-----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, LfKLLwbLSCtLNHZk1/F/7nuCsf99ecbCLNvOVgyS7uxs/kfGI7ZqytqH9PNEvhJw bPPwMD08DsZzryVGU62nMw== /in/edgar/work/0000926044-00-000147/0000926044-00-000147.txt : 20001115 0000926044-00-000147.hdr.sgml : 20001115 ACCESSION NUMBER: 0000926044-00-000147 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTBANK CORP CENTRAL INDEX KEY: 0000778972 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 382633910 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14209 FILM NUMBER: 763945 BUSINESS ADDRESS: STREET 1: 311 WOODWORTH AVE STREET 2: PO BOX 1029 CITY: ALMA STATE: MI ZIP: 48801 BUSINESS PHONE: 5174633131 MAIL ADDRESS: STREET 1: 311 WOODWORTH AVE CITY: ALMA STATE: MI ZIP: 48801 10-Q 1 0001.txt SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2000 or [ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transaction period from ______ to _______. Commission file number: 0-14209 FIRSTBANK CORPORATION (Exact name of registrant as specified in its charter) Michigan 38-2633910 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 311 Woodworth Avenue, Alma, Michigan 48801 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (517) 463-3131 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock....4,595,027 shares outstanding as of October 31, 2000. Exhibit Index is on page 17 INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements (UNAUDITED) page 3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. page 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk. page 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K page 15 SIGNATURES page 16 EXHIBIT INDEX page 17 Page 2 FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999 (Dollars in Thousands) UNAUDITED September 30, December 31, 2000 1999 ---- ---- ASSETS Cash and due from banks $22,704 $24,786 Short term investments 5,286 411 ------------ ------------ Total cash and cash equivalents 27,990 25,197 Securities available for sale 77,294 90,266 Loans Loans held for sale 377 1,117 Portfolio loans Commercial 267,442 227,855 Real estate mortgage 230,154 204,062 Consumer 80,933 75,204 ------------ ------------ Total loans 578,906 508,238 Less allowance for loan losses (9,943) (9,317) ------------ ------------ Net loans 568,963 498,921 Premises and equipment, net 15,523 14,929 Acquisition intangibles 8,698 8,838 Accrued interest receivable 4,327 3,489 Other assets 9,307 8,912 ------------ ------------ TOTAL ASSETS $712,102 $650,552 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing accounts 82,865 75,844 Interest bearing accounts: Demand 128,103 136,196 Savings 70,533 70,527 Time 248,463 208,837 ------------ ------------ Total deposits 529,964 491,404 Securities sold under agreements to repurchase and overnight borrowings 36,654 51,819 Notes payable 72,536 38,384 Accrued interest and other liabilities 9,588 7,913 ------------ ------------ Total liabilities 648,742 589,520 SHAREHOLDERS' EQUITY Preferred stock; no par value, 300,000 shares authorized, none issued Common stock; 10,000,000 shares authorized, 4,602,113 shares issued and outstanding (4,693,756 as of December 1999) 53,250 55,263 Retained earnings 10,458 6,433 Unrealized loss on available for sale securities (348) (664) ------------ ------------ Total shareholders' equity 63,360 61,032 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $712,102 $650,552 ============ ============
See accountants' review report and notes to consolidated financial statements. Page 3 FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME SEPTEMBER 30, 2000 AND 1999 (Dollars in Thousands) UNAUDITED Three months ended September 30, 2000 1999 ---- ---- Interest income: Interest and fees on loans $12,788 $10,274 Investment securities Taxable 832 918 Exempt from Federal Income Tax 363 414 Short term investments 77 47 ------------- ------------- Total interest income 14,060 11,653 Interest expense: Deposits 4,982 4,188 Notes payable and other 1,786 607 ------------- ------------- Total interest expense 6,768 4,795 ------------- ------------- Net interest income 7,292 6,858 Provision for loan losses 174 126 ------------- ------------- Net interest income after provision for loan losses 7,118 6,732 Noninterest income: Gain on sale of mortgage loans 149 230 Service charges on deposit accounts 438 406 Trust fees 93 91 Gain on sale of securities (3) (6) Mortgage servicing 81 63 Other 630 436 ------------- ------------- Total noninterest income 1,388 1,220 Noninterest expense: Salaries and employee benefits 2,943 2,681 Occupancy 817 756 Amortization of intangibles 204 183 FDIC Insurance premium 25 18 Michigan Single Business Tax 162 216 Other 1,246 1,204 ------------- ------------- Total noninterest expense 5,397 5,058 ------------- ------------- Income before federal income taxes 3,109 2,894 Federal income taxes 967 883 ------------- ------------- NET INCOME $2,142 $2,011 ============= ============= Basic earnings per share $0.46 $0.43 ============= ============= Diluted earnings per share $0.45 $0.42 ============= ============= Dividends per share $0.17 $0.15 ============= =============
