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 December 31, 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
<PAGE>
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 December 31, 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 December 31, 1997 and March 31, 1997 ..................... 1 - 2
Consolidated Statements of Operations (For the three
months and nine months ended December 31, 1997 and 1996) ....... 3
Consolidated Statements of Cash Flows (For the nine months
ended December 31, 1997 and 1996) .............................. 4 - 5
Notes to Consolidated Financial Statements ..................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 7 - 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings .............................................. 12
Item 2. Changes in Securities .......................................... 12
Item 3. Defaults Upon Senior Securities ................................ 12
Item 4. Submission of Matters to a Vote of Security Holders ............ 12
Item 5. Other Information .............................................. 12
Item 6. Exhibits and Reports on Form 8-K ............................... 12
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FirstBank Corp. and Subsidiaries
Consolidated Balance Sheets
December 31, March 31,
1997 1997
------------ ------------
(Unaudited)
ASSETS
Cash and cash equivalents
Non-interest bearing deposits $ 6,969,371 $ 3,883,176
Interest bearing deposits 2,991,430 0
Federal funds sold 500,037 1,419,560
------------ ------------
Total cash and cash equivalents 10,460,838 5,302,736
Investment securities
Held-to-maturity 3,440,375 5,199,375
Available for sale 2,384,420 0
Mortgage-backed securities
Held-to-maturity 3,502,663 2,280,743
Available for sale 8,661,967 2,599,147
Loans receivable, net 143,501,871 113,048,075
Accrued interest receivable 1,449,456 1,013,848
Real estate owned 587,439 234,366
Stock in FHLB, at cost 2,059,275 945,475
Premises and equipment, net 5,029,081 4,928,655
Income taxes receivable 224,058 0
Cash surrender value of life insurance policies 1,382,353 1,350,964
Mortgage servicing assets 334,142 242,462
Other assets 274,420 505,864
------------ ------------
TOTAL ASSETS $183,292,358 $137,651,710
============ ============
1
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<TABLE>
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FirstBank Corp. and Subsidiaries
Consolidated Balance Sheets (Continued)
December 31, March 31,
1997 1997
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
<S> <C> <C>
Bank overdrafts $ 1,089,124 $ 2,112,629
Deposits 111,416,707 107,595,602
Accrued interest on deposits 8,241 24,267
Advances from borrowers for taxes and insurance 1,298,522 1,558,438
Income taxes payable 0 116,921
Advances from FHLB 38,902,079 13,922,083
Deferred federal and state income taxes 317,508 76,664
Accrued expenses and other liabilities 607,981 1,233,995
------------- -------------
Total Liabilities 153,640,162 126,640,599
------------- -------------
Stockholders' Equity (Note 5):
Preferred stock, $.01 par value, 500,000 shares
authorized; 0 shares issued and 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 18,989,977 0
Retained earnings, substantially restricted 12,081,172 11,043,959
Unearned ESOP shares (Note 4): (1,493,430) 0
Unrealized gain (loss) on securities available-for-sale,
net of tax 54,639 (32,848)
------------- -------------
Total Stockholders' Equity 29,652,196 11,011,111
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY EQUITY $ 183,292,358 $ 137,651,710
============= =============
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
<TABLE>
<CAPTION>
FirstBank Corp. and Subsidiaries
Consolidated Statements of Operations
Three-Months Ended December 31, Nine-Months Ended December 31,
(Unaudited)
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Interest income:
Loans receivable $3,017,681 $2,365,602 $8,604,823 $6,878,474
Mortgage-backed securities 203,917 33,059 423,704 101,322
Investment securities 169,059 124,442 411,243 506,202
Other interest earning assets 88,481 17,198 405,440 154,418
---------- ---------- ---------- ----------
Total interest income 3,479,138 2,540,301 9,845,210 7,640,416
Interest expense:
Deposits 1,186,531 1,165,850 3,490,163 3,698,993
Advances from FHLB 508,219 149,160 1,363,756 315,383
---------- ---------- ---------- ----------
Total interest expense 1,694,750 1,315,010 4,853,919 4,014,376
---------- ---------- ---------- ----------
Net interest income 1,784,388 1,225,291 4,991,291 3,626,040
Provision for loan losses 75,137 137,539 143,137 193,619
---------- ---------- ---------- ----------
Net interest income after provision for loan
losses 1,709,251 1,087,752 4,848,154 3,432,421
Non-interest income:
Gain on sale of loans 305,923 239,514 708,791 959,716
