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 JUNE 30, 1999
( ) 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 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 1,664,688 shares outstanding on June 30, 1999
Transitional Small Business Disclosure Format (check one):
( ) Yes (X) No
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FIRSTBANK CORP.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page
Consolidated Statements of Financial Condition
As of June 30, 1999 and March 31, 1999 1
Consolidated Statements of Income
For the three months ended June 30, 1999 and June 30, 1998 2
Consolidated Statements of Cash Flows
For the three months ended June 30, 1999 and June 30, 1998 3
Consolidated Statements of Comprehensive Income
For the three months ended June 30, 1999 and June 30, 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6 - 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults Upon Senior Securities 9
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
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FirstBank Corp. and Subsidiaries
Consolidated Statements of Financial Condition
At June 30, At March 31,
1999 1999
------------- -------------
(Unaudited)
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ASSETS
Cash and cash equivalents:
Non-interest bearing deposits $ 3,659,538 $ 4,724,214
Interest bearing deposits 3,364,691 1,502,672
Federal funds sold 2,740,769 2,308,776
------------- -------------
Total cash and cash equivalents 9,764,998 8,535,662
Investment securities:
Held-to-maturity 450,000 700,000
Available-for-sale 6,936,068 6,535,812
Mortgage-backed securities:
Held-to-maturity 2,634,667 2,738,545
Available-for-sale 8,985,782 10,134,850
Loans receivable, net 177,840,801 165,617,367
Accrued interest receivable 2,200,127 1,610,676
Real estate owned 43,876 298,713
Stock in FHLB, at cost 3,001,175 2,501,975
Premises and equipment, net 5,697,467 5,328,788
Income taxes receivable -- 25,431
Cash surrender value of life insurance policies 1,605,523 1,586,210
Mortgage servicing assets 936,155 900,271
Other assets 380,913 230,786
------------- -------------
TOTAL ASSETS $ 220,477,552 $ 206,745,086
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits $ 136,354,491 $ 133,278,136
Advances from borrowers for taxes and insurance 825,827 1,427,915
Income taxes payable 116,352 --
Advances from FHLB 54,480,856 42,027,106
Deferred federal and state income taxes 290,460 421,000
Accrued expenses and other liabilities 1,189,225 1,816,435
------------- -------------
Total Liabilities 193,257,211 178,970,592
------------- -------------
Stockholders' Equity (Note 2):
Preferred stock, $.01 par value, 500,000 shares authorized; 0 shares issued
and outstanding -- --
Common stock, $.01 par value, 5,000,000 shares authorized; 1,983,750
shares issued and outstanding 19,838 19,838
Additional paid-in-capital 18,720,476 18,720,476
Retained earnings, substantially restricted 14,060,736 13,907,562
Unearned ESOP shares (Note 3): (1,384,070) (1,384,070)
Deferred compensation (1,045,436) (1,108,162)
Treasury stock, at cost, 187,461 and 144,191 shares (2,977,206) (2,333,706)
Accumulated other comprehensive loss (173,997) (47,444)
------------- -------------
Total Stockholders' Equity 27,200,341 27,774,494
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 220,477,552 $ 206,745,086
============= =============
See accompanying notes to consolidated financial statements
1
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FirstBank Corp. and Subsidiaries
Consolidated Statements of Income
Three months ended June 30,
1999 1998
---------- ----------
(Unaudited)
Interest income:
Loans receivable $3,683,904 $3,188,642
Mortgage-backed securities 152,863 168,078
Investment securities 83,134 67,795
Other interest earning assets 157,352 160,808
---------- ----------
Total interest income 4,077,253 3,585,323
Interest expense:
Deposits 1,230,567 1,219,432
Advances from FHLB 672,006 525,412
---------- ----------
Total interest expense 1,902,573 1,744,844
Net interest income 2,174,680 1,840,479
Provision for loan losses 134,127 135,736
---------- ----------
Net interest income after provision for loan losses 2,040553 1,704,743
Non-interest income:
Gain on sale of loans 248,785 443,954
Service fees and charges 294,003 331,390
Commissions and other 23,773 39,637
---------- ----------
Total non-interest income 566,561 814,981
Non-interest expense:
Compensation and related benefits 1,211,895 949,885
Occupancy 228,873 215,020
Other 712,066 656,590
---------- ----------
Total non-interest expense 2,152,834 1,821,495
Income before income tax expense 454,280 698,229
Income tax expense 162,582 247,651
---------- ----------
NET INCOME $ 291,698 $ 450,578
========== ==========
Earnings per share (Note 2):
Net income per share - basic $ 0.18 $ 0.25