See accountants' review report and notes to consolidated financial statements. Page 4 FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME SEPTEMBER 30, 2000 AND 1999 (Dollars in Thousands) UNAUDITED Nine months ended September 30, 2000 1999 ---- ---- Interest income: Interest and fees on loans $35,939 $29,697 Investment securities Taxable 2,595 2,742 Exempt from Federal Income Tax 1,135 1,300 Short term investments 177 236 ------------- ------------- Total interest income 39,846 33,975 Interest expense: Deposits 13,851 12,727 Notes payable and other 4,604 1,509 ------------- ------------- Total interest expense 18,455 14,236 ------------- ------------- Net interest income 21,391 19,739 Provision for loan losses 562 378 ------------- ------------- Net interest income after provision for loan losses 20,829 19,361 Noninterest income: Gain on sale of mortgage loans 320 768 Service charges on deposit accounts 1,268 1,168 Trust fees 288 275 Gain on sale of securities 1 15 Mortgage servicing 229 131 Other 1,940 1,591 ------------- ------------- Total noninterest income 4,046 3,948 Noninterest expense: Salaries and employee benefits 8,329 7,775 Occupancy 2,368 2,282 Amortization of intangibles 547 525 FDIC Insurance premium 75 57 Michigan Single Business Tax 477 428 Other 3,778 3,737 ------------- ------------- Total noninterest expense 15,574 14,804 ------------- ------------- Income before federal income taxes 9,301 8,505 Federal income taxes 2,909 2,578 ------------- ------------- NET INCOME $6,392 $5,927 ============= ============= Basic earnings per share $1.37 $1.26 ============= ============= Diluted earnings per share $1.35 $1.22 ============= ============= Dividends per share $0.51 $0.46 ============= =============
See accountants' review report and notes to consolidated financial statements. Page 5 FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Dollars in Thousands) UNAUDITED Accumulated Other Common Retained Comprehensive Comprehensive Stock Earnings Income Income (Loss) TOTAL -------------- ------------- -------------- -------------- ----------- BALANCES AT DECEMBER 31, 1998 $52,796 $5,875 $1,104 $59,775 Other comprehensive income Net income for 1999 8,036 $8,036 8,036 Other comprehensive income (loss) Net change in unrealized appreciation (depreciation) on available for sale securities (1,768) (1,768) (1,768) -------------- Comprehensive income $6,268 ============== Cash dividends - $.61 per share (2,874) (2,874) Issuance of 50,310 shares of common stock through exercise of stock options 817 817 Issuance of 44,246 shares of common stock through dividend reinvestment plan 1,098 1,098 Issuance of 19,807 shares of common stock through supplemental purchase under dividend reinvestment plan 528 528 5% stock dividend - 224,526 shares 4,603 (4,604) (1) Purchase of 180,150 shares of stock (4,793) (4,793) Issuance of 7,770 shares of stock 214 214 ---------------- --------------- -------------- ------------ ----------- BALANCES AT DECEMBER 31, 1999 $55,263 $6,433 ($664) $61,032 ================ =============== ============== ============ =========== Other comprehensive income Net income for year to date 6,392 $6,392 6,392 Other comprehensive income (loss) Net change in unrealized appreciation on available for sale securities 316 316 316 -------------- Comprehensive income $6,708 ============== Cash dividends - $.51 per share (2,367) (2,367) Issuance of 12,708 shares of common stock through exercise of stock options 170 170 Issuance of 48,180 shares of common stock through dividend reinvestment plan 913 913 Issuance of 12,345 shares of common stock through supplemental purchase under dividend reinvestment plan 246 246 Purchase of 173,946 shares of stock (3,522) (3,522) Issuance of 9,061 shares of stock 180 180 ---------------- --------------- -------------- -------------- ----------- BALANCES AT September 30, 2000 $53,250 $10,458 ($348) $63,360 ================ =============== ============== ============== ===========
See accountants' review report and notes to consolidated financial statements. Page 6 FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 and 1999 (Dollars in Thousands) UNAUDITED Nine months ended September 30, 2000 1999 ---- ---- OPERATING ACTIVITIES Net income $6,392 $5,927 Adjustments to reconcile net income to net cash provided by operating activities Provision for loan losses 562 378 Depreciation of premises and equipment 1,128 990 Net amortization of security premiums/discounts 131 247 Gain on sale of securities (1) (15) Amortization of goodwill and other intangibles 547 524 Gain on sale of mortgage loans (320) (768) Proceeds from sales of mortgage loans 28,871 47,803 Loans originated for sale (27,811) (42,193) Increase in accrued interest receivable and other assets (1,802) (1,232) Increase (decrease) in accrued interest payable and other liabilities 1,675 (325) -------------- ------------- NET CASH PROVIDED BY OPERATING ACTIVITIES 9,372 11,336 INVESTING ACTIVITIES Proceeds from sale of securities available for sale 3,345 7,018 Proceeds from maturities of securities available for sale 21,251 24,214 Purchases of securities available for sale (11,276) (23,441) Net increase in portfolio loans (71,344) (45,104) Net purchases of premises and equipment (1,722) (1,534) -------------- ------------- NET CASH USED IN INVESTING ACTIVITIES (59,746) (38,847) FINANCING ACTIVITIES Net increase (decrease) in deposits 38,560 (4,576) Increase (decrease) in securities sold under agreements to repurchase and other short term borrowings (15,165) 17,076 Increase of note payable 34,152 2,352 Repurchase of common stock (3,522) (3,701) Cash proceeds from issuance of common stock 1,509 2,156 Cash dividends (2,367) (2,157) -------------- ------------- NET CASH PROVIDED BY FINANCING ACTIVITIES 53,167 11,150 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,793 (16,361) Cash and cash equivalents at beginning of period 25,197 35,492 -------------- ------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,990 $19,131 ============== ============= Supplemental Disclosure Interest Paid $18,546 $14,384 Income Taxes Paid $3,622 $2,900
