U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 .
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
FOR THE TRANSITION PERIOD FROM _______________ TO ________________
COMMISSION FILE NUMBER 0-22435
FIRSTBANK CORP.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1389562
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
920 MAIN STREET, LEWISTON, ID 83501
ADDRESS OF PRINCIPAL EXECUTIVE OFFICES
(208) 746-9610
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13, or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date:
Common Stock 1,983,750 shares outstanding on September 30, 1997
Transitional Small Business Disclosure Format (check one):
[ ] Yes [X] No
<PAGE>
FIRSTBANK CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated Statements of Financial Condition
As of September 30,1997 and March 31, 1997 1 - 2
Consolidated Statements of Operations (For the three
months and six months ended September 30, 1997 and 1996) 3
Consolidated Statements of Cash Flows ( For the six months
ended September 30, 1997 and 1996) 4
Notes to Consolidated Financial Statements 5 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FirstBank Corp. and Subsidiaries
Consolidated Balance Sheets
September 30, March 31,
1997 1997
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents
Non-interest bearing deposits $ 5,106,569 $ 3,883,176
Interest bearing deposits 8,260,714 0
Federal funds sold 1,302,569 1,419,560
------------ ------------
Total cash and cash equivalents 14,669,852 5,302,736
Investment securities
Held-to-maturity 5,450,725 5,199,375
Available for sale 956,550 0
Mortgage-backed securities
Held-to-maturity 3,605,976 2,280,743
Available for sale 9,041,103 2,599,147
Loans receivable, net 133,079,912 113,048,075
Accrued interest receivable 1,770,425 1,013,848
Real estate owned 266,207 234,366
Stock in FHLB, at cost 2,018,675 945,475
Premises and equipment, net 5,099,178 4,928,655
Cash surrender value of life insurance policies 1,365,509 1,350,964
Mortgage servicing assets 288,501 242,462
Other assets 257,144 505,864
------------ ------------
TOTAL ASSETS $177,869,757 $137,651,710
============ ============
1
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<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY September 30, March 31,
1997 1997
------------- -------------
Liabilities:
<S> <C> <C>
Bank overdrafts 2,162,168 2,112,629
Deposits 108,500,217 107,595,602
Accrued interest on deposits 24,965 24,267
Advances from borrowers for taxes and insurance 1,632,867 1,558,438
Income taxes payable 140,089 116,921
Advances from FHLB 35,139,579 13,922,083
Deferred federal and state income taxes 121,845 76,664
Accrued expenses and other liabilities 926,659 1,233,995
------------- -------------
Total Liabilities 148,648,389 126,640,599
------------- -------------
Stockholders' Equity:
Preferred stock, $.01 par value, 500,000 shares
authorized; 0 shares issued or outstanding 0 0
Common stock, $.01 par value, 5,000,000 shares
authorized; 1,983,750 and 0 shares issued and outstanding 19,838 0
Additional paid-in-capital 18,949,856 0
Retained earnings, substantially restricted 11,750,734 11,043,959
Unearned ESOP shares (1,548,390) 0
Unrealized gain (loss) on securities available-for-sale, net of tax 49,330 (32,848)
------------- -------------
Total Stockholders' Equity 29,221,368 11,011,111
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY EQUITY $ 177,869,757 $ 137,651,710
============= =============
See accompanying notes to consolidated financial statements
2
</TABLE>
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FirstBank Corp. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three-Months Ended Sept 30, Six-Months Ended Sept 30,
(Unaudited)
1997 1996 1997 1996
----------- ----------- ----------- -----------
Interest income:
<S> <C> <C> <C> <C>
Loans receivable $ 2,921,401 $ 2,306,681 $ 5,587,142 $ 4,512,872
Mortgage-backed securities 122,633 33,466 219,787 68,263
Investment securities 111,674 163,307 183,500 363,893
Other interest earning assets 312,071 50,301 375,643 155,087
----------- ----------- ----------- -----------
Total interest income 3,467,779 2,553,755 6,366,072 5,100,115
Interest expense:
Deposits 1,133,521 1,219,552 2,303,632 2,533,143
Advances for FHLB 524,007 122,900 855,537 166,223
----------- ----------- ----------- -----------
Total interest expense 1,657,528 1,342,452 3,159,169 2,699,366
----------- ----------- ----------- -----------
Net interest income 1,810,251 1,211,303 3,206,903 2,400,749
Provision for loan losses 50,000 28,080 68,000 56,080
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 1,760,251 1,183,223 3,138,903 2,344,669
Non-interest income:
Gain on sale of loans 222,637 352,914 402,868 720,202
