% 8.89% 8.59% 8.55% 8.34% 8.56% Variable interest rate loans $ 40,012 $ 8,634 $11,970 $ 9,427 $ 9,070 $ 7,406 $ 86,519 $ 87,897 Average interest rate 8.46% 8.86% 8.57% 8.79% 8.81% 12.72% Fixed interest rate securities $ 20,628 $14,982 $16,625 $ 6,057 $ 4,263 $38,793 $101,348 $101,348 Average interest rate 5.85% 6.04% 5.92% 5.96% 5.92% 6.08% Variable interest rate securities $ 363 $ 363 $ 363 Average interest rate 7.47% Other interest bearing assets $ 13,288 $ 13,288 $ 13,288 Average interest rate 4.63% Rate sensitive liabilities: Savings & interest bearing checking $216,256 $216,256 $216,256 Average interest rate 3.09% Time deposits $156,214 $29,031 $10,100 $ 7,535 $ 5,837 $ 192 $208,909 $209,540 Average interest rate 5.18% 5.43% 5.69% 5.74% 5.48% 4.17% Fixed interest rate borrowings $ 7,900 $ 1,566 $ 9,466 $ 9,546 Average interest rate 5.75% 6.80% Variable interest rate borrowings $ 12,750 $ 12,750 $ 13,403 Average interest rate 5.41% Repurchase Agreements $ 18,678 $ 18,678 $ 19,096 Average interest rate 3.88%
REPRICING DATE --------------------------------------------------------------- DECEMBER 31, 1998 (DOLLARS IN THOUSANDS) FAIR VALUE 1998 1999 2000 2001 2002 THEREAFTER TOTAL 12/31/97 ---- ---- ---- ---- ---- ---------- ----- -------- Rate sensitive assets: Fixed interest rate loans $76,988 $59,871 $61,688 $42,877 $41,793 $26,763 $309,980 $311,930 Average interest rate 8.93% 8.98% 9.02% 8.90% 8.89% 9.44% Variable interest rate loans $37,446 $10,745 $10,451 $15,138 $12,331 $ 8,717 $ 94,828 $ 95,459 Average interest rate 9.50% 9.21% 9.72% 9.42% 9.66% 9.59% Fixed interest rate securities $18,515 $12,367 $15,441 $ 9,204 $ 6,223 $20,265 $ 82,015 $ 82,015 Average interest rate 5.76% 6.12% 6.14% 6.14% 6.26% 5.81% Variable interest rate securities $ 563 $ 563 $ 563 Average interest rate 7.63% Other interest bearing assets $ 836 $ 836 $ 836 Average interest rate 5.25%
10 ======================================================================== ===========================================================================
Rate sensitive liabilities: Savings & interest bearing checking $174,218 $174,218 $174,218 Average interest rate 3.19% Time deposits $153,395 $35,352 $11,958 $ 7,134 $ 4,356 $ 1,300 $213,495 $213,083 Average interest rate 5.49% 5.80% 6.06% 5.97% 6.07% 6.22% Fixed interest rate borrowings $ 8,300 $ 1,590 $ 9,890 $ 9,890 Average interest rate 6.63% 6.86% Variable interest rate borrowings $ 6,000 $ 6,000 $ 6,000 Average interest rate 5.80% Repurchase Agreements $ 12,933 $ 12,933 $ 12,933 Average interest rate 4.23%
CAPITAL RESOURCES The Company obtains funds for its operating expenses and dividends to shareholders through dividends from its subsidiary banks. In general, the subsidiary banks pay only those amounts required to meet holding company cash requirements. No excess liquidity is accumulated at the holding company, rather capital is maintained at the subsidiary banks to support growth. Bank regulators have established risk based capital guidelines for banks and bank holding companies. Minimum capital levels are established under these guidelines. Each asset category is assigned a perceived risk weighting. Off balance sheet items such as loan commitments and standby letters of credit also require capital allocations. As of December 31, 1998, the Company's total capital to risk weighted assets exceeded the minimum requirement for capital adequacy purposes of 8% by 4.47% or $19.6 million, Tier 1 capital to risk weighted assets exceeded the minimum of 4% by 7.21% or $31.5 million, and Tier 1 capital to average assets exceeded the minimum of 4% by 4.33% or $25.5 million. For a more complete discussion of capital requirements, please refer to Note Q to the consolidated financial statements. The Federal Deposit Insurance Corporation insures specified customer deposits and assesses premium rates based on defined criteria. Insurance assessment rates may vary from bank to bank based on the factors that measure the perceived risk of a financial institution. One condition for maintaining the lowest risk assessment, and therefore the lowest insurance rate, is the maintenance of capital at the "well capitalized" level. Each of the Company's affiliate banks has exceeded the regulatory criteria for a "well capitalized" financial institution, and is paying the lowest assessment rate assigned by FDIC. A certain level of capital growth is desirable to maintain a good ratio of equity to total assets. The compound annual growth rate for total average assets for the past five years was 17.8%. The compound annual growth rate for average equity over the same period was 25.2%. The compound annual growth rate for equity includes the $5.5 million stock issuance in 1993, and $16 million for shares issued for the acquisition of 1997. Management has determined one way of maintaining capital adequacy is to maintain a reasonable rate of internal capital growth. The percentage return on average equity times the percentage of earnings retained after dividends equals the internal growth percentage. The following table illustrates this relationship:
1998 1997 1996 ---- ---- ---- Return on Equity 12.98% 13.48% 15.15% MULTIPLIED BY Percentage of Earnings Retained 65.84% 66.49% 72.06% EQUALS Internal Capital Growth 8.55% 8.96% 10.92%
The rate of internal capital growth demonstrates the effective deployment of the addition to capital from the 1993 stock offering. The decrease in internal capital growth in 1997 and 1998 is the consequence of two factors. The first is the increase in capital emerging from the 1997 acquisition. In addition, the Company paid out a larger proportion of its earnings in 1998 and 1997 than in 1996. To maintain sufficient capital, management has determined that the rate of internal capital growth should average at least 5%. To achieve the goal of acceptable internal capital growth, management will continue its efforts to increase the Company's return on average equity while maintaining a reasonable cash dividend. ======================================================================== 11 =========================================================================== As an additional enhancement to capital growth, the Company offers a dividend reinvestment program. The Firstbank Corporation Dividend Reinvestment Plan was first offered in 1988. At December 31, 1988, 123 owners holding 199,863 shares participated in the Plan. By the end of 1998, 1,036 owners holding 1,704,107 shares were participating in the Plan. The Company is not aware of any recommendations by regulatory authorities at December 31, 1998, which are likely to have a material effect on Firstbank Corporation's liquidity, capital resources or operations. 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 December 31, 1998, it is estimated that this plan is approximately 80% 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 early 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. 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 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 or software should not function. Testing of the Corporation's core processing hardware and software indicates 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. 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. 12 ======================================================================== =========================================================================== FORWARD LOOKING STATEMENTS This annual report including, without limitation, management's discussion and analysis of financial condition and results of operations and other sections 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," "indicate," "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, 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 differences 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. ======================================================================== 13 =========================================================================== FIRSTBANK CORPORATION AND SUBSIDIARIES QUARTERLY RESULTS OF OPERATIONS (Dollars in thousands, except per share data)
1998 ---- 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER YEAR --------------------------------------------------------- Interest income $10,864 $10,896 $11,221 $11,503 $44,484 Net interest income 6,113 6,095 6,358 6,565 25,131 Provision for loan losses 370 205 240 362 1,177 Income before federal income taxes 2,490 2,614 2,645 2,671 10,420 Net income 1,748 1,830 1,853 1,872 7,303 Basic earnings per share .39 .40 .41 .42 1.62 Diluted earnings per share .37 .39 .40 .40 1.56
1997 ---- 1ST 2ND 3RD 4TH QUARTER QUARTER QUARTER QUARTER YEAR --------------------------------------------------------- Interest income $8,213 $8,649 $10,002 $11,000 $37,864 Net interest income 4,591 4,854 5,644 6,245 21,334 Provision for loan losses 251 462 365 320 1,398 Income before federal income taxes 1,702 1,690 2,112 2,305 7,809 Net income 1,227 1,222 1,500 1,609 5,558 Basic earnings per share .34 .34 .36 .36 1.40 Diluted earnings per share .34 .33 .35 .35 1.37
All per share amounts have been adjusted for stock dividends Bank of Lakeview results are included from August 8, 1997, the date of acquisition. - --------------------------------------------------------------------------- COMMON STOCK DATA Firstbank Corporation Common Stock was held by 1,505 shareholders of record as of December 31, 1998. Total shareholders number approximately 1,800 including those whose shares are held in nominee name through brokerage firms. The Company's shares are listed on the Over the Counter Bulletin Board under the symbol FBMI and are traded by several brokers. The range of bid prices for shares of common stock for each quarterly period during the past two years is as follows:
LOW AND HIGH BID QUOTATIONS --------------------------- 1998 1997 ---- ---- First Quarter $22.38-$29.05 $15.30-$16.67 Second Quarter $29.05-$33.10 $16.67-$18.14 Third Quarter $26.67-$33.10 $18.14-$18.82 Fourth Quarter $26.67-$30.48 $18.82-$22.38
The prices quoted above are obtained on a weekly basis from the NASD System. The over the counter market quotations reflect interdealer prices without retail mark up, mark down, or commission, and may not necessarily represent actual transactions. Prices have been adjusted to reflect stock dividends and a 2 for 1 stock split. The following table summarizes cash dividends paid per share (adjusted for stock dividends and 2 for 1 stock split) of common stock during 1998 and 1997.
