- -------------------------------------------------------------------------------
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 For the fiscal year ended December 31, 1999
[ ] 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. [X]
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 6, 2000: $94,717,613
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 6, 2000: 4,677,413 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the year ended
December 31, 1999, are incorporated by reference in Part II.
Portions of the definitive proxy statement for the registrant's annual
shareholders' meeting to be held April 24, 2000, are incorporated by reference
in Part III.
- --------------------------------------------------------------------------------
<PAGE>
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K including, without limitation, management's
discussion and analysis of financial conditions and results of operations and
other sections of the Corporation's Annual Report to Shareholders which are
incorporated by reference in this report contain forward looking statements that
are based on management's beliefs, assumptions, current expectations, estimates
and projections about the financial services industry, the economy, and about
the Corporation itself. Words such as "anticipate, " "believe," "determine,"
"estimate," "expect," "forecast," "intend," "is likely," "plan," "project,"
"opinion," variations of such terms, and similar expressions are intended to
identify such forward looking statements. The Year 2000 Readiness Disclosure,
the presentations and discussions of the provision and allowance for loan
losses, and determinations as to the need for other allowances presented or
incorporated by reference in this report are inherently forward looking
statements in that they involve judgments and statements of belief as to the
outcome of future events. These statements are not guarantees of future
performance and involve certain risks, uncertainties, and assumptions that are
difficult to predict with regard to timing, extent, likelihood, and degree of
occurrence. Therefore, actual results and outcomes may materially differ from
what may be expressed or forecasted in such forward looking statements. Internal
and external factors that may cause such a difference include changes in
interest rates and interest rate relationships; demand for products and
services; the degree of competition by traditional and non-traditional
competitors; changes in banking regulations; changes in tax laws; changes in
prices, levies, and assessments; the impact of technological advances;
governmental and regulatory policy changes; the outcomes of pending and future
litigation and contingencies; trends in customer behavior and customer ability
to repay loans; software failure; errors or miscalculations; the ability of
other companies on which the Corporation relies to be Year 2000 compliant; the
ability of the Corporation to locate and correct all date sensitive computer
codes; and the vicissitudes of the national economy. The Corporation undertakes
no obligation to update, amend or clarify forward looking statements, whether as
a result of new information, future events, or otherwise.
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), 1st Bank (West Branch), and Bank of Lakeview. The Corporation has
applied to form a new community bank in St. Johns, Michigan, to be known as
"Firstbank - St. Johns." The opening of the bank is subject to approval by the
FDIC and the Michigan Financial Institutions Bureau. Assuming receipt of such
approvals, it is expected that the bank will open in June or July of 2000.
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.
1st Bank owns 1st Armored, Incorporated, an armored car service provider
and 1st Collections, Incorporated, a collection service. Each of the subsidiary
banks also offers securities brokerage services at their main offices through
arrangements with third party brokerage firms.
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 78 percent of total revenues in 1999, 76
percent of total revenues in 1998, and 80 percent in 1997. In addition, interest
income from investment securities accounted for approximately 10 percent of
total revenues on a consolidated basis in 1999, 12 percent of total revenues on
a consolidated basis in 1998, and 11 percent of total revenues on a consolidated
basis in 1997. 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, Auburn, Ithaca,
Merrill, Pine River Township, Riverdale, St. Charles, St. Louis, and Vestaburg.
-1-
<PAGE>
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 two full service offices in Union Township and one full
service branch located in each of the following communities near Mount Pleasant:
Clare, Shepherd and Winn.
1st Bank is a Michigan state chartered bank which was incorporated in 1980.
Its main office and one branch are 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. 1st Bank also operates a loan production office in Roscommon,
Michigan.
Bank of Lakeview is a Michigan state chartered bank which was established
in 1904. Its main office and one branch are located in Lakeview, and it has
branches in Howard City, Morley, Remus, and Canadian Lakes (Morton Township).
The following table shows comparative information concerning the
Corporation's subsidiary banks at December 31, 1999:
<TABLE>
Bank of Alma Firstbank 1st Bank Bank of Lakeview
(In thousands of Dollars)
<S> <C> <C> <C> <C>
Assets $218,089 $132,687 $177,970 $114,508
Deposits 168,758 103,294 143,309 77,067
Loans 152,317 117,942 143,960 94,019
</TABLE>
As of December 31, 1999, the Corporation and its subsidiaries employed 300
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 four geographic banking markets where their offices are located.
Bank of Alma primarily competes in Gratiot, Midland, Montcalm, and Saginaw
Counties; Firstbank primarily in Isabella and Clare Counties; 1st Bank primarily
in Iosco, Oscoda, Ogemaw, and Roscommon Counties; and Bank of Lakeview primarily
in Mecosta and Montcalm Counties.
Banks and bank holding companies are extensively regulated. The Corporation
is a bank holding company that is regulated by the Federal Reserve System. Bank
of Alma, Firstbank, 1st Bank, and Bank of Lakeview 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
Consumer and Industry Services.
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.
-2-
<PAGE>
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 enactment of the Gramm-Leach-Bliley Act of 1999 (the "GLB Act")
represents a pivotal point in the history of the financial services industry.
The GLB Act sweeps away large parts of a regulatory framework that had its
origins in the Depression Era of the 1930s. Effective March 11, 2000, new
opportunities became available for banks, other depository institutions,
insurance companies and securities firms to enter into combinations that permit
a single financial services organization to offer customers a more complete
array of financial products and services. The GLB Act provides a new regulatory
framework for regulation through the "financial holding company," which will
have as its umbrella regulator the Federal Reserve Board. Functional regulation
of the financial holding company's separately regulated subsidiaries will be
conducted by their primary functional regulator. In order to qualify as a
financial holding company, a bank holding company must file an election to
become a financial holding company and each of its banks must be "well
capitalized" and "well managed." In addition, the GLB Act makes satisfactory or
above Community Reinvestment Act compliance for insured depository institutions
and their financial holding companies necessary in order for them to engage in
new financial activities. The GLB Act provides a federal right to privacy of
non-public personal information of individual customers. The Corporation and its
subsidiary banks are also subject to certain state laws that deal with the use
and distribution of non-public personal information.