Service fees and charges 274,543 229,382 531,821 438,692
Commissions and other 41,090 13,428 67,464 14,628
----------- ----------- ----------- -----------
Total non-interest income 538,270 595,724 1,002,153 1,173,522
Non-interest expense:
Compensation and related benefits 906,615 800,699 1,732,871 1,581,758
Occupancy 200,481 177,392 378,710 344,866
Other 417,401 933,374 894,513 1,355,291
----------- ----------- ----------- -----------
Total non-interest expense 1,524,497 1,911,465 3,006,094 3,281,915
----------- ----------- ----------- -----------
Income (loss) before income tax (expense) benefit 774,024 (132,518) 1,134,962 236,276
Income tax (expense) benefit (292,705) 57,889 (428,184) (94,778)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 481,319 ($ 74,629) $ 706,778 $ 141,498
=========== =========== =========== ===========
Earnings per common share (Note 3):
Net income per share $ 0.26 N/A $ 0.39 N/A
=========== =========== =========== ===========
See accompanying notes to consolidated financial statements
3
</TABLE>
<PAGE>
FirstBank Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six months ended Sept 30,
(Unaudited)
1997 1996
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 706,778 $ 141,498
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 322,082 161,810
Provision for loan losses 68,000 56,080
FHLB stock dividends (58,500) (35,175)
ESOP compensation expense (66,641) 0
Loss on sale of investment securities; available-for-sale 0 89,789
Other (gains) losses, net 10,498 (1,815)
Deferred income taxes (7,980) 91,333
Changes in assets and liabilities:
Accrued interest receivable and other assets (550,599) (496,346)
Accrued expenses and other liabilities (283,473) 552,862
------------- ------------
Net cash provided by operating activities 273,447 560,036
------------- ------------
Cash flows from investing activities:
Purchase of mortgage-backed securities; available-for-sale (8,327,422) 0
Proceeds from maturities of mortgage-backed securities; held-to-maturity 620,055 172,640
Decrease in loans receivable from loans sold 14,481,543 17,825,000
Other net change in loans receivable (34,776,129) (30,144,809)
Purchase of FHLB stock (1,014,700) 0
Purchases of premises and equipment (371,988) (180,953)
Net increase in cash surrender value of life insurance policies (14,545) (27,659)
Proceeds from real estate owned 149,113 78,729
Purchase of investment securities; available for sale (3,503,000) 0
Purchase of investment securities; held-to-maturity 0 (8,404,644)
Proceeds from maturities of investment securities; held-to-maturity 2,250,000 10,404,410
Proceeds from sale of investment securities; held-to-maturity 0 1,302,406
------------- ------------
Net cash used in investing activities (30,507,073) (8,974,880)
------------- ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 17,354,663 0
Net increase (decrease) in deposits 904,615 (10,094,406)
Bank overdrafts 49,539 1,286,407
Advances from borrowers for taxes and insurance 74,429 269,862
Advances from FHLB 149,372,915 36,386,500
Payments on advances from FHLB (128,155,419) (28,311,500)
------------- ------------
Net cash provided by (used in) financing activities 39,660,742 (463,137)
------------- ------------
Net increase (decrease) in cash and cash equivalents 9,367,116 (8,877,981)
------------- ------------
Cash and cash equivalents, beginning of period 5,302,736 13,580,865
------------- ------------
Cash and cash equivalents, end of period $ 14,669,852 $ 4,702,884
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 3,159,867 $ 2,689,110
Income taxes $ 218,412 $ 5,000
Noncash investing and financing activities:
Unrealized (gain) loss on securities; available-for-sale, net of tax $ (117,501) $ 36,669
Loans receivable charged to the allowance for loan losses $ 17,775 $ 14,445
Transfer from loans converted to real estate acquired through foreclosure $ 194,749 $ 127,762
See accompanying notes to consolidated financial statements
4
</TABLE>
<PAGE>
FIRSTBANK CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Generally Accepted Accounting Principles (GAAP) for interim
financial information and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by GAAP for complete financial statements. These statements
should be read in conjunction with the combined financial statements and related
notes included the Company's Form 10-KSB for the year ended March 31, 1997. In
the opinion of management, all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation have been included. The results
of operations and other data for the three-months and six-months ended September
30, 1997 are not necessarily indicative of results that may be expected for the
entire fiscal year ending March 31, 1998.