Net income per share - diluted $ 0.17 $ 0.25
Weighted average shares outstanding - basic 1,599,984 1,838,562
Weighted average shares outstanding - diluted 1,679,334 1,838,562
See accompanying notes to consolidated financial statements
2
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FirstBank Corp. and Subsidiaries,
Consolidated Statements of Cash Flows
Three months ended June 30,
1999 1998
------------ ------------
(Unaudited)
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Cash flows from operating activities:
Net income $ 291,698 $ 450,578
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 92,325 162,058
Provision for loan losses 134,127 135,736
Gain on sale of loans (248,785) (443,954)
FHLB stock dividends (47,672) (40,700)
ESOP compensation expense -- 100,561
Other (gains) losses, net 17,167 50,465
Provision for real estate owned -- 20,410
Deferred compensation expense 79,844 17,731
Deferred income taxes (48,672) (29,579)
Changes in assets and liabilities:
Accrued interest receivable and other assets (775,462) (437,425)
Accrued expenses and other liabilities (644,328) (898,914)
Loss on sale of investment securities: available-for-sale -- --
Income taxes receivable (payable) 141,783 409,378
------------ ------------
Net cash used in operating activities (1,007,975) (503,655)
Cash flows from investing activities:
Purchase of mortgage-backed securities; available-for-sale -- (750,000)
Proceeds from maturities of mortgage-backed securities; held-to-maturity 100,532 100,009
Proceeds from maturities of mortgage-backed securities; available-for-sale 1,178,592 993,648
Decrease in loans receivable from loans sold 23,986,548 20,845,679
Other net change in loans receivable (36,095,324) (31,701,556)
Purchase of FHLB stock (451,528) (15,400)
Purchases of premises and equipment (503,285) (193,013)
Proceeds from sale of fixed assets -- 336,357
Net increase in cash surrender value of life insurance policies (19,313) (129,211)
Proceeds from sale of real estate owned 237,670 353,984
Purchase of investment securities; available for sale (595,000) (580,000)
Proceeds from maturities of investment securities; held-to-maturity 252,426 750,000
------------ ------------
Net cash used in investing activities (11,908,682) (9,989,503)
Cash flows from financing activities:
Cash paid for dividends (138,524) (146,902)
Net increase in deposits 3,076,355 5,465,590
Advances from borrowers for taxes and insurance (602,088) (601,480)
Advances from FHLB 54,813,335 33,600,000
Payments on advances from FHLB (42,359,585) (27,053,473)
Treasury stock repurchase (643,500) --
------------ ------------
Net cash provided by financing activities 14,145,993 11,263,735
Net increase in cash and cash equivalents 1,229,336 770,577
Cash and cash equivalents, beginning of period 8,535,662 8,416,820
------------ ------------
Cash and cash equivalents, end of period $ 9,764,998 $ 9,187,397
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,215,997 $ 1,748,619
Income taxes $ 25,000 $ 18,934
Noncash investing and financing activities:
Unrealized (gains) losses on securities; available-for-sale, net of tax $ 152,445 $ 21,552
Loans receivable charged to the allowance for loan losses $ 17,575 $ 20,761
Transfer from loans converted to real estate acquired through foreclosure $ -- $ 195,767
See accompanying notes to consolidated financial statements
3
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FirstBank Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income
Three Months Ended June 30,
1999 1998
--------- --------
(Unaudited)
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Net Income $ 291,698 $450,578
Other comprehensive income (loss), net of tax:
Change in unrealized gains (losses) on securities;
available-for-sale, net of tax (126,553) (21,552)
--------- --------
Net other comprehensive income (loss) (126,553) (21,552)
--------- --------
Comprehensive income $ 165,145 $429,026
========= ========
See accompanying notes to consolidated financial statements
4
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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 consolidated financial statements and
related notes included in the Company's Form 10-KSB for the year ended March 31,
1999. 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 ended June 30, 1999
are not necessarily indicative of results that may be expected for the entire
fiscal year ending March 31, 2000.
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 ended June 30, 1999. All significant
intercompany accounts and transactions have been eliminated in consolidation.
(2) EARNINGS PER SHARE
Earnings per share ("EPS") is computed by dividing net income (loss) by the
weighted average number of common shares outstanding in accordance with
Statement of Financial Accounting Standards No. 128, "Earnings Per Share".
