Note 5 - Shareholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

NOTE 5 – SHAREHOLDERS’ EQUITY

We are subject to various regulatory policies and requirements relating to the payment of dividends, including requirements to maintain adequate capital above regulatory minimums. At September 30, 2013 and year end 2012 we exceeded all requirements to be classified as well as capitalized.

On January 30, 2009 we issued 33,000 shares of Series A, no par value $1,000 liquidation preference, fixed rate cumulative perpetual preferred stock (Preferred Stock) and warrants to purchase 578,947 shares of our common stock at an exercise price of $8.55 per share (Warrants), to the U.S. Department of Treasury in return for $33 million under the Capital Purchase Program (CPP). Of the proceeds, $32.7 million was allocated to the Preferred Stock and $0.3 million was allocated to the Warrants based on the relative fair value of each. The discount on the Preferred Stock was being accreted using an effective yield method over ten years. The Preferred Stock and Warrants qualified as Tier 1 capital.

The Preferred Stock required quarterly cash dividends at a rate of 5% per year on the $1,000 liquidation preference while they were outstanding. Holders of shares of the Preferred Stock had no right to exchange or convert such shares into any other security of Firstbank Corporation and had no right to require the redemption or repurchase of the Preferred Stock. The Preferred Stock did not have a sinking fund. The Preferred Stock was non-voting, other than class voting rights on certain matters that could adversely affect the Preferred Stock.

On June 28, 2012 the U.S. Department of Treasury sold all of the shares of our Preferred Stock in a modified Dutch auction process. During the auction, we successfully bid on and retired 16,000 of the 33,000 outstanding shares of our Preferred Stock at a price of $941.01 per share, or $15.1 million aggregate price. As a result of the retirement of these shares, 17,000 shares remained outstanding and carried the same terms under which they were originally issued.

On June 14, 2013 we called the remaining 17,000 shares of our Preferred Stock at their liquidation preference value of $1,000 per outstanding share plus accrued dividends. As a result of the redemption, we no longer have any outstanding Preferred Stock.

The Warrants were immediately exercisable for 578,947 shares of our common stock at an exercise price of $8.55 per common share. The Warrants were transferrable and could be exercised at any time on or before January 30, 2019. We negotiated a repurchase of all of the outstanding warrants with the U.S. Treasury at a price of $1,946,670. The repurchase of these warrants occurred in July 2012 and reduced equity by the amount of the purchase price.