Service fees and charges 296,361 235,261 828,182 673,953
Commissions and other 30,751 31,979 98,215 46,607
---------- ---------- ---------- ----------
Total non-interest income 633,035 506,754 1,635,188 1,680,276
Non-interest expense:
Compensation and related benefits 910,565 745,248 2,643,436 2,327,006
Occupancy 197,836 159,315 576,546 504,181
Other 524,074 352,834 1,418,587 1,708,125
---------- ---------- ---------- ----------
Total non-interest expense 1,632,475 1,257,397 4,638,569 4,539,312
---------- ---------- ---------- ----------
Income before income tax expense 709,811 337,109 1,844,773 573,385
Income tax expense 251,620 55,897 679,804 150,675
---------- ---------- ---------- ----------
NET INCOME $ 458,191 $ 281,212 $1,164,969 $ 422,710
========== ========== ========== ==========
Earnings per common share (Note 3):
Net income per share (basic) $ 0.25 N/A $ 0.64 N/A
========== ========== ========== ==========
Weighted average shares outstanding 1,831,659 N/A 1,826,988 N/A
</TABLE>
See accompanying notes to consolidated financial statements
3
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<TABLE>
<CAPTION>
FirstBank Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Nine-months ended December 31,
(Unaudited)
1997 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,164,969 $ 422,710
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation 423,021 267,783
Provision for loan losses 143,137 193,619
FHLB stock dividends (99,100) (53,375)
ESOP compensation expense 161,722 0
Other (gains) losses, net 10,498 1,815
Provision for real estate owned 47,706
Deferred income taxes 182,288 49,726
Changes in assets and liabilities:
Accrued interest receivable and other assets (532,230) (433,833)
Accrued expenses and other liabilities (758,961) 150,518
Loss on sale of investment securities: available-for-sale 0 89,789
------------- -------------
Net cash provided by operating activities 743,050 688,752
------------- -------------
Cash flows from investing activities:
Purchase of mortgage-backed securities: held-to-maturity (1,500,000) (109,082)
Purchase of mortgage-backed securities; available-for-sale (6,827,419) 0
Proceeds from maturities of mortgage-backed securities; held-to-maturity 1,049,829 245,367
Decrease in loans receivable from loans sold 26,793,543 46,407,000
Other net change in loans receivable (57,938,538) (64,064,367)
Purchase of FHLB stock (1,014,700) 0
Purchases of premises and equipment (409,631) (347,588)
Net increase in cash surrender value of life insurance policies (31,389) (50,277)
Proceeds from real estate owned 149,113 74,348
Purchase of investment securities; available for sale (3,491,000) (8,349,154)
Proceeds from maturities of investment securities; held-to-maturity 5,250,000 13,700,736
Proceeds from sale of investment securities; available-for-sale (2,359,343) 1,302,406
------------- -------------
Net cash used in investing activities (40,329,535) (11,190,611)
------------- -------------
Cash flows from financing activities:
Proceeds from issuance of common stock 17,354,663 0
Cash paid for dividends (127,756)
Net increase (decrease) in deposits 3,821,105 (9,975,257)
Bank overdrafts (1,023,505) 0
Advances from borrowers for taxes and insurance (259,916) (94,689)
Advances from FHLB 238,122,916 39,150,000
Payments on advances from FHLB (213,142,920) (26,394,445)
------------- -------------
Net cash provided by (used in) financing activities 44,744,587 2,685,609
------------- -------------
</TABLE>
4
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<TABLE>
<CAPTION>
FirstBank Corp. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
Nine-months ended December 31,
(Unaudited)
1997 1996
------------- -------------
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents 5,158,102 (7,816,250)
------------- -------------
Cash and cash equivalents, beginning of period 5,302,736 13,580,865
------------- -------------
Cash and cash equivalents, end of period $ 10,460,838 $ 5,764,615
============= =============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 4,845,678 $ 4,039,133
Income taxes $ 835,938 0
Noncash investing and financing activities:
Unrealized (gain) loss on securities; available-for-sale, net of tax $ 87,487 $ (36,669)
Loans receivable charged to the allowance for loan losses $ 52,256 $ 14,962
Transfer from loans converted to real estate acquired through
foreclosure $ 548,062 $ 119,629
</TABLE>
See accompanying notes to consolidated financial statements
5
<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 nine-months ended December
31, 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 nine-months ended December 31,
1997. The financial statements for the periods prior to July 1, 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. 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.