See accountants' review report and notes to consolidated financial statements. Page 7 FIRSTBANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2000 NOTE A - FINANCIAL STATEMENTS The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2000, are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet and statement of shareholders' equity at December 31, 1999, have been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation's annual report on Form 10-K for the year ended December 31, 1999. NOTE B - SECURITIES Individual securities held in the security portfolio are classified as securities available for sale. Securities might be sold prior to maturity due to changes in interest rates, prepayment risks, yield, availability of alternate investments, liquidity needs or other factors. Securities classified as available for sale are reported at their fair value and the related unrealized holding gain or loss is reported, net of related income tax effects, as a separate component of shareholders' equity until realized. NOTE C - LOAN COMMITMENTS Loan commitments (including unused lines of credit and letters of credit) are made to accommodate the financial needs of the Banks' customers. The commitments have credit risk essentially the same as that involved in extending loans to customers, and are subject to the Banks' normal credit policies and collateral requirements. Loan commitments, which are predominately at variable rates, were approximately $61,321,661 and $68,199,183 at September 30, 2000, and December 31, 1999, respectively. See accountants' review report. Page 8 NOTE D - NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES Nonperforming Loans and Assets The following table summarizes nonaccrual and past due loans at the dates indicated: September 30, December 31, (Dollars in thousands) 2000 1999 ------------------------------------------- ------------- ------------ Nonperforming loans: Nonaccrual loans $1,513 $2,165 Loans 90 days or more past due 723 663 Renegotiated loans 53 55 ------ ------ Total nonperforming loans $2,289 $2,883 ====== ====== Property from defaulted loans $ 645 $ 511 ====== ====== Nonperforming loans as a percent of: Total loans .40% .57% ====== ====== Allowance for loan losses 23.02% 30.94% ====== ======
Analysis of the Allowance for Loan Losses The following table summarizes changes in the allowance for loan losses arising from loans charged off, recoveries on loans previously charged off, and additions to the allowance which have been charged to expense. Nine Twelve months months ended ended September 30, December 31, (Dollars in thousands) 2000 1999 - ---------------------------------------------- -------------- ------------- Balance at beginning of period $9,317 $9,048 Charge-offs (462) (799) Recoveries 526 554 ----- ------- Net (charge-offs) recoveries 64 (245) Additions to allowance for loan losses 562 514 ----- ----- Balance at end of period $9,943 $9,317 ===== ===== Average loans outstanding during the period $541,541 $464,581 ======= ======= Loans outstanding at end of period $578,906 $508,238 ======= ======= Allowance as a percent of: Total loans at end of period 1.72% 1.83% ==== ==== Nonperforming loans at end of period 434% 323% === === Net charge-offs (recoveries) as a percent of: Average loans outstanding (.01)% .05% ==== === Average Allowance for loan losses (.66)% 2.66% ==== ====
See accountants' review report. Page 9 NOTE E - RECLASSIFICATION Certain 1999 amounts have been reclassified to conform to the 2000 presentation. See accountants' review report. Page 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. The consolidated financial information presented is for Firstbank Corporation ("Corporation") and its wholly owned subsidiaries, Bank of Alma (Alma), Firstbank (Mt. Pleasant), 1st Bank (West Branch), Bank of Lakeview (Lakeview), and Firstbank - St. Johns (St. Johns) (collectively the "Banks") and Gladwin Land Company, Inc. Financial Condition During the first nine months of 2000, total assets grew by $62 million, or 9.46%. Securities available for sale decreased $13 million. Proceeds realized from maturing securities have been used to help fund loan demand. Total loans grew $71 million, or 13.90%, during the first three quarters of 2000. All categories of loans increased with the largest growth in terms of both percentage and dollars in the commercial portfolio, which grew $40 million, or 17.37%. Mortgage loans also experienced double digit growth with increases of $26 million, or 12.79%. The mortgage growth was experienced in all markets serviced by Firstbank Corporation banks. The allowance for loan losses increased $626,000, or 6.72%, during the first three quarters of 2000. As a percent of outstanding loans, the allowance for loan loss was 1.72% at September 30, 2000, compared to 1.83% at December 31, 1999. The allowance as a percent of non performing loans was 434% and 323% at September 30, 2000, and December 31, 1999, respectively. During the first nine months of 2000, the allowance for loan losses was increased by a provision of $562,000 and net recoveries of $64,000. Management continues to maintain the allowance for loan losses at a level considered appropriate to absorb losses in the portfolio. The allowance for loan losses balance is established after considering past loan loss experience, current economic conditions, volume, growth and composition of the loan portfolio, delinquencies and other relevant factors. Total deposits increased $39 million, or 7.85%, during the nine month period ending September 30, 2000. Certificates of deposit grew $40 million during this time period. Total deposits at the affiliate