The unaudited consolidated financial statements of FirstBank Corp. ("the
Company") include the accounts of its wholly-owned subsidiary, FirstBank
Northwest (the "Savings Bank") and it's wholly-owned subsidiary, TriStar
Financial Corporation for the three-months and six-months ended September 30,
1997. The financial statements for the periods prior to June 30, 1997 include
only the accounts of the Savings Bank and its subsidiary. All significant
intercompany accounts and transactions have been eliminated in consolidation.
In June 1996, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfer and
Servicing of Financial Assets and Extinguishment of Liabilities," which
supersedes SFAS No. 122 and establishes new standards that focus on control
whereas, after a transfer of financial assets, an entity recognizes the
financial servicing assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. This statement applies prospectively
in fiscal years beginning after December 31, 1996.
In December 1996, the FASB issued SFAS No. 127 "Deferral of the Effective Date
of Certain Provisions of FASB Statement No. 125," which defers for one year the
effective date of certain provisions of SFAS 125 that address secured
borrowings, collateral for all transactions and transfers of financial assets
that are part of repurchase agreements, securities lending and similar
transactions. The Company does not expect the adoption of SFAS No. 125 and SFAS
No. 127 to have a material effect on its financial statements.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," which
establishes standards for computing and presenting earnings per share and
applies to entities with publicly held common stock or potential common stock.
This statement is effective for financial statements ending after December 15,
1997. The Company does not expect adoption to have a material effect on its
financial statements.
In February 1997, the FASB issued SFAS No. 129. "Disclosure of Information about
Capital Structure" which clarifies disclosure rules about such items as rights
and privileges of debt and equity securities, dividend and liquidation
preferences, participation rights and call prices. It also demands that
liquidation preferences be shown on the face of the balance sheet. This
statement is effective for financial statements ending after December 31, 1997.
The Company does not expect adoption to have a material effect on its financial
statements.
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income,"
which requires the disclosure of comprehensive income and requires the
presentation of a reconciliation for net income to the change in equity of the
business during the year arising due to transactions from nonowner sources. This
statement is effective for financial statements beginning after December 15,
1997. The Company does not expect adoption to have a material effect on its
financial statements.
(2) CONVERSION TO STOCK OWNERSHIP
On January 8, 1997 the Board of Directors of the Savings Bank unanimously
adopted a Plan of Conversion pursuant to which the Savings Bank converted from a
federally chartered mutual savings bank to a federally chartered stock savings
bank, with the concurrent formation of the Company. The Company, on July 1,
1997, sold 1,983,750 shares of common stock at $10.00 per share to depositors,
borrowers and employees of the Savings Bank and an internally leveraged employee
stock ownership plan in a subscription offering. From the proceeds, $19,838 was
allocated to common stock based on a par value of $.01 per share and
$18,921,825, which is net of conversion costs of $895,837, was allocated to
additional paid in capital.