1998 1997 ---- ---- First Quarter $.1381 $.0998 Second Quarter $.1381 $.1180 Third Quarter $.1381 $.1180 Fourth Quarter $.1381 $.1180 ------ ------ $.5524 $.4538 ====== ======
The Company's principal sources of funds to pay cash dividends are the earnings of and dividends paid by the subsidiary banks. Under current regulations, the subsidiary banks are restricted in their ability to transfer funds in the form of cash dividends, loans and advances to the Company (See Note P). As of January 1, 1999, approximately $12,453,000 of the subsidiaries' retained earnings is available for transfer in the form of dividends to the Company without prior regulatory approval. In addition, to the extent of the subsidiaries' 1999 earnings, such earnings will be available for distributions as dividends to the Company. 14 ======================================================================== =========================================================================== REPORT OF INDEPENDENT AUDITORS Board of Directors and Shareholders Firstbank Corporation Alma, Michigan We have audited the consolidated balance sheets of Firstbank Corporation as of December 31, 1998 and 1997, and the related consolidated statements of income and comprehensive income, changes in shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Firstbank Corporation at December 31, 1998 and 1997, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. Crowe, Chizek and Company LLP January 29, 1999 Grand Rapids, Michigan ======================================================================== 15 ===========================================================================
FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31 ----------- 1998 1997 ---- ---- ASSETS Cash and due from banks $ 22,203,430 $ 23,279,923 Short term investments 13,288,206 835,580 ------------ ------------ Total cash and cash equivalents 35,491,636 24,115,503 Securities available for sale 101,711,023 82,577,999 Loans: Loans held for sale 5,454,928 3,916,791 Portfolio loans Commercial 192,212,168 158,218,889 Real estate mortgage 171,554,004 167,930,825 Consumer 71,806,822 74,741,496 ------------ ------------ Total loans 441,027,922 404,808,001 Less allowance for loan losses (9,048,000) (8,114,000) ------------ ------------ Net loans 431,979,922 396,694,001 Premises and equipment, net 14,057,619 13,417,065 Intangibles 9,534,210 10,290,640 Accrued interest receivable 3,463,572 3,458,655 Other assets 6,775,852 5,768,444 ------------ ------------ TOTAL ASSETS $603,013,834 $536,322,307 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing demand accounts $ 68,887,968 $ 57,952,555 Interest bearing accounts: Demand 146,741,509 110,363,898 Savings 69,514,970 63,853,842 Time 208,908,518 213,495,526 ------------ ------------ Total deposits 494,052,965 445,665,821 Securities sold under agreements to repurchase and overnight borrowings 26,577,527 21,232,881 Notes payable 14,316,550 7,590,465 Accrued interest payable 1,311,406 1,307,629 Other liabilities 6,980,442 5,993,617 ------------ ------------ Total liabilities 543,238,890 481,790,413 SHAREHOLDERS' EQUITY Preferred stock; no par value, 300,000 shares authorized, none issued Common stock; 10,000,000 shares authorized; 4,527,256 and 4,292,210 shares issued and outstanding in 1998 and 1997 respectively 52,796,743 46,223,949 Retained earnings 5,874,601 7,420,886 Net unrealized appreciation on securities available for sale, net of deferred income tax of $568,521 in 1998, and $456,970 in 1997 1,103,600 887,059 ------------ ------------ Total shareholders' equity 59,774,944 54,531,894 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $603,013,834 $536,322,307 ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 16 ======================================================================== =========================================================================== FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
YEAR ENDED DECEMBER 31 ---------------------- 1998 1997 1996 ---- ---- ---- Interest income: Loans, including fees $ 38,498,073 $ 33,385,960 $ 27,446,750 Securities: Available for sale - Taxable 3,466,878 2,546,186 1,922,393 Available for sale - Exempt from federal income tax 1,791,291 1,620,493 1,471,602 Short term investments 728,105 311,464 175,064 ------------ ------------- -------------- Total interest income 44,484,347 37,864,103 31,015,809 Interest expense: Deposits 17,891,968 15,628,237 12,581,008 Notes payable and other 1,461,240 901,502 699,718 ------------ ------------- -------------- Total interest expense 19,353,208 16,529,739 13,280,726 ------------ ------------- -------------- Net interest income 25,131,139 21,334,364 17,735,083 Provision for loan losses 1,177,000 1,398,000 1,838,000 ------------ ------------- -------------- Net interest income after provision for loan losses 23,954,139 19,936,364 15,897,083 Noninterest income: Service charges on deposit accounts 1,499,200 1,227,700 1,009,895 Gain on sale of mortgage loans 2,099,619 759,378 620,990 Mortgage servicing, net of amortization (14,591) 247,529 386,494 Trust fees 327,464 273,222 234,951 Gain (loss) on sale of securities 3,329 (29,732) 11,773 Other 1,952,708 1,219,254 1,033,253 ------------ ------------- -------------- Total noninterest income 5,867,729 3,697,351 3,297,356 Noninterest expense: Salaries and employee benefits 9,768,488 8,032,608 6,613,365 Occupancy 2,970,065 2,128,511 1,883,193 Amortization of intangibles 756,430 826,924 271,449 FDIC Insurance premium 71,923 43,864 226,554 Michigan Single Business tax 389,800 359,567 355,800 Other 5,445,592 4,433,510 3,439,690 ------------ ------------- -------------- Total noninterest expense 19,402,298 15,824,984 12,790,051 ------------ ------------- -------------- Income before federal income taxes 10,419,570 7,808,731 6,404,388 Federal income taxes 3,117,000 2,251,000 1,761,000 ------------ ------------- -------------- NET INCOME $ 7,302,570 $ 5,557,731 $ 4,643,388 Other comprehensive income Change in unrealized gain (loss) on securities, net of tax and reclassification effects 216,541 323,720 (350,238) ------------ ------------- -------------- COMPREHENSIVE INCOME $ 7,519,111 $ 5,881,451 $ 4,293,150 ============ ============= ============== Basic earnings per share $1.62 $1.40 $1.30 ===== ===== ===== Diluted earnings per share $1.56 $1.37 $1.28 ===== ===== =====
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. ======================================================================== 17 =========================================================================== FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
NET APPRECIATION (DEPRECIATION) ON SECURITIES COMMON RETAINED AVAILABLE STOCK EARNINGS FOR SALE TOTAL ------ -------- -------------- ----- Balances at January 1, 1996 $ 21,355,293 $ 7,583,783 $ 913,577 $ 29,852,653 Net income for 1996 4,643,388 4,643,388 Cash dividends--$.36 per share (1,297,400) (1,297,400) 5% stock dividend--169,917 shares 2,620,039 (2,633,181) (13,142) Issuance of 4,692 shares of common stock through exercise of stock options 46,947 46,947 Issuance of 10,739 shares of common stock through the dividend reinvestment plan 144,063 144,063 Issuance of 4,038 shares of common stock from supplemental shareholder investments 61,790 61,790 Net change in unrealized appreciation (depreciation) on securities available for sale, net of tax of $180,426 (350,238) (350,238) ------------- ------------ ---------- ------------ BALANCES AT DECEMBER 31, 1996 24,228,132 8,296,590 563,339 33,088,061 Net income for 1997 5,557,731 5,557,731 Cash dividends--$.45 per share (1,862,378) (1,862,378) 5% stock dividend--214,026 shares 4,560,786 (4,571,057) (10,271) Issuance of 12,235 shares of common stock through exercise of stock options 163,566 163,566 Issuance of 26,870 shares of common stock through the dividend reinvestment plan 479,436 478,436 Issuance of 21,771 shares of common stock from supplemental shareholder investments 402,894 402,894 Issuance of 856,029 shares of common stock pursuant to the acquisition 16,389,135 16,389,135 Net change in unrealized appreciation (depreciation) on securities available for sale, net of tax of $166,765 323,720 323,720 ------------- ------------ ---------- ------------ BALANCES AT DECEMBER 31, 1997 46,223,949 7,420,886 887,059 54,531,894 Net income for 1998 7,302,570 7,302,570 Cash dividends--$.55 per share (2,494,909) (2,494,909) 5% stock dividend--215,388 shares 6,353,282 (6,353,946) (664) 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 the dividend reinvestment plan 635,966 635,966 Issuance of 16,747 shares of common stock from supplemental shareholder investments 482,354 482,354 Net change in unrealized appreciation (depreciation) on securities available for sale, net of tax of $111,551 216,541 216,541 Purchase of 34,990 shares of stock (1,213,670) (1,213,670) Issuance of 1,509 shares of common stock 63,370 63,370 ------------- ------------ ---------- ------------ BALANCES AT DECEMBER 31, 1998 $ 52,796,743 $ 5,874,601 $1,103,600 $ 59,774,944 ============= ============ ========== ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 18 ======================================================================== =========================================================================== FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31 ---------------------- 1998 1997 1996 ---- ---- ---- OPERATING ACTIVITIES Net income $ 7,302,570 $ 5,557,731 $ 4,643,388 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 1,177,000 1,398,000 1,838,000 Depreciation of premises and equipment 1,480,897 1,033,620 749,790 Net amortization of security premiums/discounts 122,223 131,273 343,131 Loss (gain) on sale of securities (3,329) 29,732 (11,773) Amortization of intangibles 756,430 826,924 271,449 Gain on sale of mortgage loans (2,099,619) (759,378) (620,990) Proceeds from sales of mortgage loans 152,673,876 50,910,223 46,388,544 Loans originated for sale (152,112,394) (47,311,773) (49,917,204) Deferred federal income tax benefit (356,000) (481,000) (661,000) Decrease in accrued interest receivable and other assets (693,761) (4,049,673) (453,940) Increase (decrease) in accrued interest payable and other liabilities 916,602 3,196,620 (499,416) ------------ ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 9,164,495 10,678,299 2,069,979 INVESTING ACTIVITIES Cash acquired from Lakeview Financial Corporation 1,724,418 Proceeds from sale of securities available for sale 609,415 1,560,907 3,534,165 Proceeds from maturities of securities available for sale 28,935,385 28,153,606 20,286,206 Purchases of securities available for sale (48,468,741) (42,239,442) (19,434,329) Net increase in portfolio loans (34,924,784) (23,427,147) (46,090,330) Net purchases of premises and equipment (2,121,451) (2,074,625) (1,962,736) Net increase in intangibles from acquisitions (1,757,606) ------------ ------------ ------------ NET CASH USED BY INVESTING ACTIVITIES (55,970,176) (36,302,283) (45,424,630) FINANCING ACTIVITIES Deposits from branch acquisitions 19,347,853 Net increase in deposits 48,387,144 13,586,053 32,314,920 Net increase (decrease) in securities sold under agreements to repurchase and overnight borrowings 5,344,646 12,400,289 (5,009,687) Proceeds from notes payable 6,726,085 3,351,426 2,239,039 Cash dividends and cash paid in lieu of fractional shares on stock dividend (2,495,573) (1,872,649) (1,310,542) Purchase of common stock (1,213,670) Net proceeds from issuance of common stock 1,433,182 1,045,896 252,800 ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 58,181,814 28,511,015 47,834,383 ------------ ------------ ------------ INCREASE IN CASH AND CASH EQUIVALENTS 11,376,133 2,887,031 4,479,732 Cash and cash equivalents at beginning of year 24,115,503 21,228,472 16,748,740 ------------ ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $ 35,491,636 $ 24,115,503 $ 21,228,472 ============ ============ ============ Supplemental disclosure of cash flow information: Cash paid during the year for: Interest $ 19,349,433 $ 14,944,446 $ 13,150,177 Income taxes 3,150,000 2,135,000 2,610,000 Non-cash investing and financing activities: Acquisition of Lakeview Financial Corporation Common stock issued $ 16,006,389 Fair value of stock options 382,776 Fair value of assets acquired 88,513,535 Fair value of liabilities assumed 77,410,379 Supplemental disclosure of non-cash investing activities--See Note A