The following table reconciles the number of common shares used in the basic and
diluted EPS calculations:
For the Three Months Ended June 30, 1999
----------------------------------------
Weighted-
Net Average Per-Share
Income Shares Amount
--------- --------- --------
Basic EPS:
Income available to common
stockholders $ 291,698 1,599,984 $ 0.18
Effect of dilutive securities:
Restricted stock awards -- 79,350 --
--------- --------- --------
Diluted EPS:
Income available to common
stockholders - assumed
conversions $ 291,698 1,679,334 $ 0.17
========= ========= ========
At June 30, 1999, outstanding options to purchase 171,350 shares of the
Company's common stock were not included in the computation of diluted EPS as
their effect would have been antidilutive.
At June 30, 1998, the Company had no dilutive potential common stock.
Accordingly, basic and diluted EPS are the same for the three months ended June
30, 1999.
(3) DIVIDEND
On April 15, 1999 the Board of Directors declared a cash dividend of $0.09 per
common share to shareholders of record as of May 6, 1999. The dividend was paid
on May 20, 1999. On July 21, 1999 the Board of Directors declared another cash
dividend of $0.09 per common share to shareholders of record as of August 12,
1999. This dividend will be paid on August 26, 1999.
5
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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, 1999.
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 1997, the Bank opened up a retail branch in Clarkston,
Washington. The Bank now has offices in Idaho and Washington. In January 1998
the Bank changed its charter to a Washington state savings bank.
During the quarter ended June 30, 1999, the Company completed the repurchase of
approximately 5%, or 89,297, of its common shares. In Fiscal 1999 the Company
completed a repurchase of 177,744 common shares.
During the second quarter of fiscal 2000, the shareholders approved the change
the state of incorporation from Delware to Washington.
On September 21, 1998, the Company received FDIC approval to begin construction
of a new branch office in Liberty Lake, Washington. Liberty Lake is a
fast-growing bedroom community midway between Spokane, Washington and Coeur d'
Alene, Idaho. This will be the seventh retail branch for the Company, the second
in Washington State, and will have six employees, including one loan officer. It
is expected the branch will open during the fall of 1999. The annual lease
expense for the land is $30,000, and the expected capitalized cost of
construction is $750,000.
In March 1999, the Company opened its first branch office inside a supermarket.
The new branch is located in the Tidyman's Market in Post Falls, Idaho - a fast
growing small city between Spokane, Washington and Coeur d' Alene, Idaho. The
branch is FirstBank's eighth branch and employs a staff of approximately four
people. The annual lease expense is $27,000 and capitalized costs were $104,000.
FINANCIAL CONDITION AT JUNE 30, 1999 AND MARCH 31, 1999
Assets of the Company increased from $206.7 million at March 31, 1999 to $220.5
million at June 30, 1999. Cash and cash equivalents increased from $8.5 million
at March 31, 1999 to $9.8 million at June 30, 1999. Mortgage-backed securities
available-for-sale decreased from $10.1 million at March 31, 1999 to $9.0
million at June 30, 1999. Loans receivable, increased from $165.6 million at
March 31, 1999 to $177.8 million at June 30, 1999 as a result of an increase in
agricultural operating lending of $3.0 million, home equity loans of $2.3
million, extended agricultural lines of credit of $1.8 million, and $1.2 million
in residential real estate lending. Accrued interest receivable increased $1.6
million at March 31, 1999 to $2.2 million at June 30, 1999 due to a higher
average asset base in securities and loans. Deposits increased from $133.3
million at March 31, 1999 to $136.4 million at June 30, 1999, as a result of a
$2.5 million increase in checking accounts. Federal Home Loan Bank of Seattle
(FHLB) advances increased from $42.0 million at March 31, 1999 to $54.5 million
at June 30, 1999. The increase in deposits and FHLB borrowing was used to fund
loan growth. Accrued expenses and other liabilities decreased from $1.8 million
at March 31, 1999 to $1.2 million at June 30, 1999. It is the policy of the
Savings Bank to cease accruing interest on loans 90 days or more past due.
Nonaccrual loans decreased from $612,000 at March 31, 1999 to $293,000 at June
30, 1999.
6
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RESULTS OF OPERATIONS FOR THREE MONTHS ENDED JUNE 30, 1999 AND 1998
Net income decreased from $451,000 for the three months ended June 30, 1998 to
$292,000 for the three months ended June 30, 1999.
