_________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the transition period from ____________________ to
____________________
Commission File Number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2633910
(State of Incorporation) (I.R.S. Employer Identification No.)
311 Woodworth Avenue
Alma, Michigan 48801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 463-3131
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.
Aggregate Market Value as of March 8, 1996: $43,509,294
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common stock outstanding at March 8, 1996: 1,542,844 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the year
ended December 31, 1995, are incorporated by reference in Parts I and II.
Portions of the definitive proxy statement for the registrant's annual
shareholders' meeting to be held April 22, 1996, are incorporated by
reference in Part III.
__________________________________________________________________________
PART I
ITEM 1. BUSINESS.
Firstbank Corporation (the "Corporation") is a bank holding
company. The Corporation owns all of the outstanding stock of Bank of
Alma, Firstbank (Mount Pleasant), and 1st Bank (West Branch).
The Corporation's business is concentrated in a single
industry segment--commercial banking. Each subsidiary bank of the
Corporation is a full-service, community bank. The subsidiary banks
offer all customary banking services, including the acceptance of
checking, savings, and time deposits, and the making of commercial,
mortgage (principally single family), home improvement, automobile, and
other consumer loans. Bank of Alma also offers trust services.
The principal sources of revenues for the Corporation and
its subsidiaries are interest and fees on loans. On a consolidated
basis, interest and fees on loans accounted for approximately
79 percent of total revenues in 1995, 75 percent in 1994, and
70 percent in 1993. In addition, interest income from investment
securities accounted for approximately 12 percent of total revenues on
a consolidated basis in 1995, 13 percent in 1994, and 17 percent in
1993. No other single source of revenue accounted for 15 percent or
more of the Corporation's total revenues in any of the last three
years. The Corporation has no foreign assets and no income from
foreign sources. The business of the subsidiary banks of the
Corporation is not seasonal to any material extent.
Bank of Alma is a Michigan state-chartered bank. It and its
predecessors have operated continuously in Alma, Michigan, since 1880.
Its main office and one branch are located in Alma. Bank of Alma also
has one full service branch located in each of the following
communities near Alma: Ashley, Ithaca, Pine River Township,
Riverdale, St. Charles, St. Louis, and Vestaburg.
Firstbank is a Michigan state-chartered bank which was
incorporated in 1894. Its main office and one branch are located in
Mount Pleasant, Michigan. Firstbank also has one full service branch
located in each of the following communities near Mount Pleasant:
Clare, Shepherd, Union Township, and Winn.
On June 16, 1995, Firstbank acquired an office from Standard
Federal Bank, F.S.B., located in Mt. Pleasant, Michigan. Firstbank
assumed the deposits and other specified liabilities associated with
the office and, in exchange, acquired the office's fixed assets, other
assets, and cash. At the effective date, approximately $11 million in
deposit liabilities were assumed by Firstbank.
1st Bank is a Michigan state-chartered bank which was
incorporated in 1980. Its main office is located in West Branch,
Michigan. 1st Bank also has one full service branch located in each
of the following communities near West Branch: Fairview, Hale,
Higgins Lake, Rose City, St. Helen, and West Branch Township.
The following table shows comparative information concerning
the Corporation's subsidiary banks:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
BANK OF ALMA FIRSTBANK 1ST BANK
(In thousands of Dollars)
<S><C> <C> <C> <C>
Assets $ 172,504 $ 80,637 $ 99,260
Deposits 144,604 72,867 90,114
Loans 122,972 60,326 81,549
</TABLE>
As of December 31, 1995, the Corporation and its
subsidiaries employed 202 persons on a full-time equivalent basis.
Banking in the Corporation's market areas and in the State
of Michigan is highly competitive. In addition to competition from
other commercial banks, banks face significant competition from
nonbank financial institutions. Savings and loan associations are
able to compete aggressively with commercial banks for deposits and
loans. Credit unions and finance companies are also significant
factors in the consumer loan market. Insurance companies, investment
firms, and retailers are significant competitors for investment
products. Banks compete for deposits with a broad spectrum of other
types of investments such as mutual funds, debt securities of
corporations, and debt securities of the federal government, state
governments, and their respective agencies. The principal methods of
competition for financial services are price (interest rates paid on
deposits, interest rates charged on loans, and fees charged for
services) and service (the convenience and quality of services
rendered to customers).
The Corporation's subsidiary banks compete directly with
other banks, thrift institutions, credit unions, and other
nondepository financial institutions in three geographic banking
markets where their offices are located. Bank of Alma primarily
competes in Gratiot, Montcalm, and Saginaw Counties; Firstbank
primarily in Isabella and Clare Counties; and 1st Bank primarily in
Iosco, Oscoda, Ogemaw, and Roscommon Counties.
Banks and bank holding companies are extensively regulated.
The Corporation is a bank holding company that is regulated by the
-2-
Federal Reserve System. Bank of Alma, Firstbank, and 1st Bank are
chartered under state law and are supervised, examined, and regulated
by the Federal Deposit Insurance Corporation and the Financial
Institutions Bureau of the Michigan Department of Commerce. None of
the banks are members of the Federal Reserve System. All of the
banks' deposits are insured by the Federal Deposit Insurance
Corporation to the maximum extent provided by law.
Laws that govern banks significantly limit their business
activities in a number of respects. Prior approval of the Federal
Reserve Board, and in some cases various other governing agencies, is
required for the Corporation to acquire control of any additional
banks or branches. The business activities of the Corporation and its
subsidiaries are limited to banking and to other activities which are
determined by the Federal Reserve Board to be closely related to
banking. Transactions among the Corporation and the Corporation's
subsidiary banks are significantly restricted. In addition, bank
regulations govern the ability of the subsidiary banks to pay
dividends or make other distributions to the Corporation.
In addition to laws that affect businesses in general, banks
are subject to a number of federal and state laws and regulations
which have a material impact on their business. These include, among
others, state usury laws, state laws relating to fiduciaries, the
Truth In Lending Act, the Truth in Savings Act, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds
Availability Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act, the Real Estate Settlement Procedures Act, the Bank
Secrecy Act, the Community Development and Regulatory Improvement Act,
the Financial Institutions Reform, Recovery and Enforcement Act, the
FDIC Improvement Act of 1991 (the "FDIC Improvement Act"), electronic
funds transfer laws, redlining laws, antitrust laws, environmental
laws, and privacy laws.
The instruments of government monetary policy, as determined
by the Federal Reserve Board, may influence the growth and
distribution of bank loans, investments, and deposits, and may also
affect interest rates on loans and deposits. These policies have a
significant effect on the operating results of banks.
Under applicable laws, regulations, and policies, the
Corporation is expected to act as a source of financial strength to
each subsidiary bank and to commit resources to support each
subsidiary bank. Any insured depository institution owned by the
Corporation may be assessed for losses incurred by the Federal Deposit
Insurance Corporation (the "FDIC") in connection with assistance
provided to, or the failure of, any other insured depository
institution owned by the Corporation.
-3-
The FDIC has authority to impose special assessments on
insured depository institutions to repay FDIC borrowings from the
United States Treasury or other sources and to establish periodic
assessment rates on Bank Insurance Fund ("BIF") member banks so as to
maintain the BIF at the designated reserve ratio defined in the FDIC
Improvement Act. Firstbank also holds deposits that are insured by
the Savings Association Insurance Fund ("SAIF") administered by the
FDIC. Deposit insurance premiums on those deposits are paid to the
SAIF at rates applicable to that fund. The FDIC has implemented a
system of risk-based premiums for deposit insurance pursuant to which
the premiums paid by a depository institution will be based on the
perceived probability that the insurance funds will incur a loss in
respect of that institution.
During 1995, the FDIC reduced the deposit insurance
assessment rate on BIF-insured deposits held by the Corporation's bank
subsidiaries from $.23 to $.04 per $100 of deposits effective June 1,
1995, and further reduced assessments to the minimum of $2,000 per
institution for well capitalized banks for the first six months of
1996. The FDIC did not reduce the assessment rate on SAIF-insured
deposits, which remain at $.23 per $100 of deposits.
The Omnibus Budget Reconciliation Act of 1993 requires,
among other things, that the cost of all intangible assets purchased
in an acquisition, including core deposit premiums and goodwill, must
be amortized ratably over 15 years. Under prior law, acquired
intangible assets were amortized only if they had a limited useful
life that could be determined with reasonable accuracy. In addition,
no amortization deduction was allowed under prior law for goodwill.
The new provision for the amortization of intangibles applies to
property acquired after August 10, 1993, although a business may elect
to apply the new provision to all intangible property acquired after
July 25, 1991.
Currently, the Corporation is authorized to acquire
subsidiary banks in any state in which state laws permit such
acquisition. Also, out-of-state bank holding companies in any state
are now permitted to acquire banks and bank holding companies located
in Michigan if the laws of the state in which the out-of-state bank
holding company is located authorize a bank holding company in
Michigan to acquire ownership of banks and bank holding companies in
that state on a reciprocal basis. Accordingly, the Corporation could
now acquire, and could be acquired by, financial institutions in a
significant number of states.
Under the Interstate Banking and Branching Efficiency Act of
1994, bank holding companies may make certain interstate acquisitions
beginning September 30, 1995, even if state law would otherwise
prohibit it. Beginning June 1, 1997, the Act generally allows a bank
-4-
in one state to acquire a bank in another state unless one of the
states has enacted legislation prohibiting interstate bank
acquisitions. An interstate acquisition may occur earlier if the
states of the buying and selling banks both have enacted laws
permitting interstate acquisitions by all out-of-state banks. The Act
also permits a bank to establish a DE NOVO branch in another state if
the state has a law that expressly permits all out-of-state banks to
establish de novo branches in that state. In November 1995, the State
of Michigan enacted legislation permitting a Michigan bank to sell one
or more of its branches to an out-of-state bank if that bank's state
law permits a Michigan bank to purchase branches of banks located in
that state. The Michigan legislation also permits a Michigan bank to
purchase one or more branches of an out-of-state bank, but the
Michigan bank must receive the approval of the Financial Institutions
Bureau of the Michigan Department of Commerce before operating the
purchased branch or branches. No out-of-state acquisitions or
branching by the Corporation or its subsidiary banks are presently
under consideration.
Risk-based capital and leverage standards apply to all banks
under federal regulations. The risk-based capital ratio standards
establish a systematic analytical framework that is intended to make
regulatory capital requirements sensitive to differences in risk
profiles among banking organizations, take off-balance sheet liability
exposures into explicit account in assessing capital adequacy, and
minimize disincentives to hold liquid, low-risk assets. Risk-based
capital ratios are determined by allocating assets and specified off-balance
sheet commitments into risk-weighting categories. Higher
levels of capital are required for categories perceived as
representing greater risk.
Failure to meet minimum capital ratio standards could
subject a bank to a variety of enforcement remedies available to the
federal regulatory authorities, including restrictions on certain
kinds of activities, restrictions on asset growth, limitations on the
ability to pay dividends, the issuance of a directive to increase
capital, and the termination of deposit insurance by the FDIC.
Maintaining capital at "well capitalized" levels is one condition to
the assessment of federal deposit insurance premiums at the lowest
available rate.
Each of the Corporation's subsidiary banks and the
Corporation itself, on a consolidated basis, maintains capital at
levels which exceed both the minimum and well capitalized levels under
currently applicable regulatory requirements. The following table
summarizes compliance with regulatory capital ratios by the
Corporation and each of its subsidiary banks at December 31, 1995.
-5-
<TABLE>
<CAPTION>
TIER 1
LEVERAGE TIER 1 TOTAL RISK-BASED
RATIO CAPITAL RATIO CAPITAL RATIO
<S> <C> <C> <C> <C>
Minimum regulatory requirement 4.00% 4.00% 8.00%
Well capitalized regulatory level 5.00% 6.00% 10.00%
Firstbank Corporation-Consolidated 8.08% 9.94% 11.20%
Bank of Alma 8.37% 10.78% 12.02%
Firstbank 8.14% 9.46% 10.72%
1st Bank 7.42% 9.16% 10.42%
</TABLE>
The following table shows the amounts by which the
Corporation's capital (on a consolidated basis) exceeds current
regulatory requirements on a dollar amount basis:
<TABLE>
<CAPTION>
TOTAL
TIER 1 TIER 1 RISK-BASED
LEVERAGE CAPITAL CAPITAL
(In Thousands of Dollars)
<S> <C> <C> <C> <C>
Capital balances
at December 31, 1995 $ 26,578 $ 26,578 $ 29,938
Required regulatory
capital 13,144 10,691 21,383
Capital in excess
of regulatory
minimums $ 13,434 $ 15,887 $ 8,555
</TABLE>
The nature of the business of the Corporation's subsidiaries
is such that they hold title, on a temporary or permanent basis, to a
number of parcels of real property. These include property owned for
branch offices and other business purposes as well as properties taken
in or in lieu of foreclosures to satisfy loans in default. Under
current state and federal laws, present and past owners of real
property may be exposed to liability for the cost of remediation of
contamination on or originating from such properties, even though they
are wholly innocent of the actions which caused the contamination.
Such liabilities can be material and can exceed the value of the
contaminated property.
A parcel of vacant land owned by Firstbank, adjacent to its
Winn Branch, was formerly occupied by a gasoline service station.
Soil on that parcel is contaminated by petroleum compounds. Tests of
water in nearby wells have also shown groundwater contamination.
-6-
Response activities at this site are proceeding under a state approved
remediation plan. The site has been approved for reimbursement of
response costs by the Michigan Underground Storage Tank Financial
Assurance Act Fund (the "Fund"). As the owner of a registered tank
approved for reimbursement, Firstbank is entitled to reimbursement of
reasonable remediation costs up to a maximum amount of $1,000,000,
after a $10,000 deductible payment, which has been made. Although the
site has been approved for reimbursement, it is possible that future
developments associated with this site could have a materially adverse
affect on the financial condition and results of operations of the
Company. Such developments could include, for example: (i) depletion
of the resources of the Fund; (ii) changes in law or regulation which
would eliminate the Fund as a source of remediation funding; (iii) a
determination that remediation expenses incurred have not been
reasonable; (iv) remediation costs exceeding Fund coverage;
(v) reversal of the decision that the site is eligible for
reimbursement from the Fund; and (vi) assertion of claims of a type
which is not eligible for Fund reimbursements. However, based on
facts presently known to management, the Company believes that the
probability that response costs associated with the Winn site will be
material is remote.
The following tables provide information concerning the
business of the registrant.
-7-
<TABLE>
DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
AVERAGE ASSETS:
Interest earning assets:
Securities available for
sale
Taxable Securities $ 30,198 $ 1,945 6.45% $ 26,532 $ 1,360 5.10% $ 40,956 $ 2,144 5.23%
Tax-exempt securities <F1> 28,026 2,355 8.04 28,476 2,398 8.13 26,139 2,238 8.29
Total Securities 58,224 4,300 7.21 55,008 3,758 6.69 67,095 4,382 6.43
Loans <F1><F2> 243,806 23,482 9.64 191,385 17,323 9.06 158,417 15,118 9.53
Federal funds sold 6,028 359 5.93 4,449 226 5.06 6,338 190 3.00
Interest-bearing deposits 235 16 8.37 31 3 8.37 31 3 8.27
Total earning assets 308,293 28,157 9.11% 250,873 21,310 8.48% 231,881 19,693 8.48%
Nonaccrual loans 100 186 492
Less allowance for loan loss (4,458) (3,657) (2,747)
Cash and due from banks 12,706 10,926 8,552
Other nonearning assets 13,438 9,882 9,482
Total assets $330,079 $268,210 $247,660
AVERAGE LIABILITIES:
Interest-bearing deposits:
Demand $ 61,201 2,047 3.35% $ 55,152 1,494 2.71 $ 53,296 1,461 2.74
Savings 54,879 1,533 2.80 50,447 1,407 2.79 46,086 1,428 3.10
Time 135,926 7,672 5.64 96,549 4,415 4.57 90,453 4,216 4.66
Federal funds purchased and
repurchase agreements 10,401 550 5.29 5,828 239 4.11 5,750 199 3.46
Notes payable 0 0 0.00 2,790 152 5.44
Total interest-
bearing liabilities 262,407 11,802 4.50% 207,976 7,555 3.63% 198,375 7,456 3.76%
Demand deposits 36,686 32,398 27,786
Total funds 299,093 240,374 226,161
Other liabilities 3,417 3,049 3,228
Total liabilities 302,510 243,423 229,389
-8-
Average Shareholders'
Equity 27,569 24,787 18,271
Total liabilities and
shareholders' equity $330,079 $268,210 $247,660
NET INTEREST INCOME <F1> $ 16,355 $ 13,755 $ 12,237
RATE SPREAD <F1> 4.61% 4.85% 4.72%
NET INTEREST MARGIN (PERCENT
OF AVERAGE EARNING ASSETS) <F1> 5.29% 5.47% 5.27%
<FN>
<F1> Presented on a fully taxable equivalent basis using a federal income
tax rate of 34%.
<F2> Including loan fees of $1,060,700, $897,700, and $1,187,300,
respectively. Interest is not included in nonaccrual loans.
</FN>
</TABLE>
-9-
<TABLE>
VOLUME/RATE ANALYSIS*
<CAPTION>
1995/1994 1994/1993 1993/1992
CHANGE IN INTEREST DUE TO: CHANGE IN INTEREST DUE TO: CHANGE IN INTEREST DUE TO:
AVERAGE AVERAGE NET AVERAGE AVERAGE NET AVERAGE AVERAGE NET
VOLUME RATE CHANGE VOLUME RATE CHANGE VOLUME RATE CHANGE
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INTEREST INCOME:
Securities available for sale
Taxable securities $ 226 $ 359 $ 585 $ (602) $ (181) $ (783) $ (46) $ (336) $ (382)
Tax-exempt Securities <F1> (18) (26) (44) 202 (42) 160 343 (86) 257
Total securities 208 333 541 (400) (223) (623) 297 (422) (125)
Loans <F1> 4,633 1,363 5,996 2,786 (291) 2,495 1,656 (825) 831
Federal funds sold 94 39 133 (96) 132 36 (37) (38) (75)
Interest-bearing deposits 13 13 (12) 4 (8)
Loan fees 163 163 (290) (290) 153 153
Total interest-
earning assets 5,111 1,735 6,846 2,000 (382) 1,618 2,057 (1,281) 776
INTEREST EXPENSE:
Interest-paying demand 203 350 553 39 (6) 33 75 (346) (271)
Savings deposits 18 108 126 120 (140) (20) 450 (180) 270
Time deposits 2,216 1,041 3,257 277 (78) 199 (64) (759) (823)
Total interest-
paying deposits 2,437 1,499 3,936 436 (224) 212 (461) (1,285) (824)
Federal funds
purchased and
securities sold
under agreements
to repurchase 233 77 310 (202) 90 (112) 26 (80) (54)
Notes payable (9) (25) (34)
Total interest-
bearing liabilities 2,670 1,576 4,246 234 (134) 100 478 (1,390) (912)
NET INTEREST INCOME $2,441 $ 159 $2,600 $ 1,766 $ (248) $ 1,518 $1,579 $ 109 $ 1,688
<FN>
<F*> Changes in volume/rate have been allocated between the volume
and rate variances on the basis of the ratio that the volume
and rate variances bear to each other.
<F1> Interest is presented on a fully taxable equivalent basis
using a federal income tax rate of 34%.
</FN>
</TABLE>
-10-
INVESTMENT PORTFOLIO
The carrying values of investment securities as of the dates indicated
are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993
(In Thousands of Dollars)
<S> <C> <C> <C>
Taxable
U.S. Treasury $ 6,108 $ 6,855 $ 6,691
U.S. Government agencies 17,713 16,066 13,846
Mortgage Backed Securities 1,205 1,560 4,376
Corporate and other 6,728 9,887 9,117
31,754 34,368 34,030
Tax-exempt
States and political
subdivisions 29,512 28,865 27,879
Total $61,266 $63,233 $61,909
</TABLE>
-11-
ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO
<TABLE>
The following table shows, by class of maturities at December 31,
1995, the amounts and weighted average yields of such investment
securities <F1>:
<CAPTION>
CARRYING AVERAGE
VALUE YIELD<F2>
(Dollars in Thousands)
<S> <C> <C>
U.S. Treasury
One year or less $ 999 4.88%
Over one through five 5,109 6.63
Total 6,108 6.34
U.S. Agencies
One year or less 5,193 7.74%
Over one through five years 10,022 7.00
Over five through ten years 1,313 8.03
Over ten years 1,185 7.58
Total 17,713 7.33
States and Political
subdivisions:
One year or less 3,607 7.87
Over one through five years 17,024 9.13
Over five through ten years 7,851 9.49
Over ten years 1,029 10.87
Total 29,511 9.14
Corporate and Other:
One year or less 5,149 7.54
Over one through five years 1,579 8.63
Over five through ten years 0 0.00
Over ten years 0 0.00
Total 6,728 7.80
Collateralized Mortgage Obligations
One year or less 0 0.00
Over one through five years 0 0.00
Over five through ten years 498 5.50
Over ten years 708 6.87
Total 1,206 6.30
Total $61,266 8.13
-12-
NOTES:
<FN>
<F1> Calculated on the basis of the cost and effective yields weighted
for the scheduled maturity of each security.
<F2> Weighted average yield has been computed on a fully taxable
equivalent basis. The rates shown on securities issued by states
and political subdivisions have been presented, assuming a 34%
tax rate. The amount of the adjustment, due to the fully tax
equivalent basis of presentation, is as follows:
RATE ON
TAXABLE
TAX-EXEMPT EQUIVALENT
RATE ADJUSTMENT BASIS
One year or less 5.20% 2.68% 7.87%
Over 1 through 5 years 6.03 3.11 9.13
Over 5 through 10 years 6.27 3.23 9.49
Over 10 years 7.17 3.70% 10.87%
Total 6.03% 3.11% 9.14%
<F3> The aggregate book value of the securities of no single issuer
except the U.S. Government or agencies exceeded ten percent of
the Corporation's consolidated shareholders' equity as of
December 31, 1995.