The Corporation believes that the GLB Act could significantly increase
competition in its business and is evaluating the desirability of electing to
become a financial holding company. The Corporation believes that it is
qualified to elect financial holding company status but has not yet decided to
do so.
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.
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. Bank of Alma and Firstbank also hold
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.
Federal law allows bank holding companies to acquire banks located in any
state in the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law and to establish interstate branch
networks through acquisitions of other banks. Michigan and federal law permits
both U.S. and non U.S. banks to establish branch offices in Michigan. The
Michigan Banking Code permits, in appropriate circumstances and with the
approval of the Commissioner: (i) acquisition of Michigan banks by FDIC insured
banks, savings banks, or savings and loan associations located in other states;
(ii) sale by a Michigan bank of branches to an FDIC insured bank, savings bank,
or savings and loan association located in a state in which a Michigan bank
could purchase branches of the purchasing entity; (iii) consolidation of
Michigan banks and FDIC insured banks, savings banks, or
-3-
<PAGE>
savings and loan associations located in other states having laws permitting
such consolidation; (iv) establishment of branches in Michigan by FDIC insured
banks located in other states, the District of Columbia, or U.S. territories or
protectorates having laws permitting a Michigan bank to establish a branch in
such jurisdiction; and (v) establishment by foreign banks of branches located in
Michigan.
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, 1999.
<TABLE>
Tier 1 Tier 1 Total
Leverage Capital Risk-based
Ratio Ratio Capital
<S> <C> <C> <C>
Minimum regulatory requirement 4% 4% 8%
Well capitalized regulatory level 5% 6% 10%
Firstbank Corporation-Consolidated 8.49% 10.98% 12.24%
Bank of Alma 8.72% 11.37% 12.63%
Firstbank 7.96% 9.04% 10.29%
1st Bank 7.47% 9.97% 11.23%
Lakeview 9.98% 13.92% 15.17%
</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>
Total
Tier 1 Tier 1 Risk-based
Leverage Capital Capital
<S> <C> <C> <C>
Capital Balances at December 31, 1999 $52,735 $52,735 $58,780
Required regulatory capital 24,844 19,213 38,427
------ ------ ------
Capital in excess of regulatory minimums $27,891 $33,522 $20,353
====== ====== ======
</TABLE>
-4-
<PAGE>
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.
-5-
<PAGE>
The following tables provide information concerning the business of the
registrant.
Distribution of Assets, Liabilities, and Shareholders' Equity
<TABLE>
Year Ended Year Ended Year Ended
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- -----------------
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:
Taxable securities $ 60,033 $ 3,651 6.08% $ 55,861 $ 3,431 6.15% $ 40,255 $ 2,546 5.90%
Tax exempt securities (1) 33,307 2,572 7.72 33,455 2,589 7.74 29,123 2,352 8.07
------- ------- ------- ------- -------- -------
Total securities 93,340 6,223 6.67 89,316 6,020 6.74 69,378 4,898 7.05
Loans (1) (2) 462,516 40,467 8.75 412,884 38,768 9.39 352,539 33,412 9.46
Federal funds sold 4,190 208 4.96 13,446 728 5.41 5,414 289 5.37
Interest bearing deposits 999 55 5.50 809 42 5.20 309 22 7.17
--------- --------- ------- ------- --------- ---------
Total earning assets 561,045 46,953 8.37 516,455 45,558 8.82 427,640 38,621 9.02
Nonaccrual loans 2,034 1,432 519
Less allowance for loan loss (9,213) (8,543) (7,142)
Cash and due from banks 18,877 19,173 16,413
Other non earning assets 34,700 32,421 23,009
-------- -------- --------
Total average assets $607,443 $560,938 $460,439
======= ======= ========
Average Liabilities
Interest bearing liabilities:
Demand $143,828 $ 4,662 3.24% $126,030 $4,440 3.52% $ 95,572 $ 3,393 3.55%
Savings 72,412 1,776 2.45 67,085 1,734 2.58 61,286 1,664 2.71
Time 204,417 10,485 5.13 211,243 11,718 5.55 188,378 10,571 5.61
Federal funds purchased and
repurchase agreements 29,343 1,385 4.72 17,601 757 4.30 13,468 624 4.62
Notes payable 17,777 975 5.49 11,464 704 6.14 4,480 278 6.08
-------- -------- -------- ------- --------- -------
Total interest bearing liabilities 467,777 19,283 4.12 433,423 19,353 4.47 363,184 16,530 4.49
Demand deposits 70,711 63,257 50,647
-------- -------- --------
Total funds 538,488 496,680 413,831
Other non interest bearing liabilities 8,203 8,000 5,368
--------- --------- --------
Total liabilities 546,691 504,680 419,199
Average shareholders' equity 60,752 56,258 41,240
-------- -------- --------
Total average liabilities
and shareholders' equity $607,443 $560,938 $460,439
======= ======= =======
Net interest income (1) $27,670 $26,205 $22,091
====== ====== ======
Rate spread (1) 4.25% 4.35% 4.53%
==== ==== ====
Net interest margin (percent of
average earning assets) (1) 4.92% 5.06% 5.16%
==== ==== ====
</TABLE>
(1) Presented on a fully taxable equivalent basis using a federal income tax
rate of 34%.
(2) Interest income includes amortization of loan fees of $1,312,400,
$1,726,000, and $1,387,300 respectively. Interest on nonaccrual loans is
not included.