(3) EARNINGS PER SHARE
Earnings per common share is computed by dividing the company's net income by
the weighted average number of common shares outstanding during the period. 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.
6
<PAGE>
(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 a
reduction in ESOP debt. Compensation expense related to the ESOP was $161,722
for the nine months ended December 31, 1997. The ESOP shares as of December 31,
1997 were as follows:
Allocated Shares 9,357
Shares Committed to be released 0
Unreleased Shares 149,343
Total ESOP Shares 158,700
Fair value of unreleased shares $2,818,849
(5) DIVIDEND
On October 16, 1997 the Board of Directors declared a cash dividend of $.07 per
common share to shareholders of record as of November 13, 1997. On January 22,
1998 the Board of Directors declared another cash dividend of $.07 per common
share to shareholders of record as of February 12, 1998. This dividend will be
paid on February 26, 1998.
7
<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. In August the Bank opened up a small retail branch in Clarkston,
Washington. The Bank now has offices in Idaho and Washington.
During the third quarter a Debit Card program and a new 24-hour banking
telephone service was installed and was made available for customers to use. The
24-hour banking system lets customers examine and transfer monies between their
accounts any time of the day. Also during the third quarter a VISA credit card
program was started. FirstBank is performing the credit underwriting on the
credit cards and retaining the credit. FirstBank's conversion to a
Washington-chartered savings bank has been completed as of January 30, 1998.
The company bid on and won two large offerings of tax anticipation loans; one
from the City of Lewiston and one from the Lewiston School District. The amount
was $6,700,000 at 4.37% note rates.
On January 13th, the company announced plans to offer state-of-the-art on line
banking services to customers by Fall of 1998. With this system customers can
access their accounts by screen phones, personal computers, touch-tone
telephones and through ATM machines.
FINANCIAL CONDITION AT DECEMBER 31, 1997 AND MARCH 31, 1997
Assets increased from $137.7 million at March 31, 1997 to $183.3 million at
December 31, 1997. Cash and cash equivalents increased from $5.3 million at
March 31, 1997 to $10.5 million at December 31, 1997. Mortgage-backed securities
available- for-sale increased from $2.6 million at March 31, 1997 to $8.7
million at December 31, 1997. Loans receivable, increased from $113.0 million at
March 31, 1997 to $143.5 million at December 31, 1997 as a result of an increase
in new commercial lending of $20.5 million, consumer lending of $6.9 million and
$5.5 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 $38.9 million at December 31, 1997. Accrued
interest receivable increased $1.0 million at March 31, 1997 to $1.4 million at
December 31, 1997 due to a higher average asset base in securities and loans.
Deposits increased from $107.6 million at March 31, 1997 to $111.4 million at
December 31, 1997. Activity within deposit balances includes a decrease of
approximately $5.6 million used to fund purchases of the company's stock,
combined with a $9.4 million increase primarily due to the Savings Bank
benefiting from funds deposited by the customers of other 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 $0.6 million at December 31, 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 $0.6
million at December 31, 1997.
8
<PAGE>
RESULTS OF OPERATIONS FOR THREE MONTHS ENDED DECEMBER 31, 1997
Net income increased from $281,000 for the three months ended December 31, 1996
to $458,000 for the three months ended December 31, 1997.
Net interest income increased from $1.2 million for the three months ended
December 31, 1996 to $1.8 million for the three months ended December 31, 1997.
Total interest income increased from $2.5 million for the three months ended
December 31, 1996 to $3.5 million for three months ended December 31, 1997. The
increase in interest income stemmed from an increase in average interest earning
assets. The weighted average yield on the loan portfolio was 8.70% as of
December 31, 1997, whereas the weighted yield average at December 31, 1996 was
9.24%. Interest income from investment securities increased from $124,000 for
the three months ended December 31, 1996 to $169,000 for the three months ended
December 31, 1997. The increase is primarily due to an increase in average
yield. Interest income from mortgage-backed securities increased from $33,000
for the three months ended December 31, 1996 to $204,000 for the three months
ended December 31, 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 December 31, 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 average FHLB advances. The weighted average rate on deposits
for the three months ended December 31, 1997 was 4.22%, whereas the weighted
average rate on deposits as of December 31, 1996 was 4.23%. The weighted average
rate on FHLB advances for the three months ended December 31, 1997 was 5.91%,
whereas the weighted average rate on FHLB advances as of December 31, 1996 was
7.65%.