</FN>
</TABLE>
-13-
LOAN PORTFOLIO
The following table presents the loans outstanding at the indicated
dates according to the type of loan:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992
1991
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Loan categories:
Commercial $115,779 $ 99,307 $ 81,085 $ 63,859 $
60,621
Real estate mortgages 90,753 73,760 56,770 44,574
45,765
Consumer 58,315 50,324 40,538 34,998
35,579
Total $264,847 $223,391 $178,393 $143,431
$141,965
</TABLE>
Information concerning maturities and sensitivities of loans to
changes in interest rates in the Corporation's annual report to
shareholders for the year ended December 31, 1995, under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" at page 9, is here incorporated by reference.
-14-
NONPERFORMING LOANS AND ASSETS
The following table summarizes nonaccrual, troubled debt restructurings,
and past-due loans at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992 1991
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans:
Commercial and agricultural $ 47 $110 $258 $ 467 $ 480
Real estate mortgages 0 10 71 50 65
Consumer 0 0 12 87 136
Total 47 120 341 604 681
Accruing Loans 90 days or more past due:
Commercial and agricultural 0 49 0 137 129
Real estate mortgages 319 123 35 34 100
Consumer 67 92 12 43 95
Total 386 264 47 214 324
Renegotiated loans:
Commercial and agricultural 182 0 0 218 610
Real estate mortgages 0 213 182 0 0
Total 182 213 182 218 610
Total nonperforming loans 615 597 570 1,036 1,615
Property from defaulted loans 0 86 92 262 360
Total nonperforming assets $615 $683 $662 $1,298 $1,975
<FN>
<F1> Nonperforming assets are defined as nonaccrual loans, loans 90 days
or more past due, property from defaulted loans, and renegotiated
loans.
</FN>
</TABLE>
The gross interest income that would have been recorded for the year
ended December 31, 1995, if the nonaccrual and renegotiated loans had
performed in accordance with their original terms and had been
outstanding throughout the period, or since origination if held for
part of the period, was $41,000. The amount of interest income on
those loans that was included in net income for the period was $7,000.
-15-
Loan performance is reviewed regularly by external loan review
specialists, loan officers, and senior management. When reasonable
doubt exists concerning collectibility of interest or principal, the
loan is placed in nonaccrual status. Any interest previously accrued
but not collected at that time is reversed and charged against current
earnings.
At December 31, 1995, the Corporation had $8,550,000 in commercial and
mortgage loans for which payments are presently current although the
borrowers are experiencing financial difficulties. Those loans are
subject to constant attention and their status is reviewed on a
monthly basis.
As of December 31, 1995, there were no concentrations of loans
exceeding 10% of total loans which are not otherwise disclosed as a
category of loans in the consolidated balance sheets of the
Corporation contained in the Corporation's annual report to
shareholders for the year ended December 31, 1995.
-16-
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following table summarizes changes in the allowance for loan
losses arising from loans charged off and recoveries on loans
previously charged off by loan category and additions to the allowance
which were charged to expense.
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992 1991
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $4,100 $3,254 $2,394 $1,746 $1,667
Charge-offs:
Commercial and agricultural 164 113 299 337 669
Real estate mortgages 81 0 44 8 55
Consumer 493 386 262 295 407
Total charge-offs 738 499 605 640 1,131
Recoveries:
Commercial and agricultural 97 143 129 96 94
Real estate mortgages 63 30 39 48 3
Consumer 269 172 158 164 128
Total recoveries 429 345 326 308 225
Net charge-offs 309 154 279 332 906
Additions to allowance for
loan losses 1,085 1,000 1,139 980 985
Balance at end of period $4,876 $4,100 $3,254 $2,394 $1,746
Net charge-offs as a percent
of average loans 0.13% 0.08% 0.18% 0.24% 0.64%
</TABLE>
The allowance for loan losses is based on management's evaluation of
the portfolio, past loan loss experience, current economic conditions,
volume, growth, and composition of the loan portfolio, and other
relevant factors. The allowance is increased by provisions for loan
losses that have been charged to expense and reduced by net
charge-offs.
-17-
ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was allocated to provide for possible
losses within the following loan categories at the dates indicated:
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994 1993 1992 1991
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO
LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL
LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial &
agricultural $2,232 44% $2,069 44% $1,782 45% $1,460 45% $1,128 43%
Real estate
mortgages 880 34 492 33 276 32 177 31 217 32
Consumer 1,050 22 927 23 594 23 493 24 356 25
Unallocated 714 612 602 264 45
Total $4,876 100% $4,100 100% $3,254 100% $2,394 100% $1,746 100%
</TABLE>
-18-
AVERAGE DEPOSITS
The daily average deposits and rates paid on such deposits for the
periods indicated were:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1994 1993
AMOUNT RATE AMOUNT RATE AMOUNT RATE
(Dollars in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Average Balance:
Noninterest-bearing demand deposits $ 36,686 $ 32,398 $ 27,786
Interest-bearing demand deposits 61,201 3.35% 55,152 2.71% 53,296 2.74%
Other savings deposits 54,879 2.80 50,447 2.79 46,086 3.10
Other time deposits 135,926 5.64 96,549 4.57 90,453 4.66
Total average deposits $288,692 3.89% $ 234,546 3.12% $217,621 3.27%
</TABLE>
The time remaining until maturity of time certificates of deposit and
other time deposits of $100,000 or more at December 31, 1995, was as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Three months or less $ 7,194
Over three through six months 6,696
Over six through twelve months 4,388
Over twelve months 3,190
Total $21,468
</TABLE>
-19-
RETURN ON EQUITY AND ASSETS
The following table sets forth certain financial ratios for the years
ended:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Financial ratios:
Return on average total assets 1.17% 1.20% 1.15%
Return on average equity 14.02 12.99 15.55
Average equity to average total assets 8.35 9.24 7.38
Dividend payout ratio 26.23 26.09 22.77
</TABLE>
SHORT-TERM BORROWED FUNDS
Included in short-term borrowed funds are repurchase agreements as
described in Note I to the consolidated financial statements in the
Corporation's annual report to shareholders for the year ended
December 31, 1995, which consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
(Dollars in Thousands)
<S> <C> <C> <C> <C>
Amounts outstanding at the
end of the year $ 8,442 $10,144 $ 8,042
Weighted average interest rate
at the end of the year 4.98% 3.97% 3.19%
Longest maturity 10-29-96 10-21-96 6-30-94
Maximum amount outstanding at
any month-end during year $10,714 $10,144 $15,560
Approximate average amounts
outstanding during the year 8,905 3,883 4,812
Approximate weighted average
interest rate for the year 5.16% 3.95% 3.50%
<FN>
<F1> The weighted average interest rates are derived by dividing the
interest expense for the period by the daily average balance
during the period.
</FN>
</TABLE>
-20-
ITEM 2. PROPERTIES.
The offices of the Corporation and the main office of Bank
of Alma are located at 311 Woodworth Avenue, Alma, Michigan. Bank of
Alma occupies approximately 24,000 square feet of this brick building.
The remaining 900 square feet are rented as office space to an
unrelated business. Bank of Alma owns this property, as well as a
parcel of real estate adjacent to the main office which is presently
being used as a parking lot. Bank of Alma also owns a parcel of
vacant land at 218 East Center Street, Alma, Michigan, which is
currently available for sale.
Bank of Alma owns and operates one 3-lane drive-up branch in
Alma, Michigan. Also located on the Alma branch property is a garage
used to house the bank's vehicles and for general storage. A 960
square foot building owned by Bank of Alma in Pine River Township has
three inside tellers in addition to the three outside stations.
Bank of Alma also owns the facilities for six full-service
branches and leases the facilities for one other full-service branch.
Each of the Ashley, Ithaca, Pine River Township, Riverdale, St.
Charles, and Vestaburg branches is owned by Bank of Alma and housed in
buildings having slightly less than 2,000 square feet. Bank of Alma
leases the facility for the St. Louis branch. The leased facility is
approximately 900 square feet consisting of wood frame construction.
The lease expires May 31, 1996.
The main office of Firstbank is located at 102 South Main,
Mt. Pleasant, Michigan. The 4,760 square foot facility is leased.
The lease began in April of 1991. The initial lease period is for
five years with two options to renew for five years each.
Firstbank operates a branch located in Shepherd, Michigan.
The bank owns and occupies approximately 5,800 square feet of space in
a brick building. Approximately half the building is used for bank
purposes and the other half is leased to other tenants for office
purposes. The bank operates a two-lane drive-up facility that is
attached to the building and covered by a canopy. Firstbank also owns
a parcel that is adjacent to the office which is used as a parking
lot.
Firstbank operates a branch located in Clare, Michigan. The
branch is housed in a brick building containing approximately 4,800
square feet of space. The bank owns the building and adjacent real
estate used for parking. The bank also operates a two-lane drive-up
facility that is attached to the building and covered by a canopy.
-21-
Firstbank operates a branch located in Mt. Pleasant,
Michigan. The branch is housed in a brick building containing
approximately 1,600 square feet of space. The bank owns the building
and adjacent real estate used for parking and operates a single-lane
drive-up facility attached to the building.
Firstbank operates a branch located in Winn, Michigan. This
branch facility is housed in a wood frame structure having
approximately 1,000 square feet. Firstbank owns the building.
Firstbank also owns the parcel of real estate which is adjacent to the
Winn branch site.
Firstbank also operates a branch located in Union Township,
Michigan. The branch located in Union Township is housed in a 3,200
square foot building. The building is owned by Firstbank. The Union
Township property houses a three-lane drive-up service.
The main office of 1st Bank is located at 502 West Houghton
Avenue, West Branch, Michigan. The bank occupies approximately 3,565
square feet of office space. 1st Bank owns this property, as well as
one lot adjacent to the main office. The lot has a 1,800 square foot
single family residence and separate garage. The house is currently
rented but is available for future expansion of the bank and for
parking needs.
1st Bank owns and operates branches located in Fairview,
Higgins Lake, and Rose City containing approximately 1,500 to 2,300
square feet. 1st Bank owns each of those branches. Each of those
branches occupies a wood frame building.
1st Bank also owns and operates branches located in St.
Helen and West Branch, Michigan. 1st Bank owns those properties.
Each branch occupies a wood frame building having approximately 900
square feet.
1st Bank operates a branch located in Hale, Michigan. 1st
Bank leases the property. The branch occupies a wood frame building
containing approximately 2,000 square feet and sublets approximately
1,200 square feet to an unrelated business.
1st Bank operates a courier service from a 8,500 square foot
brick and steel building. 1st Bank owns the building. Approximately
2,000 square feet of the building are leased to unrelated businesses.
Management considers the properties and equipment of the
Corporation and its subsidiaries to be well maintained, in good
operating condition, and adequate for their operations.
-22-
ITEM 3. LEGAL PROCEEDINGS.
The Corporation and its subsidiaries are parties, as
plaintiff or as defendant, to routine litigation arising in the normal
course of their business. In the opinion of management, the
liabilities arising from these proceedings, if any, will not be
material to the Corporation's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information concerning executive officers of
the Corporation who are not directors has been omitted from the
registrant's proxy statement pursuant to Instruction 3 to
Regulation S-K, Item 401(b).
Officers of the Corporation are appointed annually by the
Board of Directors of the Corporation and serve at the pleasure of the
Board of Directors. Information concerning the executive officers of
the Corporation who are not also directors or nominees for election to
the Board of Directors of the Corporation is given below. Except as
otherwise indicated, all existing officers have had the same principal
employment for over 5 years.
MARY D. DECI (age 49) has been Chief Financial Officer,
Secretary, and Treasurer of the Corporation since 1994. Ms. Deci
has been Senior Vice President of Bank of Alma since 1994, and
Controller of Bank of Alma since 1988. Ms. Deci has been Vice
President of the Corporation and of Bank of Alma since 1989 and
has been an officer of Bank of Alma since 1988.
RICHARD L. JARVIS (age 58) has been Executive Vice President
of Firstbank since December, 1991, and has been Vice President of
the Corporation since 1987. Mr. Jarvis served as President and
Chief Executive Officer of Firstbank from 1987 until December,
1991. Mr. Jarvis served as a director of Firstbank from 1987 to
1991.
DALE A. PETERS (age 53) has been Vice President of the
Corporation and President, Chief Executive Officer, and a
director of 1st Bank since 1987. He has been Chairman of the
Board of 1st Bank since 1988.
-23-
THOMAS R. SULLIVAN (age 45) has been Vice President of the
Corporation and President, Chief Executive Officer, and a
director of Firstbank since December, 1991. From 1988 to 1991,
he was President of the Battle Creek region of Old Kent Bank of
Kalamazoo.
JAMES E. WHEELER, II (age 36), has been Vice President of
the Corporation and Senior Vice President and Chief Loan Officer
of Bank of Alma since 1989.
-24-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
The information under the caption "Common Stock Data" on
page 12 in the registrant's annual report to shareholders for the year
ended December 31, 1995, is here incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information under the caption "Selected Financial Data"
on page 3 in the registrant's annual report to shareholders for the
year ended December 31, 1995, is here incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on
pages 4 through 12 in the registrant's annual report to shareholders
for the year ended December 31, 1995, is here incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of independent auditors and the consolidated
financial statements on pages 13 through 29 and the quarterly results
of operations on page 12 in the registrant's annual report to
shareholders for the year ended December 31, 1995, are here
incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
-25-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption "Board of Directors" in
the registrant's definitive proxy statement for its annual meeting of
shareholders to be held April 22, 1996, is here incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information contained under the captions "Compensation of
Directors and Executive Officers" and "Compensation Committee
Interlocks and Insider Participation" in the registrant's definitive
proxy statement for its annual meeting of shareholders to be held on
April 22, 1996, is here incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information under the caption "Voting Securities" in the
registrant's definitive proxy statement for its annual meeting of
shareholders to be held April 22, 1996, is here incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Compensation Committee
Interlocks and Insider Participation" in the registrant's definitive
proxy statement for its annual meeting of shareholders to be held
April 22, 1996, is here incorporated by reference.
-26-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a)(1) FINANCIAL STATEMENTS.
The following consolidated financial statements of the
Corporation and its subsidiaries and report of independent auditors
are incorporated by reference from the registrant's annual report to
shareholders for the year ended December 31, 1995, in Item 8:
<TABLE>
<CAPTION>
PAGE NUMBER IN
STATEMENT OR REPORT ANNUAL REPORT
<S><C> <C>
Report of Independent Auditors 13
Consolidated Balance Sheets as of December 31, 1995,
and 1994 14
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993 15
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1995, 1994,
and 1993 16
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993 17
Notes to Consolidated Financial Statements 18-29
</TABLE>
The consolidated financial statements, notes to consolidated
financial statements, and report of independent auditors listed above
are incorporated by reference in Item 8 of this report from the
corresponding portions of the registrant's annual report to
shareholders for the year ended December 31, 1995.
(2) Schedules to the consolidated financial statements required
by Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable, and therefore have been omitted.
(3) The following exhibits are filed as part of this report:
-27-
NUMBER EXHIBIT
3(a) ARTICLES OF INCORPORATION. Previously filed as an
exhibit to registrant's Registration Statement on
Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
3(b) BYLAWS. Previously filed as an exhibit to the
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(a)* FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND
OFFICERS. Previously filed as an exhibit to the
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(b) DIVIDEND REINVESTMENT PLAN. Previously filed as an
exhibit to the registrant's Registration Statement on
Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
10(c) MAIN OFFICE LEASE. Previously filed as an exhibit to
the registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(d)* DEFERRED COMPENSATION PLAN.
10(e)* TRUST UNDER DEFERRED COMPENSATION PLAN.
10(f)* STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993.
Previously filed as an appendix to the registrant's
definitive proxy statement for its annual meeting of
shareholders held April 26, 1993. Here incorporated by
reference.
13 1995 ANNUAL REPORT TO SHAREHOLDERS. (This report, except for
those portions which are expressly incorporated by reference
in this filing, is furnished for the information of the
Securities and Exchange Commission and is not deemed "filed"
as part of this filing.)
21 SUBSIDIARIES OF REGISTRANT.
23 CONSENT OF CROWE, CHIZEK AND COMPANY LLP.
24 POWERS OF ATTORNEY.
-28-
27 FINANCIAL DATA SCHEDULE.
*Management contract or compensatory plan.
The registrant will furnish a copy of any exhibit listed
above to any shareholder of the registrant without charge upon written
request to Mary D. Deci, Secretary, Firstbank Corporation,
311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan 48801.
(b) REPORTS ON FORM 8-K.
During the last quarter of the period covered by this
report, the registrant filed no Current Reports on Form 8-K.
-29-
SIGNATURES
Pursuant to the requirements of Section 13 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.
Dated: March 27, 1996 FIRSTBANK CORPORATION
By /S/MARY D. DECI
Mary D. Deci
Vice President, Secretary,
Treasurer, and Chief Financial
Officer
-30-
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
March 27, 1996 /S/JOHN A. MCCORMACK
John A. McCormack
President, Chief Executive
Officer, and Director
(Principal executive officer)
March 27, 1996 /S/MARY D. DECI
Mary D. Deci
Vice President, Secretary, and Treasurer
(Principal financial and accounting
officer)
March 27, 1996 /S/WILLIAM E. GOGGIN*
William E. Goggin
Director
March 27, 1996 /S/EDWARD B. GRANT*
Edward B. Grant
Director
March 27, 1996 /S/CHARLES W. JENNINGS*
Charles W. Jennings
Director
March 27, 1996 /S/PHILLIP G. PEASLEY*
Phillip G. Peasley
Director
March 27, 1996 /S/DAVID D. ROSLUND*
David D. Roslund
Director
*By /S/MARY D. DECI
Mary D. Deci
(Attorney in Fact)
-31-
INDEX TO EXHIBITS
NUMBER EXHIBIT PAGE
3(a) ARTICLES OF INCORPORATION. Previously filed as an **
exhibit to the registrant's Registration Statement
on Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
3(b) BYLAWS. Previously filed as an exhibit to the **
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(a)* FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND OFFICERS. **
Previously filed as an exhibit to the registrant's
Registration Statement on Form S-2 (Registration No.
33-68432) filed on September 3, 1993. Here incorporated
by reference.
10(b) DIVIDEND REINVESTMENT PLAN. Previously filed as an **
exhibit to the registrant's Registration Statement
on Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
10(c) MAIN OFFICE LEASE. Previously filed as an exhibit to **
the registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(d)* DEFERRED COMPENSATION PLAN.
10(e)* TRUST UNDER DEFERRED COMPENSATION PLAN.
10(f)* STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993. **
Previously filed as an appendix to the registrant's
definitive proxy statement for its annual meeting of
shareholders held April 26, 1993. Here incorporated by
reference.
13 1995 ANNUAL REPORT TO SHAREHOLDERS. (This report, except
for those portions which are expressly incorporated by
reference in this filing is furnished for the information
of the Securities and Exchange Commission and is not
deemed "filed" as part of this filing.)
21 SUBSIDIARIES OF REGISTRANT.
23 CONSENT OF CROW, CHIZEK AND COMPANY LLP.
-32-
24 POWERS OF ATTORNEY.
27 FINANCIAL DATA SCHEDULE.
________________________
*Management contract or compensatory plan.
**This Exhibit is filed by incorporation by reference to a prior
filing.
-33-
EXHIBIT 10(d)
DEFERRED COMPENSATION PLAN
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 1995)
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Eligibility to Participate. . . . . . . . . . . . . . . . . 2
Section 2.2 Commencement of Participation . . . . . . . . . . . . . . . 2
Section 2.3 Termination of Participation . . . . . . . . . . . . . . . 2
ARTICLE III CONTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . 3
Section 3.1 Elective Deferrals. . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 Amount of 401(k) Excess Elective Deferral . . . . . . . . . 3
Section 3.3 Matching Contributions. . . . . . . . . . . . . . . . . . . 3
Section 3.4 Additional Deferral . . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Bonus Deferral. . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.6 Change in Deferral. . . . . . . . . . . . . . . . . . . . . 4
Section 3.7 Discontinuance of Deferral. . . . . . . . . . . . . . . . . 4
ARTICLE IV BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.1 Eligibility for Benefits. . . . . . . . . . . . . . . . . . 5
Section 4.2 Amount of Benefits. . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 Time and Method of Payment of Benefits. . . . . . . . . . . 5
Section 4.4 Change in Control . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5 Payment Upon Hardship . . . . . . . . . . . . . . . . . . . 6
ARTICLE V ACCOUNTS AND INTEREST . . . . . . . . . . . . . . . . . . . 7
Section 5.1 Deferred Compensation Account . . . . . . . . . . . . . . . 7
Section 5.2 Valuation of Account. . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.1 Administration of Plan . . . . . . . . . . . . . . . . . . 7
Section 6.2 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . 8
Section 7.1 Amendment and Termination . . . . . . . . . . . . . . . . . 8
Section 7.2 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . 8
-1-
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1 Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.2 No Contract . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.3 Nonassignability. . . . . . . . . . . . . . . . . . . . . . 9
Section 8.4 Rules of Construction . . . . . . . . . . . . . . . . . . . 9
Section 8.5 Distributions to Minors and Incompetent Individuals . . . . 9
Section 8.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . .10
-2-
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 1995)
This amended Deferred Compensation Plan (the "Plan") is made this 27th
day of November, 1995, but is effective as of January 1, 1995, by
FIRSTBANK CORPORATION, a Michigan corporation, along with its subsidiary
banks (collectively called the "Company").
W I T N E S S E T H
WHEREAS, the Company desires to recognize and reward the contribution
of its directors and certain of its management employees towards the
success of the Company; and
WHEREAS, the Company desires to adopt a plan to provide for director
fee or salary deferrals and financial security to such directors and
management employees and their families;
NOW, THEREFORE, in consideration of the premises and of the provisions
hereinafter set forth, the Plan shall be and hereby is adopted as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in the Plan, the following
words and phrases shall have the meaning set forth below unless the context
plainly requires a different meaning:
- "Beneficiary" means the person or persons designated by a
Participant to receive the benefit provided hereunder after the
Participant's death in a written designation filed with the
Company. A Participant may revoke, amend or alter the
designation of Beneficiary at any time. In the absence of a
designation of Beneficiary, or if the Beneficiary designated
shall not survive the Participant, the Participant's benefit
provided hereunder shall be paid to the individual, or to the
individuals, in the following classes of successive preference:
(a) his spouse,
(b) his issue,
(c) his parent, or
(d) his brothers, sisters and issue thereof.
If no such Beneficiary survives the Participant, the
Participant's benefit shall be paid to the Participant's estate.