-6-
<PAGE>
Volume/Rate Analysis(1)
<TABLE>
1999/1998 1998/1997
Change in Interest Due to: Change in Interest Due to:
Average Average Net Average Average Net
Volume Rate Change Volume Rate Change
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest Income:
Securities
Taxable securities $ 253 $ (33) $ 220 $ 961 $ (76) $ 885
Tax-exempt securities(2) (11) (6) (17) 338 (101) 237
------- --------- -------- ------- ---- -------
Total securities 242 (39) 203 1,299 (177) 1,122
Loans(2) 4,457 (2,758) 1,699 5,669 (313) 5,356
Federal funds Sold (464) (56) (520) 435 4 439
Interest bearing deposits 10 3 13 27 (7) 20
------- ---------- -------- -------- ----- --------
Total interest income on earning assets 4,245 (2,850) 1,395 7,430 (493) 6,937
Interest Expense:
Deposits
Interest paying demand 595 (373) 222 1,073 (26) 1,047
Savings 133 (91) 42 152 (82) 70
Time (370) (863) (1,233) 1,270 (123) 1,147
------ ------- ------ ------ ---- ------
Total deposits 358 (1,327) (969) 2,495 (231) 2,264
Federal funds purchased and securities
sold under agreements to repurchase 548 80 628 180 (47) 133
Notes payable 353 (82) 271 429 (3) 426
------ -------- ------- ------- ------ -------
Total interest expense on liabilities 1,259 (1,329) (70) 3,104 (281) 2,823
----- ------ ------- ------ ---- ------
Net Interest Income $2,986 $(1,521) $ 1,465 $ 4,326 $(212) $4,114
===== ====== ====== ====== ==== =====
</TABLE>
(1) 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.
(2) Interest is presented on fully taxable equivalent basis using a federal
income tax rate of 34%.
-7-
<PAGE>
Investment Portfolio
The carrying values of investment securities as of the dates indicated are
summarized as follows:
<TABLE>
December 31,
1999 1998 1997
---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C>
Taxable
US Treasury $ 8,002 $ 9,250 $11,083
US Government agencies 24,787 22,932 15,388
States and political subdivisions 5,654 4,839 2,196
Mortgage Backed Securities 2,175 3,614 4,550
Corporate and other 19,004 24,819 16,237
------ -------- ------
Total taxable 59,622 65,454 49,454
Tax-exempt
States and political subdivisions 30,644 36,257 33,124
------ -------- ------
Total $90,266 $101,711 $82,578
====== ======= ======
</TABLE>
-8-
<PAGE>
Analysis of Investment Securities Portfolio
The following table shows, by class of maturities at December 31, 1999, the
amounts and weighted average yields of such investment securities (1):
<TABLE>
Carrying Average
Value Yield(2)
(Dollars in thousands)
<S> <C> <C>
US Treasury:
One year or less $ 3,502,343 6.0541%
Over one through five years 4,499,688 6.2233
-----------
Total $ 8,002,031 6.1493%
US Agencies:
One year or less $ 4,292,611 8.4217%
Over one through five years 12,726,033 5.0482
Over five through ten years 5,217,873 6.2379
Over ten years 2,550,907 5.9809
-----------
Total $24,787,424 5.9788%
States & Political subdivisions:
One year or less $ 5,315,940 8.9413%
Over one through five years 12,503,552 8.9885
Over five through ten years 15,317,824 8.3033
Over ten years 3,160,707 8.9515
-----------
Total $36,298,023 8.6892%
Corporate and Other:
One year or less $ 8,943,842 6.1048%
Over one through five years 10,060,009 6.0829
----------
Total $19,003,851 6.0932%
Collateralized Mortgage Obligations
Over five through ten years $ 935,238 5.7699%
Over ten years 1,239,650 6.3514
-----------
Total $ 2,174,888 6.1013%
TOTAL $90,266,217 7.1109%
========== ======
</TABLE>
(1) Calculated on the basis of the cost and effective yields weighted for
the scheduled maturity of each security.
(2) 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:
-9-
<PAGE>
Analysis of Investment Securities Portfolio (cont.)
<TABLE>
Rate on
Taxable
Tax-exempt Equivalent
Rate Adjustment Basis
<S> <C> <C> <C>
One year or less 5.87% 3.02% 8.89%
Over 1 through 5 years 5.74 2.96 8.70
Over 1 through 10 years 5.30 2.73 8.04
Over 10 years 5.91 3.04 8.95
Total 5.60% 2.88% 8.48%
</TABLE>
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, 1999.
-10-
<PAGE>
Loan Portfolio
The following table presents the loans outstanding at December 31,
<TABLE>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Loan categories:
Commercial and agricultural $227,855 $192,212 $158,219 $122,934 $115,779
Real estate mortgages 205,179 177,009 171,848 122,605 90,753
Consumer 75,204 71,807 74,741 69,081 58,315
-------- -------- -------- -------- --------
Total $508,238 $441,028 $404,808 $314,620 $264,847
======== ======== ======= ======== =======
</TABLE>
The following table shows the maturity of commercial and agricultural and real
estate construction loans outstanding at December 31, 1999. Also provided are
the amounts due after one year classified according to their sensitivity to
changes in interest rates.
<TABLE>
One year One year to After
or less five years five years Total
(Dollars in thousands)
<S> <C> <C> <C> <C>
Commercial and agricultural $ 95,586 $110,661 $21,608 $227,855
Real Estate Construction 17,966 2,180 1,745 21,891
-------- -------- ------- --------
Total $113,552 $112,841 $23,353 $249,746
======= ======= ====== ========
Loans due after one year:
With pre-determined rate $107,745 $28,117 $135,862
With adjustable rates 332 0 332
-------- ------- --------
Total $108,077 $28,117 $136,194
======== ======= ========
</TABLE>
-11-
<PAGE>
Nonperforming Loans and Assets
The following table summarizes nonaccrual, troubled debt restructurings, and
past-due loans at December 31,
<TABLE>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Nonperforming loans:
Nonaccrual loans:
Commercial and agricultural $ 701 $ 584 $ 447 $ 127 $ 47
Real estate mortgages 1,454 186 800 79 0
Consumer 10 20 27 12 0
------- ------- ------- ------- ------
Total 2,165 790 1,274 218 47
Accruing Loans 90 days or more past due:
Commercial and agricultural 561 359 752 178 0
Real estate mortgages 74 241 426 475 319
Consumer 28 21 37 36 67
------- ------- ------- ------- -----
Total 663 621 1,215 689 386
Renegotiated loans:
Commercial and agricultural 55 86 121 150 182
Real estate mortgages 0 0 0 0 0
-------- -------- -------- -------- ------
Total 55 86 121 150 182
Total nonperforming loans 2,883 1,497 2,610 1,057 615
Property from defaulted loans 511 527 663 130 0
------ ------ ------ ------ ------
Total nonperforming assets $3,394 $2,024 $3,273 $1,187 $ 615
</TABLE>
(1) Nonperforming assets are defined as nonaccrual loans, loans 90 days or more
past due, property from defaulted loans, and renegotiated loans.