bank opened in June 2000 account for $12 million of the deposit totals. All of the banks have been successful in increasing their time deposits. Securities sold under agreements to repurchase grew $3 million, or 13.03%, while overnight borrowings decreased $18 million, or 59.31%, during the first three quarters of 2000. Historically, securities sold under agreements to repurchase experience increases into the early portion of the fourth quarter. Therefore, this moderate increase may be cyclical. The decrease in overnight borrowings is offset by an increase in notes payable of $34 million, or 88.97%. The proceeds from the notes payable, used to fund loan increases, reduced the need for overnight borrowings. At September 30, 2000, overnight borrowings were $12 million compared to $30 million at December 31, 1999. Page 11 Total shareholders' equity grew $2,328,000, or 3.81%, during the first nine months of 2000. Net income of $6,392,000 and net change in unrealized appreciation on available for sale securities of $316,000 increased shareholders' equity while dividends of $2,367,000 and net repurchases of stock of $2,013,000 reduced shareholders' equity. In January, 2000, the Board of Directors authorized the continuation of the Corporation's stock repurchase plan with the approval of the acquisition of up to 250,000 additional shares of Firstbank Corporation stock. As of September 30, 2000, the Corporation acquired 173,946 shares as a result of the repurchase plan. Book value was $13.77 per share on September 30, 2000, compared to $13.00 at December 31, 1999. The following table discloses compliance with current regulatory capital requirements on a consolidated basis: Total Tier 1 Risk-based (Dollars in thousands) Leverage Capital Capital ----------------------------------------- -------- ------- -------- Capital balances at September 30, 2000 $54,622 $54,622 $61,299 Required regulatory minimum capital 28,195 21,235 42,470 ------- ------- ------- Capital in excess of regulatory minimums 26,427 33,387 18,829 ======= ======= ======= Capital ratios at September 30, 2000 7.75% 10.29% 11.55% Regulatory capital ratios -- "well capitalized" 5.00% 6.00% 10.00% definition Regulatory capital ratios -- minimum requirement 4.00% 4.00% 8.00%
The Corporation acquired Gladwin Land Company, Inc. (a real estate appraisal company), on May 8, 2000. The acquisition was accounted for using the purchase method of accounting. Firstbank - St. Johns received final regulatory approval and opened for business on June 16, 2000. The results of both of these affiliates are included in the consolidated financial statements from the dates of the acquisition and the opening. Results of Operations For the three months ending September 30, 2000, net income was $2,142,000, basic earnings per share were $0.46 and diluted earnings per share $0.45, compared to $2,011,000, $0.43, and $0.42 for the third quarter of 1999. Net income for the first nine months of 2000 was $6,392,000, with basic earnings per share $1.37 and diluted earnings per share $1.35 compared to $5,927,000, $1.26, and $1.22 for the same period in 1999. Net income for the first three quarters of 2000 is $465,000, or 7.85%, greater than the same period in 1999. For the nine month period ending September 30, 2000, basic earnings per share were $0.11, or 8.73%, higher and diluted earnings per share were $0.13, or 10.66%, higher than the same period in 1999. Average earning assets increased $74 million, or 13.36%, in the twelve months ended September 30, 2000. The yield on earning assets increased 23 basis points to 8.59% during this same period. During the same twelve month period, average deposits increased $13 million, average securities sold under agreement to repurchase grew $5 million and average advances and notes payable increased $45 million. The cost of funding these rate related liabilities increased 46 basis points in the twelve month period from September 30, 1999, to September 30, 2000. Net interest margin declined 24 basis points from 4.90% for the nine months ended September 30, 1999, to 4.66% for the nine Page 12 months ending September 30, 2000. Net interest income before the provision for loan losses increased $1,652,000, or 8.37%, for the first three quarters of 2000 and $434,000, or 6.33%, for the third quarter of 2000 compared to the same periods in 1999. The provision for loan losses increased $184,000 to $562,000 for the first three quarters of 2000, and $48,000 to $174,000 for the third quarter of 2000. The increases in the provision for loan losses reflect the recognition of strong loan growth as opposed to concern over loan quality. Total noninterest income increased 2.48%, or $98,000, during the first three quarters of 2000 when compared to the same period of 1999. The gains on the sale of mortgage loans posted a decline of 58.33%, or $448,000, when comparing these same periods. Mortgage volume for loans originated for sale during the first nine months of 2000 was about 60% of that experienced during the first nine months of 1999. The increase in mortgage rates and the fact that many real estate agencies are using affiliate mortgage processors combine to cause this reduction. Other noninterest income increased 21.94% or $349,000 during the first three quarters of 2000 as compared to the same time period in 1999. Over $300,000 of this increase is noninterest income from the real estate appraisal company, title company, and the new bank. Noninterest expense increased $770,000, or 5.20%, during the first nine months of 2000 compared to the nine month period ended September 30, 1999. Nearly three quarters of