- "Board of Directors" means the Board of Directors of Firstbank
Corporation and any of its subsidiaries.
- "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
- "Compensation" means the director's fees paid to a Director or
"compensation" as defined in the 401(k) Plan.
- "Director" means a member of the Board of Directors.
- "Elective Deferrals" means Compensation reduction contributions
made pursuant to a Participant's election in accordance with
Section 3.1 of this Plan.
- "Employee" means a person employed by the Company of a full-time
and salaried basis.
- "401(k) Plan" means the Firstbank Corporation Amended and
Restated 401(k) and Employee Stock Ownership Plan.
- "Participant" means a Director or Employee eligible to
participate in this Plan as provided in Article II.
- "Plan Year" means the year commencing January 1 and ending
December 31.
ARTICLE II
PARTICIPATION
Section 2.1 ELIGIBILITY TO PARTICIPATE. All Directors shall be
eligible to participate in the Plan. The Employees eligible to participate
under this Plan shall be those key management Employees designated, in
writing, by the Board of Directors from time to time.
Section 2.2 COMMENCEMENT OF PARTICIPATION. An eligible Director or
Employee shall commence participation in this Plan by executing a deferral
agreement as provided by the Company.
Section 2.3 TERMINATION OF PARTICIPATION. A Director shall remain
a Participant until the termination of his directorship with the Company
for any reason. An Employee shall remain a Participant until his
termination of employment with the Company for any reason.
-2-
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
Section 3.1 ELECTIVE DEFERRALS. A Participant may elect to reduce
the Compensation earned and received by him subsequent to the effective
date of his election, and to defer payment of such amounts in the manner
and subject to the adjustments provided in this Plan; provided, however,
that:
(a) In no event shall the effective date of any such deferral
agreement be earlier than the first day of the Plan Year
next following its acceptance by the Company. However, for
a Director or Employee who first becomes eligible to
participate in the Plan, the effective date of his deferral
agreement may be any date not later than 60 days after the
date on which he first becomes eligible to participate.
(b) In no event shall any Compensation earned by a Participant
prior to the date of the acceptance of such Participant's
deferral agreement by the Company be deferred hereunder;
(c) In no event shall any amount be deferred hereunder for any
period during which the Participant shall not remain a
Director or Employee of the Company entitled to Compensation
for his service as such;
(d) Except as provided in Sections 3.6 and 3.7, any such
election shall be irrevocable with respect to Compensation
earned by the Participant subsequent to the effective date
of the deferral agreement.
Section 3.2 AMOUNT OF 401(K) EXCESS ELECTIVE DEFERRAL. For each
Plan Year, a Participant may elect to defer an amount ("Excess Elective
Deferral") which shall not exceed the difference between:
(a) The maximum amount of salary reduction contributions which
could have been made on behalf of the Participant to the
401(k) Plan under the limitation of Code <Section>401(g)(1)
as in effect for the immediately preceding Plan Year; and
(b) The amount of salary reduction contributions actually made
on behalf of the Participant to the 401(k) Plan for the
immediately preceding Plan Year.
Section 3.3 MATCHING CONTRIBUTIONS. On or before the last day of
the Plan Year, the Company shall contribute to this Plan an amount
("Matching Contribution") equal to a percentage, as determined solely at
the discretion of the Board of Directors of the Company under the terms of
-3-
the 401(k) Plan, of that portion of each Participant's Excess Elective
Deferral which does not exceed 6% of the Participant's Compensation. A
Participant shall become vested in the Matching Contribution made on his or
her behalf pursuant to the following schedule:
<TABLE>
<CAPTION>
YEARS OF NONFORFEITABLE
SERVICE PERCENTAGE
<S> <C> <C>
1 0
2 0
3 25
4 50
5 75
6 100
</TABLE>
Section 3.4 ADDITIONAL DEFERRAL. In addition to any Excess
Elective Deferral made under Section 3.2 above, a Participant may also
elect in his deferral agreement to defer any amount of Compensation
received in excess of the maximum amount of salary reduction contributions
which could have been made on behalf of the Participant to the 401(k) Plan
under Code <Section>402(g)(1) as in effect for the immediately preceding
Plan Year. Any Additional Deferral made hereunder shall not qualify for a
Matching Contribution under Section 3.3.
Section 3.5 BONUS DEFERRAL. In addition to any Excess Elective
Deferral made under Section 3.2 above, or any Additional Deferral made
under Section 3.4 above, a Participant may elect in his deferral agreement
to defer all or a portion of his bonus.
Section 3.6 CHANGE IN DEFERRAL. A Participant shall have the right
to change the amount of his Excess Elective Deferral and his Additional
Deferral for any subsequent Plan Year by completing, signing and filing
with the Company prior to the commencement of any subsequent Plan Year a
deferral agreement in form satisfactory to the Company. Failure of a
Participant to elect to change the amount of his Excess Elective Deferral
and his Additional Deferral for any subsequent Plan Year shall constitute a
waiver of his right to do so for such Plan Year, and the amount by which
his Compensation will be reduced and deferred as elected in his most
recently executed deferral agreement shall continue in effect until the
earliest of the following events: (i) he elects to change the same for a
subsequent Plan Year, (ii) he elects to discontinue the same pursuant to
Section 3.7, or (iii) the termination of his directorship or employment.
Section 3.7 DISCONTINUANCE OF DEFERRAL. A Participant shall have
the right to discontinue the deferral of his Compensation as of the first
day of any month subsequent to the acceptance of his deferral agreement by
the Company, provided the Participant gives the Company written notice of
such discontinuance at least 30 days prior to the effective date of the
-4-
same. A Participant shall not be eligible to defer any portion of his
Compensation until the Plan Year following the Plan Year of such
discontinuance.
ARTICLE IV
BENEFITS
Section 4.1 ELIGIBILITY FOR BENEFITS. A Participant or a
Participant's Beneficiary shall be eligible to receive benefits under this
Plan upon the earlier of the following events to occur:
(a) Termination of directorship or employment with the Company
by the Participant for any reason; or
(b) Death of the Participant prior to termination of
directorship or employment with the Company.
Section 4.2 AMOUNT OF BENEFITS. The amount of benefits payable to
a Participant or to the Participant's Beneficiary under this Plan shall be
equal to the amount credited to the Participant's Deferred Compensation
Account, as defined in Section 5.1, as of the date of the earlier to occur
of the events in Section 4.1(a) or (b).
Section 4.3 TIME AND METHOD OF PAYMENT OF BENEFITS. Participant
may, by written instrument, elect the time and method of payment of
benefits hereunder. The election may be changed at any time or times by a
written instrument filed with the Board of Directors; provided, however, no
such election shall be valid if filed with the Board of Directors less than
twenty-four (24) months prior to termination of directorship or employment.
A Participant's election shall be from among the following alternatives:
(a) One lump sum payment of the balance to the Participant's
credit under the Plan.
(b) A stated dollar amount, or a percentage of the balance to
the credit of the Participant, at the time of termination
with the balance paid in annual installments, as equal as
possible, over not less than five (5) nor more than fifteen
(15) years.
(c) Annual installments, as equal as possible, over not less
than five (5) nor more than fifteen (15) years.
If no valid election has been made, the benefit will be paid in fifteen
annual installments, as equal as possible, commencing ninety (90) days
following termination of directorship or employment. If benefits are
payable to the Participant's Beneficiary, payments shall be made, or if
-5-
applicable shall continue, under the method elected by the Participant. If
benefits to the Participant have not commenced, and the Participant has not
elected a method of payment, payments shall be made to the Beneficiary in
fifteen (15) annual installments, as equal as possible, commencing ninety
(90) days following the Participant's death.
Notwithstanding the foregoing, the Participant or the
Participant's Beneficiary may request a different time and method of
payment. The Board of Directors shall determine whether a different time
and method will be allowed, in its sole and total discretion. The
Participant and the Participant's Beneficiary shall have no power or
authority to require a different time and method of payment. A Participant
who is a member of the Board of Directors shall not take part in any
decision by the Board of Directors with respect to payment of the
Participant's own benefit.
Section 4.4 CHANGE IN CONTROL. In the event of a change in control
of the Company, the benefits of all Participants under this Plan shall
immediately become payable in one lump sum, unless immediately after such
change in control the then Board of Directors of the Company readopts and
reaffirms this Plan. For purposes of this Plan, "change in control" means:
(a) Any purchase under a tender or exchange offer for the
Company's shares of common stock other than by the Company
or a wholly-owned subsidiary of the Company following which
the offeror owns beneficially more than 20% of the Company's
outstanding common stock;
(b) Shareholder approval of any merger, consolidation or sale of
all or substantially all of the Company's assets to or into
any person or entity other than a wholly-owned subsidiary of
the Company formed for the purpose of changing the Company's
corporate domicile;
(c) A change in the identity of a majority of the members of the
Board of Directors of the Company within any twelve-month
period, which change or changes are not recommended by the
incumbent directors immediately prior to any such change or
changes; or
(d) Any "person" (as the term "person" is defined in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), is or becomes the "beneficial owner" as the
term "beneficial owner" is defined in Rule 13d-3 under the
Exchange Act) directly or indirectly of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities. For
purposes of this Plan, ownership of voting securities shall
take into account and include ownership as determined by
applying the provisions of said Rule 13d-3.
-6-
Section 4.5 PAYMENT UPON HARDSHIP. At the written request of a
Participant or the Participant's Beneficiary if payments are due to the
Beneficiary, the Board of Directors, in its sole discretion, may authorize
payment of all or a portion of the Participant's benefit prior to
termination of the Participant's directorship or employment, upon a
demonstration of unforeseeable financial hardship of the Participant,
Beneficiary or their immediate families. An unforeseeable financial
hardship means an emergency need for funds resulting from extraordinary
circumstances arising as a result of events beyond the control of the
Participant or Beneficiary. Distributions as a result of an unforeseeable
financial hardship shall be permitted only to the extent reasonably
necessary to satisfy the emergency. A Participant who is a member of the
Board of Directors shall not take part in any decision by the Board of
Directors with respect to a hardship distribution to the Participant.
ARTICLE V
ACCOUNTS AND INTEREST
Section 5.1 DEFERRED COMPENSATION ACCOUNT. On or before the last
day of the Plan Year, the Company shall credit to a Deferred Compensation
Account established in the name of each Participant the Participant's
Excess Elective Deferral, his vested portion of the Matching Contribution,
his Additional Deferral, and his Bonus Deferral. Any amounts so credited
to a Participant's Deferred Compensation Account may, at the sole
discretion of the Company, be kept in cash or invested and reinvested in
those certain certificates, bonds, securities, investment funds or other
assets as may be selected by the Company from time to time. In addition,
at the sole discretion of the Company, such amounts may be invested by the
Company, as requested by each Participant, in one or more investment funds
as selected by the Company from time to time. For purposes of Section 5.2,
a Participant's Deferred Compensation Account shall be deemed to be
invested as requested by such Participant, whether or not the Company so
chooses to invest such Account. The Company shall at all times retain
title to all assets of the Plan, including those assets which may be
invested as requested by a Participant.
Section 5.2 VALUATION OF ACCOUNT. Each Participant's Deferred
Compensation Account shall be adjusted annually to reflect the net earnings
or net losses of such Account and the increase or decrease in the value of
each Account. Such adjustment shall be made on the basis of actual
investment experience for such year; provided, however, that if the
Participant has requested certain investments pursuant to Section 5.1, then
such annual adjustment of his Deferred Compensation Account shall be made
on the basis of the investment experience that would have resulted for such
year if the Company had made investments as so requested by such
Participant.
-7-
ARTICLE VI
ADMINISTRATION
Section 6.1 ADMINISTRATION OF PLAN. The Company shall administer
and interpret this Plan. All decisions of the Company concerning the Plan
shall be final, conclusive and binding upon all parties, and any person
participating in the Plan hereby agrees to be bound by the determinations
of the Company. Neither any member of the Board of Directors of the
Company nor any officer of the Company shall be liable for any action taken
by the Company or determination made by the Company with respect to the
Plan.
Section 6.2 CLAIMS PROCEDURE. Claims for benefits under the Plan
shall be made in writing to the Company. If a claim for benefits is wholly
or partially denied, the Company shall, within a reasonable period of time,
but not later than 90 days after receipt of the claim, provide the claimant
with a written notice setting forth in a manner calculated to be understood
by the claimant:
(a) The specific reason or reasons for denial;
(b) Specific reference to the pertinent Plan provisions on which
denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(d) Any explanation of the Plan's claim review procedure.
A Participant whose claim for benefits under the Plan has been denied, or
his duly authorized representative, may request a review upon written
application to the Company, may review pertinent documents, and may submit
issues and comments in writing. The claimant's written request for review
must be submitted to the Company with 60 days after receipt by the claimant
of written notification of the denial of a claim. A decision by the
Company shall be made not later than 60 days after the Company's receipt of
a request for review, unless special circumstances require an extension of
time, in which cases a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of the request for review. The
decision on review shall be in writing and shall include specific reasons
for the decision, specific references to the pertinent Plan provision on
which the decision is based, and shall be written in a manner calculated to
be understood by the claimant.
-8-
ARTICLE VII
AMENDMENT AND TERMINATION OF THE PLAN
Section 7.1 AMENDMENT AND TERMINATION. The Plan may be amended by
the Company at any time or from time to time and may be terminated by the
Company with respect to any or all Participants at any time. Any action
taken by the Company under this Plan may be taken by resolution of the
Board of Directors or by any person or persons authorized by a resolution
of the Board of Directors to take such action.
Section 7.2 ERISA COMPLIANCE. Notwithstanding any provisions of
this Article VII to the contrary, the Company may amend or modify the Plan
in any respect which shall be necessary or advisable in order that the
benefits provided by the Plan shall constitute unfunded deferred
compensation for a select group of management or highly compensated
employees as described in Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 UNFUNDED PLAN. The undertakings of the Company herein
constitute merely the unsecured promise of the Company to make the payments
as provided for herein. Neither a Participant nor any Beneficiary nor any
other person shall have, by reason of this Plan, any rights, title or
interest of any kind in or to any property of the Company. If the Company
transfers any property to a trust in connection with this Plan, such trust
shall not be held for the exclusive benefit of Participants, and any assets
held in such trust shall be subject to the claims of the Company's general
creditors in the event of the Company's insolvency.
Section 8.2 NO CONTRACT. Neither anything contained in this Plan,
nor any amendment pursuant hereto, shall be construed as entitling a
Participant to be continued as a director or in the employ of the Company
for any period of time, or as obliging the Company to keep said Participant
as a director or in its employ for any period of time. Furthermore,
neither anything contained in this Plan, nor any amendment pursuant
thereto, shall be construed as restricting in any way the right of the
Company to reassign a Participant for any reason to a new employment
position at lower or higher compensation.
Section 8.3 NONASSIGNABILITY. No rights of any kind under this
Plan shall be transferable or assignable by a Participant, Beneficiary or
any other person, or be subject to alienation, encumbrance, garnishment,
attachment, execution or levy of any kind, voluntary or involuntary.
-9-
Section 8.4 RULES OF CONSTRUCTION. In the event that any provision
of the Plan is determined by any judicial, quasi-judicial or administrative
body to be void or unenforceable for any reason, all other provisions of
the Plan shall remain in full force and effect as if such void or
unenforceable provision had never been a part of the Plan. The singular
herein shall include the plural, or vice versa, wherever the context so
requires. A pronoun in the masculine, feminine or neuter gender shall be
deemed, where appropriate, to include also the masculine, feminine or
neuter gender.
Section 8.5 DISTRIBUTIONS TO MINORS AND INCOMPETENT INDIVIDUALS.
If the President of the Company shall determine, in his sole and absolute
discretion, that any person to whom any amount is payable under the Plan is
unable to care for his affairs because of illness or accident, or is a
minor, any payment due (unless a prior claim therefor shall have been made
by a duly appointed guardian, committee or other legal representative) may
be paid in one or more of the following ways as the President deems best:
to the Participant or his Beneficiary directly, to the legally appointed
guardian of the Participant or his Beneficiary, to the custodian for the
Beneficiary under the Uniform Gifts to Minors Act if such is permitted by
the laws of the residence of the Beneficiary or to any person or
institution responsible for or assuming the care of the Participant or his
Beneficiary. The written receipt of the Participant, the Beneficiary,
guardian, custodian, person or institution shall be a complete release to
the Company, and the Company shall have no duty to see to the use or
application of any funds so paid.
Section 8.6 APPLICABLE LAW. The Plan shall be construed in
accordance with, and governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the Company, by its officer duly authorized, has
executed this document as of the day and year first above written.
Attest: FIRSTBANK CORPORATION
/S/ NANCY A. STARK By: /S/ JOHN MCCORMACK
Nancy A. Stark John McCormack
Its: President and Chief
Executive Officer
EXHIBIT 10(d)
DEFERRED COMPENSATION PLAN
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 1995)
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . 2
Section 2.1 Eligibility to Participate. . . . . . . . . . . . . . . . . 2
Section 2.2 Commencement of Participation . . . . . . . . . . . . . . . 2
Section 2.3 Termination of Participation . . . . . . . . . . . . . . . 2
ARTICLE III CONTRIBUTIONS AND ALLOCATIONS . . . . . . . . . . . . . . . 3
Section 3.1 Elective Deferrals. . . . . . . . . . . . . . . . . . . . . 3
Section 3.2 Amount of 401(k) Excess Elective Deferral . . . . . . . . . 3
Section 3.3 Matching Contributions. . . . . . . . . . . . . . . . . . . 3
Section 3.4 Additional Deferral . . . . . . . . . . . . . . . . . . . . 4
Section 3.5 Bonus Deferral. . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.6 Change in Deferral. . . . . . . . . . . . . . . . . . . . . 4
Section 3.7 Discontinuance of Deferral. . . . . . . . . . . . . . . . . 4
ARTICLE IV BENEFITS . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.1 Eligibility for Benefits. . . . . . . . . . . . . . . . . . 5
Section 4.2 Amount of Benefits. . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 Time and Method of Payment of Benefits. . . . . . . . . . . 5
Section 4.4 Change in Control . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5 Payment Upon Hardship . . . . . . . . . . . . . . . . . . . 6
ARTICLE V ACCOUNTS AND INTEREST . . . . . . . . . . . . . . . . . . . 7
Section 5.1 Deferred Compensation Account . . . . . . . . . . . . . . . 7
Section 5.2 Valuation of Account. . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 7
Section 6.1 Administration of Plan . . . . . . . . . . . . . . . . . . 7
Section 6.2 Claims Procedure. . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE VII AMENDMENT AND TERMINATION OF THE PLAN . . . . . . . . . . . 8
Section 7.1 Amendment and Termination . . . . . . . . . . . . . . . . . 8
Section 7.2 ERISA Compliance. . . . . . . . . . . . . . . . . . . . . . 8
-1-
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1 Unfunded Plan . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.2 No Contract . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.3 Nonassignability. . . . . . . . . . . . . . . . . . . . . . 9
Section 8.4 Rules of Construction . . . . . . . . . . . . . . . . . . . 9
Section 8.5 Distributions to Minors and Incompetent Individuals . . . . 9
Section 8.6 Applicable Law. . . . . . . . . . . . . . . . . . . . . . .10
-2-
FIRSTBANK CORPORATION AFFILIATED
DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 1995)
This amended Deferred Compensation Plan (the "Plan") is made this 27th
day of November, 1995, but is effective as of January 1, 1995, by
FIRSTBANK CORPORATION, a Michigan corporation, along with its subsidiary
banks (collectively called the "Company").
W I T N E S S E T H
WHEREAS, the Company desires to recognize and reward the contribution
of its directors and certain of its management employees towards the
success of the Company; and
WHEREAS, the Company desires to adopt a plan to provide for director
fee or salary deferrals and financial security to such directors and
management employees and their families;
NOW, THEREFORE, in consideration of the premises and of the provisions
hereinafter set forth, the Plan shall be and hereby is adopted as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINITIONS. Whenever used in the Plan, the following
words and phrases shall have the meaning set forth below unless the context
plainly requires a different meaning:
- "Beneficiary" means the person or persons designated by a
Participant to receive the benefit provided hereunder after the
Participant's death in a written designation filed with the
Company. A Participant may revoke, amend or alter the
designation of Beneficiary at any time. In the absence of a
designation of Beneficiary, or if the Beneficiary designated
shall not survive the Participant, the Participant's benefit
provided hereunder shall be paid to the individual, or to the
individuals, in the following classes of successive preference:
(a) his spouse,
(b) his issue,
(c) his parent, or
(d) his brothers, sisters and issue thereof.
If no such Beneficiary survives the Participant, the
Participant's benefit shall be paid to the Participant's estate.
- "Board of Directors" means the Board of Directors of Firstbank
Corporation and any of its subsidiaries.
- "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
- "Compensation" means the director's fees paid to a Director or
"compensation" as defined in the 401(k) Plan.
- "Director" means a member of the Board of Directors.
- "Elective Deferrals" means Compensation reduction contributions
made pursuant to a Participant's election in accordance with
Section 3.1 of this Plan.
- "Employee" means a person employed by the Company of a full-time
and salaried basis.
- "401(k) Plan" means the Firstbank Corporation Amended and
Restated 401(k) and Employee Stock Ownership Plan.
- "Participant" means a Director or Employee eligible to
participate in this Plan as provided in Article II.
- "Plan Year" means the year commencing January 1 and ending
December 31.
ARTICLE II
PARTICIPATION
Section 2.1 ELIGIBILITY TO PARTICIPATE. All Directors shall be
eligible to participate in the Plan. The Employees eligible to participate
under this Plan shall be those key management Employees designated, in
writing, by the Board of Directors from time to time.
Section 2.2 COMMENCEMENT OF PARTICIPATION. An eligible Director or
Employee shall commence participation in this Plan by executing a deferral
agreement as provided by the Company.
Section 2.3 TERMINATION OF PARTICIPATION. A Director shall remain
a Participant until the termination of his directorship with the Company
for any reason. An Employee shall remain a Participant until his
termination of employment with the Company for any reason.
-2-
ARTICLE III
CONTRIBUTIONS AND ALLOCATIONS
Section 3.1 ELECTIVE DEFERRALS. A Participant may elect to reduce
the Compensation earned and received by him subsequent to the effective
date of his election, and to defer payment of such amounts in the manner
and subject to the adjustments provided in this Plan; provided, however,
that:
(a) In no event shall the effective date of any such deferral
agreement be earlier than the first day of the Plan Year
next following its acceptance by the Company. However, for
a Director or Employee who first becomes eligible to
participate in the Plan, the effective date of his deferral
agreement may be any date not later than 60 days after the
date on which he first becomes eligible to participate.