The gross interest income that would have been recorded for the year ended
December 31, 1999, 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 $134,545. The
amount of interest income on those loans that was included in net income for the
period was $247,948.
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, 1999, the Corporation had $15,847,000 in commercial and mortgage
loans for which payments are presently current although the borrowers are
experiencing financial difficulties. Those loans are subject to special
attention and their status is reviewed on a monthly basis.
As of December 31, 1999, there were no concentrations of loans exceeding 10
percent 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,
1999.
-12-
<PAGE>
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 at
December 31,
<TABLE>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(Dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period $9,048 $8,114 $6,247 $4,876 $4,100
Charge-offs:
Commercial and agricultural 240 71 211 110 164
Real estate mortgages 67 60 79 45 81
Consumer 492 581 980 625 493
------ ----- ----- ----- -----
Total charge-offs 799 712 1,270 780 738
Recoveries:
Commercial and agricultural 234 97 97 83 97
Real estate mortgages 20 47 7 28 63
Consumer 300 325 309 202 269
------ ----- ----- ----- -----
Total recoveries 554 469 413 313 429
Net charge-offs 245 243 857 467 309
------ ----- ----- ------ ------
Additions to allowance for loan losses 514 1,177 2,724 (1) 1,838 1,085
------ ----- ----- ----- -----
Balance at end of period $9,317 $9,048 $8,114 $6,247 $4,876
===== ===== ===== ===== =====
Net charge-offs as a percent of average loans .05% .06% .24% .16% .13%
</TABLE>
(1) Includes the allowance of Bank of Lakeview at date of acquisition of $1,326.
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.
Allocation of the Allowance for Loan Losses
The allowance for loan losses was allocated to provide for possible losses
within the following loan categories as of December 31,
<TABLE>
1999 1998 1997 1996 1995
-------------------------------------------------------------------------------------------------------
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial &
agricultural $5,344 45% $4,758 44% $3,806 39% $2,763 39% $2,232 44%
Real estate
mortgages 539 40 476 40 516 42 364 39 880 34
Consumer 1,521 15 1,690 16 1,621 19 1,576 22 1,050 22
Unallocated 1,913 2,124 2,171 1,544 714
----- --- ----- --- ----- ---- ----- --- ------ ---
Total $9,317 100% $9,048 100% $8,114 100% $6,247 100% $4,876 100%
====== === ===== === ====== === ====== === ====== ===
</TABLE>
-13-
<PAGE>
Average Deposits
The daily average deposits and rates paid on such deposits for the years ending
December 31,
<TABLE>
1999 1998 1997
---- ---- ----
Amount Rate Amount Rate Amount Rate
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Average Balance:
Noninterest-bearing demand deposits $ 70,711 $ 63,257 $ 50,647
Interest-bearing demand deposits 143,828 3.24% 126,030 3.52% 95,572 3.55%
Other savings deposits 72,412 2.45% 67,085 2.58% 61,286 2.71%
Other time deposits 204,417 5.13% 211,243 5.55% 188,378 5.61%
------- ---- ------- ---- ------- ----
Total average deposits $491,368 3.44% $467,615 3.83% $395,883 3.95%
======= ==== ======= ==== ======= ====
</TABLE>
The time remaining until maturity of time certificates of deposit and other time
deposits of $100,000 or more at December 31, 1999, was as follows (Dollars in
Thousands):
<TABLE>
<S> <C>
Three months or less $16,198
Over three through six months 6,000
Over six through twelve months 15,005
Over twelve months 4,793
-------
Total $41,996
</TABLE>
Return on Equity and Assets
The following table sets forth certain financial ratios for the years ended:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Financial ratios:
Return on average total assets 1.31% 1.30% 1.21%
Return on average equity 13.37% 12.98% 13.48%
Average equity to average total assets 9.81% 10.03% 8.96%
Dividend payout ratio 35.78% 34.16% 33.51%
</TABLE>
-14-
<PAGE>
Short Term Borrowed Funds
Included in short term borrowed funds are repurchase agreements as described in
Note J to the consolidated financial statements in the Corporation's Annual
Report to shareholders for the year ended December 31, 1999, which consist of
the following:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Amounts outstanding at the end of the year $21,519 $18,678 $12,932
Weighted average interest rate at the end of the year 4.17% 3.88% 4.23%
Longest maturity 1-18-00 1-20-99 2-20-98
Maximum amount outstanding at any month end during year $21,519 $18,678 $13,911
Approximate average amounts outstanding during the year $19,495 $15,618 $10,894
Approximate weighted average interest rate for the year 4.05% 4.15% 4.36%
</TABLE>
(1) The weighted average interest rates are derived by dividing the interest
expense for the period by the daily average balance during the period.
-15-
<PAGE>
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 building owned by Bank of Alma. The
Corporation's Operations Center is housed in a 14,800 square foot building
located in Alma and owned by Bank of Alma. The main office of Firstbank -- Mt.
Pleasant is located at 102 South Main, Mount Pleasant, Michigan. The 5,600
square foot facility is leased. The lease will expire in 2001. Firstbank has an
option to extend the term for an additional five years. The main office of 1st
Bank is located at 502 West Houghton Avenue, West Branch, Michigan in an
approximately 3,600 square foot building owned by the Bank. The executive
offices of 1st Bank and a full service branch are located in a 10,000 square
foot building owned by the Bank and located at 601 West Houghton Avenue, West
Branch, Michigan. The main office of Bank of Lakeview, which is owned by the
Bank, is located in a brick and block frame building of approximately 16,000
square feet at 506 South Lincoln Avenue, Lakeview, Michigan. The subsidiary
banks operate a total of 29 branch facilities, all but two of which are owned
and most of which are full service facilities and which range in size from 1,200
to 3,200 square feet used for banking purposes. In several instances, branch
facilities contain more space than required for current banking operations. This
excess space, totaling approximately 17,000 square feet, is 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.