the increase falls into the salary and benefit line item. Salary and benefit increases reflect the annual salary adjustments as well as the addition of staff to accommodate both a branch that opened in the fall of 1999, the addition of a real estate appraisal company in May of 2000, and the new bank that opened in June 2000. FORWARD LOOKING STATEMENTS This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation itself. Words such as "anticipate," "believe," "determine," "estimate," "expect," "forecast," "intend," "is likely," "plan," "project," "opinion," variations of such terms, and similar expressions are intended to identify such forward-looking statements. The 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 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; and the vicissitudes of the national economy. The Corporation undertakes no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events, or otherwise. Page 13 Item 3. Quantitative and Qualitative Disclosures about Market Risk Information under the headings, "Liquidity and Interest Rate Sensitivity" on pages 8 and 9 and "Quantitative and Qualitative Disclosure About Market Risk" on pages 9 through 11 in the registrant's annual report to shareholders for the year ended December 31, 1999, is here incorporated by reference. Firstbank's annual report is filed as Exhibit 13 to its Form 10-K annual report for its fiscal year ended December 31, 1999. Firstbank faces market risk to the extent that both earnings and the fair values of its financial instruments are affected by changes in interest rates. The Corporation manages this risk with static GAP analysis and simulation modeling. Throughout the third quarter of 2000, the results of these measurement techniques were within the Corporation's policy guidelines. The Corporation does not believe that there has been a material change in the nature of the Corporation's primary market risk exposures, including the categories of market risk to which the Corporation is exposed and the particular markets that present the primary risk of loss to the Corporation. As of the date of this Form 10-Q Quarterly Report, the Corporation does not know of or expect there to be any material change in the general nature of its primary market risk exposure in the near term. The methods by which the Corporation manages its primary market risk exposures, as described in the sections of its Form 10-K Annual Report incorporated by reference in response to this item, have not changed materially during the current year. As of the date of this Form 10-Q quarterly report, the Corporation does not expect to change those methods in the near term. However, the Corporation may change those methods in the future to adapt to changes in circumstances or to implement new techniques. The Corporation's market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships in the future will be primarily determined by market factors which are outside of Firstbank's control. All information provided in response to this item consists of forward looking statements. Reference is made to the section captioned "Forward Looking Statements" on page 13 of this Form 10-Q quarterly report for a discussion of the limitations on Firstbank's responsibility for such statements. Page 14 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 10 - Form of Change of Control Severance Agreement Exhibit 27 - Financial Data Schedule Exhibit 99 - Report on Review by Independent Certified Public Accountants (b) Reports on Form 8-K During the quarter the registrant filed a report on form 8-K dated August 7, 2000, which reported the resignation of the registrant's Vice President & Chief Financial Officer, Mary D. Deci. Page 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTBANK CORPORATION (Registrant) Date: November 10, 2000 \s\ Thomas R. Sullivan Thomas R. Sullivan President & Chief Executive Officer (Principal Executive & Financial Officer) Date: November 10, 2000 \s\ James E. Wheeler, II James E. Wheeler, II Vice President & Secretary Page 16 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRSTBANK CORPORATION (Registrant) Date: November 10, 2000 /s/ Thomas R. Sullivan Thomas R. Sullivan President & Chief Executive Officer (Principal Executive & Financial Officer) Date: November 10, 2000 /s/ James E. Wheeler, II James E. Wheeler, II Vice President & Secretary Page 16 EXHIBIT INDEX Exhibit 10 - Form of Change of Control Severance Agreement page 18 Exhibit 27 - Financial Data Schedule page 26 Exhibit 99 - Report on Review by Independent Certified Public Accountant page 25 Page 17 EXHIBIT 10 FORM OF CHANGE OF CONTROL SEVERANCE AGREEMENT The following individuals have entered into a Change of Control Severance Agreement with the Registrant in the attached form, all of which are identical except for the names and dates of the respective agreement for each such individual employee: Daniel Grenier, Mark B. Perry, Dale A. Peters, Thomas R. Sullivan, James M. Taylor, and James E. Wheeler, II. Page 18 AGREEMENT This agreement entered into this day of , 2000, by and between FIRSTBANK CORPORATION, hereinafter referred to as "FIRSTBANK", and , hereinafter referred to as "EXECUTIVE". WITNESSETH: WHEREAS, FIRSTBANK is a Michigan Banking Corporation with subsidiaries in Alma, Mt. Pleasant, West Branch and Lakeview, and WHEREAS, EXECUTIVE is an executive officer of FIRSTBANK, or one of its subsidiaries, whose continued employment has been deemed to be beneficial to FIRSTBANK by its Board of Directors, and WHEREAS, EXECUTIVE's knowledge of the day to day operations of FIRSTBANK, or its subsidiaries, and the existing