(b) In no event shall any Compensation earned by a Participant
prior to the date of the acceptance of such Participant's
deferral agreement by the Company be deferred hereunder;
(c) In no event shall any amount be deferred hereunder for any
period during which the Participant shall not remain a
Director or Employee of the Company entitled to Compensation
for his service as such;
(d) Except as provided in Sections 3.6 and 3.7, any such
election shall be irrevocable with respect to Compensation
earned by the Participant subsequent to the effective date
of the deferral agreement.
Section 3.2 AMOUNT OF 401(K) EXCESS ELECTIVE DEFERRAL. For each
Plan Year, a Participant may elect to defer an amount ("Excess Elective
Deferral") which shall not exceed the difference between:
(a) The maximum amount of salary reduction contributions which
could have been made on behalf of the Participant to the
401(k) Plan under the limitation of Code <Section>401(g)(1)
as in effect for the immediately preceding Plan Year; and
(b) The amount of salary reduction contributions actually made
on behalf of the Participant to the 401(k) Plan for the
immediately preceding Plan Year.
Section 3.3 MATCHING CONTRIBUTIONS. On or before the last day of
the Plan Year, the Company shall contribute to this Plan an amount
("Matching Contribution") equal to a percentage, as determined solely at
the discretion of the Board of Directors of the Company under the terms of
-3-
the 401(k) Plan, of that portion of each Participant's Excess Elective
Deferral which does not exceed 6% of the Participant's Compensation. A
Participant shall become vested in the Matching Contribution made on his or
her behalf pursuant to the following schedule:
<TABLE>
<CAPTION>
YEARS OF NONFORFEITABLE
SERVICE PERCENTAGE
<S> <C> <C>
1 0
2 0
3 25
4 50
5 75
6 100
</TABLE>
Section 3.4 ADDITIONAL DEFERRAL. In addition to any Excess
Elective Deferral made under Section 3.2 above, a Participant may also
elect in his deferral agreement to defer any amount of Compensation
received in excess of the maximum amount of salary reduction contributions
which could have been made on behalf of the Participant to the 401(k) Plan
under Code <Section>402(g)(1) as in effect for the immediately preceding
Plan Year. Any Additional Deferral made hereunder shall not qualify for a
Matching Contribution under Section 3.3.
Section 3.5 BONUS DEFERRAL. In addition to any Excess Elective
Deferral made under Section 3.2 above, or any Additional Deferral made
under Section 3.4 above, a Participant may elect in his deferral agreement
to defer all or a portion of his bonus.
Section 3.6 CHANGE IN DEFERRAL. A Participant shall have the right
to change the amount of his Excess Elective Deferral and his Additional
Deferral for any subsequent Plan Year by completing, signing and filing
with the Company prior to the commencement of any subsequent Plan Year a
deferral agreement in form satisfactory to the Company. Failure of a
Participant to elect to change the amount of his Excess Elective Deferral
and his Additional Deferral for any subsequent Plan Year shall constitute a
waiver of his right to do so for such Plan Year, and the amount by which
his Compensation will be reduced and deferred as elected in his most
recently executed deferral agreement shall continue in effect until the
earliest of the following events: (i) he elects to change the same for a
subsequent Plan Year, (ii) he elects to discontinue the same pursuant to
Section 3.7, or (iii) the termination of his directorship or employment.
Section 3.7 DISCONTINUANCE OF DEFERRAL. A Participant shall have
the right to discontinue the deferral of his Compensation as of the first
day of any month subsequent to the acceptance of his deferral agreement by
the Company, provided the Participant gives the Company written notice of
such discontinuance at least 30 days prior to the effective date of the
-4-
same. A Participant shall not be eligible to defer any portion of his
Compensation until the Plan Year following the Plan Year of such
discontinuance.
ARTICLE IV
BENEFITS
Section 4.1 ELIGIBILITY FOR BENEFITS. A Participant or a
Participant's Beneficiary shall be eligible to receive benefits under this
Plan upon the earlier of the following events to occur:
(a) Termination of directorship or employment with the Company
by the Participant for any reason; or
(b) Death of the Participant prior to termination of
directorship or employment with the Company.
Section 4.2 AMOUNT OF BENEFITS. The amount of benefits payable to
a Participant or to the Participant's Beneficiary under this Plan shall be
equal to the amount credited to the Participant's Deferred Compensation
Account, as defined in Section 5.1, as of the date of the earlier to occur
of the events in Section 4.1(a) or (b).
Section 4.3 TIME AND METHOD OF PAYMENT OF BENEFITS. Participant
may, by written instrument, elect the time and method of payment of
benefits hereunder. The election may be changed at any time or times by a
written instrument filed with the Board of Directors; provided, however, no
such election shall be valid if filed with the Board of Directors less than
twenty-four (24) months prior to termination of directorship or employment.
A Participant's election shall be from among the following alternatives:
(a) One lump sum payment of the balance to the Participant's
credit under the Plan.
(b) A stated dollar amount, or a percentage of the balance to
the credit of the Participant, at the time of termination
with the balance paid in annual installments, as equal as
possible, over not less than five (5) nor more than fifteen
(15) years.
(c) Annual installments, as equal as possible, over not less
than five (5) nor more than fifteen (15) years.
If no valid election has been made, the benefit will be paid in fifteen
annual installments, as equal as possible, commencing ninety (90) days
following termination of directorship or employment. If benefits are
payable to the Participant's Beneficiary, payments shall be made, or if
-5-
applicable shall continue, under the method elected by the Participant. If
benefits to the Participant have not commenced, and the Participant has not
elected a method of payment, payments shall be made to the Beneficiary in
fifteen (15) annual installments, as equal as possible, commencing ninety
(90) days following the Participant's death.
Notwithstanding the foregoing, the Participant or the
Participant's Beneficiary may request a different time and method of
payment. The Board of Directors shall determine whether a different time
and method will be allowed, in its sole and total discretion. The
Participant and the Participant's Beneficiary shall have no power or
authority to require a different time and method of payment. A Participant
who is a member of the Board of Directors shall not take part in any
decision by the Board of Directors with respect to payment of the
Participant's own benefit.
Section 4.4 CHANGE IN CONTROL. In the event of a change in control
of the Company, the benefits of all Participants under this Plan shall
immediately become payable in one lump sum, unless immediately after such
change in control the then Board of Directors of the Company readopts and
reaffirms this Plan. For purposes of this Plan, "change in control" means:
(a) Any purchase under a tender or exchange offer for the
Company's shares of common stock other than by the Company
or a wholly-owned subsidiary of the Company following which
the offeror owns beneficially more than 20% of the Company's
outstanding common stock;
(b) Shareholder approval of any merger, consolidation or sale of
all or substantially all of the Company's assets to or into
any person or entity other than a wholly-owned subsidiary of
the Company formed for the purpose of changing the Company's
corporate domicile;
(c) A change in the identity of a majority of the members of the
Board of Directors of the Company within any twelve-month
period, which change or changes are not recommended by the
incumbent directors immediately prior to any such change or
changes; or
(d) Any "person" (as the term "person" is defined in Section
13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act"), is or becomes the "beneficial owner" as the
term "beneficial owner" is defined in Rule 13d-3 under the
Exchange Act) directly or indirectly of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities. For
purposes of this Plan, ownership of voting securities shall
take into account and include ownership as determined by
applying the provisions of said Rule 13d-3.
-6-
Section 4.5 PAYMENT UPON HARDSHIP. At the written request of a
Participant or the Participant's Beneficiary if payments are due to the
Beneficiary, the Board of Directors, in its sole discretion, may authorize
payment of all or a portion of the Participant's benefit prior to
termination of the Participant's directorship or employment, upon a
demonstration of unforeseeable financial hardship of the Participant,
Beneficiary or their immediate families. An unforeseeable financial
hardship means an emergency need for funds resulting from extraordinary
circumstances arising as a result of events beyond the control of the
Participant or Beneficiary. Distributions as a result of an unforeseeable
financial hardship shall be permitted only to the extent reasonably
necessary to satisfy the emergency. A Participant who is a member of the
Board of Directors shall not take part in any decision by the Board of
Directors with respect to a hardship distribution to the Participant.
ARTICLE V
ACCOUNTS AND INTEREST
Section 5.1 DEFERRED COMPENSATION ACCOUNT. On or before the last
day of the Plan Year, the Company shall credit to a Deferred Compensation
Account established in the name of each Participant the Participant's
Excess Elective Deferral, his vested portion of the Matching Contribution,
his Additional Deferral, and his Bonus Deferral. Any amounts so credited
to a Participant's Deferred Compensation Account may, at the sole
discretion of the Company, be kept in cash or invested and reinvested in
those certain certificates, bonds, securities, investment funds or other
assets as may be selected by the Company from time to time. In addition,
at the sole discretion of the Company, such amounts may be invested by the
Company, as requested by each Participant, in one or more investment funds
as selected by the Company from time to time. For purposes of Section 5.2,
a Participant's Deferred Compensation Account shall be deemed to be
invested as requested by such Participant, whether or not the Company so
chooses to invest such Account. The Company shall at all times retain
title to all assets of the Plan, including those assets which may be
invested as requested by a Participant.
Section 5.2 VALUATION OF ACCOUNT. Each Participant's Deferred
Compensation Account shall be adjusted annually to reflect the net earnings
or net losses of such Account and the increase or decrease in the value of
each Account. Such adjustment shall be made on the basis of actual
investment experience for such year; provided, however, that if the
Participant has requested certain investments pursuant to Section 5.1, then
such annual adjustment of his Deferred Compensation Account shall be made
on the basis of the investment experience that would have resulted for such
year if the Company had made investments as so requested by such
Participant.
-7-
ARTICLE VI
ADMINISTRATION
Section 6.1 ADMINISTRATION OF PLAN. The Company shall administer
and interpret this Plan. All decisions of the Company concerning the Plan
shall be final, conclusive and binding upon all parties, and any person
participating in the Plan hereby agrees to be bound by the determinations
of the Company. Neither any member of the Board of Directors of the
Company nor any officer of the Company shall be liable for any action taken
by the Company or determination made by the Company with respect to the
Plan.
Section 6.2 CLAIMS PROCEDURE. Claims for benefits under the Plan
shall be made in writing to the Company. If a claim for benefits is wholly
or partially denied, the Company shall, within a reasonable period of time,
but not later than 90 days after receipt of the claim, provide the claimant
with a written notice setting forth in a manner calculated to be understood
by the claimant:
(a) The specific reason or reasons for denial;
(b) Specific reference to the pertinent Plan provisions on which
denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is
necessary; and
(d) Any explanation of the Plan's claim review procedure.
A Participant whose claim for benefits under the Plan has been denied, or
his duly authorized representative, may request a review upon written
application to the Company, may review pertinent documents, and may submit
issues and comments in writing. The claimant's written request for review
must be submitted to the Company with 60 days after receipt by the claimant
of written notification of the denial of a claim. A decision by the
Company shall be made not later than 60 days after the Company's receipt of
a request for review, unless special circumstances require an extension of
time, in which cases a decision shall be rendered as soon as possible, but
not later than 120 days after receipt of the request for review. The
decision on review shall be in writing and shall include specific reasons
for the decision, specific references to the pertinent Plan provision on
which the decision is based, and shall be written in a manner calculated to
be understood by the claimant.
-8-
ARTICLE VII
AMENDMENT AND TERMINATION OF THE PLAN
Section 7.1 AMENDMENT AND TERMINATION. The Plan may be amended by
the Company at any time or from time to time and may be terminated by the
Company with respect to any or all Participants at any time. Any action
taken by the Company under this Plan may be taken by resolution of the
Board of Directors or by any person or persons authorized by a resolution
of the Board of Directors to take such action.
Section 7.2 ERISA COMPLIANCE. Notwithstanding any provisions of
this Article VII to the contrary, the Company may amend or modify the Plan
in any respect which shall be necessary or advisable in order that the
benefits provided by the Plan shall constitute unfunded deferred
compensation for a select group of management or highly compensated
employees as described in Sections 201(2), 301(a)(3) and 401(a)(1) of the
Employee Retirement Income Security Act of 1974.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 UNFUNDED PLAN. The undertakings of the Company herein
constitute merely the unsecured promise of the Company to make the payments
as provided for herein. Neither a Participant nor any Beneficiary nor any
other person shall have, by reason of this Plan, any rights, title or
interest of any kind in or to any property of the Company. If the Company
transfers any property to a trust in connection with this Plan, such trust
shall not be held for the exclusive benefit of Participants, and any assets
held in such trust shall be subject to the claims of the Company's general
creditors in the event of the Company's insolvency.
Section 8.2 NO CONTRACT. Neither anything contained in this Plan,
nor any amendment pursuant hereto, shall be construed as entitling a
Participant to be continued as a director or in the employ of the Company
for any period of time, or as obliging the Company to keep said Participant
as a director or in its employ for any period of time. Furthermore,
neither anything contained in this Plan, nor any amendment pursuant
thereto, shall be construed as restricting in any way the right of the
Company to reassign a Participant for any reason to a new employment
position at lower or higher compensation.
Section 8.3 NONASSIGNABILITY. No rights of any kind under this
Plan shall be transferable or assignable by a Participant, Beneficiary or
any other person, or be subject to alienation, encumbrance, garnishment,
attachment, execution or levy of any kind, voluntary or involuntary.
-9-
Section 8.4 RULES OF CONSTRUCTION. In the event that any provision
of the Plan is determined by any judicial, quasi-judicial or administrative
body to be void or unenforceable for any reason, all other provisions of
the Plan shall remain in full force and effect as if such void or
unenforceable provision had never been a part of the Plan. The singular
herein shall include the plural, or vice versa, wherever the context so
requires. A pronoun in the masculine, feminine or neuter gender shall be
deemed, where appropriate, to include also the masculine, feminine or
neuter gender.
Section 8.5 DISTRIBUTIONS TO MINORS AND INCOMPETENT INDIVIDUALS.
If the President of the Company shall determine, in his sole and absolute
discretion, that any person to whom any amount is payable under the Plan is
unable to care for his affairs because of illness or accident, or is a
minor, any payment due (unless a prior claim therefor shall have been made
by a duly appointed guardian, committee or other legal representative) may
be paid in one or more of the following ways as the President deems best:
to the Participant or his Beneficiary directly, to the legally appointed
guardian of the Participant or his Beneficiary, to the custodian for the
Beneficiary under the Uniform Gifts to Minors Act if such is permitted by
the laws of the residence of the Beneficiary or to any person or
institution responsible for or assuming the care of the Participant or his
Beneficiary. The written receipt of the Participant, the Beneficiary,
guardian, custodian, person or institution shall be a complete release to
the Company, and the Company shall have no duty to see to the use or
application of any funds so paid.
Section 8.6 APPLICABLE LAW. The Plan shall be construed in
accordance with, and governed by, the laws of the State of Michigan.
IN WITNESS WHEREOF, the Company, by its officer duly authorized, has
executed this document as of the day and year first above written.
Attest: FIRSTBANK CORPORATION
/S/ NANCY A. STARK By: /S/ JOHN MCCORMACK
Nancy A. Stark John McCormack
Its: President and Chief
Executive Officer
EXHIBIT 13
1995 ANNUAL REPORT TO SHAREHOLDERS
EXHIBIT 13
PRESIDENT'S MESSAGE
TO OUR SHAREHOLDERS:
[Net Income Graph]
The highlight of 1995 was a 20% increase in earnings to $3,865,000.
Firstbank Corporation also achieved record loans, deposits, total assets
and shareholders' equity in 1995. Per share earnings increased 19% to
$2.52 in 1995 compared to $2.12 in 1994. Net income per share has been
adjusted for the 5% stock dividend issued in December 1995.
Net income of $3,865,000 was the highest ever achieved by Firstbank
Corporation and compares to $3,221,000 net income earned in 1994. The
increase in earnings was primarily the result of a strong net interest
margin of 5.29% and a $41.5 million increase in loans.
The continued record performance of Firstbank Corporation has been achieved
because of our commitment to community banking. Firstbank Corporation is
comprised of three banks that operate independently of one another. Each
bank has a CEO and Board of Directors that are actively involved in their
respective communities and in generating new business.
Many multibank holding companies are consolidating their statewide banks
into a single bank and centralizing some decision processes that negatively
impact customers. Certainly there are some cost savings by consolidation
but our growth in earning assets has been a result of our ability to
respond to customer needs because of our community bank concepts. We have
centralized those departments that do not impact customer decisions. Each
community bank is able to make loan, marketing, and product decisions
locally that efficiently serve their customers. The local decision
capability by each bank has increased our market share thereby increasing
income over the past several years.
Total assets increased 14% in 1995 to $353 million compared to $310 million
in 1994. A branch acquisition by Firstbank, Mt. Pleasant, added $11
million in new deposits with the balance of the growth coming from
increased deposits and loans at each bank.
Total loans increased 19% to $265 million compared to $223 million in 1994.
Loans increased in all three loan categories with commercial loans
increasing 17%, real estate mortgages 23% and consumer loans 16%.
Consistent with the increase in loans, the allowance for loan losses also
increased 19% to $4,876,000 from $4,100,000 in 1994.
The loan growth was funded by a $40 million increase in deposits and a $2
million decrease in securities. Time deposits grew by $33 million in 1995
which accounted for the majority of the deposit growth.
Loans grew by $41.5 million and loan quality remains very good.
Nonperforming loans to total loans were .23% and the allowance for loan
losses to nonperforming loans was 792%. Net charge offs to average loans
was .13% for the year.
We consistently scrutinize the quality of the loan portfolio and utilize
the services of an outside loan review specialist. The loan review
specialist reviews approximately 60% of the outstanding commercial loan
portfolio annually and also performs periodic quality tests on the consumer
and real estate mortgage portfolios. We believe the quality of the loan
portfolio is very good and the allowance for loan losses is adequate for
any unforseen problem loans.
The banks of Firstbank Corporation operate under four strategic priorities.
The priorities are: the customer, employees, communities, and
shareholders. Each of these priorities is linked. The customers are the
focal point of how we have grown our company and are the foundation for the
success of the other three priorities. We pride ourselves by providing
customers with professional and efficient service which has resulted in our
growth. A recent survey to determine customer satisfaction of a subsidiary
bank indicated that 91% of customers were either satisfied or very
satisfied with customer service, which exceeds results of national surveys.
Each employee is critical to our success. We spend a sizeable amount of
time and money to ensure that employees are well trained and motivated to
satisfy customer needs.
We are also cognizant of the needs of the communities we serve. We expect
our employees to be involved in organizations within their communities and
in many instances they assume important leadership roles.
Satisfied customers, employees that are dedicated to customer satisfaction,
and leadership in the communities we serve all result in enhancement of
franchise and shareholder value. When we are successful in our first three
priorities, the shareholder is the beneficiary of our success. Through
attention to the four priorities, we have increased the compounded growth
of average assets of Firstbank Corporation by 11% annually over the past
eight years and net income has increased 17% compounded annually for the
same period.
Shareholder value as measured by share price and dividends created
excellent value for Firstbank Corporation shareholders in 1995. The
reported bid value of Firstbank Corporation shares at the end of 1995 was
up 28% from the end of 1994. Cash dividends, adjusted for stock dividends,
increased 22% in 1995 from $.54 per share in 1994 to $.66 per share in
-2-
addition to increased market valuation. The Board of Directors will be
reviewing 1995 financial results and earnings projections for 1996 early in
the second quarter to determine if another increase in cash dividends is
warranted.
A 5% stock dividend was issued at the end of 1995 and by late February the
bid price of our stock increased from $24.75 per share to $27.00 per share
for a 9% increase in market value.
In the fourth quarter of 1995, Firstbank Corporation upgraded its
technology systems and acquired new technology to improve marketing and
customer service. The new technology positions us to stay on the forefront
of electronic banking. We recognize the need to deliver quality products
and services at a reduced cost, and we continually monitor technology to
benefit our customers and shareholders' value.
Bank of Alma directors, employees and customers were saddened by the
unexpected death of Arland Conner. Mr. Conner passed away in December
after working for Bank of Alma for 31 years. At the time of his death, he
served as a Vice President of the bank, and manager of the Consumer Loan
Department. He is deeply missed by his customers and the directors and
employees of the Bank.
We appreciate the support of all shareholders whose commitment to Firstbank
Corporation is vital to our success. We believe 1996 will be another
successful year that will reward your investment in our company.
Respectfully submitted,
/s/JOHN MCCORMACK
John McCormack
President & Chief Executive Officer
-3-
<PAGE>
[Dividend per Share Quarterly Average Graph]
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
FOR THE YEAR: 1995 1994 1993 1992 1991
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income $ 27,356 $ 20,496 $ 18,931 $ 18,284 $ 19,533
Net interest income 15,554 12,941 11,476 9,917 8,809
Provision for loan losses 1,085 1,000 1,139 980 985
Noninterest income 2,509 2,547 2,726 2,347 1,269
Noninterest expense 11,813 10,328 9,522 8,701 8,635
Net income 3,865 3,221 2,841 2,003 270
AT YEAR END:
Total assets 352,943 309,722 257,339 242,105 220,266
Total earnings assets 327,232 286,956 243,443 224,886 200,630
Loans 264,847 223,391 178,394 143,432 141,965
Deposits 306,823 266,894 220,157 213,846 188,890
Shareholders' equity 29,853 25,596 23,497 15,542 13,906
AVERAGE BALANCES:
Total assets 330,079 268,399 247,659 222,658 213,706
Total earnings assets 308,294 250,984 231,881 206,624 196,556
Loans 243,962 191,682 158,908 139,130 142,873
Deposits 288,692 234,546 217,621 196,804 186,288
Shareholders' equity 27,569 24,787 18,271 14,840 14,296
PER SHARE:<F1>
Net income 2.52 2.12 2.28 1.76 0.25
Cash dividends 0.66 0.54 0.51 0.49 0.49
Shareholders' equity 19.36 16.76 15.47 13.49 12.30
FINANCIAL RATIOS:
Return on average total assets 1.17% 1.20% 1.15% 0.90% 0.13%
Return on average equity 14.02% 12.99% 15.55% 13.50% 1.89%
Average equity to average assets 8.35% 9.24% 7.38% 6.66% 6.69%
Dividend payout ratio 26.23% 26.09% 22.77% 28.01% 215.06%
<FN>
<F1>All per share amounts adjusted for stock dividends and stock split
</FN>
</TABLE>
The Corporation's Firstbank subsidiary acquired a branch in Clare during
1992. In that transaction the bank assumed $16,000,000 of deposit
liabilities. The purchase method of accounting was used for the
transaction. Accordingly, the assets and operating results of this
branch are included in the consolidated financial statements for periods
after October 16, 1992, the date of purchase.