5
<PAGE>
(3) EARNINGS PER SHARE
Earnings per common share were computed by the weighted number of common shares
outstanding, which was 1,825,050 at September 30, 1997. Only ESOP shares
allocated and committed to be released are considered outstanding for purposes
of computing earnings per common share. No shares were outstanding prior to July
1, 1997, therefore earnings per common share for those periods have not been
presented.
(4) EMPLOYEE STOCK OWNERSHIP PLAN ("ESOP")
During 1997 the Company established a tax-qualified internally leveraged ESOP.
The ESOP covers substantially all employees who have attained the age of 21 and
completed one year of service. In connection with the conversion to a stock
company, the ESOP purchased 158,700 shares of the Company's common stock at a
price of $10.00 per share using funds loaned by the Company. All ESOP shares are
held in a suspense account and are allocated among the participants on a pro
rata basis as the loan is repaid. Currently this receivable from the ESOP is
scheduled to be repaid with level principal and interest payments over 15 years
with no penalty for prepayment. Shares released from the suspense account are
allocated among the participants based upon their pro rata annual compensation.
The sale of the shares to the ESOP was recorded by the Company as unearned ESOP
shares, a contra equity account. As ESOP shares are committed to be released to
compensate employees, the contra equity account is reduced and a corresponding
charge to compensation expense equal to the fair market value of the shares
committed to be released is recorded. Upon committing these share to be
released, they become outstanding for purposes of earnings-per-share
computations. Dividends on allocated ESOP shares are recorded as a reduction of
retained earnings; dividends on unallocated ESOP shares are recorded as
compensation expense. Compensation expense related to the ESOP was $66,641 for
the six months ended September 30, 1997. The ESOP shares as of September 30,
1997 were as follows:
Allocated Shares 0
Shares Committed to be released 3,861
Unreleased Shares 154,839
Total ESOP Shares 157,800
Fair value of unreleased shares $2,632,263
(5) DIVIDEND
On October 16, the Board of Directors declared a cash dividend of $.07 per
common share to shareholders of record as of November 13, 1997. The dividend
will be paid on November 26, 1997.
6
<PAGE>
Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking statements, within the meaning of Section 21E of the Securities
and Exchange Act of 1934, are made throughout this Management's Discussion and
Analysis of Financial Condition and Results of Operations. For this purpose, any
statements contained herein that are not statements of historical fact may be
deemed to be forward-looking statements. Without limiting the foregoing, the
words "believes", "anticipates", "plans", "expects", "estimates" and similar
expressions are intended to identify forward-looking statements. There are a
number of important factors that could cause the results of the Company to
differ materially from those indicated herein. These factors include, but are
not limited to, those set forth in Item 7 entitled Management's Discussion and
Analysis of Financial Condition and Results of Operations in the Company's Form
10-KSB for the year ended March 31, 1997.
GENERAL
On July 1, 1997, FirstBank Northwest converted from mutual to stock form and
became a wholly-owned subsidiary of a newly formed Delaware holding company,
FirstBank Corp. The Company sold 1,983,750 shares of common stock at $10.00 per
share in conjunction with a subscription offering to the Savings Bank's Employee
Stock Ownership Plan (ESOP) and eligible account holders. The net proceeds were
approximately $18,921,825. The company used approximately $9,470,000 of the net
proceeds to purchase all the capital stock of the Savings Bank. In addition,
$1,587,000 was loaned to the ESOP for the purchase of 158,700 shares in the
offering.
The Company's principal business is the business of the Savings Bank. Therefore,
the discussion in the Management's Discussion and Analysis of Financial
Conditions and Results of Operation relates to the Savings Bank and its
operations. During the quarter the Bank opened up a small retail branch in
Clarkston, Washington. The Bank now has offices in Idaho and Washington.
During the quarter a VISA credit card program was started. FirstBank is
performing the credit underwriting on the credit cards and retaining the credit.