banking relationships with customers of FIRSTBANK is such that EXECUTIVE's termination of employment with FIRSTBANK and commencement of employment with a direct competitor of FIRSTBANK could have severe detrimental effects upon the business successes of FIRSTBANK, and WHEREAS, EXECUTIVE is knowledgeable of the continuing possibility that FIRSTBANK may at some time in the future be purchased, merged into, or acquired by another banking organization, and WHEREAS, EXECUTIVE is aware that such a purchase, merger or acquisition of FIRSTBANK might thereafter jeopardize EXECUTIVE's continued employment as a result of downsizing, consolidation, or differences in operational philosophies, and WHEREAS, FIRSTBANK desires to enter into a non competition agreement with EXECUTIVE which, under certain terms and conditions, will prevent EXECUTIVE from leaving employment with FIRSTBANK and commencing employment with a competitor of FIRSTBANK, and WHEREAS, EXECUTIVE is willing to enter into such a non competition agreement with FIRSTBANK in exchange for a guarantee from FIRSTBANK of certain severance benefits, in the event of the purchase, merger or acquisition of FIRSTBANK by banking another organization. IT IS HEREBY AGREED AS FOLLOWS: 1. The initial term of this agreement shall be for a period commencing on the 16th , day of August , 2000 and continuing until either party gives the required notice in writing that the agreement is to be terminated. This notice must be given at least two years prior to the anniversary date of this agreement when termination is to be effective. It is the intention of this paragraph that the terms of this agreement will remain in effect until notice of termination is given by either party at least two (2) years prior to the anniversary date of this agreement upon which termination of the agreement shall become effective. Page 19 2. EXECUTIVE's rights for severance benefits established hereunder shall be applicable only if a CHANGE OF CONTROL occurs during the time this agreement remains in effect. A CHANGE OF CONTROL shall be defined as a purchase, merger, buy out, consolidation or other reorganization under the terms of which more than 50 percent of the combined voting power of the outstanding stock of FIRSTBANK becomes held by any group of less than ten (10) individuals, a banking entity, a trust, a corporation, an LLC, a joint venture, or any other business entity. 3. In the event a CHANGE OF CONTROL occurs, then if EXECUTIVE's employment is involuntarily terminated for any reason other than for CAUSE within six (6) months before, or two (2) years after the date of the CHANGE OF CONTROL, EXECUTIVE shall be entitled to the severance benefits set forth in paragraph 4. In addition, if a CHANGE OF CONTROL occurs, and the terms or conditions of EXECUTIVE's employment "substantially change" during a time period defined as commencing six (6) months prior to the effective date of the CHANGE OF CONTROL and ending two (2) years after the effective date of the CHANGE OF CONTROL, then if EXECUTIVE elects to voluntarily terminate employment and said voluntary termination occurs within one (1) year of the occurrence of the "substantial change", EXECUTIVE shall be entitled to severance benefits set forth in paragraph 4. If EXECUTIVE's employment is terminated, or is in the process of being terminated, at any time for CAUSE (as that term is defined in paragraph 5 below) EXECUTIVE shall not under any circumstances be entitled to any of the severance benefits set forth in paragraph 4. A "substantial change" in EXECUTIVE's employment shall be deemed to have occurred if any of the following occur: a. EXECUTIVE's employment is involuntarily terminated without CAUSE. b. EXECUTIVE is assigned duties which result in a significant reduction or material change in EXECUTIVE's authority or responsibility. c. EXECUTIVE's total base salary is reduced or EXECUTIVE is given bonuses or salary increases in a manner that is substantially less than the those provided to other executive officers of FIRSTBANK. d. EXECUTIVE is relocated to a place in excess of 25 miles from the location where EXECUTIVE is based on the date of this agreement. e. FIRSTBANK or its successor fails to provide EXECUTIVE with substantially the same fringe benefits as other executives in similar positions with FIRSTBANK or its successors. 4. If eligible under the terms established in paragraph 3 above, the EXECUTIVE shall receive the following severance benefits upon termination: a. A lump sum cash amount equal to 150% EXECUTIVE's annual base salary at the highest annual rate in effect during the 12 month period prior to the date of termination. Page 20 b. 150% of any incentive bonus that may have been earned to date of termination by EXECUTIVE. c. Continued health care coverage for a period of two (2) years that is equivalent to the best coverage available for EXECUTIVE during the 12 month period prior to termination. d. Continued life, accidental death and dismemberment coverage for a period of two (2) years equivalent to the best coverage provided for EXECUTIVE during the 12 month period prior to termination. e. Continued disability insurance coverage for a period of two (2) years equivalent to the best coverage available to EXECUTIVE during the 12 month period prior to termination. 