-4-
The Corporation's Bank of Alma subsidiary acquired a branch in St.
Charles during 1994. In that transaction the bank assumed $11,000,000 of
deposit liabilities and acquired $5,000,000 in earning assets. The
assets, liabilities and operating results of this branch are included in
the consolidated financial statements after November 11, 1994. The
Corporation's 1st Bank subsidiary acquired branches in Fairview and
Higgins Lake during 1994. In that transaction, the bank assumed
$15,000,000 of deposit liabilities. The assets, liabilities and
operating results of these branches are included in the consolidated
results after November 30, 1994. The purchase method of accounting was
used for these transactions.
The Corporation's Firstbank subsidiary acquired a branch in Mt. Pleasant
during 1995. In that transaction, the bank assumed $11,000,000 of
deposit liabilities. The purchase method of accounting was used for the
transaction. Accordingly, the assets and operating results of this
branch are included in the consolidated financial statements for periods
after June 16, 1995.
THE CORPORATION'S FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION WILL BE PROVIDED TO ANY SHAREHOLDER WITHOUT CHARGE UPON
WRITTEN REQUEST. REQUESTS SHOULD BE ADDRESSED TO MARY D. DECI, CHIEF
FINANCIAL OFFICER, FIRSTBANK CORPORATION, 311 WOODWORTH AVENUE, P. O. BOX
1029, ALMA, MICHIGAN 48801-6029.
-5-<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this section of the annual report is to provide narrative
discussion about Firstbank Corporation's financial condition and results
of operations. Please refer to the consolidated financial statements and
the selected financial data presented in this report in addition to the
following discussion and analysis.
[Earnings Per Share Graph]
RESULTS OF OPERATIONS
HIGHLIGHTS
Record earnings headline the story of the Company's 1995 performance.
Net income of $3,865,000 for 1995 exceeded 1994 earnings by $645,000 or
20%. 1994 earnings surpassed 1993 results by 13%. Net interest income
of $15.6 million was $2.7 million higher than the 1994 results, driven
primarily by a $40 million increase in earning assets. In both the
previous years of 1994 and 1993, earnings were enhanced by nonrecurring
items. Net income in 1994 was augmented by a $291,000 (net of the effect
of federal income tax) gain on termination of the Company's defined
benefit pension plan. The Company's 1993 net income rose $256,000
relating to a required change in the Company's method of accounting for
income taxes. The Company's 1995 net income was not increased by
nonrecurring factors, but rather was the result of continued strength in
core banking activities.
Management believes that standard performance indicators help evaluate
the Company's performance. The Company posted a return on average assets
of 1.17%, 1.20% and 1.15% in 1995, 1994, and 1993 respectively. Total
average assets increased $62 million in 1995, $21 million in 1994, and
$25 million in 1993. Return on average equity was 14.02%, 12.99%, and
15.55% for 1995, 1994, and 1993. Net income per share was $2.52, $2.12,
and $2.28 for the same periods.
NET INTEREST INCOME
The core business of the Company is earning interest on loans and paying
interest on deposits. In successfully managing this business, the
Company has increased its net interest income by $2.6 million from 1994
for a 20% gain. Net interest margin was 5.29% in 1995, 5.47% in 1994,
and 5.27% in 1993. These wide margins are maintained through strong
lending activity. The Company's loan to deposit ratio, using average
balances, was 83% at December 31, 1995, as compared to 80% and 81% at the
end of 1994 and 1993. Loans grew $41 million during 1995 with all of the
growth generated from the markets in which the Company operates.
-6-
Interest rates on earning assets and interest bearing liabilities are
both subject to market forces. However, the Company can generally
exercise more control over deposit costs than earning rates on assets.
Loan products carry either fixed rates of interest or rates tied to
market indices determined independently. The Company sets its own rates
on deposits, providing management with some flexibility in determining
the timing and proportion of rate changes for the cost of its deposits.
-7-
<PAGE>
<TABLE>
Summary of Consolidated Net Interest Income
<CAPTION>
Year Ended Year Ended Year Ended
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
Average Average Average Average Average Average
(Dollars in thousands) Balance Interest Rate Balance Interest Rate Balance Interest Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Average Assets
Interest earning
assets:
Securities available
for sale
Taxable securities $ 30,198 $ 1,945 6.45 $ 26,532 $ 1,360 5.10 $ 40,956 $ 2,144 5.23
Tax exempt
securities <F1> 28,026 2,355 8.04 28,476 2,398 8.13 26,139 2,238 8.29
Total securities 58,224 4,300 7.21 55,008 3,758 6.69 67,095 4,382 6.43
Loans <F1> <F2> 243,806 23,482 9.64 191,385 17,323 9.06 158,417 15,118 9.53
Federal funds sold 6,028 359 5.93 4,449 226 5.06 6,338 190 3.00
Interest bearing
deposits 235 16 8.37 31 3 8.37 31 3 8.27
Total earning
assets 308,293 28,157 9.11 250,873 21,310 8.48 231,881 19,693 8.48
Nonaccrual loans 100 186 492
Less allowance for
loan loss (4,458) (3,657) (2,747)
Cash and due from
banks 12,706 10,926 8,552
Other non earning
assets 13,438 9,882 9,482
Total assets $330,079 $268,210 $247,660
Average Liabilities
Interest bearing
deposits:
Demand $ 61,201 $ 2,047 3.35 $ 55,152 $ 1,494 2.71 $ 53,296 $ 1,461 2.74
Savings 54,879 1,533 2.80 50,447 1,407 2.79 46,086 1,428 3.10
Time 135,926 7,672 5.64 96,549 4,415 4.57 90,453 4,216 4.66
Federal funds
purchased and
repurchase
agreements 10,401 550 5.29 5,828 239 4.11 5,750 199 3.46
Notes payable 2,790 152 5.44
Total interest
bearing
liabilities 262,407 11,802 4.50 207,976 7,555 3.63 198,375 7,456 3.76
-8-
Demand deposits 36,686 32,398 27,786
Total funds 299,093 240,374 226,161
Other liabilities 3,417 3,049 3,228
Total liabilities 302,510 243,423 229,389
Average Shareholders'
Equity 27,569 24,787 18,271
Total liabilities
and shareholders'
equity $330,079 $268,210 $247,660
Net interest
income<F1> $16,355 $ 13,755 $ 12,237
Rate spread <F1> 4.61% 4.85% 4.72%
Net interest margin
(percent of
average earning
assets) <F1> 5.29% 5.47% 5.27%
<FN>
<F1> Presented on a fully taxable equivalent basis using a federal income tax rate of 34%.
<F2> Including loan fees of $1,060,300, $897,700, and $1,187,300, respectively.
Interest is not included in nonaccrual loans.
</FN>
</TABLE>
The preceding table presents a comparison of average balances, average rates,
rate spread and net interest margin on average assets for 1995, 1994 and
1993. The average earning rate on total earning assets was 9.11% in 1995,
and 8.48% in 1994 and 1993. Prime rate remained unchanged during 1993 and
increased 175 basis points during 1994. Although prime rate began and ended
1995 at the same level, it rose early in the year, and then declined during
the last half of 1995. The Company's earning assets are primarily term
instruments which do not reprice until maturity or refinancing occurs. The
increase in the 1995 average earning rate is, to a large extent, the result
of the prime rate increases of 1994. The average rate paid on interest
bearing liabilities was 4.50% in 1995, 3.63% in 1994 and 3.76% in 1993. As
management expected, the combination of the prime rate increases of 1994 and
competition for deposit dollars have resulted in the Company offering a
higher rate to its deposit customers. The largest increase in average rates
paid on interest bearing liabilities is time deposits. This class of deposit
tends to be more interest sensitive than demand or savings accounts.
The 1995 rate spread of 4.61% decreased 24 basis points from the 1994 level
of 4.85% which was an increase of 13 basis points from 4.72% of 1993. Tax
equivalent net interest income increased $2.6 million from 1994 to 1995 as
total average assets rose $62 million for the same period. Net interest
-9-
margin decreased from 5.47% in 1994 to 5.29% in 1995. The decrease in both
the rate spread and net interest margin are a result of average deposit rates
rising more than average asset yields.
PROVISION FOR LOAN LOSSES
The provision for loan losses was $1.1 million in 1995 and 1993 and $1.0
million in 1994. Net charge offs were $309,000 in 1995 as compared to
$154,000 and $279,000 in 1994 and 1993. Net charge offs as a percent of
average loans were .13% for 1995, .08% for 1994, and .18% for 1993. At
December 31, 1995, nonperforming assets were .23% of total loans compared to
.31% and .37% for 1994 and 1993 respectively. Management actively monitors
the adequacy of the allowance for loan losses and maintains the allowance at
a level intended to provide for losses inherent in the portfolio.
NONINTEREST INCOME
Total noninterest income posted a small decrease of $37,000 or 1.5% from 1994
to 1995 after declining $2.5 million from 1993 to 1994. While service
charges on deposit accounts, trust fees and other income items increased, the
additions to those items were not enough to make up for the pension plan
termination gain included in the 1994 results. The $272,000 addition to
other noninterest income consists of three major items. First, recoveries on
other real estate owned in 1995 were $82,000 higher than in 1994. Secondly,
one of the Company's affiliates began a purchased receivable program in 1995.
The income from that program was $120,000 in 1995. The third item is a
result of impaired securities which were written down to their estimated
market value in 1991. In 1992, holders of those securities initiated a class
action suit against the issuers of the securities. Late in 1995, the Company
received a settlement of $32,000 as a result of the litigation. The gain on
sale of mortgages declined $95,000 in 1995 when compared to 1994, which was a
$688,000 decrease from 1993. The Company's large mortgage origination volume
in 1993 was a result of interest rates during that period that were lower
than most outstanding mortgages at that time. Such a rate scenario created
the opportunity for refinancings in addition to stimulating activity in the
housing market. Management believes that the origination levels of 1993 are
not likely to be repeated even if rates fall, although a decrease in rates
would likely result in an increase in volume over 1995 levels.
Evident in the results of the mortgage banking activity of the last few years
is the increase in the loans serviced for others. The mortgage loans
serviced portfolio exceeded $128 million for a 16% increase when compared to
1994. The Company earned $329,000 from mortgage servicing in 1995 which
surpassed the 1994 and 1993 earnings of $292,000 and $251,000. Beginning
January 1, 1996, the Company will adopt Financial Accounting Standards Board
Statements SFAS 122, ACCOUNTING FOR MORTGAGE SERVICING RIGHTS. For further
discussion of SFAS 122 please refer to Note D of the consolidated financial
statements.
-10-
NONINTEREST EXPENSE
Noninterest expense posted a $1,484,000 or 14% increase in 1995 when compared
to 1994, which was $806,000 or 8% higher than 1993. Salary and benefit
expenses account for $632,000 of the rise in noninterest expenses. The
personnel costs associated with operating three additional branches for the
entire year and a fourth branch for over six months in addition to normal
increments explain this increase. Occupancy expense showed a decline of
$85,000 in 1995 after increasing $213,000 in 1994. The Company upgraded its
data processing mainframe hardware and software in late 1995. The previous
computer system was fully depreciated by the end of 1994, and 1995 results
include only two months of depreciation expense for the mainframe computer
hardware and software.
Deposit insurance costs have shown a reduction although insured deposits have
increased $40 million. The insurance fund covering bank insured deposits
(Bank Insurance Fund or BIF) became fully capitalized during the first half
of 1995. As a consequence, the assessment rate on the Company's BIF insured
deposits was reduced from $.23 to $.04 per $100 of deposits and the Company
received refunds from BIF of $89,000 in the third quarter of 1995. BIF
continues to be well capitalized and management expects the FDIC insurance
cost for bank insured deposits to be $2,000 per year per affiliate bank.
Some of the Company's affiliate banks have purchased deposits from Savings
and Loan Associations that continue to be insured by the Savings Association
Insurance Fund (SAIF). The Company currently has $37 million of deposits
insured with SAIF. Those deposits will continue to have insurance costs
associated with them which are in excess of the BIF insurance premiums. In
addition, a recapitalization plan for the SAIF is under consideration by
Congress to provide for a special assessment on all SAIF insured deposits.
The estimated effect of this one time assessment is not expected to have a
material effect on the financial position or results of operations.
Other noninterest expense increased $1,051,000 in 1995 after rising $243,000
in 1994. Much of this increase is a result of operating three branches
acquired late in 1994 for the entire 1995 year. In addition, the Company
purchased a branch in the second quarter of 1995. The costs associated with
operating that facility are included in the 1995 results, subsequent to its
acquisition date. Management intends to continue to actively pursue
acquisition opportunities that will enhance shareholder value.
FEDERAL INCOME TAX EXPENSE
The Company's effective tax rate was 25%, 23%, and 27% for 1995, 1994, and
1993 respectively. The principal difference between those percentages and
the corporate tax rate of 34% is the Company's investment in securities and
loans which provided income exempt from federal income tax. In 1993, the
Company adopted Statement of Financial Accounting Standards No. 109,
ACCOUNTING FOR INCOME TAXES. Adoption of the standard had no material effect
apart from the $256,000 cumulative effect adjustment recorded at the time of
adoption, which increased 1993 earnings.
-11-
FINANCIAL CONDITION
BALANCE SHEET STRUCTURE
Total assets of the Company at December 31, 1995 surpassed the December 31,
1994 total by $43 million or 14% to reach $353 million. Loans grew $41.5
million during this one year period, with all classes of loans increasing.
In addition to the expansion of portfolio loans, mortgage loans serviced for
others rose $18 million.
The following table displays the change in loan balances during 1995.
<TABLE>
<CAPTION>
(Dollars in thousands)
1995 1994 CHANGE % CHANGE
<S> <C> <C> <C> <C>
Commercial $ 115,779 $ 99,307 $ 16,472 16.6%
Real Estate Mortgage 90,753 73,760 16,993 23.0%
Consumer 58,315 50,324 7,991 15.9%
Total $ 264,847 $223,391 $ 41,456 18.6%
Mortgages Serviced
for others $ 128,418 $110,472 $ 17,946 16.2%
</TABLE>
Management expects loan demand will continue to be strong during the next
twelve months, but that the rate of growth will diminish. Much of the loan
growth experienced in 1995 is attributable to the sites selected for new
branches over the last three years. As the personnel from these offices have
become established in their respective communities, they have been able to
successfully compete for loan business. Michigan's stable economy has
created loan demand in all three portfolios of the Company's loans. The loan
growth has been funded by an increase in deposits and a decrease in
investment securities.
Pursuant to the FASB Special Report, A GUIDE TO IMPLEMENTATION OF STATEMENT
NO. 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
the entire portfolio of held to maturity securities was transferred to the
available for sale classification on December 12, 1995. The Company believes
that the reclassification of all securities as available for sale will
provide management with greater flexibility in managing its assets and
liabilities. The Company has used the proceeds from the maturities and sales
of investment securities to fund loan growth.
Premises and equipment increased $2,155,000 after depreciation expense of
$437,000. The Company opened three new branch bank facilities during 1995 in
addition to purchasing a new mainframe computer system and upgrading the
mainframe software. During the year, an affiliate bank began a courier
service as a subsidiary of that bank. The building and vehicles needed to
operate the courier service were added to premises and equipment during 1995.
-12-
Deposit growth of $40 million was primarily used to fund the increase in
loans. The majority of the addition to deposits is in time deposits. The
Company has aggressively promoted its time deposit products in an attempt to
mitigate the volatility of its deposit portfolio. Also included in the
increase in deposits is $11 million of deposits from branch acquisitions.
Securities sold under agreements to repurchase and overnight borrowings have
decreased $2.3 million from December 31, 1994. The majority of this decrease
is from a $1.7 million drop in securities sold under agreements to
repurchase. The Company's governmental depositors are demonstrating a
preference for time deposits instead of securities sold under agreements to
repurchase. The Company has designed a product for certain large customers
that automates the notification standards of securities sold under agreement
to repurchase while providing these customers with the flexibility they
desire.
ASSET QUALITY
Management continues to be aggressive in its recognition of problem loans.
In most cases, when a loan becomes 90 days past due, all income earned but
not paid is deducted from current income. Loans are carried at an amount
management believes will be collected. A balance not deemed collectible is
charged against the allowance. In 1995 net chargeoffs were $309,000 compared
to $154,000 and $279,000 in 1994 and 1993 respectively.
Nonperforming loans are defined as nonaccrual loans, loans 90 days or more
past due, and any loans where the terms have been renegotiated. Total
nonperforming loans were $615,000 and $597,000 at the end of 1995 and 1994
respectively. The average investment in impaired loans for the year ended
December 31, 1995 was $304,000, as more fully disclosed in Note E to the
financial statements. Nonaccrual loans were $47,000 at December 31, 1995,
compared to $120,000 at the end of 1994.
The allowance for loan losses increased $776,000 or 19% during 1995. The
allowance for loan losses represented 1.84% of outstanding loans at December
31, 1995 and 1994. Management maintains the allowance at a level which
adequately provides for losses inherent in the portfolio. Such losses are
estimated by a variety of factors, including specific examination of certain
borrowing relationships and consideration of historical losses incurred on
certain types of credits. Management focuses on early identification of
problem credits through ongoing review by management, loan personnel and an
outside loan review contractor.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The primary goal of asset liability management is to achieve reasonable and
predictable earnings and liquidity. Related to that goal is the maintenance
of a proper balance between interest earning assets and interest bearing
liabilities.
-13-
Liquidity management also involves the ability to meet the cash flow
requirements of the Company's customers. These customers may be either
borrowers needing to meet their credit needs or depositors wanting to
withdraw funds. Management of interest rate sensitivity attempts to avoid
widely varying net interest margins and to achieve consistent net interest
income through periods of changing interest rates. The prime rate increased
50 basis points in early 1995, which put pressure on the rates the Company
pays on deposit products. Two 25 basis point decreases in the prime rate
subsequent to the initial increase have put the prime rate back to the same
level as the end of 1994.
The Company earned a net interest margin of 5.29% in 1995 compared to 5.47%
in 1994. Loan yields were 9.64% and 9.06% in 1995 and 1994 respectively, and
deposit costs were 3.89% and 3.12% for the same periods. While considering
that loan yields rose 58 basis points while deposit costs have increased 77
basis points, the challenge of asset liability management becomes clear. An
increase in deposit rates affects most rates paid immediately. Therefore,
deposit rate increases have a significant negative impact on net interest
margin. With the exception of variable rate loans, a corresponding increase
in loan rates does not affect the Company's customers, and therefore the
Company's yield, until a new loan is made.
The principal sources of liquidity for the Company are maturing securities,
federal funds sold, loan payments by borrowers, investment securities, loans
held for sale, and deposit or deposit equivalent growth. Securities maturing
within one year at both December 31, 1995 and 1994, totaled $15 million.
Estimated maturities of collateralized mortgage obligations are based on
their recent payment history.
-14-
The following table shows the interest sensitivity gaps for five different
intervals as of December 31, 1995:
<TABLE>
MATURITY OR REPRICING FREQUENCY
(Dollars in millions)
<CAPTION>
2 days 4 mos. 13 mos.
through through through
1 day 3 mos. 12 mos. 5 yrs. 5+ yrs.
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Loans $ 77.3 $ 19.9 $ 37.6 $ 113.9 $ 16.1
Investment securities 0.0 1.2 13.7 33.7 12.7
Other earning assets 1.0 0.2 0.0 0.0 0.0
Total 78.3 21.3 51.3 147.6 28.8
Interest bearing
liabilities:
Deposits 118.6 41.0 75.1 32.9 0.3
Other bearing liabilities 3.4 4.6 3.9 0.1 0.2
Total 122.0 45.6 79.0 33.0 0.5
Interest sensitivity gap (43.7) (24.3) (27.7) 114.6 28.3
Cumulative gap $ (43.7) $(68.0) $(95.7) $ 18.9 $ 47.2
</TABLE>
For the one day interval, maturities of interest bearing liabilities exceed
those of interest earning assets by $43.7 million. The one day maturity
classification includes $119 million of savings and checking accounts which
are contractually available to the Company's customers, but function however
as a core deposit, or a liability with a considerably longer maturity. The
pattern of interest sensitive liabilities exceeding interest sensitive assets
continues through the one year time frame resulting in a cumulative excess of
$95.7 million. For the time periods of over one year to five years, and 5+
years, the trend reverses so that at 5+ years, interest sensitive assets
exceed interest sensitive liabilities by a cumulative gap of $47 million.
[Book Value Per Share Graph]
Interest rate sensitivity varies with different types of interest earning
assets and interest bearing liabilities. Overnight investments, on which
rates change daily, and loans tied to the prime rate, differ considerably
from long term investment securities and fixed rate loans. Time deposits
over $100,000 and money market accounts are more interest sensitive than
regular savings accounts. Comparison of the repricing intervals of interest
earning assets to interest bearing liabilities is a measure of the interest
sensitivity gap. Balancing this gap is a continual challenge in a changing
rate environment. The Company relies on a computer modeling technique to
-15-
measure interest rate sensitivity. The Company uses a sophisticated computer
program to perform analysis of interest rate risk and assist with its asset
liability management.
CAPITAL RESOURCES
The Company obtains funds for its operating expenses and dividends to
shareholders through dividends from its subsidiary banks. In general, the
subsidiary banks pay only those amounts required to meet holding company cash
requirements. No excess liquidity is accumulated at the holding company,
rather capital is maintained at the subsidiary banks to support growth.
Bank regulators have established risk based capital guidelines for banks and
bank holding companies. Minimum capital levels are established under these
guidelines. Each asset category is assigned a perceived risk weighting. Off
balance sheet items such as loan commitments and standby letters of credit
also require capital allocations.