A Debit Card program will be implemented during the next quarter. A new 24 hour
banking telephone is being installed and should be available for customer to use
in the next quarter. The 24 hour banking system lets customers examine and
transfer monies between their accounts any time of the day.
FINANCIAL CONDITION AT SEPTEMBER 30, 1997 AND MARCH 31, 1997
Assets increased from $137.7 million at March 31, 1997 to $177.9 million at
September 30, 1997. Cash and cash equivalents increased from $5.3 million at
March 31, 1997 to $14.7 million at September 30, 1997. Mortgage-backed
securities available-for-sale increased from $2.6 million at March 31, 1997 to
$9.0 million at September 30, 1997. Loans receivable, increased from $113.0
million at March 31, 1997 to $133.1 million at September 30, 1997 as a result of
increased commercial lending of $9.0 million , consumer lending of $6.0 million
and $4.0 million in residential real estate lending. The increases in cash and
cash equivalents, mortgage-backed securities available-for-sale, and loans
receivable were attributable to the proceeds received from the company's stock
offering and from Federal Home Loan Bank of Seattle (FHLB) advances which
increased from $13.9 million at March 31, 1997 to $35.1 million at September 30,
1997. Accrued interest receivable increased $1.0 million at March 31, 1997 to
$1.8 million at September 30, 1997 due to a higher average asset base in
securities and loans. Deposits increased from $107.6 million at March 31, 1997
to $108.5 million at September 30, 1997. Activity within deposit balances
includes a decrease of approximately $5.6 million used to fund purchases of
stock. The increase in deposits is primarily due to the Savings Bank benefiting
from funds deposited by the customers of the local institutions, following
larger bank mergers, who become frustrated due to higher fees and less
personalized service. Accrued expenses and other liabilities decreased from $1.2
million at March 31, 1997 to $1.0 million at September 30, 1997. The primary
reason for the decrease was timing of investor mortgage loan payoffs. It is the
policy of the Savings Bank to cease accruing interest on loans 90 days or more
past due. Nonaccrual loans decreased from $1.1 million at March 31, 1997 to $1.0
million at September 30, 1997.
RESULTS OF OPERATIONS FOR QUARTER ENDED SEPTEMBER 30, 1997
Net earnings increased from a net loss of $75,000 for the three months ended
September 30, 1996 to net income $481,000 for the three months ended September
30, 1997. The results for the three months ended September 30, 1996 reflect the
payment of an industry-wide, one time special assessment to recapitalize the
Savings Association Insurance Fund (SAIF). The Savings Bank's portion of the
assessment was $584,000.
Net interest income increased from $1.2 million for the three months ended
September 30, 1996 to $1.8 million for the three months ended September 30,
1997. Total interest income increased from $2.6 million for the three months
ended September 30, 1996 to $3.5 million for three months ended September 30,
1997. The increase in interest income stemmed from an increase in average
earning assets and higher yields on those assets. The weighted average yield on
7
<PAGE>
the loan portfolio was 8.97% as of September 30, 1997, whereas the weighted
yield average at September 30, 1996 was 8.84%. Interest income from investment
securities decreased from $163,000 for the three months ended September 30, 1996
to $112,000 for the three months ended September 30, 1997. The decrease is
primarily due to a decrease in average balances outstanding. Interest income
from mortgage-backed securities increased from $34,000 for the three months
ended September 30, 1996 to $121,000 for the three months ended September 30,
1997. The increase was due primarily to the purchase of approximately $6.4
million in mortgage-backed securities available-for-sale with higher yields.
Interest expense increased from $1.3 million for the three months ended
September 30, 1996 to $1.7 million for the same time period in 1997. The
increase in interest expense is due primarily to higher average deposit balances
and an increase in FHLB advances. The weighted average rate on deposits for the
three months ended September 30, 1997 was 4.26%, whereas the weighted average
rate on deposits as of September 30, 1996 was 4.54%. The weighted average rate
on FHLB advances for the three months ended September 30, 1997 was 7.07%,
whereas the weighted average rate on FHLB advances as of September 30, 1996 was
6.01%.