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. ======================================================================== 19 =========================================================================== NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A--SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS: Firstbank Corporation (the "Company") is a bank holding company. Each subsidiary bank of the Company is a full service community bank. The subsidiary banks offer all customary banking services, including the acceptance of checking, savings and time deposits, and the making of commercial, agricultural, real estate, personal, home improvement, automobile and other installment and consumer loans. Trust services are provided throughout the Company's service area by one of its subsidiary banks. The consolidated assets of the Company of $603 million as of December 31, 1998, primarily represent commercial and retail banking activity. Mortgage loans serviced for others of $215 million and trust assets of $10 million as of December 31, 1998, are not included in the Company's consolidated balance sheet. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Bank of Alma, Firstbank, 1st Bank, and Bank of Lakeview (The "Banks"), Niles Agency, Incorporated, 1st Armored, Incorporated, and 1st Collections after elimination of intercompany accounts and transactions. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. CERTAIN SIGNIFICANT ESTIMATES: The primary estimates incorporated into the Company's financial statements which are susceptible to change in the near term include the allowance for loan losses and the determination and carrying value of certain financial instruments. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS: The Company's business is concentrated in the mid-central section of the lower peninsula of Michigan. Management is of the opinion that no concentrations exist that make the Company vulnerable to the risk of a near term severe impact. While the loan portfolio is diversified, the customers' ability to honor their debts is partially dependent on the local economies. The Company's service area is primarily dependent on the manufacturing (automotive and other), agricultural and recreational industries. Most commercial and agricultural loans are secured by business assets, including commercial and agricultural real estate and federal farm agency guarantees. Generally, consumer loans are secured by various items of personal property and mortgage loans are secured by residential real estate. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand, amounts due from banks, and short term investments which include interest bearing deposits with banks, federal funds sold, and overnight money market fund investments. Generally, federal funds and overnight money market funds are purchased for a one day period. The Company reports customer loan transactions, deposit transactions, and repurchase agreements and overnight borrowings on a net cash flow basis. SECURITIES: Securities available for sale consist of bonds and notes which might be sold prior to maturity due to changes in interest rates, prepayment risks, yield and availability of alternative 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 (the difference between the fair value and amortized cost of the securities so classified) is reported, net of related income tax effects, as a separate component of shareholders' equity until realized. Gains and losses on sales are determined using the specific identification method. Premium and discount amortization is recognized in interest income using the level yield method over the period to call or maturity, whichever is earlier. MORTGAGE BANKING ACTIVITIES: Servicing rights are recognized as assets for purchased rights and for the allocated value of retained servicing rights on loans sold. Servicing rights are expensed in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on the fair value of the rights, using groupings of the underlying loans as to interest rates and then, secondarily, as to geographic and prepayment characteristics. Any impairment of a grouping is reported as a valuation allowance. LOANS: Loans receivable, for which management has the intent and ability to hold for the foreseeable future or payoff, are reported at their outstanding unpaid principal balances reduced by charge offs and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts. Loan origination fees and certain origination costs are capitalized and recognized as an adjustment of the yield of the related loan. Loans held for sale are reported at the lower of cost or market, on an aggregate basis. 20 ======================================================================== =========================================================================== ALLOWANCE FOR LOAN LOSSES: the allowance for loan losses is maintained at a level believed by management to be adequate to absorb inherent losses in the loan portfolio. Management's determination of the adequacy of the allowance is based on an evaluation of the portfolio, past loan loss experience, current economic conditions, volume, growth and composition of the loan portfolio and other relevant factors. The allowance is increased by provisions for loan losses charged to expense and reduced by charge offs, net of recoveries. The valuation of loans is reviewed on an ongoing basis for impairment. A loan is impaired when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans are measured based on the present value of expected cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the loan's observable market price or at the fair value of collateral if the loan is collateral dependent. Loans considered to be impaired are reduced to the present value of expected future cash flows or to the fair value of collateral, by allocating a portion of the allowance for loan losses to such loans. If these allocations cause an increase in the allowance for loan losses, such increase is reported as bad debt expense. Smaller balance homogeneous loans such as residential first mortgage loans secured by one to four family residences, residential construction loans, automobile, home equity and second mortgage loans are collectively evaluated for impairment. Commercial loans and first mortgage loans secured by other properties are evaluated individually for impairment. When credit analysis of the borrower's operating results and financial condition indicates the underlying ability of the borrower's business activity is not sufficient to generate adequate cash flow to service the business' cash needs, including the Company's loans to the borrower, the loan is evaluated for impairment. Often this is associated with a delay or shortfall in payments of 90 days or less. Commercial loans are rated on a scale of 1 to 8, with grades 1 to 4 being pass grades, 5 being special attention or watch, 6 substandard, 7 doubtful and 8 loss. Loans graded 6, 7 and 8 are considered for impairment. Loans are generally moved to nonaccrual status when 90 days or more past due. These loans are often considered impaired. Impaired loans, or portions thereof, are charged off when deemed uncollectible. PREMISES AND EQUIPMENT: Premises and equipment are stated on the basis of cost, less accumulated depreciation. Depreciation is computed over the estimated useful lives of the assets, primarily by accelerated methods for income tax purposes, and by the straight line method for financial reporting purposes. OTHER REAL ESTATE: Other real estate (included as a component of other assets) includes properties acquired through either a foreclosure proceeding or acceptance of a deed in lieu of foreclosure and is initially recorded at lower of cost or fair value at the date of foreclosure, establishing a new cost basis. These properties are evaluated periodically and are carried at the lower of cost or estimated fair value less estimated costs to sell. ACQUISITION INTANGIBLES: The acquisition of purchased subsidiaries and branches has included amounts related to the value of customer deposit relationships ("core deposit intangibles") and excess of cost over estimated fair value of net assets acquired ("goodwill"). The core deposit intangibles are amortized over the expected life of the value of the acquired relationship. The goodwill is amortized using the straight line method for periods of not less than 15 years or more than 20 years. INTEREST INCOME: Interest on loans is accrued over the term of the loans based upon the principal outstanding. The carrying value of impaired loans is periodically adjusted to reflect cash payments, revised estimates of future cash flows and increases in the present value of expected cash flows due to the passage of time. Cash payments representing interest income are reported as such and other cash payments are reported as reductions in carrying value. Increases or decreases in carrying value due to changes in estimates of future payments or the passage of time are reported as reductions or increases in bad debt expense. INCOME TAXES: The Company records income tax expense based on the amount of taxes due on its tax return plus the change in deferred taxes computed based on the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, using enacted tax rates. The Company and its subsidiaries file a consolidated federal income tax return on a calendar year basis. EARNINGS PER SHARE: Basic earnings per share is based on weighted average common shares outstanding. Diluted earnings per share includes the dilutive effect of additional common shares issuable under stock options. All per share amounts are restated for stock dividends and stock splits through the date of issue of the financial statements. COMPREHENSIVE INCOME: Comprehensive income consists of net income and unrealized gains and losses on securities available for sale which is also recognized as a separate component of equity. The accounting standard that requires reporting comprehensive income first applies for 1998, with prior information restated to be comparable. SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: During 1997, the Company transferred $2,886,318 from loans held for sale to portfolio loans. ======================================================================== 21 =========================================================================== RECLASSIFICATION: Certain 1997 and 1996 amounts have been reclassified to conform to the 1998 presentation. FUTURE ACCOUNTING CHANGES: Beginning January 1, 2000, a new accounting standard will require all derivatives to be recorded at fair value. Unless designated as hedges, changes in these fair values will be recorded in the income statement. Fair value changes involving hedges will generally be recorded by offsetting gains and losses on the hedge and on the hedged item, even if the fair value of the hedged item is not otherwise recorded. Mortgage loans originated in mortgage banking are converted into securities on occasion. A new accounting standard for 1999 will allow classifying these securities as available for sale, trading, or held to maturity, instead of the current requirement to classify as trading. Management does not expect either of these changes to have a material effect upon the Company. SEGMENT INFORMATION: While the Company's chief decision makers monitor the revenue streams of various products and services, operations are managed and financial performance is evaluated on a company-wide basis. Accordingly, all of the Company's banking operations are considered by management to be aggregated in one reportable operating segment. NOTE B-ACQUISITIONS The Company did not consummate any acquisitions during 1998. On August 8, 1997, the Company completed its acquisition of Lakeview Financial Corporation. The purchase price of the transaction was $17 million based on the Company's trading prices for a 20 day period ending six days prior to the merger. Lakeview Financial Corporation shareholders could elect cash (up to 35% of the total purchase price) or stock based upon an exchange rate of .5839 shares of the Company's stock for each outstanding share of Lakeview Financial Corporation stock. Over 98% of the common stock shareholders of Lakeview Financial Corporation elected to receive the Company's stock, resulting in the issuance of 856,029 shares. Options held by officers of Lakeview Financial Corporation could be exchanged for options in the Company, cash, or stock. Options held by non-officer Directors of Lakeview Financial Corporation were converted to cash. Cash of $681,000 and options for 22,470 shares with exercise prices of $6.92 to $10.23 completed the merger. The acquisition was accounted for as a purchase transaction. Accordingly, the results of operations of Lakeview Financial Corporation are included with those of the Company for periods subsequent to the date of merger. The surviving entity is Firstbank Corporation. Bank of Lakeview will continue to operate as a community bank in the five communities (six locations) of their branches. Management believes that synergies exist in support functions, and that overall overhead costs will be reduced from this merger. This acquisition did not create an overlap of the Company's markets and as such the Company has not divested itself of any branches. The markets served by the acquired bank are contiguous to markets already served by the Company's banks. The unaudited pro forma amounts in the table below are presented for informational purposes and are not necessarily indicative of the results of operations of the combined Company for the periods presented. These amounts are also not necessarily indicative of the future results of operations of the combined Company. The following unaudited pro forma combined summary of income gives effect to the combination as if the acquisition was consummated on January 1, 1996.