5. Nothing in this agreement shall be deemed to establish any right to continued employment by EXECUTIVE, and severance benefits shall be payable to EXECUTIVE only if all of the specific circumstances provided for herein are met. In the event EXECUTIVE is terminated for CAUSE, EXECUTIVE shall not be entitled to receive the severance benefits provided for herein. The term CAUSE shall be defined to mean: a. The willful commission by the EXECUTIVE of a criminal or other act that causes or is likely to cause substantial economic damage or substantial injury to the business reputation of FIRSTBANK, or one of its subsidiaries. b. Commission by EXECUTIVE of an act of fraud in the performance of EXECUTIVE's duties on behalf of FIRSTBANK or one of its subsidiaries. c. The continuing willful failure of EXECUTIVE to perform the duties of such EXECUTIVE to FIRSTBANK, one of its subsidiaries, or its successors. 6. Maximum Payments. Notwithstanding any provision in this agreement to the contrary, if part or all of any amount to be paid to EXECUTIVE by FIRSTBANK under this agreement or otherwise constitute a "parachute payment" (or payments) under Section 280G or any other similar provision of the Internal Revenue Code of 1986, as amended (the "Code"), the following limitation shall apply: If the aggregate present value of such parachute payments (the "Parachute Amount") exceeds 2.99 times EXECUTIVE's "base amount" as defined in Section 280G of the Code, the amount otherwise payable to or for the benefit of the EXECUTIVE subsequent to the termination of his employment, and taken into account in calculating the Parachute Amount (the "termination payment"), shall be reduced and/or delayed, as further described below, to the extent necessary so that the Parachute Amount is equal to 2.99 times the EXECUTIVE's "base amount". Any determination or calculation described in this Paragraph 6 shall be made by FIRSTBANK's independent accountants. Such determination, and any proposed reduction and/or delay in termination Page 21 payments shall be furnished in writing promptly by the accountants to the EXECUTIVE. The EXECUTIVE may then elect, in his sole discretion, which and how much of any particular termination payment shall be reduced and/or delayed and shall advise FIRSTBANK in writing of his election, within thirty (30) days of the accountant's determination, of the reduction or delay in termination payments. If no such election is made by the EXECUTIVE within such 30 days period, FIRSTBANK may elect which and how much of any termination payment shall be reduced and/or delayed and shall notify the EXECUTIVE promptly of such election. As promptly as practicable following such determination and the elections hereunder, FIRSTBANK shall pay to or distribute to or for the benefit of the EXECUTIVE such amounts as are then due to the EXECUTIVE. Any disagreement regarding a reduction or delay in termination payments will be subject to arbitration under paragraph 9 of this agreement. Neither the EXECUTIVE's designation of specific payments to be reduced or delayed, nor the EXECUTIVE's acceptance of reduced or delayed payments, shall waive the EXECUTIVE's right to contest such reduction or delay. 7. Non Competition. The EXECUTIVE acknowledges that he/she has had and by the nature of his/her employment will have access to privileged, confidential, and proprietary information concerning FIRSTBANK and its subsidiaries. Under all circumstances and regardless of the reason for, or date of, termination of EXECUTIVE's employment, the EXECUTIVE will maintain the confidentiality of and will not disclose to anyone or any entity other than FIRSTBANK or its subsidiaries said information. In addition, if (1) EXECUTIVE's employment is involuntarily terminated for CAUSE or if (2) EXECUTIVE voluntarily terminates employment at any time this agreement remains in effect, but when neither a CHANGE OF CONTROL nor a "substantial change" of EXECUTIVE's employment have occurred, then EXECUTIVE may not for a period of two years after the effective date of termination of EXECUTIVE's employment: a. Consult with, advise, manage, operate, control or be employed in any capacity by any business enterprise competing with FIRSTBANK, or one of its subsidiaries, in any aspect of business actively being engaged in by FIRSTBANK or one of its subsidiaries as of the date of termination. This non-competition restriction shall extend to all geographical areas defined by a twenty-five (25) mile radius from the location of FIRSTBANK's home office and the home offices of all subsidiaries of FIRSTBANK that exist as of the date of termination. Employment by the EXECUTIVE for a banking institution or similar business that happens to maintain a branch office within the restricted territory shall not be deemed to be a violation of this non-competition provision so long as the location of the EXECUTIVE's personal office, and the territory or business locations being served, supervised or managed by the EXECUTIVE in said new employment, are not located within the restricted area and so long as EXECUTIVE does not directly or indirectly solicit or attempt to cause individuals or business entities that are customers of FIRSTBANK to change or modify their banking or business relationships with FIRSTBANK in any manner. Page 22 b. Irrespective of the arbitration provisions of paragraph 9, the parties to this agreement stipulate that Gratiot County, Michigan, shall be the venue for resolution of disputes over the provisions of this paragraph 7. Likewise, the non-competition provisions of this paragraph may be enforced through injunctive relief issued by the Circuit Court of Gratiot County, Michigan. It is understood that the noncompetition provisions of this agreement are NOT meant to be effective if either EXECUTIVE's position is involuntarily terminated without CAUSE or if EXECUTIVE voluntarily terminates employment within one (1) year after both a CHANGE OF CONTROL has occurred and EXECUTIVE's position has been "substantially changed" as defined in paragraph 3. 