The following table compares the Company's capital ratios at December 31,
1995, to current regulatory guidelines:
<TABLE>
<CAPTION>
Tier 1 Tier 1 Total
Leverage Risk-Based Risk-Based
RATIO CAPITAL RATIO CAPITAL RATIO
<S> <C> <C> <C>
Adequately capitalized
regulatory level 4.00% 4.00% 8.00%
Well capitalized regulatory
level 5.00% 6.00% 10.00%
Firstbank Corporation --
Consolidated 8.08% 9.94% 11.20%
Bank of Alma 8.37% 10.78% 12.02%
Firstbank 8.14% 9.46% 10.72%
1st Bank 7.42% 9.16% 10.42%
</TABLE>
-16-
The following table shows the dollar amounts, in thousands, by which the
Company's capital exceeds current regulatory requirements:
<TABLE>
<CAPTION>
Tier 1 Total
Tier 1 Risk-Based Risk-Based
LEVERAGE CAPITAL CAPITAL
(Dollars in Thousands)
<S> <C> <C> <C>
Capital balances at 12/31/95 $26,578 $26,578 $29,938
Adequate regulatory capital
level 13,144 10,691 21,383
Excess $13,434 $15,887 $ 8,555
</TABLE>
The Federal Deposit Insurance Corporation insures specified customer deposits
and assesses premium rates based on defined criteria. Insurance assessment
rates may vary from bank to bank based on the factors that measure the
perceived risk of a financial institution. One condition for maintaining the
lowest risk assessment and therefore the lowest insurance rate is the
maintenance of capital at the "well capitalized" level. Each of the
Company's affiliate banks has exceeded the regulatory criteria for a "well
capitalized" financial institution, and therefore is paying the lowest
assessment rate assigned by FDIC.
A certain level of capital growth is desirable to maintain a good ratio of
equity to total assets. The compound annual growth rate for total average
assets for the past five years was 10.95%. The compound annual growth rate
for average equity over the same period was 16.04%. The compound annual
growth rate for equity includes the stock offering in 1993.
Management has determined that one way of maintaining capital adequacy is to
maintain a reasonable rate of internal capital growth. The percentage return
on average equity times the percentage of earnings retained after dividends
equals the internal growth percentage. The following table illustrates this
relationship:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Return on Equity 14.0% 13.0% 15.6%
MULTIPLIED BY
Percentage of Earnings Retained 73.8% 73.9% 77.2%
EQUALS
Internal Capital Growth 10.3% 9.6% 12.0%
</TABLE>
-17-
The increase in the rate of internal capital growth in 1995 is an indication
of the effective deployment of the capital addition from the 1993 stock
offering. The decrease in the rate of internal capital growth in 1994 is a
result of a decrease in return on average equity. The 1993 stock offering
affects the return on equity calculation for the entire year of 1994, but
only the last quarter of 1993. To maintain sufficient capital, management
has determined that the rate of internal capital growth should average at
least 5%. To achieve this goal, management will continue its efforts to
increase the Company's return on average equity while maintaining a
reasonable cash dividend.
As an additional enhancement to capital growth, the Company offers a dividend
reinvestment program. The Firstbank Corporation Dividend Reinvestment Plan
was first offered in 1988. At December 31, 1988, 123 owners of 86,325 shares
participated in the plan. By the end of 1995, 396 owners holding 315,471
shares were participating in the plan.
The Company is not aware of any recommendations by regulatory authorities at
December 31, 1995, which are likely to have a material effect on Firstbank
Corporation's liquidity, capital resources or operations.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS
123). The Statement establishes new methods of reporting stock based
compensation costs in the financial statements. For a complete description
of this standard, refer to Note A to the financial statements.
IMPACT OF INFLATION AND CHANGING PRICES
Most assets and liabilities of a financial institution are monetary in
nature. This differs from most commercial and industrial companies that have
significant investments in fixed assets or inventories. The effect of
inflation on financial institutions is to a large extent indirect and the
measure of such impact is largely subjective.
Noninterest expenses tend to rise during periods of general inflation.
Inflation levels are to some degree reflected in interest rates. Changes in
interest rates, which are somewhat attributable to changes in inflation rates
or uncertainty concerning changes in inflation rates, do affect the earnings
of the Company. The Company seeks to protect net interest income from the
adverse effects of interest rate fluctuations through its asset liability
management program.
The Company believes that general increases in bank assets and deposits
result in part, from monetary inflation. As bank assets and liabilities
increase, the bank must increase equity capital proportionately to maintain
appropriate relationships between assets and equity.
-18-
<PAGE>
FIRSTBANK CORPORATION AND SUBSIDIARIES
<TABLE>
QUARTERLY RESULTS OF OPERATIONS
<CAPTION>
(In thousands, except per share amounts) 1995
1st 2nd 3rd 4th
QUARTER QUARTER QUARTER QUARTER YEAR
<S> <C> <C> <C> <C> <C>
Interest income $6,231 $6,728 $7,130 $7,267 $27,356
Net interest income 3,725 3,835 3,964 4,030 15,554
Provision for loan losses 340 230 170 345 1,085
Income before federal income
taxes 1,278 1,251 1,305 1,332 5,166
Net income 954 950 962 999 3,865
Net income per share<F1> .63 .62 .63 .64 2.52
</TABLE>
<TABLE>
<CAPTION>
1994
1st 2nd 3rd 4th
QUARTER QUARTER QUARTER QUARTER YEAR
<S> <C> <C> <C> <C> <C>
Interest Income $4,554 $4,880 $5,263 $5,799 $20,496
Net interest income 2,840 3,133 3,354 3,614 12,941
Provision for loan losses 138 298 387 177 1,000
Income before federal income
taxes 1,087 984 1,206 883 4,160
Net income 836 804 878 703 3,221
Net income per share<F1> .55 .52 .58 .47 2.12
<FN>
<F1>Adjusted for stock dividend
</FN>
</TABLE>
COMMON STOCK DATA
Firstbank Corporation shares were held by 893 shareholders of record as of
December 31, 1995. Total shareholders, including those whose shares are held
in street name, are approximately 1,100. The Company's shares are listed on
the NASD Over the Counter Bulletin Board under the symbol FBMI and are traded
by several brokers. The range of bid prices for shares of common stock for
each quarterly period during the past two years is as follows:
-19-
<TABLE>
<CAPTION>
LOW AND HIGH BID QUOTATIONS
1995 1994
<S> <C> <C>
First Quarter $19.52 - $20.95 $18.14 - $19.05
Second Quarter $20.71 - $23.10 $19.05 - $19.28
Third Quarter $23.10 - $23.57 $19.05 - $19.28
Fourth Quarter $23.81 - $25.00 $19.05 - $19.52
</TABLE>
The prices quoted above are obtained on a weekly basis from the NASD System.
The over the counter market quotations reflect interdealer prices without
retail mark up, mark down, or commission, and may not necessarily represent
actual transactions. Prices have been adjusted to reflect stock dividends.
The following table summarizes cash dividends paid per share (retroactively
restated to give effect to stock dividends) of common stock during 1995 and
1994.
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
First Quarter $ .1429 $ .1357
Second Quarter $ .1714 .1357
Third Quarter $ .1714 .1357
Fourth Quarter $ .1714 .1357
$ .6571 $ .5428
</TABLE>
The Company's principal sources of funds to pay cash dividends are the
earnings of and dividends paid by the subsidiary banks. Under current
regulations, the subsidiary banks are restricted in their ability to transfer
funds in the form of cash dividends, loans and advances to the Company (See
Note N). As of January 1, 1996, approximately $6,471,000 of the
subsidiaries' retained earnings are available for transfer in the form of
dividends to the Company without prior regulatory approval. In addition, to
the extent of the subsidiaries' 1996 earnings, such earnings will be
available for distributions as dividends to the Company.
-20-
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Firstbank Corporation
Alma, Michigan
We have audited the consolidated balance sheets of Firstbank Corporation as
of December 31, 1995 and 1994, and the related consolidated statements of
income, changes in shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Firstbank
Corporation at December 31, 1995 and 1994, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note A to the consolidated financial statements, the Company
changed its methods of accounting for impaired loans in 1995 and investments
and income taxes in 1993.
/s/CROWE, CHIZEK AND COMPANY LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
January 19, 1996
-21-<PAGE>
FIRSTBANK CORPORATION
<TABLE>
CONSOLIDATED BALANCE SHEETS
<CAPTION>
DECEMBER 31
1995 1994
<S> <C> <C>
ASSETS
Cash and due from banks--Note B $ 15,526,265 $ 15,152,634
Short term investments 1,222,475 706,227
Total cash and cash equivalents 16,748,740 15,858,861
Securities available for sale--
Notes C and I 61,266,466 25,234,530
Securities held to maturity (fair value:
$37,928,730)
--Notes C and I 37,998,951
Loans:
Loans held for sale--Note D 2,606,213 2,992,194
Portfolio loans--Notes E and K:
Commercial 115,779,085 99,306,532
Real estate mortgage 88,146,830 70,767,698
Consumer 58,315,109 50,324,264
Total loans 264,847,237 223,390,688
Less allowance for loan losses (4,876,000) (4,1000,000)
Net loans 259,971,237 219,290,688
Premises and equipment, net--Note F 7,006,008 4,851,612
Acquisition intangibles 2,227,911 1,964,184
Accrued interest receivable 2,259,443 1,697,252
Other assets 3,463,020 2,825,924
TOTAL ASSETS $352,942,825 $309,722,002
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $ 38,847,288 $ 36,113,926
Interest bearing accounts:
Demand 64,288,096 60,317,875
Savings 54,343,238 54,368,810
Time--Note H 149,344,719 116,092,944
Total Deposits 306,823,341 266,893,555
Securities sold under agreements to
repurchase and overnight borrowings--
Notes C and I 11,842,279 14,143,470
Accrued interest and other liabilities 4,424,552 3,088,964
Total liabilities 323,090,172 284,125,989
COMMITMENTS AND CONTINGENTS--Notes L and M
-22-
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized, none issued
Common stock;
2,500,000 shares authorized; 1,542,295
and 1,542,083 shares issued and
outstanding in 1995 and 1994
respectively 21,355,293 19,540,938
Retained earnings 7,583,783 6,550,164
Unrealized appreciation (depreciation) on
securities available for sale, net of
income tax of ($470,632) in 1995,
and $173,231 in 1994--Note A 913,577 (336,272)
Total shareholders' equity 29,852,653 25,754,830
Less 15,414 unallocated ESOP shares in
1994--Note J (158,817)
Total Shareholders' equity 29,852,653 25,596,013
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $352,942,825 $309,722,002
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-23-<PAGE>
FIRSTBANK CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Interest income:
Loans, including fees $23,482,159 $17,330,498 $15,117,529
Securities:
Available for sale - Taxable 1,501,296 752,896
Available for sale - Exempt
from federal income tax 175,924 52,140
Held to maturity - Taxable 443,346 606,992 2,143,466
Held to maturity - Exempt from
federal income tax 1,378,401 1,524,905 1,477,402
Short term investments 375,083 228,510 192,843
Total interest income 27,356,209 20,495,941 18,931,240
Interest expense:
Deposits 11,252,294 7,315,617 7,103,679
Notes payable and other 549,629 239,786 351,136
Total interest expense 11,801,923 7,555,403 7,454,815
Net interest income 15,554,286 12,940,538 11,476,425
Provision for loan losses--Note E 1,085,000 1,000,060 1,139,000
Net interest income after
provision for loan losses 14,469,286 11,940,478 10,337,425
Noninterest income:
Service charges on deposit
accounts 946,172 783,207 729,875
Gain on sale of mortgage loans--
Note D 302,382 397,079 1,084,964
Mortgage servicing--Note D 329,188 292,311 250,813
Trust fees 224,207 182,608 195,764
Gain on sale of securities--Note C 24,072 38,817 155,981
Gain on termination of plan--Note J 441,450
Other 683,704 411,985 308,132
Total noninterest income 2,509,725 2,547,457 2,725,529
Noninterest expense:
Salaries and employees benefits 5,834,699 5,202,642 4,878,714
Occupancy 1,507,268 1,592,267 1,378,878
FDIC Insurance premium 327,704 466,550 464,049
Michigan Single Business tax 293,200 268,300 245,300
Other 3,849,661 2,798,280 2,554,849
Total noninterest expense 11,812,532 10,328,039 9,521,790
Income before federal income
taxes and cumulative effect of
change in accounting principle 5,166,479 4,159,896 3,541,164
Federal income taxes--Note G 1,301,000 939,000 956,000
-24-
Income before cumulative effect of
change in accounting principle 3,865,479 3,220,896 2,585,164
Cumulative effect of change in
accounting principle --Note A 256,000
NET INCOME $ 3,865,479 $ 3,220,896 $ 2,841,164
Per Share--Note A
Earnings before cumulative effect
of change in accounting principle $2.52 $2.12 $2.07
Cumulative effect of change in
accounting principle 0.21
NET INCOME PER SHARE $2.52 $2.12 $2.28
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-25-
<PAGE>
FIRSTBANK CORPORATION
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<CAPTION>
Net Unrealized
Appreciation
(Depreciation)
on Securities Unallocated
Common Retained Available ESOP
STOCK EARNINGS FOR SALE SHARES TOTAL
<S> <C> <C> <C> <C> <C>
Balances at
January 1, 1993 $11,224,289 $ 4,776,314 $ (458,817) $ 15,541,786
Cash dividends--
$.51 per share (661,850) (661,850)
5% stock dividend-
73,176 shares 1,310,847 (1,316,817) (5,970)
Issuance of 350,761
shares of common
stock 5,485,542 5,485,542
Issuance of 3,647
shares of
restricted stock--
Note J 68,513 68,513
Allocation of 14,557
shares to ESOP
participant
accounts--Note J 150,000 150,000
Unrealized
appreciation on
available for
sale of securities,
net of tax of
($42,105) $ 78,194 78,194
Net income for 1993 2,841,164 2,841,164
BALANCES AT
DECEMBER 31, 1993 18,089,191 5,638,811 78,194 (308,817) 23,497,379
Cash dividends--
$.54 per share (840,233) (840,233)
5% stock dividend-
73,105 shares 1,462,104 (1,469,310) (7,206)
Issuance of 29 shares of
common stock through
exercise of stock
options--Note J 518 518
Allocation of 14,557
shares to ESOP
participant accounts
--Note J 150,000 150,000
-26-
Forfeiture of restricted
stock (10,875) (10,875)
Net change in unrealized
appreciation
(depreciation) on
securities available
for sale, net of
tax of $215,336 (414,466) (414,466)
Net income for 1994 3,220,896 3,220,896
BALANCES AT
DECEMBER 31, 1994 19,540,938 6,550,164 (336,272) (158,817) 25,596,013
Cash dividends--$.66
per share (1,013,748) (1,013,748)
5% stock dividend-
73,113 shares 1,809,547 (1,818,112) (8,565)
Issuance of 63 shares
of common stock
through exercise
of stock options--
Note J 1,289 1,289
Issuance of 145 shares
of common stock 3,519 3,519
Allocation of 15,414
shares to ESOP
participant accounts--
Note J 158,817 158,817
Net change in unrealized
appreciation
(depreciation) on
securities available
for sale, net of tax
($643,863) 1,249,849 1,249,849
Net income for 1995 3,865,479 3,865,479
BALANCES AT
DECEMBER 31, 1995 $21,355,293 $7,583,783 $ 913,577 $ 0 $29,852,653
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-27-<PAGE>
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,865,479 $ 3,220,896 $ 2,841,164
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for loan losses 1,085,000 1,000,060 1,139,000
Depreciation of premises and equipment 436,564 710,927 595,124
Provision for loss (recovery) on certain other
real estate (1,896) (93,799)
Net amortization of security premiums/discounts 287,659 606,215 1,010,068
Gain on sale of securities (24,072) (38,817) (155,981)
Allocation of common stock to ESOP participants 158,817 150,000 150,000
Amortization of acquisition intangibles 232,348 188,135 178,920
Gain on sale of mortgage loans (302,382) (397,079) (1,084,964)
Proceeds from sales of mortgage loans 34,262,839 35,151,078 71,048,088
Loans originated for sale (33,574,477) (38,648,315) (69,963,124)
Unrealized loss on loans held for sale 160,000
Increase in accrued interest receivable and
other assets (1,843,046) (544,344) (95,664)
Increase (decrease) in accrued interest payable
and other liabilities 1,335,588 245,927 (154,177)
NET CASH PROVIDED BY OPERATING ACTIVITIES 5,920,317 1,802,787 5,414,655
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 6,188,687 4,262,296
Proceeds from sale of securities 5,314,905
Proceeds from maturities of securities available
for sale 4,280,804 6,896,076
Proceeds from maturities of securities held to
maturity 9,102,877 13,648,132
Proceeds from maturities of securities 28,134,295
Purchases of securities available for sale (13,636,714) (19,233,012)
Purchases of securities held to maturity (2,338,617) (8,095,352)
Purchases of securities (27,199,743)
Net increase in portfolio loans (42,151,529) (36,650,324) (35,241,597)
Loans from branch acquisitions (4,766,260)
Net purchases of premises and equipment (2,590,960) (1,030,928) (333,189)
Increase in acquisition intangibles (496,076) (1,566,772)
NET CASH USED BY INVESTING ACTIVITIES (41,641,528) (46,536,144) (29,325,329)
FINANCING ACTIVITIES
Deposits from branch acquisitions 10,901,185 25,556,817
Net increase in deposits 29,028,601 21,180,032 6,309,769
Payments on notes payable (3,489,625)
-28-
Increase (decrease) in securities sold under
agreements to repurchase and overnight borrowings (2,301,191) 3,301,188 4,376,476
Cash dividends and cash paid in lieu of
fractional shares on stock dividend (1,022,313) (847,439) (667,820)
Net proceeds from issuance/cancellation of common stock 4,808 (10,357) 5,485,542
NET CASH PROVIDED BY FINANCING ACTIVITIES 36,611,090 49,180,241 12,014,342
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 889,879 4,446,884 (11,896,332)
Cash and cash equivalents at beginning of year 15,858,861 11,411,977 23,308,309
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 16,748,740 $ 15,858,861 $ 11,411,977
Supplemental disclosure of cash flow information:
Interest paid $ 11,489,482 $ 7,461,327 $ 7,617,875
Income taxes paid 1,710,000 990,000 1,320,000
</TABLE>
Supplemental disclosure of non-cash investing activities--See Note A
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
-29-<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND NATURE OF OPERATIONS: The consolidated
financial statements include the accounts of Firstbank Corporation (the
"Company") and its wholly owned subsidiaries, Bank of Alma, Firstbank and
1st Bank (the "Banks") after elimination of intercompany accounts and
transactions.
The Company is a bank holding company. Each subsidiary bank of the Company
is a full service community bank. The subsidiary banks offer all customary
banking services, including the acceptance of checking, savings and time
deposits, and the making of commercial, agricultural, real estate, personal,
home improvement, automobile and other installment and consumer loans.
Trust services are provided throughout the Company's service area by one of
its subsidiary banks. The consolidated assets of the Company of
$352,943,000 as of December 31, 1995, primarily represent commercial and
retail banking activity. Mortgage loans serviced for others of $128,418,000
and trust assets of $59,238,000 as of December 31, 1995, are not included in
the Company's consolidated balance sheet.
USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS: The preparation of
financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from those estimates.
CERTAIN SIGNIFICANT ESTIMATES: The primary estimates incorporated into the
Company's financial statements which are susceptible to change in the near
term include the allowance for loan losses and the determination and
carrying value of certain financial instruments.
CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS: The Company's business
is concentrated in the mid-central section of the lower peninsula of
Michigan. Management is of the opinion that no concentrations exist that
make the Company vulnerable to the risk of a near term severe impact. While
the loan portfolio is diversified, the customers' ability to honor their
debts is partially dependent on the local economies. The Company's service
area is primarily dependent on the manufacturing (automotive and other),
agricultural and recreational industries. Most commercial and agricultural
loans are secured by business assets, including commercial and agricultural
real estate and federal farm agency guarantees. Generally, installment
loans are secured by various items of personal property and mortgage loans
are secured by residential real estate.
-30-
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include cash on hand,
amounts due from banks, interest bearing deposits with banks, federal funds
sold and overnight money market fund investments. Generally, federal funds
and overnight money market funds are purchased for a one day period. The
Company reports customer loan transactions and deposit transactions on a
net cash flow basis.
SECURITIES: Securities available for sale consist of bonds and notes not
classified as held to maturity. Such securities might be sold prior to
maturity due to changes in interest rates, prepayment risks, yield and
availability of alternative investments, liquidity needs or other factors.
At December 31, 1993, the Company adopted Statement of Financial Accounting
Standards No. 115, ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES (SFAS 115). As required by SFAS 115, securities classified as
available for sale on or after December 31, 1993, are reported at their fair
value and the related unrealized holding gain or loss (the difference
between the fair value and amortized cost of the securities so classified)
is reported, net of related income tax effects, as a separate component of
shareholders' equity until realized. Bonds and notes for which management
has the positive intent and the Company has the ability to hold to maturity
are reported at amortized cost.
Gains and losses on sales are determined using the specific identification
method. Premium and discount amortization is recognized in interest income
using the level yield method over the period to call or maturity, whichever
is earlier.
MORTGAGE BANKING ACTIVITIES: Mortgage loans originated and intended for sale
in the secondary market are accounted for at the lower of aggregate cost or
market value. Net unrealized losses are recognized through a valuation
allowance by charges to income.
PORTFOLIO LOANS: Loans receivable, for which management has the intent and
ability to hold for the foreseeable future or payoff, are reported at their
outstanding unpaid principal balances reduced by charge offs and net of any
deferred fees or costs on originated loans, or unamortized premiums or
discounts. Loan origination fees and certain origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
ALLOWANCE FOR LOAN LOSSES: The allowance for loan losses is maintained at a
level believed by management to be adequate to absorb inherent losses in the
loan portfolio. Management's determination of the adequacy of the allowance
is based on an evaluation of the portfolio, past loan loss experience,
current economic conditions, volume, growth and composition of the loan
portfolio and other relevant factors. The allowance is increased by
provisions for loan losses charged to expense and reduced by charge offs,
net of recoveries.