YEAR ENDED DECEMBER 31 SUMMARY OF INCOME 1997 1996 ----------------- ---- ---- Net interest income $23,854,000 $21,827,000 Provision for loan losses 1,538,000 2,018,000 Noninterest income 4,008,000 3,881,000 Noninterest expense 17,189,000 16,506,000 Net income 5,684,000 5,177,000 Basic earnings per share $1.33 $1.22
The Company's Bank of Alma subsidiary acquired branches in Merrill and Auburn during 1996. The Bank assumed $19,000,000 of deposit liabilities. The purchase method of accounting was used for this transaction. Accordingly, the assets and operating results of these branches are included in the consolidated financial statements for periods after December 13, 1996. 22 ======================================================================== =========================================================================== NOTE C--RESTRICTIONS ON VAULT CASH AND DUE FROM BANK ACCOUNTS The Company's subsidiary banks are required to maintain average reserve balances in the form of cash and noninterest bearing balances due from the Federal Reserve Bank. The average reserve balances required to be maintained at December 31, 1998 and 1997, were $2,759,000 and $2,302,000 respectively. These reserves do not earn interest. NOTE D--SECURITIES Debt and equity securities have been classified in the consolidated balance sheets according to management's intent. The carrying amounts of securities and their fair values were as follows:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED FAIR COST GAINS LOSSES VALUE ---- ----- ------ ----- SECURITIES AVAILABLE FOR SALE: December 31, 1998: U.S. Treasury $ 9,028,443 $ 221,401 $ (51) $ 9,249,793 U.S. governmental agency 22,770,082 222,608 (60,658) 22,932,032 States and political subdivisions 40,016,678 1,214,073 (134,582) 41,096,169 Collateralized mortgage obligations 3,583,726 30,603 (529) 3,613,800 Corporate 22,824,634 226,073 (46,819) 23,003,888 Equity 1,815,341 0 0 1,815,341 ------------ ---------- --------- ------------ $100,038,904 $1,914,758 $(242,639) $101,711,023 ============ ========== ========= ============ December 31, 1997: U.S. Treasury $10,996,073 $ 87,137 $ (594) $11,082,616 U.S. governmental agency 15,270,745 129,358 (11,547) 15,388,556 States and political subdivisions 34,287,320 1,036,076 (3,727) 35,319,669 Collateralized mortgage obligations 4,479,036 75,603 (4,462) 4,550,177 Corporate 14,420,854 39,084 (2,898) 14,457,040 Equity 1,779,941 0 0 1,779,941 ------------ ---------- --------- ------------ $81,233,969 $1,367,258 $ (23,228) $82,577,999 ============ ========== ========= ============
Gross realized gains (losses) on sales and calls of securities were:
1998 1997 1996 ---- ---- ---- Gross realized gains $ 4,858 $ 1,050 $ 22,511 Gross realized losses (1,529) (30,782) (10,738) -------- -------- -------- Net realized gains $ 3,329 $(29,732) $ 11,773 ======== ======== ========
The amortized cost and fair value of securities at December 31, 1998, by stated maturity are shown below. Actual maturities may differ from stated maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
SECURITIES AVAILABLE FOR SALE ----------------------------- AMORTIZED FAIR COST VALUE ---- ----- Due in one year or less $ 19,850,074 $ 19,873,716 Due after one year through five years 41,674,222 42,681,886 Due after five years through ten years 24,623,852 25,000,243 Due after ten years 12,075,415 12,339,837 ------------ ------------ Total 98,223,563 99,895,682 Equity securities 1,815,341 1,815,341 ------------ ------------ Total securities $100,038,904 $101,711,023 ============ ============
At December 31, 1998, securities with a carrying value approximating $49,424,000 were pledged to secure public and trust deposits, securities sold under agreements to repurchase, and for such other purposes as required or permitted by law. ======================================================================== 23 =========================================================================== NOTE E--SECONDARY MORTGAGE MARKET ACTIVITIES Loans serviced for others, which are not reported as assets, total $215,308,000 and $167,295,00 at 1998 and 1997. Activity for capitalized mortgage servicing rights was as follows:
1998 1997 ---- ---- Servicing rights: Beginning of year $503,370 $269,501 Additions 969,416 571,077 Amortized to expense 475,560 337,208 -------- -------- End of year $997,226 $503,370 ======== ========
Management has determined that a valuation allowance is not necessary at December 31, 1998 or 1997. NOTE F-LOANS Loans at year-end were as follows:
1998 1997 ---- ---- Commercial $117,351,858 $109,151,314 Mortgage loans on real estate: Residential 173,420,825 164,468,490 Loans held for sale 5,454,928 3,916,791 Commercial 109,412,665 79,956,655 Construction 23,415,773 19,467,996 Consumer 70,136,552 69,953,725 Credit Card 6,519,740 6,606,615 ------------ ------------ Subtotal 505,712,341 453,521,586 Less: Allowance for loan losses 9,048,000 8,114,000 Net deferred loan fees 9,764 2,950 Undisbursed loan funds 64,674,655 48,710,635 ------------ ------------ Loans, net $431,979,922 $396,694,001 ============ ============
Activity in the allowance for loan losses for the year was as follows:
1998 1997 1996 ---- ---- ---- Beginning balance $8,114,000 $6,247,000 $4,876,000 Lakeview allowance at acquisition 1,326,000 Provision for loan losses 1,177,000 1,398,000 1,838,000 Loans charged-off (712,000) (1,270,000) (780,000) Recoveries 469,000 413,000 313,000 ---------- ---------- ---------- Ending balance $9,048,000 $8,114,000 $6,247,000 ========== ========== ==========
Impaired loans were as follows: 1998 1997 ---- ---- Year-end loans with no allocated allowance for loan losses $ 504,000 $868,000 Year-end loans with allocated allowance for loan losses 1,102,000 65,000 ---------- -------- Total $1,606,000 $933,000 ========== ========
1998 1997 1996 ---- ---- ---- Amount of the allowance for loan losses allocated $ 118,000 $ 48,000 Loans past due over 90 days still on accrual $ 621,000 $1,215,158 Average of impaired loans during the year $1,879,000 $ 972,000 $ 368,000 Interest income recognized during impairment $ 128,000 $ 87,000 $ 26,000 Cash-basis interest income recognized $ 31,000 $ 0 $ 0
24 ======================================================================== =========================================================================== NOTE G--PREMISES AND EQUIPMENT
Year end premises and equipment were as follows: 1998 1997 ---- ---- Land $ 3,174,570 $ 2,982,783 Buildings 11,594,443 10,358,212 Furniture, fixtures and equipment 8,206,337 7,596,195 ----------- ----------- 22,975,350 20,937,190 Less: Accumulated depreciation (8,917,731) (7,520,125) ----------- ----------- $14,057,619 $13,417,065 =========== ===========
Rent expense for 1998 was $115,801 and for 1997 was $81,695. Rent commitments under noncancellable operating leases were as follows, before considering renewal options that generally are present.
1999 $182,424 2000 179,864 2001 181,319 2002 165,176 2003 166,705 -------- Total $875,488 ========
NOTE H--FEDERAL INCOME TAXES
Federal income taxes consist of the following: 1998 1997 1996 ---- ---- ---- Current expense $3,473,000 $2,536,000 $2,422,000 Deferred benefit (356,000) (285,000) (661,000) ---------- ---------- ---------- Total $3,117,000 $2,251,000 $1,761,000 ========== ========== ==========
A reconciliation of the difference between federal income tax expense and the amount computed by applying the federal statutory tax rate of 34% is as follows:
1998 1997 1996 ---- ---- ---- Tax at statutory rate $ 3,543,000 $2,655,000 $2,177,000 Effect of surtax exemption 4,000 Effect of tax-exempt interest (550,000) (619,000) (509,000) Other 120,000 215,000 93,000 ----------- ---------- ---------- Federal income taxes $ 3,117,000 $2,251,000 $1,761,000 =========== ========== ========== Effective tax rate 30% 29% 27%
The components of deferred tax assets and liabilities consist of the following at December 31:
Deferred tax assets: 1998 1997 ---- ---- Allowance for loan losses $2,543,000 $2,191,000 Deferred compensation 505,000 448,000 Other 460,000 531,000 ---------- ---------- Total deferred tax assets 3,508,000 3,170,000 ---------- ---------- Deferred tax liabilities: Fixed assets (393,000) (508,000) Unrealized gain on securities available for sale (569,000) (457,000) Mortgage servicing rights (380,000) (196,000) Purchase accounting adjustment (1,662,000) (1,760,000) Other (42,000) (31,000) ---------- ---------- Total deferred tax liabilities (3,046,000) (2,952,000) ---------- ---------- Net deferred tax asset $ 462,000 $ 218,000 ========== ==========
A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefits related to such assets will not be realized. Management has determined that no such allowance is required at December 31, 1998 or 1997. ======================================================================== 25 =========================================================================== Deferred tax assets at December 31, 1998 and 1997, are included in other assets in the accompanying consolidated balance sheets. Federal income tax laws require recapture of the tax loan loss reserve when average assets of the group exceed $500 million. The recapture occurs over a four year period in amounts equal to 10%, 20%, 30% and 40% of the tax loan loss reserve. NOTE I--DEPOSITS Time deposits of $100,000 or more were $39,798,000 and $35,670,000 at year end 1998 and 1997. Scheduled maturities of time deposits were as follows:
YEAR AMOUNT ---- ------ 1999 $156,214,182 2000 29,030,802 2001 10,100,172 2002 7,535,266 2003 5,836,531 2004 and after 191,565 ------------ Total $208,908,518 ============
NOTE J--BORROWINGS Information relating to securities sold under agreements to repurchase follows:
At December 31: 1998 1997 1996 ---- ---- ---- Outstanding balance $18,678,000 $12,932,000 $ 5,933,000 Average interest rate 3.88% 4.23% 4.40% Daily average for the year: Outstanding balance $15,618,000 $10,894,000 $10,527,000 Average interest rate 4.15% 4.36% 4.73% Maximum outstanding at any month end $18,678,000 $13,911,000 $14,290,000
Securities sold under agreements to repurchase (repurchase agreements) generally have original maturities of less than one year. Repurchase agreements are treated as financings and the obligations to repurchase securities sold are reflected as liabilities. Securities involved with the agreements are recorded as assets of the Company and are primarily held in safekeeping by correspondent banks. Repurchase agreements are offered principally to certain large deposit customers as deposit equivalent investments. At year-end, advances from the Federal Home Loan Bank were as follows:
1998 1997 ---- ---- Maturities August 1999 through October 2017 primarily fixed rate at rates from 4.64% to 7.30% averaging 5.56% $14,103,412 $7,364,000
Each advance is payable at its maturity date, with a prepayment penalty. The advances were collateralized by $109,488,000 and $91,679,000 of first mortgage loans under a blanket lien arrangement at year-end 1998 and 1997.