-16-
<PAGE>
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 consolidated 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 53) has been Chief Financial Officer, Secretary, and
Treasurer of the Corporation since 1994. Ms. Deci has been Executive Vice
President of Bank of Alma since 1999, and Controller of Bank of Alma since 1988.
She had been Senior Vice President of Bank of Alma from 1994 - 1999. 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 62) has been Executive Vice President of Firstbank
since 1991 and has been Vice President of the Corporation and an officer of
Firstbank since 1987. Mr. Jarvis served as a director of Firstbank from 1987 to
1991.
Dale A. Peters (age 57) 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.
Richard J. Schurtz (age 63) has been Vice President of the Corporation
since the acquisition of Bank of Lakeview in August of 1997. Mr. Schurtz has
been President and Chief Executive Officer and a director of Bank of Lakeview
since 1994. Mr. Schurtz retired on January 7, 2000.
Thomas R. Sullivan (age 49) was named President Elect of the Corporation in
June 1999, and became President on January 1, 2000. He has also served as
President, Chief Executive Officer and a director of Firstbank, Mt. Pleasant,
since 1991. Mr. Sullivan had been Executive Vice President of the Corporation
since 1996 and served as Vice President of the Corporation from 1991 to 1996.
James E. Wheeler, II (age 40), has been Vice President of the Corporation
and Chief Loan Officer of Bank of Alma since 1989. Mr. Wheeler was named
President and CEO elect of Bank of Alma in July 1999. Mr. Wheeler has been
Executive Vice President of Bank of Alma since 1999. From 1994 to 1999, Mr.
Wheeler served as Senior Vice President of Bank of Alma.
-17-
<PAGE>
PART II
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The information under the caption "Common Stock Data" on page 13 in the
registrant's annual report to shareholders for the year ended December 31, 1999,
is here incorporated by reference.
ITEM 6. Selected Financial Data.
The information under the heading "Financial Highlights" on page 3 in the
registrant's annual report to shareholders for the year ended December 31, 1999,
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, 1999,
is here incorporated by reference.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Information under the headings "Liquidity and Interest Rate Sensitivity" on
pages 8 and 9 and "Quantitative and Qualitative Disclosure About Market Risk" on
pages 9 through 11 in the registrant's annual report to shareholders for the
year ended December 31, 1999, is here incorporated by reference.
ITEM 8. Financial Statements and Supplementary Data.
The report of independent auditors and the consolidated financial
statements on pages 14 through 32 and the quarterly results of operations on
page 13 in the registrant's annual report to shareholders for the year ended
December 31, 1999, are here incorporated by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-18-
<PAGE>
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information under the captions "Board of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the registrant's definitive proxy
statement for its annual meeting of shareholders to be held Apri1 24, 2000, 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 April 24, 2000, 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
Apri1 24, 2000, 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 24, 2000, is here incorporated
by reference.
-19-
<PAGE>
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(l) 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, 1999, in Item 8: Page Number in Statement or Report Annual Report
Report of Independent Auditors 14
Consolidated Balance Sheets as of December 31, 1999
and 1998 15
Consolidated Statements of Income and Comprehensive
Income for the years ended December 31, 1999, 1998, and 1997 16
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1999, 1998, and 1997 17
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998, and 1997 18
Notes to Consolidated Financial Statements 19-32
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, 1999.
(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:
Number Exhibit
3(a) Articles of Incorporation. Previously filed as an exhibit to
registrant's Form 10-Q for the quarter ended March 31, 1997. 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)* Deferred Compensation Plan. Previously filed as an exhibit to the
registrant's Form 10-K for the year ended December 31, 1995. Here
incorporated by reference.
-20-
<PAGE>
Number Exhibit
10(c)* Trust under Deferred Compensation Plan. Previously filed as an
exhibit to the registrant's Form 10-K for the year ended
December 31, 1995. Here incorporated by reference.
10(d)* 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.
10(e)* Stock Option and Restricted Stock Plan of 1997. Previously filed
as an appendix to the registrant's definitive proxy statement for
its annual meeting of shareholders on April 28, 1997. Here
incorporated by reference.
10(f) Employee Stock Purchase Plan of 1999. Previously filed as an
exhibit to the registrant's Registration Statement on Form S-8
(Registration No. 333-89771) filed on October 27, 1999. Here
incorporated by reference.
13 1999 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.) This report was delivered to the Registrant's
shareholders as an appendix to the Registrant's proxy statement
dated March 29, 2000, relating to the April 24, 2000, annual
shareholders meeting, which was delivered to the Registrant's
shareholders in compliance with Rule 14(a)-3 of the Securities
Act of 1934, as amended.
21 Subsidiaries of Registrant.
23 Consent of Crowe, Chizek and Company LLP.
24 Powers of Attorney. Contained on the signature page of this
report.
27 Financial Data Schedule for year ended December 31, 1999.
99 Firstbank Corporation 401(k) Plan Performance Table.
*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.
The registrant filed no Current Reports on Form 8-K during the last quarter
of the period covered by this report.
-21-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 February 28,
2000.
FIRSTBANK CORPORATION
/s/ Thomas R. Sullivan
Thomas R. Sullivan
President, Chief Executive Officer
(Principal Executive Officer)
/s/ Mary D. Deci
Mary D. Deci
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated. Each director of the Registrant,
whose signature appears below, hereby appoints Thomas R. Sullivan and Mary D.
Deci, and each of them severally, as his attorney-in-fact, to sign in his name
and on his behalf, as a director of the Registrant, and to file with the
Commission any and all Amendments to this Report on Form 10-K.