-31-
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 114, ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN, and later amended by No. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN -- INCOME RECOGNITION AND DISCLOSURES (SFAS 114 and
118). As amended, SFAS 114, adopted by the Company at January 1, 1995,
requires that impaired loans, as defined, be measured based on the present
value of expected cash flows discounted at the loan's effective interest
rate or, as a practical expedient, at the loan's observable market price or
at the fair value of collateral if the loan is collateral dependent. Under
this standard, loans considered to be impaired are reduced to the present
value of expected future cash flows or to the fair value of collateral, by
allocating a portion of the allowance for loan losses to such loans. If
these allocations cause the allowance for loan losses to require increase,
such increase is reported as bad debt expense. The effect of adopting this
standard is reported in the provision for loan losses, and was not material
for 1995.
Smaller balance homogeneous loans such as residential first mortgage loans
secured by one to four family residences, residential construction loans,
automobile, home equity and second mortgage loans are collectively evaluated
for impairment. Commercial loans and first mortgage loans secured by other
properties are evaluated individually for impairment. When credit analysis
of the borrower's operating results and financial condition indicates the
underlying ability of the borrower's business activity is not sufficient to
generate adequate cash flow to service the business' cash needs, including
the Company's loans to the borrower, the loan is evaluated for impairment.
Often this is associated with a delay or shortfall in payments of 90 days or
less. Commercial credits are rated on a scale of 1 to 8, with grades 1 to 4
being pass grades, 5 being special attention or watch, 6 substandard, 7
doubtful and 8 loss. Loans graded 6, 7 and 8 are considered for impairment.
Loans are generally moved to nonaccrual status when 90 days or more past
due. These loans are often also considered impaired. Impaired loans, or
portions thereof, are charged off when deemed uncollectible. The nature of
disclosures for impaired loans is considered generally comparable to prior
nonaccrual and renegotiated loans and nonperforming and past-due asset
disclosures.
PREMISES AND EQUIPMENT: Premises and equipment are stated on the basis of
cost, less accumulated depreciation. Depreciation is computed primarily by
accelerated methods over the estimated useful lives of the assets for income
tax purposes and primarily by the straight line method for financial
reporting purposes.
OTHER REAL ESTATE: Other real estate (included as a component of other
assets) includes properties acquired through either a foreclosure proceeding
or acceptance of a deed in lieu of foreclosure and is initially recorded at
fair value at the date of foreclosure, establishing a new cost basis. These
properties are evaluated periodically and are carried at the lower of cost
or estimated fair value less estimated costs to sell.
-32-
ACQUISITION INTANGIBLES: The acquisition of purchased subsidiaries and
branches has included amounts related to the value of customer deposit
relationships ("core deposit intangibles") and excess of cost over estimated
fair value of net assets acquired ("goodwill"). The core deposit
intangibles are amortized over the expected life of the value of the
acquired relationship, approximately 5 years. The goodwill is amortized
over 15 years.
INTEREST INCOME: Interest on loans is accrued over the term of the loans
based upon the principal outstanding. Under SFAS 114, as amended by SFAS
118, the carrying value of impaired loans is periodically adjusted to
reflect cash payments, revised estimates of future cash flows and increases
in the present value of expected cash flows due to the passage of time.
Cash payments representing interest income are reported as such and other
cash payments are reported as reductions in carrying value. Increases or
decreases in carrying value due to changes in estimates of future payments
or the passage of time are reported as reductions or increases in bad debt
expense.
INCOME TAXES: Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES (SFAS
109). The Corporation records income tax expense based on the amount of
taxes due on its tax return plus the change in deferred taxes computed based
on the future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, using enacted tax rates.
The effect of the adoption of SFAS 109 as of January 1, 1993, is shown as
the cumulative effect of a change in accounting principle in the 1993
consolidated statement of income.
The Company and its subsidiaries file a consolidated federal income tax
return on a calendar year basis.
NET INCOME PER SHARE AND OTHER: Per share amounts are based on the weighted
average net shares outstanding (which excludes unallocated ESOP shares) for
each period (1,534,375 shares in 1995; 1,519,911 shares in 1994; and
1,248,286 shares in 1993). Options are excluded from the calculation
because their effect is immaterial. All share and per share amounts have
been adjusted to reflect a two for one stock split effective September 15,
1993, and all share and per share amounts have also been adjusted for the 5%
stock dividends paid in 1995, 1994 and 1993.
ISSUED BUT NOT YET ADOPTED ACCOUNTING STANDARDS: In March 1995, the FASB
issued Statement of Financial Accounting Standards No. 121, ACCOUNTING FOR
THE IMPAIRMENT OF LONG LIVED ASSETS AND FOR LONG LIVED ASSETS TO BE DISPOSED
OF (SFAS 121). SFAS 121 establishes accounting standards for the impairment
of long lived assets, certain identifiable intangibles and goodwill related
to those assets to be held and used and for long lived assets and certain
identifiable intangibles to be disposed of. The Statement requires review
of such assets whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an
-33-
impairment loss for long lived assets and identifiable intangibles that an
entity expects to hold and use should be based on the fair value of the
asset. The Statement is effective for financial statements for fiscal years
beginning after December 15, 1995. The Company will adopt SFAS 121
effective January 1, 1996. Its adoption is expected to have no material
effect on the Company's consolidated financial position or results of
operations.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 122, ACCOUNTING FOR MORTGAGE SERVICING RIGHTS (SFAS
122), which will change the accounting for mortgage servicing rights
retained by the loan originator. See discussion in Note D.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 123, ACCOUNTING FOR STOCK BASED COMPENSATION (SFAS
123). The Statement establishes a fair value based method of accounting for
employee stock options and similar equity instruments, such as warrants, and
encourages all companies to adopt that method of accounting for all of their
employee stock compensation plans. However, the Statement allows companies
to continue measuring compensation cost for such plans using accounting
guidance in place prior to SFAS 123. Companies that elect to remain with
the former method of accounting must make pro-forma disclosures of net
income and earnings per share as if the fair value method provided for in
SFAS 123 had been adopted. The accounting requirements of the Statement are
required for transactions entered into in fiscal years that begin after
December 15, 1995, although early adoption is permitted. Disclosure
requirements are effective for financial statements issued after December
15, 1995, or the period in which the accounting requirements are adopted if
they are adopted early. Companies which elect to continue measuring
compensation costs under current guidance must present pro-forma disclosures
for awards granted in the first fiscal year beginning after December 15,
1994, however that disclosure need not be made until financial statements
for that fiscal year are presented for comparative purposes with financial
statements for a later fiscal year. Management has concluded that the
Company will not adopt the fair value accounting provisions of SFAS 123 and
will continue to apply its current method of accounting. Accordingly,
adoption of the SFAS 123 will have no impact on the Company's consolidated
financial position or results of operations.
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITIES: Upon the adoption
of SFAS 115 at December 31, 1993, the Company transferred $17,905,832 from
securities held to maturity to securities available for sale. During 1994,
the Company transferred $7,292,029 from loans held for sale to portfolio
loans. During 1995, the Company transferred securities with a cost of
$31,121,988 and fair value of $32,194,948 from held to maturity to available
for sale.
RECLASSIFICATION: Certain 1994 and 1993 amounts have been reclassified to
conform to the 1995 presentation.
-34-
NOTE B--RESTRICTIONS ON CASH AND DUE FROM BANK ACCOUNTS
The Company's subsidiary banks are required to maintain average reserve
balances in the form of cash and noninterest bearing balances due from the
Federal Reserve Bank. The average reserve balances required to be
maintained at December 31, 1995 and 1994 were $1,316,000 and $1,170,000
respectively.
-35-<PAGE>
NOTE C--SECURITIES
Debt and equity securities have been classified in the consolidated balance
sheets according to management's intent. The carrying amounts of securities
and their fair values were as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE:
December 31, 1995:
U.S. treasury $ 6,053,375 $ 66,195 $ (11,630) $ 6,107,940
U.S. governmental agency 17,527,486 208,474 (22,898) 17,713,062
States and political
subdivisions 28,442,075 1,090,150 (20,477) 29,511,748
Collateralized mortgage
obligations 1,194,161 16,440 (4,942) 1,205,659
Corporate and other 6,665,160 62,897 0 6,728,057
$59,882,257 $1,444,156 $ (59,947) $61,266,466
December 31, 1994:
U.S. treasury $ 5,920,683 $ 768 $(113,041) $ 5,808,410
U.S. governmental agency 13,916,559 14,320 (261,712) 13,669,167
States and political
subdivisions 1,804,421 2,799 (115,637) 1,691,583
Collateralized mortgage
obligations 1,062,808 16 (7,949) 1,054,875
Corporate and other 3,039,562 (29,067) 3,010,495
$25,744,033 $ 17,903 $(527,406) $25,234,530
</TABLE>
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
COST GAINS LOSSES VALUE
<S> <C> <C> <C> <C>
SECURITIES HELD TO MATURITY:
December 31, 1994:
U.S. treasury $ 1,046,345 $ (65,415) $ 980,930
U.S. governmental agency 2,397,538 $ 2,608 (74,776) 2,325,370
States and political
subdivisions 27,173,624 496,175 (322,659) 27,347,140
Collateralized mortgage
obligations 505,195 (34,710) 470,485
Corporate and other 5,391,466 962 (64,336) 5,328,092
Commercial paper & banker
acceptance 1,484,783 (8,070) 1,476,713
$37,998,951 $ 499,745 $(569,966) $37,928,730
</TABLE>
-36-
Gross realized gains (losses) on sale and calls of securities were:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Gross realized gains $27,680 $40,296 $169,863
Gross realized losses (3,608) (1,479) (13,882)
Net realized gains $24,072 $38,817 $155,981
</TABLE>
Pursuant to the FASB Special Report, A GUIDE TO IMPLEMENTATION OF STATEMENT
NO. 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES,
the entire portfolio of held to maturity securities, with a carrying value
of $31,121,988, fair value of $32,194,948, unrealized gain of $1,103,138 and
unrealized loss of $30,178, was transferred to the available for sale
classification on December 12, 1995. The transfer increased shareholders'
equity by $708,154, net of the related deferred tax asset of $364,807.
Management believes the classification of all securities as available for
sale will provide the Company with greater flexibility in managing its
assets and liabilities.
All sales subsequent to the adoption of SFAS 115 at December 31, 1993, were
of securities classified as available for sale.
The amortized cost and fair value of debt securities at December 31, 1995,
by projected maturity are shown below. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES AVAILABLE FOR SALE
Amortized Fair
COST VALUE
<S> <C> <C>
Due in one year or less $14,880,215 $14,947,507
Due after one year through five years 32,763,799 33,734,963
Due after five years through ten years 9,386,505 9,661,700
Due after ten years 2,851,738 2,922,296
$59,882,257 $61,266,466
</TABLE>
At December 31, 1995, securities with a carrying value approximating
$23,577,000 were pledged to secure public and trust deposits, securities
sold under agreements to repurchase, and for such other purposes as required
or permitted by law.
-37-
NOTE D--SECONDARY MORTGAGE MARKET OPERATIONS
The following summarizes the Company's secondary mortgage market activities:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
During the period:
Loans originated for sale $33,574,477 $38,648,315 $69,963,124
Proceeds from sale of
mortgage loans $34,262,839 $35,151,078 $71,048,088
Transfer from loans held
for sale to portfolio
loans $ 7,242,029
Gain on sale of mortgage loans $302,382 $397,079 $1,084,964
Unrealized loss on loans
held for sale $160,000
Servicing fees earned on
mortgage loans $329,188 $292,311 $250,813
At end of period:
Mortgage loans serviced
for others $128,417,926 $110,472,000 $94,000,000
Loans held for sale $2,606,213 $2,992,194 $6,549,907
Escrow balances maintained
for loans serviced $220,093 $517,819 $296,069
</TABLE>
The Company will adopt SFAS 122 on January 1, 1996, as required. This
Statement changes the accounting for mortgage servicing rights retained by
the loan originator. Under this standard, if the originator sells or
securitizes mortgage loans and retains the related servicing rights, the
total cost of the mortgage loan is allocated between the loan (without the
servicing rights) and the servicing rights, based on their relative fair
values. Under current practice, all such costs are assigned to the loan.
The costs allocated to mortgage servicing rights will be recorded as a
separate asset and will be amortized in proportion to, and over the life of,
the net servicing income. The carrying value of the mortgage servicing
rights will be periodically evaluated for impairment.
Based on its current volume of mortgage banking activity, the Company does
not expect SFAS 122 to have a significant impact on its consolidated
financial condition and operations for 1996. The impact in subsequent years
is difficult to predict. SFAS 122 will initially result in the recognition
of larger gains on sales of mortgage loans because of the initial
capitalization of the originated mortgage servicing right asset. However,
the larger gains on sales of loans will be offset by the future amortization
of the mortgage servicing right asset. In addition, the valuation allowance
on impaired mortgage servicing rights may fluctuate significantly in the
future because the impairment evaluation is based on assumed loan prepayment
and default rates, interest rates and other factors.
-38-
NOTE E--NONACCRUAL LOANS AND
ALLOWANCE FOR LOAN LOSSES
Activity in the allowance for loan losses is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Balance at January 1 $4,100,000 $3,254,000 $2,394,000
Provision charged to expense 1,085,000 1,000,000 1,139,000
Recoveries credited to allowance 429,000 345,000 326,000
Loans charged off (738,000) (499,000) (605,000)
BALANCE AT DECEMBER 31 $4,876,000 $4,100,000 $3,254,000
</TABLE>
Loans approximating $47,000, $120,000 and $341,000 were in nonaccrual status
at December 31, 1995, 1994 and 1993 respectively. If these loans had
performed in accordance with their original terms, additional interest
income of $4,000, $33,000 and $51,000 would have been recognized during
1995, 1994 and 1993 respectively.
The valuation of loans is reviewed on an ongoing basis for impairment. A
loan is impaired when it is probable that the Company will be unable to
collect all amounts due according to the contractual terms of the loan
agreement.
Information regarding impaired loans is as follows for the year ended
December 31, 1995:
<TABLE>
<S> <C>
Average investment in impaired loans $303,554
Interest income recognized on impaired loans
including interest income
recognized on cash basis $36,938
Interest income recognized on impaired loans
on cash basis $0
</TABLE>
Information regarding impaired loans at year end is as follows:
<TABLE>
<S> <C>
Total impaired loans $361,000
Less loans for which no allowance for loan
losses is allocated 0
Impaired loan balance for which an allowance
for loan losses is allocated $361,000
Portion of allowance allocated to impaired loans $119,000
</TABLE>
-39-
NOTE F--PREMISES AND EQUIPMENT
Major classes of premises and equipment consisted of the following at
December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 1,293,912 $ 926,291
Buildings and improvements 5,274,306 4,247,689
Furniture and equipment 4,864,717 3,667,997
11,432,935 8,841,977
Less accumulated depreciation (4,426,927) (3,990,365)
Total premises and equipment, net $ 7,006,008 $ 4,851,612
</TABLE>
NOTE G--FEDERAL INCOME TAXES
Federal income taxes consist of the following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current expense $1,700,000 $1,204,000 $1,131,000
Deferred benefit (399,000) (265,000) (175,000)
$1,301,000 $ 939,000 $ 956,000
</TABLE>
A reconciliation of the difference between federal income tax expense and
the amount computed by applying the federal statutory tax rate
of 34% is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Tax at statutory rate $1,757,000 $1,414,000 $1,204,000
Effect of tax-exempt
interest (468,000) (557,000) (433,000)
Other 12,000 82,000 185,000
Federal income taxes $1,301,000 $ 939,000 $ 956,000
Effective tax rate 25% 23% 27%
</TABLE>
The components of deferred tax assets and liabilities consist of the
following at December 31:
-40-
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses $1,132,000 $ 869,000
Deferred Compensation 117,000 91,000
Unrealized loss on securities
available for sale 173,000
Other 291,000 160,000
Total deferred tax assets 1,540,000 1,293,000
Deferred tax liabilities:
Fixed assets (444,000) (380,000)
ESOP (54,000)
Unrealized gain on securities
available for sale (471,000)
Other (25,000) (14,000)
Total deferred tax liability (940,000) (448,000)
Net deferred tax asset $ 600,000 $ 845,000
</TABLE>
Under SFAS 109, a valuation allowance related to deferred tax assets is
required when it is considered more likely than not that all or part of the
benefits related to such assets will not be realized. Management has
determined that no such allowance is required at December 31, 1995 or 1994.
Deferred tax assets at December 31, 1995 and 1994 are included in other
assets in the accompanying balance sheets.
NOTE H--DEPOSITS
Time deposits at December 31, 1995, have the following maturity
distribution.
<TABLE>
<CAPTION>
DOLLARS IN THOUSANDS
YEAR AMOUNT
<S> <C> <C>
1996 $112,273
1997 17,199
1998 9,166
1999 4,685
2000 5,673
2001 and over 349
TOTALS $149,345
</TABLE>
Included in total time deposits are time deposit liabilities issued in
denominations of $100,000 or more. At December 31, 1995 and 1994, these
deposits amounted to $21,468,000 and $17,945,000, respectively.
-41-
Interest expense on time deposits issued in denominations of $100,000 or
more for 1995, 1994, and 1993 amounted to $1,103,000, $684,000 and $586,000
respectively.
NOTE I--SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE
Information relating to securities sold under agreements to repurchase
follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
At December 31:
Outstanding balance $ 8,442,000 $10,144,000 $ 8,042,000
Average interest rate 4.98% 3.97% 3.19%
Daily average for the year:
Outstanding balance $8,905,000 $3,883,000 $4,812,000
Average interest rate 5.16% 3.95% 3.50%
Maximum outstanding at
any month end $10,714,000 $10,144,000 $15,560,000
</TABLE>
Securities sold under agreements to repurchase (repurchase agreements)
generally have original maturities of less than one year. Repurchase
agreements are treated as financings and the obligations to repurchase
securities sold are reflected as liabilities. Securities involved with the
agreements are recorded as assets of the banks and are primarily held in
safekeeping by correspondent banks. Repurchase agreements are offered
principally to certain large customers as deposit equivalent investments.
NOTE J--EMPLOYEE BENEFIT PLANS
The Company established an Employee Stock Ownership Plan (ESOP) effective
January 1, 1988, covering substantially all employees. The ESOP is a
qualified stock bonus plan, a qualified 401(k) salary deferral plan and a
qualified employee stock ownership plan. Both employee and employer
contributions may be made to the ESOP. The Company's 1995, 1994 and 1993
matching 401(k) contributions charged to expense were $133,211, $131,664 and
$92,536 respectively. The percent of the Company's matching contributions
to the 401(k) is determined annually by the Board of Directors.
Effective June 30, 1988, the Company terminated its then existing defined
benefit pension plan. After satisfaction of all plan benefit obligations,
remaining plan assets of approximately $1,381,000 were transferred to the
ESOP. Upon transfer of the excess assets of the former pension plan to the
ESOP, the ESOP purchased approximately 134,000 shares of previously unissued
common stock of the Company at an estimated fair value of $10.31 per share.
-42-
These shares were allocated to ESOP participants' accounts over an eight
year period. Unallocated ESOP shares were reflected as a reduction of
shareholders' equity. Upon allocation to participant accounts, unallocated
shares were reduced and a corresponding amount was recognized as
compensation expense. In 1994 and 1993, 14,557 shares with value of
$150,000 were allocated to participants' accounts with an equal amount
recognized as expense. In 1995, the remaining 15,414 unallocated shares
with a value of $158,817, were allocated to participants' accounts.
Effective July 1, 1988, the Company established a new defined benefit
pension plan. In April 1993, the Board of Directors authorized curtailment
and termination of this plan. As a result, all participant benefits became
vested and the net assets of the plan were allocated among the participants
and beneficiaries in the order provided by ERISA. By September 30, 1994,
the plan settled all benefit obligations arising from the termination of the
plan at interest rates higher than those existing at the curtailment date.
Approximately 89% of the total settlement payments of $1,253,000 were made
to other qualified plans on behalf of participants, with the remainder paid
directly to participants as lump sum distributions. A final contribution of
approximately $375,000 was made by the Company to the plan in connection
with the termination. Termination of the plan resulted in a 1994 pre tax
gain of approximately $441,000. At December 31, 1993, the estimated amount
of the projected benefit obligation was equivalent to the sum of the plan's
net assets available for benefits and the Company's pension liability.
During 1993, the shareholders approved the Firstbank Corporation Stock
Option and Restricted Stock Plan of 1993 (Plan), which provides for the
grant of 115,763 shares of stock, in either restricted form or under option.
Options may be either incentive stock options or nonqualified stock options.
The Plan will terminate on April 26, 2003, unless terminated earlier by the
Board.
Each option granted under the Plan may be exercised in whole or in part from
time to time during such period as is specified in the option agreement
governing that option. Options are issued with exercised prices equal to
the stock's market value at date of issuance. A nonincentive stock option
may not be exercised after fifteen years from the grant date. Incentive
stock options must be exercised within ten years of the grant date.
The following is a summary of transactions which occurred during 1993, 1994
and 1995:
-43-
<TABLE>
<CAPTION>
Number Exercise
OF SHARES PRICE RANGE
<S> <C> <C>
Outstanding -- January 1, 1993 0
Granted 28,306 $18.79
Outstanding -- December 31, 1993 28,306 $18.79
Granted 25,247 $19.72
Exercised (29) $18.79 - $19.72
Canceled (2,066) $18.79 - $19.72
Forfeited (579)
Outstanding -- December 31, 1994 50,879 $18.79 - $19.72
Granted 0
Exercised (63) $18.79 - $19.72
Canceled (1,988) $18.79 - $19.72
Outstanding -- December 31, 1995 48,828 $18.79 - $19.72
Exercisable -- December 31, 1995 28,550
Available for grant --
December 31, 1995 66,843
</TABLE>
NOTE K--RELATED PARTY TRANSACTIONS
Certain directors and executive officers of the Company and its subsidiary
banks, including their immediate families and companies in which they are
principal owners, are loan customers of the Banks. Total loans to these
persons approximate $18,665,980 and $15,494,691 at December 31, 1995 and
1994 respectively. Included in these balances are loans totaling $645,415
and $1,509,000 at December 31, 1995 and 1994 respectively, which were made
to companies controlled by directors of a subsidiary bank and for which
management has some concerns as to the ability of such borrowers to comply
with the present loan repayment terms. During 1995, $31,150,588 of related
party loans were made and $27,979,299 of repayments were made on those
loans.