Maturities over the next five years are: 1999 $ 1,000,000 2000 2,250,000 2001 250,000 2002 0 2003 7,000,000 2004 and after 3,603,412 ----------- $14,103,412 ===========
26 ======================================================================== =========================================================================== NOTE K--EMPLOYEE BENEFIT PLANS The Company established an Employee Stock Ownership Plan (ESOP) effective January 1, 1988, covering substantially all employees. The ESOP is a qualified stock bonus plan, a qualified 401(k) salary deferral plan and a qualified employee stock ownership plan. Both employee and employer contributions may be made to the ESOP. The Company's 1998, 1997, and 1996, matching 401(k) contributions charged to expense were $264,441, $204,165, and $158,934, respectively. The percent of the Company's matching contributions to the 401(k) is determined annually by the Board of Directors. Effective June 30, 1988, the Company terminated its then existing defined benefit pension plan. After satisfaction of all plan benefit obligations, remaining plan assets of approximately $1,381,000 were transferred to the ESOP. Upon transfer of the excess assets of the former pension plan to the ESOP, the ESOP purchased approximately 310,800 shares of previously unissued common stock of the Company at an estimated fair value of $4.44 per share. These shares were allocated to ESOP participants' accounts over an eight year period. Unallocated ESOP shares were reflected as a reduction of shareholders' equity. Upon allocation to participant accounts, unallocated shares were reduced and a corresponding amount was recognized as compensation expense. NOTE L--STOCK OPTIONS The Firstbank Corporation Stock Option Plans of 1993 and 1997 ("Plans") provide for the grant of 268,019 and 220,500 shares of stock, respectively, in either restricted form or under option. Options may be either incentive stock options or nonqualified stock options. The Plan of 1993 will terminate April 26, 2003. The 1997 Plan will terminate April 28, 2007. The Board, at its discretion, may terminate either or both Plans prior to the Plans' termination dates. Each option granted under the Plans may be exercised in whole or in part during such period as is specified in the option agreement governing that option. Options are issued with exercise prices equal to the stock's market value at date of issuance. A nonqualified stock option may not be exercised after fifteen years from the grant date. Incentive stock options may not be exercised after ten years from the grant date. The following is a summary of option transactions which occurred during 1996, 1997 and 1998:
NUMBER WEIGHTED OF SHARES AVERAGE --------- ------- Outstanding - December 31, 1995 160,398 $ 9.08 Granted 61,122 15.33 Exercised (4,692) 8.45 Canceled (7,396) 9.24 ------- ------ Outstanding - December 31, 1996 209,432 10.90 Granted 87,980 20.75 Granted pursuant to acquisition 45,049 10.20 Exercised (12,235) 8.86 Canceled (4,731) 13.34 ------- ------ Outstanding December 31, 1997 325,495 13.57 Granted 89,723 30.48 Exercised (14,395) 11.30 Canceled (10,424) 16.59 ------- ------ Outstanding - December 31, 1998 390,399 17.41 Available for exercise -- December 31, 1998 168,058 11.88 Available for grant -- December 31, 1998 66,588
Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS 123), which became effective for 1996, establishes a fair value based method of accounting for employee stock options. Although the Statement encourages all companies to adopt a fair value based method of accounting, companies may elect to continue their former method of accounting and make pro forma disclosures of net income and earnings per share as if the fair value method had been adopted. Accordingly, the following pro forma information presents net income and earnings per share information as if SFAS 123 had been adopted. No compensation cost was ======================================================================== 27 =========================================================================== actually recognized for stock options in 1998, 1997, or 1996 because the options were granted with an exercise price equal to the fair value of the Company's stock at the grant date.
1998 1997 1996 ---- ---- ---- Net income as reported $7,302,570 $5,557,731 $4,643,388 Pro forma net income $7,222,719 $5,507,459 $4,625,685 Basic earnings per share as reported $1.62 $1.40 $1.30 Pro forma basic earnings per share $1.60 $1.39 $1.29 Diluted earnings per share as reported $1.56 $1.37 $1.28 Pro forma diluted earnings per share $1.54 $1.35 $1.27
In future years, the pro forma effect under this standard is expected to increase as additional options are granted. The fair value of options granted during 1998, 1997, and 1996 is estimated using the Black-Scholes model and the following weighted average information: risk free interest rate of 5.06%, 5.86%, and 6.42%, expected life of 7 years, expected volatility of stock price of 33.9%, 27.4%, and 29.1% and expected dividends of 3% per year. The fair value of the options granted in 1998, 1997, and 1996, were $207,000, $227,000, and $86,000 respectively. At December 31, 1998, the options granted in 1998 had a remaining option life of 7 years, the options granted in 1997 had a remaining option life of 6 years, and the options granted in 1996 had a remaining option life of 5 years. NOTE M--RELATED PARTY TRANSACTIONS Loans to principal officers, directors, and their affiliates in 1998 were as follows:
Beginning balance $14,173,540 New loans 19,816,980 Effect of changes in related parties (24,860) Repayments (19,132,350) ----------- Ending balance $14,833,310 ===========
Deposits from principal officers, directors, and their affiliates at year- end 1998 and 1997 were $7,772,000 and $6,902,000. Directors have deferred some of their fees for future payment, including interest. Amounts deferred are expensed, and were $62,400 and $52,200 for 1998 and 1997. NOTE N--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK Some financial instruments, such as loan commitments, credit lines, letters of credit, and overdraft protection, are issued to meet customer financing needs. These are agreements to provide credit or to support the credit of others, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance-sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies are used to make such commitments as are used for loans, including obtaining collateral at exercise of the commitment. Financial instruments with off-balance-sheet risk were as follows at year end:
1998 1997 ------------ ------------ Fixed Rate Variable Rate Fixed Rate Variable Rate Commitments to make loans (at market rates) $6,970,298 $ 0 $6,917,124 $ 0 Unused lines of credit and letters of credit $4,534,424 $53,169,933 $9,330,619 $32,462,892
Commitments to make loans are generally made for periods of 60 days or less. The fixed rate loan commitments have interest rates ranging from 6.375% to 7.375% and maturities ranging from 15 years to 30 years. 28 ======================================================================== =========================================================================== NOTE O--CONTINGENCIES From time to time certain claims are made against the Company and its banking subsidiaries in the normal course of business. There were no outstanding claims considered by management to be material at December 31, 1998. NOTE P--DIVIDEND LIMITATION OF SUBSIDIARIES The subsidiary banks are restricted in their ability to pay dividends to the Company by regulatory requirements. For 1999, approximately $12,453,000 of the subsidiaries' retained earnings (in addition to their 1999 net income) is available for transfer in the form of dividends without prior regulatory approval. NOTE Q--CAPITAL ADEQUACY The subsidiary banks of the Company are subject to regulatory capital requirements administered by federal regulatory agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors. The regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The capital ratios of the Company and each of its affiliate banks exceed the requirements to be considered well capitalized. The minimum requirements are:
CAPITAL TO RISK-WEIGHTED ASSETS TIER 1 CAPITAL TOTAL TIER 1 TO ADJUSTED TOTAL ASSETS ----- ------ ------------------------ Well capitalized 10% 6% 5% Adequately capitalized 8% 4% 4% Undercapitalized 6% 3% 3%
At December 31, 1998, actual capital levels were:
TOTAL TIER 1 TIER 1 RISK-BASED RISK-BASED LEVERAGE CAPITAL RATIO CAPITAL RATIO RATIO ------------- ------------- --------- Firstbank Corporation -- Consolidated 12.47% 11.21% 8.33% Bank of Alma 11.35% 10.09% 7.94% Firstbank 11.91% 10.66% 8.75% 1st Bank 11.96% 10.69% 7.31% Lakeview 15.09% 13.83% 10.01%