Signature Date
/s/ Duane A. Carr February 28, 2000
Duane A. Carr
/s/ William E. Goggin February 28, 2000
William E. Goggin
/s/ Edward B. Grant February 25, 2000
Edward B. Grant
/s/ Charles W. Jennings February 29, 2000
Charles W. Jennings
/s/ Phillip G. Peasley February 28, 2000
Phillip G. Peasley
/s/ David D. Roslund February 28, 2000
David D. Roslund
/s/ Thomas R. Sullivan February 28, 2000
Thomas R. Sullivan
<PAGE>
EXHIBIT 13
Firstbank Corporation
1999
Annual Report
This 1999 Annual Report contains audited financial statements and a detailed
financial review. This is Firstbank Corporation's 1999 annual report to
shareholders. Although attached to our proxy statement, this report is not part
of our proxy statement, is not deemed to be soliciting material, and is not
deemed to be filed with the Securities and Exchange Commission (the "SEC")
except to the extent that it is expressly incorporated by reference in a
document filed with the SEC.
The 1999 Report to Shareholders accompanies this proxy statement. That report
presents information concerning the business and financial results of Firstbank
Corporation in a format and level of detail that we believe shareholders will
find useful and informative. Shareholders who would like to receive even more
detailed information than that contained in this 1999 Annual Report are invited
to request our Annual Report on Form 10-K.
Firstbank 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 Deci, Chief Financial Officer,
Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan
48801-6029.
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
December 31
-----------
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and due from banks $ 24,786,354 $ 22,203,430
Short term investments 410,519 13,288,206
------------- ------------
Total cash and cash equivalents 25,196,873 35,491,636
Securities available for sale 90,266,217 101,711,023
Loans:
Loans held for sale 1,117,160 5,454,928
Portfolio loans
Commercial 227,854,617 192,212,168
Real estate mortgage 204,062,307 171,554,004
Consumer 75,204,334 71,806,822
------------ ------------
Total loans 508,238,418 441,027,922
Less allowance for loan losses (9,317,000) (9,048,000)
------------- -------------
Net loans 498,921,418 431,979,922
Premises and equipment, net 14,928,427 14,057,619
Intangibles 8,916,984 9,534,210
Accrued interest receivable 3,489,060 3,463,572
Other assets 8,833,070 6,775,852
------------- -------------
TOTAL ASSETS $650,552,049 $603,013,834
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing demand accounts $ 75,843,929 $ 68,887,968
Interest bearing accounts:
Demand 136,196,228 146,741,509
Savings 70,526,731 69,514,970
Time 208,836,832 208,908,518
----------- -----------
Total deposits 491,403,720 494,052,965
Securities sold under agreements to
repurchase and overnight borrowings 51,819,165 26,577,527
Notes payable 38,384,277 14,316,550
Accrued interest payable 1,255,070 1,311,406
Other liabilities 6,657,767 6,980,442
------------- -------------
Total liabilities 589,519,999 543,238,890
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized, none issued
Common stock; 10,000,000 shares authorized;
4,693,765 and 4,527,256 shares issued and
outstanding in 1999 and 1998 respectively 55,262,941 52,796,743
Retained earnings 6,433,294 5,874,601
Accumulated other comprehensive income (664,185) 1,103,600
------------- -------------
Total shareholders' equity 61,032,050 59,774,944
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $650,552,049 $603,013,834
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
Year Ended December 31
----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Interest income:
Loans, including fees $40,450,730 $38,498,073 $33,385,960
Securities:
Taxable 3,651,268 3,466,878 2,546,186
Exempt from federal income tax 1,697,457 1,791,291 1,620,493
Short term investments 263,029 728,105 311,464
------------ ------------ ------------
Total interest income 46,062,484 44,484,347 37,864,103
Interest expense:
Deposits 16,923,239 17,891,968 15,628,237
Notes payable and other 2,360,089 1,461,240 901,502
----------- ----------- ------------
Total interest expense 19,283,328 19,353,208 16,529,739
---------- ---------- ----------
Net interest income 26,779,156 25,131,139 21,334,364
Provision for loan losses 514,000 1,177,000 1,398,000
------------ ----------- -----------
Net interest income after
provision for loan losses 26,265,156 23,954,139 19,936,364
Noninterest income:
Service charges on deposit accounts 1,577,526 1,499,200 1,227,700
Gain on sale of mortgage loans 882,704 2,099,619 759,378
Mortgage servicing, net of amortization 201,804 (14,591) 247,529
Trust fees 381,511 327,464 273,222
Gain (loss) on sale of securities (1,385) 3,329 (29,732)
Other 2,326,639 1,952,708 1,219,254
----------- ------------ -----------
Total noninterest income 5,368,799 5,867,729 3,697,351
Noninterest expense:
Salaries and employee benefits 10,504,581 9,768,488 8,032,608
Occupancy 3,037,218 2,970,065 2,128,511
Amortization of intangibles 617,226 756,430 826,924
FDIC Insurance premium 76,080 71,923 43,864
Michigan Single Business tax 564,600 389,800 359,567
Other 5,268,217 5,445,592 4,433,510
----------- ------------ -----------
Total noninterest expense 20,067,922 19,402,298 15,824,984
---------- ----------- ----------
Income before federal income taxes 11,566,033 10,419,570 7,808,731
Federal income taxes 3,530,000 3,117,000 2,251,000
----------- ------------ -----------
NET INCOME $ 8,036,033 $ 7,302,570 $ 5,557,731
Other comprehensive income:
Change in unrealized gain (loss) on
securities, net of tax and reclassification effects (1,767,785) 216,541 323,720
------------ ---------- ----------
COMPREHENSIVE INCOME $ 6,268,248 $ 7,519,111 $ 5,881,451
========= ========= =========
Basic earnings per share $1.70 $1.54 $1.34
==== ==== ====
Diluted earnings per share $1.66 $1.48 $1.30
==== ==== ====
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Income Total
<S> <C> <C> <C> <C>
Balances at January 1, 1997 $24,228,132 $8,296,590 $ 563,339 $ 33,088,061
Net income for 1997 5,557,731 5,557,731
Cash dividends-$.43 per share (1,862,378) (1,862,378)
5% stock dividend-224,727 shares 4,560,786 (4,571,057) (10,271)
Issuance of 12,847 shares of common
stock through exercise of stock options 163,566 163,566
Issuance of 28,214 shares of common stock
through the dividend reinvestment plan 479,436 479,436
Issuance of 22,860 shares of common stock from