A one time increase in income was realized in the quarter ending September 30,
1997. Said increase of $41,000 is attributable to the spread on the money which
was held for the conversion.
Provision for loan losses is based upon management's consideration of economic
conditions which may affect the ability of borrowers to repay the loans.
Management also reviews individual loans for which full collectibility may not
be reasonably assured and considers, among other matters, the risks inherent in
the Savings Bank's portfolio and the estimated fair value of the underlying
collateral. This evaluation is ongoing and results in variations in the Savings
Bank's provision for loan losses. As a result of this evaluation, the Savings
Bank's provision for loan losses increased from $28,000 for the three months
ended September 30, 1996 to $50,000 for the three months ended September 30,
1997.
Non-interest income decreased from $596,000 for the three months ended September
30, 1996 to $538,000 for the three months ended September 30, 1997. The primary
reason was due to a decrease in gain on sale of loans as loans sold decreased
from $29.5 million for the three months ended September 30, 1996 to $25.5
million for the three months ended September 30, 1997.
Non-interest expense decreased from $1.9 million for the three months ended
September 30, 1996 to $1.5million for the three months ended September 30, 1997.
The decrease is primarily due to a charge in 1996 of $584,000 for the one time
expense for SAIF premium. The decrease was offset by compensation for an
additional loan officer hired in Lewiston from one of the larger regional
national banks.
Income taxes increased from a benefit of $58,000 for the three months ended
September 30, 1996 to expense of $293,000 for the same time period in 1997. The
increase was primarily due to a increase in taxable income.
RESULTS OF OPERATIONS FOR SIX MONTHS ENDED SEPTEMBER 30, 1997
Net earnings increased from $141,000 for the six months ended September 30, 1996
to $707,000 for the six months ended September 30, 1997.
Net interest income increased from $2.4 million for the six months ended
September 30, 1996 to $3.2 million for the six months ended September 30, 1997.
Total interest income increased from $5.1 million for the six months ended
September 30, 1996 to $6.4 million for six months ended September 30, 1997. The
increase in interest income stemmed from an increase in average earning assets
and higher yields on those assets. The weighted average yield on the loan
portfolio was 8.94% as of September 30, 1997, whereas the weighted yield average
at September 30, 1996 was 8.91%. Interest income from investment securities
decreased from $364,000 for the six months ended September 30, 1996 to $184,000
for the six months ended September 30, 1997. The decrease is primarily due to a
decrease in average balances outstanding. Interest income from mortgage-backed
securities increased from $68,000 for the six months ended September 30, 1996 to
$220,000 for the six months ended September 30, 1997. The increase was due
primarily to the purchase of approximately $6 million in mortgage-backed
securities available-for-sale with higher yields. Interest expense increased
from $2.7 million for the six months ended September 30, 1996 to $3.2 million
for the same time period in 1997. The increase in interest expense is due
primarily to higher average deposit balances and an increase in FHLB advances.
The weighted average rate on deposits for the six months ended September 30,
1997 was 4.28%, whereas the weighted average rate on deposits as of September
30, 1996 was 4.59%.
Provision for loan losses is based upon management's consideration of economic
conditions which may affect the ability of borrowers to repay the loans.
Management also reviews individual loans for which full collectibility may not
be reasonably assured and considers, among other matters, the risks inherent in
the Savings Bank's portfolio and the estimated fair value of the underlying
collateral. This evaluation is ongoing and results in variations in the Savings
Bank's provision for loan losses. As a result of this evaluation, the Savings
8
<PAGE>
Bank's provision for loan losses increased from $56,000 for the six months ended
September 30, 1996 to $68,000 for the six months ended September 30, 1997.
Non-interest income decreased from $1.2 million for the six months ended
September 30, 1996 to $1.0 million for the six months ended September 30, 1997.