======================================================================== 29 =========================================================================== The following tables show the dollar amounts, in thousands, of the Company's capital and the amounts that exceed current regulatory requirements:
TOTAL TIER 1 RISK-BASED RISK-BASED TIER 1 CAPITAL CAPITAL LEVERAGE ----------- ----------- -------- Actual Capital balances at December 31, 1998 Firstbank Corporation -- Consolidated $ 54,534 $ 49,025 $ 49,025 Bank of Alma 18,936 16,832 16,832 Firstbank 10,614 9,498 9,498 1st Bank 12,875 11,512 11,612 Lakeview 11,171 10,240 10,240 Adequate regulatory capital level Firstbank Corporation -- Consolidated $ 34,975 $ 17,487 $ 23,534 Bank of Alma 13,341 6,670 8,483 Firstbank 7,128 3,564 4,342 1st Bank 8,611 4,305 6,303 Lakeview 5,922 2,961 4,091 Excess Firstbank Corporation -- Consolidated $ 19,559 $ 31,538 $ 25,491 Bank of Alma 5,595 10,162 8,349 Firstbank 3,486 5,934 5,156 1st Bank 4,264 7,207 5,209 Lakeview 5,249 7,279 6,149
NOTE R--FAIR VALUE OF FINANCIAL INSTRUMENTS Carrying amount and estimated fair values of financial instruments were as follows at year-end:
1998 1997 ---- ---- CARRYING CARRYING (Dollars in thousands) OR NOTIONAL FAIR OR NOTIONAL FAIR AMOUNT VALUE AMOUNT VALUE ------ ----- ------ ----- Financial assets: Cash and cash equivalents $ 35,492 $ 35,492 $ 24,116 $ 24,116 Securities available for sale 101,711 101,711 82,578 82,578 Loans, net 431,980 438,963 396,694 399,275 Accrued interest receivable 3,464 3,464 3,459 3,459 Financial liabilities: Deposits $(494,053) $(494,685) $(445,666) $(445,723) Securities sold under agreements to repurchase and overnight borrowings (26,578) (26,996) (21,233) (21,288) Notes payable (14,317) (15,049) (7,590) (7,536) Accrued interest payable (1,311) (1,311) (1,308) (1,308) Off-balance sheet credit-related items: Loan commitments $ 64,675 -- $ 59,380 --
The methods and assumptions used to estimate fair value are described as follows. Carrying amount is the estimated fair value for cash and cash equivalents, short-term borrowings, Federal Home Loan Bank stock, accrued interest receivable and payable, demand deposits, short-term debt, and variable rate loans or deposits that reprice frequently and fully. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. For fixed rate loans or deposits and for variable rate loans or deposits with infrequent repricing or repricing limits, fair value is based on discounted cash flows using current market rates applied to the estimated life and credit risk. Fair values for impaired loans are estimated using discounted cash flow analysis or underlying collateral values. Fair value of loans held for sale is based on market quotes. Fair value of debt is based on current rates for similar financing. The fair value of off-balance-sheet items is based on the current fees or cost that would be charged to enter into or terminate such arrangements. 30 ======================================================================== =========================================================================== NOTE S-BASIC AND DILUTED EARNINGS PER SHARE
YEAR ENDED DECEMBER 31 1998 1997 1996 ---- ---- ---- Earnings per share Net income $7,302,570 $5,557,731 $4,643,388 Net income available to common shareholders $7,302,570 $5,557,731 $4,643,388 ========== ========== ========== Weighted average common shares outstanding 4,519,852 3,957,832 3,580,595 ========== ========== ========== Earnings per share $1.62 $1.40 $1.30 ========== ========== ========== Earnings per share assuming dilution Net income available to common shareholders $7,302,570 $5,557,731 $4,643,388 ========== ========== ========== Weighted average common shares outstanding 4,519,852 3,957,832 3,580,595 Add dilutive effects of assumed exercises of options 172,382 109,469 51,209 ---------- ---------- ---------- Weighted average common and dilutive potential common shares outstanding 4,692,234 4,067,301 3,631,804 ========== ========== ========== Earnings per share Assuming dilution $1.56 $1.37 $1.28 ========== ========== ==========
NOTE T--FIRSTBANK CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS DECEMBER 31 1998 1997 ---- ---- ASSETS Cash and cash equivalents $ 1,262,996 $ 599,225 Securities available for sale 15,349 8,248 Investment in and advances to banking subsidiaries 53,673,418 48,742,296 Other assets 7,433,588 6,924,502 ----------- ----------- Total assets $62,385,351 $56,274,271 =========== =========== LIABILITIES AND EQUITY Accrued expenses and other liabilities $ 2,610,407 $ 1,742,377 Shareholders' equity 59,774,944 54,531,894 ----------- ----------- Total liabilities and shareholders' equity $62,385,351 $56,274,271 =========== ===========
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Years ended December 31 1998 1997 1996 ---- ---- ---- Dividends from banking subsidiaries $3,138,000 $1,638,000 $1,335,656 Other income 191,428 67,223 29,847 Other expense 862,439 497,248 259,428 ---------- ---------- ---------- Income before income tax and undistributed subsidiary income 2,466,989 1,207,975 1,106,075 Income tax benefit 121,000 83,612 65,000 Equity in undistributed subsidiary income 4,714,581 4,266,144 3,472,313 ---------- ---------- ---------- Net income 7,302,570 5,557,731 4,643,388 Change in unrealized gain(loss) on securities, net of tax and classification effects 216,541 323,720 (350,238) ---------- ---------- ---------- Comprehensive income $7,519,111 $5,881,451 $4,293,150 ========== ========== ==========
======================================================================== 31 ===========================================================================
CONDENSED STATEMENTS OF CASH FLOWS Years ended December 31 1998 1997 1996 ---- ---- ---- Cash flows from operating activities Net income $7,302,570 $5,557,731 $4,643,388 Adjustments: Equity in undistributed subsidiary income (4,714,581) (4,266,144) (3,472,313) Change in other assets (509,086) (675,823) (368,844) Change in other liabilities 868,030 1,068,773 205,842 ---------- ---------- ---------- Net cash from operating activities 2,946,933 1,684,537 1,008,073 Cash flows from investing activities Investments in subsidiaries (7,101) Purchase of securities (8,137) ---------- ---------- ---------- Net cash from investing activities (7,101) (8,137) Cash flows from financing activities Cash used for acquisition (680,774) Proceeds from stock issue 1,433,182 1,045,896 252,800 Purchase of common stock (1,213,670) Dividends paid and cash paid in lieu of fractional shares on stock dividend (2,495,573) (1,872,649) (1,310,543) ---------- ---------- ---------- Net cash from financing activities (2,276,061) (1,507,527) (1,057,743) ---------- ---------- ---------- Net change in cash and cash equivalents 663,771 177,010 (57,807) Beginning cash and cash equivalents 599,225 422,215 480,022 ---------- ---------- ---------- Ending cash and cash equivalents $1,262,996 $ 599,225 $ 422,215 ========== ========== ==========
NOTE U--OTHER COMPREHENSIVE INCOME Other comprehensive income components and related taxes were as follows:
1998 1997 1996 ---- ---- ---- Unrealized holding gains and losses on available-for-sale securities $ 331,418 $460,754 $(518,892) Less reclassification adjustments for gains and losses later recognized in income 3,329 (29,732) 11,773 --------- -------- --------- Net unrealized gains and losses 328,089 490,486 (530,665) Tax effect (111,548) (166,766) 180,427 --------- -------- --------- Other comprehensive income $ 216,541 $323,720 $(350,238) ========= ======== =========