supplemental shareholder investments 402,894 402,894
Issuance of 898,830 shares of common
stock pursuant to the acquisition 16,389,135 16,389,135
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of $166,765 323,720 323,720
---------- --------- ------- ----------
BALANCES AT DECEMBER 31, 1997 46,223,949 7,420,886 887,059 54,531,894
Net income for 1998 7,302,570 7,302,570
Cash dividends-$.53 per share (2,494,909) (2,494,909)
5% stock dividend-226,157 shares 6,353,282 (6,353,946) (664)
Issuance of 15,115 shares of common
stock through exercise of stock options 251,492 251,492
Issuance of 23,097 shares of common stock
through the dividend reinvestment plan 635,966 635,966
Issuance of 17,584 shares of common stock from
supplemental shareholder investments 482,354 482,354
Net change in unrealized appreciation (depreciation) on
securities available for sale, net of tax of $111,551 216,541 216,541
Purchase of 36,740 shares of stock (1,213,670) (1,213,670)
Issuance of 1,584 shares of common stock 63,370 63,370
---------- --------- --------- ----------
BALANCES AT DECEMBER 31, 1998 52,796,743 5,874,601 1,103,600 59,774,944
Net income for 1999 8,036,033 8,036,033
Cash dividends-$.61 per share (2,874,108) (2,874,108)
5% stock dividend-224,526 shares 4,602,334 (4,602,783) (449)
Issuance of 50,310 shares of common
stock through exercise of stock options 816,769 816,769
Issuance of 44,246 shares of common stock
through the dividend reinvestment plan 1,098,099 1,098,099
Issuance of 19,807 shares of common stock from
supplemental shareholder investments 527,549 527,549
Purchase of 180,150 shares of stock (4,792,687) (4,792,687)
Issuance of 7,770 shares of common stock 213,685 213,685
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of ($911,674) (1,767,785) (1,767,785)
----------- ---------- ------------ -----------
BALANCES AT DECEMBER 31, 1999 $55,262,492 $6,433,743 $ (664,185) $61,032,050
=========== ========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Year Ended December 31
----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 8,036,033 $ 7,302,570 $ 5,557,731
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses 514,000 1,177,000 1,398,000
Depreciation of premises and equipment 1,342,052 1,480,897 1,033,620
Net amortization of security premiums/discounts 303,260 122,223 131,273
Loss (gain) on sale of securities 1,385 (3,329) 29,732
Amortization of intangibles 617,226 756,430 826,924
Gain on sale of mortgage loans (882,704) (2,099,619) (759,378)
Proceeds from sales of mortgage loans 57,565,972 152,673,876 50,910,223
Loans originated for sale (52,345,500) (152,112,394) (47,311,773)
Deferred federal income tax benefit (305,000) (356,000) (285,000)
Increase in accrued interest receivable and other assets (866,031) (693,761) (4,049,673)
Increase (decrease) in accrued interest payable and other liabilities (379,011) 916,602 3,196,620
------------ -------------- -----------
NET CASH FROM OPERATING ACTIVITIES 13,601,682 9,164,495 10,678,299
INVESTING ACTIVITIES
Cash acquired from Lakeview Financial Corporation 1,724,418
Proceeds from sale of securities available for sale 7,017,959 609,415 1,560,907
Proceeds from maturities of securities available for sale 29,480,622 28,935,385 28,153,606
Purchases of securities available for sale (28,037,880) (48,468,741) (42,239,442)
Net increase in portfolio loans (71,793,264) (34,924,784) (23,427,147)
============
Net purchases of premises and equipment (2,212,860) (2,121,451) (2,074,625)
------------ -------------- ------------
NET CASH FROM INVESTING ACTIVITIES (65,545,423) (55,970,176) (36,302,283)
FINANCING ACTIVITIES
Net increase (decrease) in deposits (2,649,245) 48,387,144 13,586,053
Net increase in securities sold under
agreements to repurchase and overnight borrowings 25,241,638 5,344,646 12,400,289
Retirement of notes payable (14,127) (13,327) (14,160)
Proceeds from Federal Home Loan Bank borrowings 31,720,000 14,750,000 5,364,000
Retirement of Federal Home Loan Bank borrowings (7,638,146) (8,010,588) (1,998,414)
Cash dividends and cash paid in lieu of fractional shares on stock dividend (2,874,557) (2,495,573) (1,872,649)
Purchase of common stock (4,792,687) (1,213,670)
Net proceeds from issuance of common stock 2,656,102 1,433,182 1,045,896
----------- ------------- -----------
NET CASH FROM FINANCING ACTIVITIES 41,648,978 58,181,814 28,511,015
---------- ------------ ----------
INCREASE IN CASH AND CASH EQUIVALENTS (10,294,763) 11,376,133 2,887,031
Cash and cash equivalents at beginning of year 35,491,636 24,115,503 21,228,472
---------- ------------ ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $25,196,873 $ 35,491,636 $24,115,503
========== ============ ==========
Supplemental disclosure of cash flow information: Cash paid during the year for:
Interest $19,339,664 $ 19,349,433 $14,944,446
Income taxes 4,000,000 3,150,000 2,135,000
Non-cash investing and financing activities:
Acquisition of Lakeview Financial Corporation
Common stock issued $16,006,389
Fair value of stock options 382,776
Fair value of assets acquired 88,513,535
Fair value of liabilities assumed 77,410,379
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Firstbank Corporation (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 $650 million as of December 31, 1999, primarily represent
commercial and retail banking activity. Mortgage loans serviced for others of
$234 million and trust assets of $74 million as of December 31, 1999, are not
included in the Company's consolidated balance sheet.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries: Bank of Alma,
Firstbank, 1st Bank, and Bank of Lakeview (the "Banks"), 1st Armored,
Incorporated, and 1st Collections, Incorporated, after elimination of
intercompany accounts and transactions.
Use of Estimates: 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, consumer loans are secured by various items of personal property and
mortgage loans are secured by residential real estate. The Company's funding
sources include time deposits and other deposit products which bear interest.
Periods of rising interest rates result in an increase in the cost of funds to
the Company.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand,
amounts due from banks, and short term investments which include 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,
deposit transactions, and repurchase agreements and overnight borrowings on a
net cash flow basis.