During 1994, a subsidiary bank purchased a small general insurance agency
from the Chairman of the Company's Board of Directors at a price established
by an independent valuation firm.
NOTE L--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its
customers. These financial instruments include commitments to make loans,
unused lines of credit and standby letters of credit. The Company's
exposure to credit loss is the contractual amount of these instruments,
-44-
assuming the amounts are fully advanced and collateral or other security is
of no value. The following is a summary of commitments as of December 31:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Commitments to make loans $ 4,202,268 $ 1,716,878
Unused lines of credit 36,890,123 35,937,163
Standby letters of credit 2,410,950 3,172,850
</TABLE>
Commitments are generally made for periods not to exceed 90 days.
Approximately 18% of commitments were made at fixed rates as of December 31,
1995. Rate ranges for these fixed rate commitments were 6.95% to 18.00%.
NOTE M--CONTINGENCIES
From time to time certain claims are made against the Company and its
banking subsidiaries in the normal course of business. There were no
material outstanding claims at December 31, 1995.
NOTE N--DIVIDEND LIMITATION OF SUBSIDIARIES
The subsidiary banks are restricted in their ability to pay dividends to the
Company by regulatory requirements. In 1996, approximately $6,471,000 of
the subsidiaries' retained earnings (in addition to their 1996 net income)
is available for transfer in the form of dividends without prior regulatory
approval. At December 31, 1995, the Company and its subsidiary banks all
exceeded the "well capitalized" regulatory levels.
NOTE O--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the fair value of financial instruments is made
in accordance with the requirements of Financial Accounting Standards No.
107, DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107). Where
quoted market prices are not available, as is the case for a significant
portion of the Company's financial instruments, the fair values are based on
estimates using present value of expected cash flows or other valuation
techniques. These techniques are significantly affected by the assumptions
used, including the discount rate and the timing of estimated cash payments
and receipts. Accordingly, certain of the fair value estimates presented
herein cannot be substantiated by comparison to independent markets and are
not necessarily indicative of the amounts the Company could realize in a
current market exchange.
In addition, the fair value estimates are limited to existing on and off
balance sheet financial instruments without attempting to estimate the value
of anticipated future business and the value of assets and liabilities that
-45-
are not considered financial instruments. Other significant assets and
liabilities that are not considered financial assets or liabilities include
the Banks' mortgage servicing operation, premises and equipment and
acquisition intangibles. In addition, tax ramifications related to the
realization of unrealized gains and losses such as those within the
investment securities portfolio can also have a significant effect on fair
values and have not been considered in the estimates. Accordingly, the
aggregate fair value amounts do not represent the underlying value of the
Company.
The carrying amounts and fair values of the Company's financial instruments
were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
Carrying Fair Carrying Fair
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Financial Assets:
Cash and cash
equivalents $ 16,748,740 $ 16,748,740 $ 15,858,861 $ 15,858,861
Securities 61,266,466 61,266,466 63,233,481 63,163,260
Net Loans 259,971,237 261,865,654 219,290,688 215,461,000
Accrued interest
receivable 2,259,443 2,259,443 1,697,252 1,697,252
Financial
liabilities:
Deposits (306,823,341) (307,223,953) (266,893,555) (265,493,000)
Securities sold
under
agreements
to repurchase
and overnight
borrowings (11,842,279) (11,842,279) (14,143,470) (14,143,470)
Accrued interest
payable (952,043) (952,043) (612,602) (612,602)
</TABLE>
The Banks' loan commitments, standby letters of credit and undisbursed loans
have been estimated to have no material fair value as such commitments are
generally fulfilled at current market rates.
The carrying amounts of the following financial instruments are a reasonable
approximation of their fair values:
Cash and cash equivalents
Accrued interest receivable
Securities sold under agreements to repurchase and overnight
borrowings
Accrued interest payable
-46-
The various methods and assumptions used by the Banks in estimating fair
value for their other financial instruments are as follows:
SECURITIES
Fair values for securities are based on published market prices and are
disclosed in detail in Note C.
NET LOANS
For variable rate loans that reprice frequently with no significant change
in credit risk, fair values are based on carrying values. For loans held
for sale, fair value is based on prices offered in the secondary market.
The fair values for all other loans are estimated using discounted cash flow
analysis at interest rates currently offered for loans with similar terms to
borrowers of similar credit quality.
DEPOSITS
The fair values disclosed for deposit accounts with no defined maturities
are, by definition, equal to the amount payable on demand at the reporting
date. Fair values for certificates of deposit are estimated using a
discounted cash flow calculation that applies interest rates currently being
offered on certificates to a schedule of aggregated expected monthly
maturities on time deposits.
NOTE P--FIRSTBANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION
<TABLE>
BALANCE SHEETS
<CAPTION>
DECEMBER 31
1995 1994
<S> <C> <C>
Assets:
Cash $ 480,022 $ 528,206
Investment in subsidiaries 29,348,421 24,579,618
Other assets 822,948 1,100,479
TOTAL ASSETS $30,651,391 $26,208,303
Liabilities and Shareholders' Equity:
Accounts payable and other liabilities $ 798,738 $ 612,290
Shareholders' equity 29,852,653 25,596,013
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $30,651,391 $26,208,303
</TABLE>
-47-
<TABLE>
STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
Income:
Dividends from subsidiaries $1,655,074 $1,410,000 $1,259,477
Other 14,904 46,614 127,250
TOTAL INCOME 1,669,978 1,456,614 1,386,727
Expense:
Interest 151,436
ESOP expense 158,817 150,000 150,000
Other 316,633 489,700 315,191
TOTAL EXPENSE 475,450 639,700 616,627
Income before federal income tax
benefit and equity in
undistributed
net income of subsidiaries 1,194,528 816,914 770,100
Federal income taxes (benefit) (152,000) (186,000) (337,000)
Income before equity in
undistributed net income
of subsidiaries 1,346,528 1,002,914 1,107,100
Equity in undistributed net income
of subsidiaries 2,518,951 2,217,982 1,734,064
NET INCOME $3,865,479 $3,220,896 $2,841,164
</TABLE>
<TABLE>
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,865,479 $3,220,896 $2,841,164
Adjustments to reconcile net
income to net cash provided
by operating activities:
Undistributed earnings of
subsidiaries (2,518,951) (2,217,982) (1,734,064)
Provision for loss (recovery)
on certain other real estate 0 (1,896) (93,799)
Allocation of common stock
to ESOP participants 158,817 150,000 150,000
Amortization of goodwill and
other 41,626 44,916 53,125
Decrease (increase) in other
assets 235,902 33,249 (477,047)
-48-
Increase (decrease) in
accounts payable and other
liabilities 186,448 (553,675) 164,283
NET CASH PROVIDED BY OPERATING
ACTIVITIES 1,969,321 675,508 903,662
INVESTING ACTIVITIES
Proceeds from maturity of
security -- 1,027,458
Purchase of security -- (1,033,281)
Cash invested in subsidiaries (1,000,000) (1,000,000) (1,000,000)
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES (1,000,000) 27,458 (2,033,281)
FINANCING ACTIVITIES
Cash dividends and cash paid
in lieu of fractional (1,022,313) (847,439) (667,820)
shares on stock dividend
Payments on notes payable (3,489,625)
Net proceeds from issuance/
cancellation of common stock 4,808 (10,357) 5,485,542
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES (1,017,505) (857,796) 1,328,097
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (48,184) (154,830) 198,478
Cash and cash equivalents at
beginning of year 528,206 683,036 484,558
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 480,022 $ 528,206 $ 683,036
Supplemental disclosure of cash
flow information:
Interest paid $ 0 $ 0 $ 151,436
</TABLE>
-49-<PAGE>
FIRSTBANK CORPORATION
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman John A. McCormack
CHAIRMAN, BANK OF ALMA PRESIDENT AND CHIEF
ATTORNEY, GOGGIN & BAKER EXECUTIVE OFFICER
Mary D. Deci
Edward B. Grant VICE PRESIDENT, SECRETARY,
TREASURER AND CHIEF FINANCIAL OFFICER
DIRECTOR, GRADUATE BUSINESS STUDIES,
CENTRAL MICHIGAN UNIVERSITY Richard L. Jarvis
VICE PRESIDENT
Charles W. Jennings
ATTORNEY, JENNINGS & ELLIAS, PC Dale A. Peters
VICE PRESIDENT
John A. McCormack
PRESIDENT AND CHIEF EXECUTIVE OFFICER, Thomas R. Sullivan
FIRSTBANK CORPORATION VICE PRESIDENT
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
TRUST OFFICER, BANK OF ALMA James E. Wheeler, II
VICE PRESIDENT
Phillip G. Peasley
PRESIDENT, PEASLEY'S HARDWARE &
FURNITURE, INC.
David D. Roslund, CPA
ADMINISTRATOR, WILCOX HEALTH CARE CENTER
SMALL BUSINESS INVESTOR AND MANAGER
FIRSTBANK CORPORATION
311 Woodworth Avenue
P. O. Box 1029
Alma, Michigan 48801-6029
(517) 463-3131
-50-<PAGE>
BANK OF ALMA
BOARD OF DIRECTORS HONORARY DIRECTORS
William E. Goggin, Chairman Milford Cordray
CHAIRMAN, FIRSTBANK CORPORATION Robert H. Hicks
ATTORNEY, GOGGIN & BAKER Robert D. Hoxie
Ralph Schnepp
Bob M. Baker
PRESIDENT AND CEO, GRATIOT COMMUNITY
HOSPITAL
Peggy Bever OFFICERS
BUSINESS MANAGER
John A. McCormack
Donald Crumbaugh PRESIDENT, CHIEF FINANCIAL OFFICER
FARMER AND TRUST OFFICER
Jon Groteluschen Mary D. Deci
VICE PRESIDENT OF FINANCE, ALMA COLLEGE SENIOR VICE PRESIDENT, CONTROLLER,
CASHIER AND CHIEF FINANCIAL OFFICER
L. Douglas Lippert Larry Trexler
PRESIDENT, LIPPERT COMPONENTS, INC. SENIOR VICE PRESIDENT AND BRANCH
ADMINISTRATOR
John A. McCormack James E. Wheeler, II
PRESIDENT AND CHIEF EXECUTIVE OFFICER, SENIOR VICE PRESIDENT AND CHIEF
FIRSTBANK CORPORATION LOAN OFFICER
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND TRUST OFFICER, BANK OF ALMA
Timothy P. Clark
William R. McKinstry VICE PRESIDENT AND SENIOR TRUST
SUPERINTENDENT, OFFICER
ALMA PUBLIC SCHOOLS
Nancy Gallagher
John P. Morgan VICE PRESIDENT AND COMPLIANCE
PARTNER, MORGAN-MEIJER COMMUNICATIONS OFFICER
Phillip G. Peasley
PRESIDENT, PEASLEY'S HARDWARE &
FURNITURE, INC.
David D. Roslund, CPA
ADMINISTRATOR, WILCOX HEALTH CARE CENTER
SMALL BUSINESS INVESTOR AND MANAGER
Victor V. Rozas, M.D.
PHYSICIAN
-51-
Alan J. Stone
PRESIDENT, ALMA COLLEGE
<TABLE>
OFFICE LOCATIONS
<CAPTION>
ALMA ASHLEY RIVERDALE ST. LOUIS
<S> <C> <C> <C>
7455 N. Alger Rd. 114 S. Sterling 6716 N. Lumberjack Rd. 135 W. Washington
(517) 463-3134 (517) 847-2394 (517) 833-7331 (517) 681-5758
230 Woodworth Ave. ITHACA ST. CHARLES VESTABURG
(517) 463-3137 219 E. Center St. 102 Pine Street 8846 Third St.
(517) 875-4107 (517) 865-9918 (517) 268-5445
311 Woodworth Ave.
(517) 463-3131
</TABLE>
-52-<PAGE>
FIRSTBANK
BOARD OF DIRECTORS HONORARY DIRECTORS
Edward B. Grant, Chairman Elton L. Philo
DIRECTOR, GRADUATE BUSINESS STUDIES, C.A. Koester
CENTRAL MICHIGAN UNIVERSITY
Ralph E. Baumgarth
DENTIST OFFICERS
Ralph M. Berry Thomas R. Sullivan
OWNER, BERRY FUNERAL HOME PRESIDENT AND CHIEF EXECUTIVE
OFFICER
Glen D. Blystone Richard L. Jarvis
CERTIFIED PUBLIC ACCOUNTANT, EXECUTIVE VICE PRESIDENT
BLYSTONE & BAILEY, CPAS, PC
James M. Taylor
Sibyl Ellis SENIOR VICE PRESIDENT
PRESIDENT, SOMEPLACE SPECIAL, INC.
Robert L. Wheeler
Keith A. Gaede VICE PRESIDENT
PHARMACIST, PUNCHES PHARMACY
Edward H. Kalis
OWNER, KALIS TRUCKING AND KALIS FARMS
Douglas N. LaBelle
PARTNER, LABELLE MANAGEMENT
Phillip R. Seybert
PRESIDENT, P.S. EQUITIES, INC.
Thomas R. Sullivan
PRESIDENT AND CHIEF EXECUTIVE OFFICER, FIRSTBANK
VICE PRESIDENT, FIRSTBANK CORPORATION
Arlene Yost
SECRETARY AND TREASURER, JAY'S SPORTING GOODS, INC.
OFFICE LOCATIONS
MT. PLEASANT CLARE WINN
102 S. Main 806 N. McEwan 2783 Blanchard Rd.
(517) 773-2600 (517) 386-7313 (517) 866-2210
4699 E. Pickard SHEPHERD
(517) 773-2335 258 W. Wright
(517) 828-6625
2013 S. Mission
(517) 773-3959<PAGE>
1ST BANK
BOARD OF DIRECTORS OFFICERS
Dale A. Peters, Chairman Dale A. Peters
PRESIDENT AND CHIEF EXECUTIVE OFFICER, PRESIDENT AND CHIEF EXECUTIVE
1ST BANK OFFICER
VICE PRESIDENT, FIRSTBANK CORPORATION
Daniel Grenier
Bryon Bernard SENIOR VICE PRESIDENT
CEO, BERNARD BUILDING CENTER
Larry Scheider
Joe Clark VICE PRESIDENT
OWNER, MORSE CLARK FURNITURE
Danny Gallagher
Timothy Eyth VICE PRESIDENT
OWNER, WEST BRANCH VETERINARY SERVICES
Richard Pfahl
David Fultz VICE PRESIDENT
OWNER, FULTZ INSURANCE AGENCY
Michael Ehinger
Robert Griffin VICE PRESIDENT
OWNER AND PRESIDENT, GRIFFIN BEVERAGE
COMPANY,
NORTHERN BEVERAGE CO., AND WEST BRANCH
TANK & TRAILER
Charles W. Jennings
ATTORNEY, JENNINGS & ELLIAS, PC
Norman Miller
OWNER, MILLER FARMS, AND MILLER DAIRY
EQUIPMENT AND FEED
Jeff Schubert
DENTIST
Milford Scott
OWNER, SCOTT'S TRUE VALUE HARDWARE
Robert Smith
OWNER, INDEPENDENT INSURANCE AGENT,
CRECINE INSURANCE AGENCY
-54-
OFFICE LOCATIONS
WEST BRANCH FAIRVIEW HIGGINS LAKE ST. HELEN
502 W. Houghton P.O. Box 195 P.O. Box 216 2040 N. St. Helen Road
(517) 345-7900 (517) 848-2243 (517) 821-9231 (517) 389-1311
2087 S. M-76 HALE ROSE CITY
(517) 345-5050 3281 M-65 505 S. Bennett
(517) 728-7566 (517) 685-3909
-55-<PAGE>
BUSINESS OF THE COMPANY
Firstbank Corporation (the "Company") is a bank holding company. As of
December 31, 1995, the Company's wholly-owned subsidiaries are Bank of Alma,
Firstbank and 1st Bank.
The Company is in the business of banking. Each subsidiary bank of the
Company is a full service community bank. The subsidiary banks offer all
customary banking services, including the acceptance of checking, savings and
time deposits, and the making of commercial, agricultural, real estate,
personal, home improvement, automobile and other installment and consumer
loans. Bank of Alma also offers trust services. Deposits of each of the
banks are insured by the Federal Deposit Insurance Corporation.
The banks obtain most of their deposits and loans from residents and
businesses in Clare, Gratiot, Iosco, Isabella, Montcalm, Ogemaw, Oscoda,
Roscommon, Saginaw and parts of Clinton County. Bank of Alma has its main
office and one branch in Alma, Michigan, and one branch located in each of
the following: Ashley, Ithaca, Pine River Township (near Alma), Riverdale,
St. Charles, St. Louis, and Vestaburg, Michigan. Firstbank has its main
office in Mt. Pleasant, Michigan, and one branch located in each of the
following: Clare, Mt. Pleasant, Shepherd, Union Township (near Mt.
Pleasant), and Winn, Michigan. 1st Bank has its main office in West Branch,
Michigan, and one branch located in each of the following: Fairview, Hale,
Higgins Lake, Rose City, St. Helen, and West Branch Township (near West
Branch), Michigan. The banks have no material foreign assets or income.
The principal sources of revenues for the Company and its subsidiaries are
interest and fees on loans. On a consolidated basis, interest and fees on
loans accounted for approximately 79% of total revenues in 1995, 75% in 1994,
and 70% in 1993. Interest on investment securities accounted for
approximately 12% of total revenues in 1995, 13% in 1994, and 17% in 1993.
No other single source of revenue accounted for 10% of the Company's total
revenues in any of the last 3 years.
As of December 31, 1995, the Company and its subsidiaries employed 202 people
on a full-time equivalent basis.
CORPORATE INFORMATION
ANNUAL MEETING STOCK INFORMATION
The annual meeting of shareholders Firstbank Corporation shares are
will be held on Monday, April 22, listed on the NASD Over the
1996, 5:00 p.m., at the Counter Bulletin Board under
Comfort Inn, Alma, Michigan. the symbol FBMI.
INDEPENDENT AUDITORS Nikki Gregg
Crowe, Chizek and Company LLP Roney & Company
Grand Rapids, Michigan 800/572-0786
-56-
GENERAL COUNSEL Ted Fuger
Warner, Norcross & Judd Robert W. Baird & Company
Grand Rapids, Michigan 800/888-6200
TRANSFER AGENT Pete VanDer Schaaf
Bank of Alma Trust Department Stifel, Nicolaus & Company, Inc.
800/676-0477
Mike Young
First of Michigan Corp.
800/521-1197
Jack Korff
McDonald & Company
800/548-6011
Ted Vogt
Dean Witter Reynolds, Inc.
800/788-9640
-57-
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
STATE OF INCORPORATION
SUBSIDIARY OR ORGANIZATION
Bank of Alma Michigan
Firstbank Michigan
1st Bank Michigan
EXHIBIT 23
CONSENT OF CROW, CHIZEK AND COMPANY LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration
Statement of Firstbank Corporation on Form S-8 (Registration No. 33-60190),
of our report dated January 19, 1996 on the 1995 consolidated financial
statements of Firstbank Corporation, which report is included in the 1995
Annual Report on Form 10-K of Firstbank Corporation.
/S/ CROWE, CHIZEK AND COMPANY LLP
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
March 25, 1996
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
March 27, 1996 /S/ MARY D. DECI
Mary D. Deci
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
February 8, 1996 /S/ JOHN A. MCCORMACK
John A. McCormack
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
March 27, 1996 /S/ WILLIAM E. GOGGIN
William E. Goggin
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
February 2, 1996 /S/ CHARLES W. JENNINGS
Charles W. Jennings
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
February 7, 1996 /S/ DAVID D. ROSLUND
David D. Roslund
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
February 5, 1996 /S/ PHILLIP G. PEASLEY
Phillip G. Peasley
EXHIBIT 24
POWERS OF ATTORNEY
The undersigned, in his or her capacity as a director or officer,
or both, as the case may be, of Firstbank Corporation, does hereby appoint
MARY D. DECI and JOHN A. McCORMACK, or either of them, his or her attorneys
or attorney to execute in his or her name an Annual Report of Firstbank
Corporation on Form 10-K for its fiscal year ended December 31, 1995, and
any amendments to that report, and to file it with the Securities and
Exchange Commission. Each attorney shall have power and authority to do
and perform in the name and on behalf of the undersigned, in any and all
capacities, every act to be done in the premises as fully and to all
intents and purposes as the undersigned could do in person, and the
undersigned hereby ratifies and approves the acts of such attorneys.
DATE SIGNATURE
March 27, 1996 /S/ EDWARD B. GRANT
Edward B. Grant
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FINANCIAL STATEMENTS OF FIRSTBANK CORPORATION CONTAINED IN ITS FORM
10-K AND ANNUAL REPORT TO SHAREHOLDERS FOR THE PERIOD ENDED DECEMBER 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,526
<INT-BEARING-DEPOSITS> 272
<FED-FUNDS-SOLD> 950
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 61,266
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 264,847
<ALLOWANCE> 4,876
<TOTAL-ASSETS> 352,943
<DEPOSITS> 306,823
<SHORT-TERM> 11,842
<LIABILITIES-OTHER> 4,425
<LONG-TERM> 0
<COMMON> 21,355
0
0
<OTHER-SE> 8,498
<TOTAL-LIABILITIES-AND-EQUITY> 352,943
<INTEREST-LOAN> 23,482
<INTEREST-INVEST> 3,499
<INTEREST-OTHER> 375
<INTEREST-TOTAL> 27,356
<INTEREST-DEPOSIT> 11,252
<INTEREST-EXPENSE> 11,802
<INTEREST-INCOME-NET> 15,554
<LOAN-LOSSES> 1,085
<SECURITIES-GAINS> 24
<EXPENSE-OTHER> 11,813
<INCOME-PRETAX> 5,166
<INCOME-PRE-EXTRAORDINARY> 3,865
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,865
<EPS-PRIMARY> 2.52
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.29
<LOANS-NON> 47
<LOANS-PAST> 386
<LOANS-TROUBLED> 182
<LOANS-PROBLEM> 8,550
<ALLOWANCE-OPEN> 4,100
<CHARGE-OFFS> 738
<RECOVERIES> 429
<ALLOWANCE-CLOSE> 4,876
<ALLOWANCE-DOMESTIC> 4,162
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 714
</TABLE>