32 ======================================================================== =========================================================================== FIRSTBANK CORPORATION BOARD OF DIRECTORS William E. Goggin, Chairman CHAIRMAN, BANK OF ALMA ATTORNEY, GOGGIN & BAKER Duane A. Carr ATTORNEY, CARR & MULLENDORE, PC Edward B. Grant CHAIRMAN, FIRSTBANK CHAIRMAN, SCHOOL OF ACCOUNTING, CENTRAL MICHIGAN UNIVERSITY PRESIDENT, LEARNET, INC. (VIDEO PRODUCTION SERVICE) Charles W. Jennings ATTORNEY, JENNINGS & ELLIAS, PC John A. McCormack PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK CORPORATION PRESIDENT, CHIEF EXECUTIVE OFFICER AND TRUST OFFICER, BANK OF ALMA Phillip G. Peasley PRESIDENT, PEASLEY'S HARDWARE & FURNITURE, INC. (RETAIL) David D. Roslund, CPA ADMINISTRATOR, WILCOX HEALTH CARE CENTER (LONG-TERM CARE FACILITY) SMALL BUSINESS INVESTOR AND MANAGER OFFICERS John A. McCormack PRESIDENT AND CHIEF EXECUTIVE OFFICER Thomas R. Sullivan EXECUTIVE VICE PRESIDENT Mary D. Deci VICE PRESIDENT, SECRETARY, TREASURER AND CHIEF FINANCIAL OFFICER Richard L. Jarvis VICE PRESIDENT Dale A. Peters VICE PRESIDENT Richard J. Schurtz VICE PRESIDENT James E. Wheeler, II VICE PRESIDENT - --------------------------------------------------------------------------- FIRSTBANK CORPORATION 311 Woodworth Avenue P. O. Box 1029 Alma, Michigan 48801-6029 (517) 463-3131 ======================================================================== 33 =========================================================================== BANK OF ALMA BOARD OF DIRECTORS William E. Goggin, Chairman CHAIRMAN, FIRSTBANK CORPORATION ATTORNEY, GOGGIN & BAKER Bob M. Baker PRESIDENT AND CEO, GRATIOT COMMUNITY HOSPITAL Sally M. (Peggy) Bever BUSINESS MANAGER Donald W. Crumbaugh AGRICULTURE John A. McCormack PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK CORPORATION PRESIDENT, CHIEF EXECUTIVE OFFICER AND TRUST OFFICER, BANK OF ALMA John P. Morgan PARTNER, MORGAN-MEIJER COMMUNICATIONS Phillip G. Peasley PRESIDENT, PEASLEY'S HARDWARE & FURNITURE, INC. David D. Roslund, CPA ADMINISTRATOR, WILCOX HEALTH CARE CENTER SMALL BUSINESS INVESTOR AND MANAGER Victor V. Rozas, M.D. PHYSICIAN Alan J. Stone PRESIDENT, ALMA COLLEGE OFFICERS John A. McCormack PRESIDENT, CHIEF EXECUTIVE OFFICER AND TRUST OFFICER Mary D. Deci SENIOR VICE PRESIDENT, CONTROLLER, CASHIER AND CHIEF FINANCIAL OFFICER James E. Wheeler, II SENIOR VICE PRESIDENT AND CHIEF LOAN OFFICER Timothy P. Clark VICE PRESIDENT AND SENIOR TRUST OFFICER Steven E. Canole VICE PRESIDENT Gregory A. Daniels VICE PRESIDENT Marita A. Harkness VICE PRESIDENT Gerald E. Kench VICE PRESIDENT Timothy M. Lowe VICE PRESIDENT Shannon J. Vasicek VICE PRESIDENT SUBSIDIARY Niles Agency, Incorporated 315 Woodworth Ave. Alma, MI 48801 (517) 463-1725 - --------------------------------------------------------------------------- OFFICE LOCATIONS
ALMA ASHLEY MERRILL ST. LOUIS 7455 N. Alger Rd. 114 S. Sterling St. 125 W. Saginaw St. 135 W. Washington Ave. (517) 463-3134 (517) 847-2394 (517) 643-7253 (517) 681-5758 230 Woodworth Ave. AUBURN RIVERDALE VESTABURG (517) 463-3131 4710 S. Garfield Rd. 6716 N. Lumberjack Rd. 8846 Third St. (517) 662-4459 (517) 833-7331 (517) 268-5445 311 Woodworth Ave. (517) 463-3131 ITHACA ST. CHARLES 219 E. Center St. 102 Pine St. (517) 875-4107 (517) 865-9918
34 ======================================================================== =========================================================================== FIRSTBANK BOARD OF DIRECTORS Edward B. Grant, Chairman CHAIRMAN, SCHOOL OF ACCOUNTING, CENTRAL MICHIGAN UNIVERSITY PRESIDENT, LEARNET, INC. Ralph E. Baumgarth DENTIST Ralph M. Berry OWNER, BERRY FUNERAL HOME Kenneth C. Bovee, CPM PARTNER, W.S. SMITH COMPANY Glen D. Blystone CERTIFIED PUBLIC ACCOUNTANT, BLYSTONE & BAILEY, CPAS, PC Sibyl M. Ellis PRESIDENT, SOMEPLACE SPECIAL, INC. Keith A. Gaede PHARMACIST, PUNCHES PHARMACY Douglas N. LaBelle PARTNER, LABELLE MANAGEMENT William M. McClintic ATTORNEY, W.M. MCCLINTIC, P.C. John A. McCormack PRESIDENT & CEO, FIRSTBANK CORPORATION PRESIDENT & CEO, BANK OF ALMA Phillip R. Seybert PRESIDENT, P.S. EQUITIES, INC. Thomas R. Sullivan PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK EXECUTIVE VICE PRESIDENT, FIRSTBANK CORPORATION Arlene A. Yost SECRETARY AND TREASURER, JAY'S SPORTING GOODS, INC. OFFICERS Thomas R. Sullivan PRESIDENT AND CHIEF EXECUTIVE OFFICER Richard L. Jarvis EXECUTIVE VICE PRESIDENT Mark B. Perry SENIOR VICE PRESIDENT James M. Taylor SENIOR VICE PRESIDENT Robert L. Wheeler SENIOR VICE PRESIDENT Daniel J. Timmins VICE PRESIDENT OFFICE LOCATIONS - --------------------------------------------------------------------------- OFFICE LOCATIONS
MT. PLEASANT CLARE WINN 102 S. Main St. 806 N. McEwan Ave. 2783 Blanchard Rd. (517) 773-2600 (517) 386-7313 (517) 866-2210 4699 E. Pickard St. SHEPHERD (517) 773-2335 258 W. Wright Ave. (517) 828-6625 2013 S. Mission St. (517) 773-3959
======================================================================== 35 =========================================================================== 1ST BANK BOARD OF DIRECTORS Dale A. Peters, Chairman PRESIDENT AND CHIEF EXECUTIVE OFFICER, 1ST BANK VICE PRESIDENT, FIRSTBANK CORPORATION Bryon A. Bernard CEO, BERNARD BUILDING CENTER Joseph M. Clark OWNER, MORSE CLARK FURNITURE Timothy H. Eyth OWNER, WEST BRANCH VETERINARY SERVICES David W. Fultz OWNER, FULTZ INSURANCE AGENCY Robert T. Griffin OWNER AND PRESIDENT, GRIFFIN BEVERAGE COMPANY, NORTHERN BEVERAGE CO., AND WEST BRANCH TANK & TRAILER Charles W. Jennings ATTORNEY, JENNINGS & ELLIAS, PC John A. McCormack PRESIDENT & CEO, FIRSTBANK CORPORATION PRESIDENT & CEO, BANK OF ALMA Norman J. Miller OWNER, MILLER FARMS, AND MILLER DAIRY EQUIPMENT AND FEED Jeffrey C. Schubert DENTIST Milford J. Scott OWNER, SCOTT'S TRUE VALUE HARDWARE Robert R. Smith OWNER, INDEPENDENT INSURANCE AGENT, CRECINE INSURANCE AGENCY OFFICERS Dale A. Peters PRESIDENT AND CHIEF EXECUTIVE OFFICER Daniel H. Grenier SENIOR VICE PRESIDENT Michael F. Ehinger VICE PRESIDENT Danny J. Gallagher VICE PRESIDENT Rosalind A. Heideman VICE PRESIDENT Eileen S. McGregor VICE PRESIDENT Richard L. Pfahl VICE PRESIDENT W. John Powell VICE PRESIDENT Larry M. Schneider VICE PRESIDENT Marie A. Wilkins VICE PRESIDENT SUBSIDIARIES 1st Armored, Incorporated 1st Collections, Incorporated - --------------------------------------------------------------------------- OFFICE LOCATIONS
WEST BRANCH FAIRVIEW HALE ST. HELEN 502 W. Houghton 1979 Miller 3281 M-65 2040 N. St. Helen (517) 345-7900 (517) 848-2243 (517) 728-7566 (517) 389-1311 601 W. Houghton ROSCOMMON ROSCOMMON ROSE CITY (517) 345-7900 Higgins Lake Branch Loan Production Office 505 S. Bennett 4522 W. Higgins Lake P.O. Box 401 (517) 685-3909 2087 S. M-76 Roscommon, MI Roscommon, MI (517) 345-5050 (517) 821-9231 (517) 275-8970
36 ======================================================================== =========================================================================== BANK OF LAKEVIEW BOARD OF DIRECTORS V. Dean Floria, Chairman OWNER, FLORIA FARM & HOME CENTER Duane A. Carr ATTORNEY, CARR & MULLENDORE John B. Crawford AGRICULTURE, CRAWFORD FARMS Chalmer Gale Hixson OWNER, COUNTRY CORNER SUPERMARKET OWNER, A FLAIR FOR HAIR OWNER, HARRY CHALMERS, INC. John A. McCormack PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK CORPORATION PRESIDENT, CHIEF EXECUTIVE OFFICER, & TRUST OFFICER, BANK OF ALMA Gerald L. Nielsen OWNER, NIELSEN'S TV & APPLIANCES Richard J. Schurtz PRESIDENT AND CHIEF EXECUTIVE OFFICER, BANK OF LAKEVIEW VICE PRESIDENT, FIRSTBANK CORPORATION OFFICERS Richard J. Schurtz PRESIDENT AND CHIEF EXECUTIVE OFFICER William L. Benear EXECUTIVE VICE PRESIDENT David L. Miller VICE PRESIDENT Kim D. vonKronenberger VICE PRESIDENT - --------------------------------------------------------------------------- OFFICE LOCATIONS
LAKEVIEW CANADIAN LAKES HOWARD CITY MORLEY 506 Lincoln Avenue 10049 Buchanan Road 20020 Howard City/Edmore Road 101 E 4th Street (517) 352-7271 Stanwood, MI (616) 937-4383 (616) 856-7652 (616) 972-4200 9531 N Greenville Road REMUS (517) 352-8180 201 W Wheatland Avenue (517) 967-3602
======================================================================== 37 =========================================================================== BUSINESS OF THE COMPANY Firstbank Corporation (the "Company") is a bank holding company. As of December 31, 1998, the Company's wholly owned subsidiaries are Bank of Alma, Firstbank, 1st Bank, Bank of Lakeview, Niles Agency, Incorporated, 1st Armored, Incorporated, and 1st Collections Incorporated. As of December 31, 1998, the Company and its subsidiaries employed 294 people on a full-time equivalent basis. The Company is in the business of banking. Each subsidiary bank of the Company is a full service community bank. The subsidiary banks offer all customary banking services, including the acceptance of checking, savings and time deposits, and the making of commercial, agricultural, real estate, personal, home improvement, automobile and other installment and consumer loans. Bank of Alma also offers trust services. Deposits of each of the banks are insured by the Federal Deposit Insurance Corporation. The banks obtain most of their deposits and loans from residents and businesses in Bay, Clare, Gratiot, Iosco, Isabella, Mecosta, Midland, Montcalm, Ogemaw, Oscoda, Roscommon, Saginaw and parts of Clinton County. Bank of Alma has its main office and one branch in Alma, Michigan, and one branch located in each of the following areas: Ashley, Auburn, Ithaca, Merrill, Pine River Township (near Alma), Riverdale, St. Charles, St. Louis, and Vestaburg, Michigan. Firstbank has its main office in Mt. Pleasant, Michigan, and one branch located in each of the following areas: Clare, Mt. Pleasant, Shepherd, Union Township (near Mt. Pleasant), and Winn, Michigan. 