Net interest income increased from $1.8 million for the three months ended June
30, 1998 to $2.2 million for the three months ended June 30, 1999. Total
interest income increased from $3.6 million for the three months ended June 30,
1998 to $4.1 million for three months ended June 30, 1999. The increase in
interest income stemmed from an increase in average interest earning offset by a
decrease in the weighted average tax effected yield on the loan portfolio was
8.65% as of June 30, 1998 compared to the weighted average tax effected yield at
June 30, 1999 of 8.58%. The average balance for loans receivable was $150.0
million in the quarter ended June 30, 1998 compared to the quarter ended June
30, 1999 average balance of $171.8 million. Interest income from investment
securities increased from $68,000 for the three months ended June 30, 1998 to
$83,000 for the three months ended June 30, 1999. The increase is primarily due
to a increase in average yield. Interest income from mortgage-backed securities
decreased from $168,000 for the three months ended June 30, 1998 to $153,000 for
the three months ended June 30, 1999. The decrease is due primarily to a higher
average balance and a lower yield. Interest expense increased from $1.7 million
for the three months ended June 30, 1998 to $1.9 million for the same time
period in 1999. The increase in interest expense is due primarily to higher
average deposit balances, an increase in average FHLB advances and a decrease in
weighted average rates. The weighted average rate on deposits for the three
months ended June 30, 1999 was 3.72%, whereas the weighted average rate on
deposits as of June 30, 1998 was 4.17%. The weighted average rate on FHLB
advances for the three months ended June 30, 1999 was 5.38%, whereas the
weighted average rate on FHLB advances for three months ended June 30, 1998 was
5.70%.
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 $136,000 for the three months
ended June 30, 1998 to $134,000 for the three months ended June 30, 1999. The
loans receivable portfolio increased about $12.2 million dollars in the last
quarter, of which approximately $4.7 million was in consumer lending.
Non-interest income decreased from $815,000 for the three months ended June 30,
1998 to $567,000 for the three months ended June 30, 1999. The primary reason
for the increase is the gain on sale of loans decreased about $195,000.
Non-interest expense increased from $1.8 million for the three months ended June
30, 1998 to $2.2 million for the three months ended June 30, 1999. The increase
in compensation and other related expenses of $262,000 is caused by additional
staff for new branches and compensation related to the Management Recognition
and Development Plan. Other expenses that were up are data processing increasing
by $86,000, and other start-up expenses associated with opening new branches.
Income taxes decreased from an expense of $248,000 for the three months ended
June 30, 1998 to expense of $163,000 for the same time period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary recurring sources of funds are customer deposits,
proceeds from principal and interest payments on loans, proceeds from sales of
loans, maturing securities and FHLB advances. While maturities and scheduled
amortization of loans are a predictable source of funds, deposit flows and
mortgage prepayments are greatly influenced by general interest rates, economic
conditions and competition.
The Company must maintain an adequate level of liquidity to ensure the
availability of sufficient funds to support loan growth and deposit withdrawals,
to satisfy financial commitments and to take advantage of investment
opportunities. The Company generally maintains sufficient cash and short-term
investments to meet short-term liquidity needs. At June 30, 1999, cash and cash
equivalents totaled $9.8 million, or 4.4% of total assets In addition, the
Company maintains a credit facility with the FHLB-Seattle, which provides for
immediately available advances. Advances under this credit facility totaled
$54.5 million at June 30, 1999.
The primary investing activity of the Company is the origination of
mortgage loans. During the quarters ended June 30, 1998 and 1999, the Company
originated loans in the amounts of $40.3 million and $45.7 million respectively.
At June 30, 1999, the Company had loan commitments totaling $27.7 million,
undisbursed lines of credit totaling $6.0 million, credit card available
balances of $1.0 million and undisbursed loans in process totaling $4.1 million.
The Company anticipates that it will have sufficient funds available to meet its
current loan origination commitments. Certificates of deposit that are scheduled
to mature in less than one year from June 30, 1999 totaled $57.3 million.
Historically, the Company has been able to retain a significant amount of its
deposits as they mature. In addition, management of the Company believes that it
can adjust the offering rates of savings certificates to retain deposits in
changing interest rate environments.
7
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The Bank is required to maintain specific amounts of capital pursuant
to the FDIC and the State of Washington requirements. As of June 30, 1999, the
Bank was in compliance with all regulatory capital requirements which were
effective as of such date with Tier 1 Capital to average assets, Tier 1 Capital
to risk-weighted assets and total capital to risk-weighted assets of 10.65%,
13.96%, and 13.85%, respectively. For a detailed discussion of regulatory
capital requirements, see "REGULATION -- State Regulation and Supervision" and
"-- Capital Requirements."