8. Withholding of Taxes. FIRSTBANK may withhold from any amounts payable under this agreement all federal, state, city, or other taxes as required by law. 9. Successors: Binding Agreements. This Agreement shall inure to the benefit of and be enforceable by EXECUTIVE's personal and legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. EXECUTIVE's rights and benefits under this Agreement may not be assigned, except that if EXECUTIVE dies while benefits are being paid hereunder, any amount that would still be payable to EXECUTIVE hereunder if EXECUTIVE had continued to live, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement, to the beneficiaries designated by the EXECUTIVE to receive benefits under this Agreement in a writing on file the FIRSTBANK at the time of EXECUTIVE's death or, if there has been no such beneficiary named, to EXECUTIVE's estate. FIRSTBANK will require any successor (whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of FIRSTBANK (or of any division or subsidiary thereof employing EXECUTIVE) to expressly assume and agree to perform this Agreement in the same manner and to the same extent that FIRSTBANK would be required to perform if no such succession had taken place. Failure of FIRSTBANK to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle EXECUTIVE to compensation from FIRSTBANK in the same manner and on the same terms to which EXECUTIVE would be entitled hereunder if EXECUTIVE had been involuntarily terminated without CAUSE following a CHANGE OF CONTROL. 10. Representations. As an inducement to FIRSTBANK to enter into and perform under the Agreement, EXECUTIVE represents and warrants to FIRSTBANK that to his/her knowledge all parts of this Agreement and the non-competition restrictions imposed upon EXECUTIVE by this agreement are entered into to protect FIRSTBANK and are reasonable and necessary under the circumstances and are believed by EXECUTIVE to be so. Page 23 11. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, or at such other addresses as the parties may designate in writing. 12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by EXECUTIVE and such officer as may be specifically designated by the Board of Directors of FIRSTBANK. The validity, interpretation, construction, and performance of this Agreement shall be governed by the laws of the State of Michigan. 13. Employment Rights. This Agreement shall not confer upon EXECUTIVE any right to continue in the employ of FIRSTBANK or its subsidiaries and shall not in any way affect the right of FIRSTBANK or its subsidiaries to dismiss or otherwise terminate EXECUTIVE's employment at any time with or without cause. ANY AND ALL FINANCIAL BENEFITS PROVIDED TO EXECUTWE HEREIN ARE PAYABLE ONLY IN THE EVENT OF A CHANGE OF CONTROL AS THAT TERM IS DEFINED HEREIN. 14. No Vested Interest. Neither EXECUTIVE nor EXECUTIVE's beneficiary shall have any right, title, or interest in any benefit under this Agreement prior to the occurrence of the right to the payment thereof, or in any property of FIRSTBANK or its subsidiaries or affiliates. WHEREFORE, the parties hereto have hereunto set their hands the day and year first above written. WITNESSES: FIRSTBANK by its EXECUTIVE Page 24 EXHIBIT 99 ANDREWS HOOPER & PAVLIK P.L.C. Certified Public Accountants Board of Directors and Shareholders Firstbank Corporation Alma, Michigan We have reviewed the accompanying consolidated balance sheet of Firstbank Corporation as of September 30, 2000, and the related consolidated statement of income for the three-month and nine-month periods ended September 30, 2000 and the consolidated statements of cash flows and changes in shareholders' equity for the nine-month period ended September 30, 2000. These financial statements are the responsibility of Firstbank Corporation's management. We did not make a similar review of the consolidated statement of income for the three-month and nine-month period ended September 30, 1999 and cash flows for the nine-month period ended September 30, 1999. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the September 30, 2000 consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. The consolidated balance sheet of Firstbank Corporation as of December 31, 1999, and the related statements of income, changes in shareholders' equity, and cash flows for the year then ended (not presented herein) were audited by other auditors whose report dated February 4, 2000, expressed an unqualified opinion on those statements. In our opinion, the information set forth in the accompanying consolidated balance sheet and the related consolidated statement of changes in shareholders' equity as of December 31, 1999, are fairly stated, in all material respects, in relation to the consolidated balance sheet and consolidated statement of changes in shareholders' equity from which it has been derived. /s/ Andrews Hooper & Pavlik P.L.C. Saginaw, Michigan November 3, 2000 Page 25 EX-27 2 0002.txt
9 The schedule contains summary financial information extracted from Firstbank Corporation's unaudited financial statements and is qualified in its entirety by reference to such financial statements as of September 30, 2000. 1,000 9-MOS DEC-31-2000 SEP-30-2000 22,704 306 4,980 0 77,294 0 0 578,906 (9,943) 712,102 529,964 36,654 9,588 72,536 0 0 53,249 10,111 712,102 35,939 3,907 0 39,846 13,851 18,455 21,391 562 1 15,574 9,301 9,301 0 0 6,392 1.37 1.35 4.66 1,513 723 53 2,367 9,317 462 526 9,943 8,262 0 1,681
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