1st Bank has its main office in West Branch, Michigan, and one branch located in each of the following areas: Fairview, Hale, Higgins Lake, Rose City, St. Helen, and West Branch Township (near West Branch), Michigan. Bank of Lakeview has its main office and one branch in Lakeview, Michigan, and one branch located in each of the following areas: Canadian Lakes, Howard City, Morley, and Remus. The banks have no material foreign assets or income. The principal sources of revenues for the Company and its subsidiaries are interest and fees on loans. On a consolidated basis, interest and fees on loans accounted for approximately 76% of total revenues in 1998, and 80% in 1997 and 1996. Interest on investment securities accounted for approximately 12% of total revenues in 1998, 11% in 1997, and 10% in 1996. No other single source of revenue accounted for 10% of the Company's total revenues in any of the last 3 years. CORPORATE INFORMATION ANNUAL MEETING STOCK INFORMATION The annual meeting of shareholders Firstbank Corporation shares are will be held on Monday, April 26, listed Over the Counter Bulletin 1999, 5:00 p.m., at the Comfort Inn, Board under the symbol FBMI. Alma, Michigan. First of Michigan INDEPENDENT AUDITORS Mike Young Crowe Chizek and Company LLP 1-800-521-1197 Grand Rapids, Michigan McDonald Investments GENERAL COUNSEL Chris Turner Warner Norcross & Judd LLP 1-800-548-6011 Grand Rapids, Michigan Morgan Stanley Dean Witter TRANSFER AGENT Ted Vogt Bank of Alma Shareholder Services 1-800-788-9640 Department (517) 463-3131 extension 7336 Robert W. Baird & Company Toll free shareholder hotline: Bill L. Ockerlund (888) 637-0590 1-888-202-5048 Roney & Company Nikki Gregg 1-800-572-0786 Stifel, Nicolaus & Company, Inc. Pete VanDer Schaaf 1-800-676-0477 Tucker Anthony Jack Korff, 1-888-861-2200 38 ======================================================================== EX-21 3 EXHIBIT 21 SUBSIDIARIES OF REGISTRANT NAME OF SUBSIDIARY STATE OF FORMATION Bank of Alma Michigan Firstbank Michigan 1st Bank Michigan Bank of Lakeview Michigan Niles Agency, Incorporated Michigan 1st Armored, Incorporated Michigan 1st Collections, Incorporated Michigan EX-23 4 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of Firstbank Corporation on Form S-8 (Registration No. 33- 60190), Form S-3 (Registration No. 333-15131), Form S-8 (Registration No. 333-20377), and Form S-8 (Registration No. 333-53957) of our report dated January 29, 1999 on the 1998 consolidated financial statements of Firstbank Corporation, which report is included in the 1998 Annual Report on Form 10-K of Firstbank Corporation. Grand Rapids, Michigan Crowe, Chizek and Company LLP March 29, 1999 EX-24 5 EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ MARY D. DECI Mary D. Deci EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE March 22, 1999 /S/ JOHN MCCORMACK John McCormack EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ DUANE A. CARR Duane A. Carr EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ WILLIAM E. GOGGIN William E. Goggin EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ CHARLES W. JENNINGS Charles W. Jennings EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ DAVID D. ROSLUND David D. Roslund EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ PHILLIP G. PEASLEY Phillip G. Peasley EXHIBIT 24 POWERS OF ATTORNEY The undersigned, in his or her capacity as a director or officer, or both, as the case may be, of Firstbank Corporation, does hereby appoint MARY D. DECI and JOHN McCORMACK, or either of them, his or her attorneys or attorney to execute in his or her name an Annual Report of Firstbank Corporation on Form 10-K for its fiscal year ended December 31, 1998, and any amendments to that report, and to file it with the Securities and Exchange Commission. Each attorney shall have power and authority to do and perform in the name and on behalf of the undersigned, in any and all capacities, every act to be done in the premises as fully and to all intents and purposes as the undersigned could do in person, and the undersigned hereby ratifies and approves the acts of such attorneys. DATE SIGNATURE February 22, 1999 /S/ EDWARD B. GRANT Edward B. Grant EX-27 6 ART. 9 FDS FOR FORM 10-K FOR 1998
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED DECEMBER 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 22,203 2,385 10,903 0 101,711 0 0 441,028 9,048 603,014 494,053 26,578 8,292 14,317 52,797 0 0 6,978 59,775 38,498 5,258 728 44,484 17,892 19,353 25,131 1,177 3 19,402 10,420 10,420 0 0 7,303 1.62 1.56 5.06 790 621 86 1,494 8,114 712 469 9,048 6,924 0 2,124
EX-27 7 ART. 9 FDS FOR 3RD QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 19,860 414 38,513 0 88,962 0 0 420,654 8,734 592,949 494,097 18,021 22,654 0 45,756 0 0 12,420 592,949 28,675 3,831 475 32,981 13,350 14,415 18,566 815 3 14,278 7,749 7,749 0 0 5,431 1.26 1.21 5.12 306 678 214 1,198 8,114 522 327 8,734 6,488 0 2,246
EX-27 8 ART. 9 FDS FOR 2ND QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1998 JAN-01-1998 JUN-30-1998 27,457 453 7,413 0 85,562 0 0 411,961 8,555 558,484 465,611 16,221 19,262 0 46,817 0 0 10,573 558,484 18,996 2,535 230 21,760 8,829 9,552 12,208 575 1 9,437 5,104 5,104 0 0 3,578 .83 .80 5.16 1,157 766 222 2,145 8,114 343 209 8,555 6,150 0 2,405
EX-27 9 ART. 9 FDS FOR 1ST QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 20,530 405 7,749 0 90,856 0 0 403,591 8,419 548,494 456,405 27,258 8,781 0 46,720 0 0 9,330 548,493 9,492 1,253 120 10,864 4,411 4,752 6,113 370 1 4,538 2,490 2,490 0 0 1,748 .41 .39 5.13 862 439 109 1,403 8,114 160 95 8,419 6,831 0 1,588
EX-27 10 ART. 9 FDS FOR FORM 10-K FOR 1997
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 23,280 279 556 0 82,578 0 0 404,808 8,114 536,322 445,666 21,233 7,301 7,590 46,224 0 0 8,308 54,532 33,386 4,167 311 37,864 15,628 16,530 21,334 1,398 (30) 15,825 7,809 7,809 0 0 5,558 2.72 2.68 5.16 1,274 1,215 121 1,578 6,247 1,270 413 8,114 5,943 0 2,171
EX-27 11 ART. 9 FDS FOR 3RD QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 20,884 971 2,700 0 81,476 0 0 401,876 8,284 532,047 446,800 24,140 7,941 0 41,419 0 0 11,747 532,047 23,776 2,916 172 26,864 11,169 11,775 15,089 1,078 1 10,947 5,504 5,504 0 0 3,949 2.19 2.13 5.14 820 618 126 202 7,573 688 321 8,284 6,099 0 2,185
EX-27 12 ART. 9 FDS FOR 2ND QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JAN-01-1997 JUN-30-1997 21,148 183 2,350 0 63,873 0 0 328,872 6,652 428,021 364,801 23,689 4,474 0 24,686 0 0 10,371 428,021 14,940 1,824 99 16,863 7,081 7,418 9,445 713 0 6,907 3,392 3,392 0 0 2,449 1.43 1.39 5.10 199 482 135 122 6,247 484 176 6,652 5,182 0 1,470
EX-27 13 ART. 9 FDS FOR 1ST QUARTER 10-Q
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 18,049 228 3,350 0 63,888 0 0 318,573 6,429 416,315 364,232 11,490 6,870 0 24,404 0 0 154 416,315 7,275 939 0 8,213 3,482 3,623 4,591 251 0 3,385 1,702 1,702 0 0 1,227 0.72 0.70 5.04 199 302 141 82 6,247 174 105 6,429 5,185 0 1,269
EX-27 14 ART. 9 FDS FOR FORM 10-K FOR 1996
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM 10-K AND ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 19,431 147 1,650 0 56,572 0 0 314,620 6,247 404,571 358,669 9,072 3,742 0 24,228 0 0 563 404,571 27,447 3,569 0 31,016 12,581 13,281 17,735 1,838 12 12,790 6,404 6,404 0 0 4,643 2.72 2.68 5.26 218 689 150 273 4,876 780 313 6,247 4,703 0 1,544
EX-99 15 EXHIBIT 99 Firstbank Corporation 401(k) Plan Performance Table
INITIAL INVESTMENT VALUE VALUE VALUE FUND ON 12/31/95 ON 12/31/96 ON 12/31/97 ON 12/31/98 Firstbank Corporation 32.123% 44.203% 26.495% Common Stock $ 1,000.00 $1,321.23 $1,905.23 $ 2,410.05 Federated Money Market for U.S. 5.06% 5.22% 5.11% Treasury Obligation $ 1,000.00 $1,050.60 $1,105.44 $ 1,161.93 Federated Capital 5.70% 5.86% 5.64% Preservation Fund $ 1,000.00 $1,057.00 $1,118.94 $ 1,182.05 Vanguard Fixed Income 3.58% 9.44% 8.60% Total Bond Fund $ 1,000.00 $1,035.80 $1,133.58 $ 1,231.07 Vanguard Fixed Income Long-Term Corporate 1.20% 13.79% 9.20% Bond Fund $ 1,000.00 $1,012.00 $1,151.55 $ 1,257.50 21.17% 34.42% 17.26% Federated Stock $ 1,000.00 $1,211.70 $1,628.77 $ 1,909.89 Vanguard Index 22.86% 33.21% 28.60% 500 Fund $ 1,000.00 $1,228.60 $1,636.62 $ 2,104.69 American Century 13.85% 23.13% 34.55% 20th Century Ultra $ 1,000.00 $1,138.50 $1,401.84 $ 1,886.17 Warburg Pincus Emerging Growth 9.87% 21.27% 5.82% Fund $ 1,000.00 $1,098.70 $1,332.39 $ 1,409.94 T. Rowe Price International 15.99% 2.70% 16.14% Stock Fund $ 1,000.00 $1,159.90 $1,191.22 $ 1,383.48 Vanguard International 14.65% 4.12% 16.93% Growth Fund $ 1,000.00 $1,146.50 $1,193.74 $ 1,395.84 Fidelity Overseas 13.10% 10.92% 12.84% Fund $ 1,000.00 $1,131.00 $1,254.51 $ 1,415.58 American Century - 20th Century International 31.18% 17.48% 17.86% Discovery Fund $ 1,000.00 $1,311.80 $1,541.10 $ 1,816.34
-----END PRIVACY-ENHANCED MESSAGE-----