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 decreased from $138,000 for the three months
ended December 31, 1996 to $75,000 for the three months ended December 31, 1997.
Non-interest income increased from $507,000 for the three months ended December
31, 1996 to $633,000 for the three months ended December 31, 1997. Service fees
and charges were the primary reason for the increase.
Non-interest expense increased from $1.3 million for the three months ended
December 31, 1996 to $1.6 million for the three months ended December 31, 1997.
The increase is due to elevated personnel costs attributable to the addition of
the Clarkston branch and growth in the commercial loan department.
Income taxes increased from an expense of $56,000 for the three months ended
December 31, 1996 to expense of $252,000 for the same time period in 1997. The
increase was primarily due to an increase in taxable income.
RESULTS OF OPERATIONS FOR NINE MONTHS ENDED DECEMBER 31, 1997
Net income increased from $423,000 for the nine months ended December 31, 1996
to $1,165,000 for the nine months ended December 31, 1997. Net income for 1996
reflects the payment of a one-time, industry-wide special assessment to
recapitalize the Savings Association Insurance Fund.
Net interest income increased from $3.6 million for the nine months ended
December 31, 1996 to $5.0 million for the nine months ended December 31, 1997.
Total interest income increased from $7.6 million for the nine months ended
December 31, 1996 to $9.8 million for nine months ended December 31, 1997. The
increase in interest income stemmed from an increase in average interest earning
assets. The weighted average yield on the loan portfolio was 8.86% as of
December 31, 1997, whereas the weighted yield average at December 31, 1996 was
8.87%. Interest income from investment securities decreased from $506,000 for
the nine months ended December 31, 1996 to $411,000 for the nine months ended
December 31, 1997. The decrease is primarily due to a decrease in average
balances outstanding. Interest income from mortgage-backed securities increased
from $101,000 for the nine months ended December 31, 1996 to $424,000 for the
nine months ended December 31, 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 $4.0
million for the nine months ended December 31, 1996 to $4.9 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 average FHLB advances. The weighted
average rate on deposits for the nine months ended December 31, 1997 was 4.26%,
whereas the weighted average rate on deposits as of December 31, 1996 was 4.48%.
The weighted average paid on advances from FHLB decreased to 6.33% as of
December 31, 1997 from 6.72% for December 31, 1996.
9
<PAGE>
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 decreased from $194,000 for the nine months
ended December 31, 1996 to $143,000 for the nine months ended December 31, 1997.
Non-interest income decreased from $1.7 million for the nine months ended
December 31, 1996 to $1.6 million for the nine months ended December 31, 1997.
The primary reason was due to a decrease in gain or sale of loans as loans sold
decreased from $46.4 million for the nine months ended December 31, 1996 to
$36.9 million for the nine months ended December 31, 1997. Service fees and
charges also increased for the nine month period ending December 31, 1997
helping to offset the decrease caused by the lower loan volume.
Non-interest expense increased to 4.6 million for the nine months ended December
31, 1997 from 4.5 million for the corresponding period in the previous year.
This increase can be attributed to the growth in premises and personnel of the
bank.
Income taxes increased from $151,000 for the nine months ended December 31, 1996
to $680,000 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 the FHLB to provide cash advances, should the need for
additional funds be required. Advances totaled $38.9 million at December 31,
1997. In addition, the Company had $11.0 million of securities available for
sale at December 31, 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 1998.
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 4%. The Savings Bank's liquidity ratio was approximately
6.71% at December 31, 1997.
Commitments to originate adjustable-rate mortgage loans at December 31, 1997
were approximately $3.6 million. Commitments to originate fixed-rate mortgage
loans at December 31, 1997 were approximately $8.6 million. Commitments to fund
outstanding credit lines at December 31, 1997 were approximately $7.5 million.
Commitments to originate commercial loans at December 31, 1997 were
approximately $3.2 million.
10
<PAGE>
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 December 31, 1997:
Percent of Adjusted
Amount Total Assets
---------- -------------------
(Unaudited)
(Dollars in Thousands)
Tangible capital $ 20,049 11.18%
Tangible capital requirement $ 2,690 1.50%
Excess $ 17,359 9.68%
Core capital $ 20,049 11.18%
Core capital requirement $ 5,382 3.00%
Excess $ 14,667 8.18%
Risk-based capital $ 21,114 17.70%
Risk-based capital requirement $ 9,543 8.00%
Excess $ 11,571 9.70%
11
<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
None.
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.
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: February 13, 1998 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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<PERIOD-START> OCT-01-1997
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