The primary reason was due to a decrease in gain or sale of loans as loans sold
decreased from $64.0 million for the six months ended September 30, 1996 to
$51.2 million for the six months ended September 30, 1997.
Non-interest expense decreased from $3.3 million for the six months ended
September 30, 1996 to $3.0 million for the six months ended September 30, 1997.
Despite an increase in 1997 compensation and other expenses related to the
addition of personnel for expanding loan products, last year's non-interest
expense was higher due to the one time SAIF charge of $584,000. Income taxes
increased from $95,000 for the six months ended September 30, 1996 to $428,000
for the same time period in 1997. The decrease was primarily due to a increase
in taxable income.
LIQUIDITY AND CAPITAL RESOURCES
The Savings Bank's principal sources of funds are cash receipts from deposits,
loan repayments by borrowers, sale of loans and net income. The Savings Bank has
an agreement with FHLB to provide cash advances, should the need for additional
funds be required. Advances totaled $35.1 million at September 30, 1997. In
addition, the Company had $9.0 million of securities available for sale at
September 30, 1997. The Savings Bank uses its liquidity resources principally to
fund existing and future loan commitments, to fund maturing certificates of
deposit and deposit withdrawals, to invest in other interest-earning assets, to
maintain liquidity and to meet operating expenses. Management believes that loan
repayments and other sources of funds will be adequate to meet or exceed the
Bank's liquidity needs for the remainder of fiscal 1997.
For regulatory purposes, liquidity is measured as a ratio of cash and certain
investments to withdrawable deposits. The minimum level of liquidity required by
regulation is presently 5%. The Savings Bank's liquidity ratio was approximately
8.52% at September 30, 1997.
Commitments to originate adjustable-rate mortgage loans at September 30, 1997
were approximately $6.6 million. Commitments to originate fixed-rate mortgage
loans at September 30, 1997 were approximately $10.3 million. Commitments to
fund outstanding credit lines at September 30, 1997 were approximately $7.3
million. Commitments for commercial loans at September 30, 1997 were
approximately $2.1 million.
The Savings Bank is required to meet certain tangible, core and risk-based
capital requirements. The following table presents the Savings Bank's capital
position relative to its regulatory capital requirements at September 30, 1997:
9
<PAGE>
Percent of Adjusted
Amount Total Assets
------ ------------
(Unaudited)
(Dollars in Thousands)
Tangible capital $29,172 16.40%
Tangible capital requirement $ 2,668 1.50%
Excess $26,504 14.90%
Core capital $29,172 16.40%
Core capital requirement $ 5,336 3.00%
Excess $23,836 13.40%
Risk-based capital $30,214 16.96%
Risk-based capital requirement $ 8,106 4.56%
Excess $22,108 12.43%
10
<PAGE>
FIRSTBANK CORP. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 - Legal Proceeding
There are no material legal proceedings to which the Company or the Savings
Bank is a party or of which any of their property is subject. From time to
time, the Savings Bank is a party to various legal proceedings incident to
its business.
Item 2 - Changes in Securities
None.
Item 3 - Defaults upon Senior Securities
Not applicable.
Item 4 - Submission of Matters to a Vote of Security Holders
None.
Item 5 - Other Information
Dr Glen Carlson retired from the Savings Bank's Board of Directors after
serving for 20 years. Russ Zenner was appointed to fill the vacancy on the
Savings Bank's Board
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits: none
(b) Reports on Form 8-K; No reports on Form 8-K have been filed during the
quarter for which this report is filed.
11
<PAGE>
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 CORP.
DATED: November 14, 1997 BY:/s/ CLYDE E. CONKLIN
--------------------------------------------
Clyde E. Conklin
President and Chief Executive Officer
BY:/s/ LARRY K. MOXLEY
--------------------------------------------
Larry K. Moxley
Secretary and Chief Financial Officer
12
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<CIK> 0001035513
<NAME> First Bank Corp
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<CURRENCY> USD
<S> <C>
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<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
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