YEAR 2000 ISSUES
The Year 2000 issue exists because many computer systems and
applications use two-digit date fields to designate a year. As the century date
change occurs, date-sensitive systems may recognize the Year 2000 as 1900, or
not at all. This inability to recognize or properly treat the Year 2000 may
cause systems to process financial and operational information incorrectly. The
Company has developed a plan and created a committee of the Board of Directors
to analyze how the Year 2000 will impact its operations and to monitor the
status of its vendors. The following guidelines identify the five steps provided
by The Federal Financial Institutions Examination Council ("FFIEC"):
Awareness Phase - Define the Year 2000 problem and establish a Year
2000 program team and overall strategy. The Company as of September 30, 1997
completed this step.
Assessment Phase - Assess the size and complexity of the problem and
detail the magnitude of effort necessary to address Year 2000 issues, including
hardware, software, networks, automated teller machines, etc. This step was
approximately 99% complete by June 30, 1999 and assessment will be ongoing until
the Year 2000.
Renovation Phase - This phase includes hardware and software upgrades
and system replacements. This step was 100% complete for in-house systems at
December 31, 1998. This phase also encompasses ongoing discussions with and
monitoring of outside servicers and third- party software providers.
Validation/Testing Phase - This process includes testing of hardware
and software components. Testing is completed by performing extensive tests with
the computer dates changed to January 1, 2, and 3, 2000. Such testing will
continue through June 30, 1999, with the most critical functions tested first.
This allows time to correct any discovered deficiencies before the end of 1999.
In-house systems and third party service bureaus are 100% tested as of March 31,
1999. The Company is either testing or reviewing test documents of additional
third party vendors that are deemed critical to the operations of the Company.
The validation phase was approximately 95% complete as of June 30, 1999.
Implementation Phase - Systems successfully tested will be certified as
Year 2000 compliant. For any system failing validation testing, the business
impact must be assessed and a contingency plan implemented. This phase was
completed by June 30, 1999.
Critical data processing applications have been identified. These
include applications such as electronic processing through the Federal Reserve
Bank and ATM processing. Testing with Federal Reserve has been successfully
completed. All ATM machines have been upgraded and are now ready for Year 2000.
Contingency plans are also being developed by the committee. The contingency
plans address actions to be taken to continue operations in the event of system
failure due to areas that cannot be tested in advance, such as power service,
which are vital to business continuation. Contingency planning was completed by
June 30, 1999.
All new commercial and agricultural loans over $100,000 are assessed
for Year 2000 risk. Loans are then rated low, medium or high risk. A higher
reserve level will be maintained for medium and high-risk loans. All existing
commercial and agriculture loans over $100,000 have been rated: 1 loan rated at
the highest risk and 12 at medium risk.
The Bank has assessed its liquidity needs and believes there will be
adequate funds available from FHLB or the Portland Federal Reserve.
In June 1999, the Bank converted from a service bureau to an in-house
computer system. This system will be a client/server system that was developed
from 1992 to 1996 with Year 2000 compliance as a priority. Part of the
conversion process was to test the interfaces to outside vendors. The Bank has a
complete separate system set up solely for the purpose of Year 2000 testing.
Test scripts were ran in June after the conversion. There were no problems with
changing to the Year 2000 test dates.
There can be no guarantee that the systems of other companies on which
the Banks systems rely will be fully functional, or timely converted, or that a
failure to convert by another company, or a conversion that is incompatible with
the Banks systems would not have a material adverse effect on the Bank. However,
the Bank has tested for the Y2K preparedness of all internal functions and
external functions provided by third parties whenever possible and do not expect
to experience any significant failures. In addition, contingency or alternate
sources of support have been identified for each critical function and many
non-critical functions. In the event that the Banks data processing providers'
systems prove not to be Y2K compliant and FBNW is not able to switch to an
alternative provider in a timely manner, resulting computer malfunctions could
interrupt the operations of the Bank and have a significant adverse effect on
FBNW's financial condition and results of operations.
8
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FIRSTBANK CORPORATION
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:
3.1 Articles of Incorporation of the Registrant*
3.2 Bylaws of the Registrant*
10.1 Employment Agreement between FirstBank Northwest,
FirstBank Corp. and Clyde E. Conklin
10.2 Employment Agreement between FirstBank Northwest,
FirstBank Corp. and Larry K. Moxley*
10.3 Salary Continuation Agreement between First Federal
Bank of Idaho F.S.B. and Clyde E. Conklin*
10.4 Salary Continuation Agreement between First Federal
Bank of Idaho, F.S.B. and Larry K. Moxley*
21 Subsidiaries of the Registrant
27 Financial Data Schedule
(b) Reports on Form 8-K; No reports on Form 8-K have been filed during the
quarter for which this report is filed.
9
<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: August 12, 1999 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
10
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<CIK> 0001035513
<NAME> FirstBank Corp.
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<CURRENCY> USD
<S> <C>
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<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
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0
0
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