Securities: Securities available for sale consist of bonds and notes which 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. Securities classified as available for sale 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. 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 maturity.
Mortgage Banking Activities: Servicing rights are recognized as assets for
purchased rights and for the allocated value of retained servicing rights on
loans sold. Servicing rights are expensed in proportion to, and over the period
of, estimated net servicing revenues. Impairment is evaluated based on the fair
value of the rights, using groupings of the underlying loans as to interest
rates and then, secondarily, as to geographic and prepayment characteristics.
Any impairment of a grouping is reported as a valuation allowance.
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. Loans held for sale are reported at the lower of
cost or market, on an aggregate basis.
<PAGE>
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.
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. Impaired
loans are 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. 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 an increase in the allowance for loan losses, such increase is
reported as bad debt expense.
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 loans 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
considered impaired. Impaired loans, or portions thereof, are charged off when
deemed uncollectible.
Premises and Equipment: Premises and equipment are stated on the basis of cost,
less accumulated depreciation. Depreciation is computed over the estimated
useful lives of the assets, primarily by accelerated methods for income tax
purposes, and 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 lower
of cost or 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.
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. The goodwill is
amortized using the straight line method for periods of not less than 15 years
or more than 20 years.
Interest Income: Interest on loans is accrued over the term of the loans based
upon the principal outstanding. 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: The Company 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
Company and its subsidiaries file a consolidated federal income tax return on a
calendar year basis.
Earnings Per Share: Basic earnings per share is based on weighted average common
shares outstanding. Diluted earnings per share includes the dilutive effect of
additional common shares issuable under stock options. All per share amounts are
restated for stock dividends and stock splits through the date of issue of the
financial statements.
Comprehensive Income: Comprehensive income consists of net income and unrealized
gains and losses on securities available for sale which is also recognized as a
separate component of equity. Accumulated other comprehensive income consists of
unrealized gains and losses on securities available for sale.
Supplemental Disclosure of Non-Cash Investing Activities: During 1997, the
Company transferred $2,886,318 from loans held for sale to portfolio loans.
<PAGE>
Reclassification: Certain 1998 and 1997 amounts have been reclassified to
conform to the 1999 presentation.
Future Accounting Changes: Beginning January 1, 2001, a new accounting standard
will require all derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income statement.
Fair value changes involving hedges will generally be recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair value of
the hedged item is not otherwise recorded. This is not expected to have a
material effect; however, the actual effect will depend upon derivative holdings
when the standard becomes effective.
Segment Information: While the Company's chief decision makers monitor the
revenue streams of various products and services, operations are managed and
financial performance is evaluated on a company wide basis. Accordingly, all of
the Company's banking operations are considered by Management to be aggregated
in one reportable operating segment.
NOTE B-ACQUISITIONS/DIVESTURES
The Company did not consummate any acquisitions during 1999. On August 8, 1997,
the Company completed its acquisition of Lakeview Financial Corporation. The
purchase price of the transaction was $17 million based on the Company's trading
prices for a 20 day period ending six days prior to the merger. Over 98% of the
common stock shareholders of Lakeview Financial Corporation elected to receive
the Company's stock, resulting in the issuance of 898,830 shares. Cash of
$681,000 and options for 23,594 shares with exercise prices of $6.59 to $9.74
completed the merger.
The acquisition was accounted for as a purchase transaction. Accordingly, the
results of operations of Lakeview Financial Corporation are included with those
of the Company for periods subsequent to the date of merger. Bank of Lakeview
continues to operate as a community bank in the five communities (six locations)
of their offices.
On April 1, 1999, the Company's Bank of Alma subsidiary sold its insurance
agency, Niles Agency, Incorporated, to an unrelated third party. Operating
results of the Niles Agency are included in consolidated results until the date
of sale. A gain of $59,000 was recognized on the sale of the agency, and is
included in other income of the consolidated statements of income and
comprehensive income. The effect of the operation and sale of the Niles Agency
was not material to the consolidated financial statements of the Company.
NOTE C--RESTRICTIONS ON VAULT 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, 1999 and 1998, were $2,765,000 and $2,759,000 respectively. These reserves
do not earn interest.
<PAGE>
NOTE D--SECURITIES
The carrying amounts of securities and their fair values were as follows:
<TABLE>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
<S> <C> <C> <C> <C>
Securities available for sale:
December 31, 1999:
U.S. Treasury $ 8,027,823 $ 13,050 $ (38,842) $ 8,002,031
U.S. governmental agency 25,385,598 8,434 (606,608) 24,787,424
States and political subdivisions 36,537,652 247,607 (487,236) 36,298,023
Collateralized mortgage obligations 2,186,369 1,619 (13,100) 2,174,888
Corporate 16,827,876 1,512 (133,776) 16,695,612
Equity 2,308,239 0 0 2,308,239
----------- --------- ---------- -----------
$ 91,273,557 $ 272,222 $(1,279,562) $ 90,266,217
========== ========= ========== ===========
December 31, 1998:
U.S. Treasury $ 9,028,443 $ 221,401 $ (51) $ 9,249,793
U.S. governmental agency 22,770,082 222,608 (60,658) 22,932,032
States and political subdivisions 40,016,678 1,214,073 (134,582) 41,096,169
Collateralized mortgage obligations 3,583,726 30,603 (529) 3,613,800
Corporate 22,824,634 226,073 (46,819) 23,003,888
Equity 1,815,341 0 0 1,815,341
----------- --------- ---------- -----------
$100,038,904 $1,914,758 $( 242,639) $101,711,023
=========== ========= ========== ===========
</TABLE>
Gross realized gains (losses) on sales and calls of securities were:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Gross realized gains $ 38,373 $ 4,858 $ 1,050
Gross realized losses (39,758) ( 1,529) (30,782)
------ ------ ------
Net realized gains $( 1,385) $ 3,329 $(29,732)
====== ======= ======
</TABLE>
The amortized cost and fair value of securities at December 31, 1999, by stated
maturity are shown below. Actual maturities may differ from stated maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
<TABLE>
Securities Available for Sale
-----------------------------
Amortized Fair
Cost Value
---- -----
<S> <C> <C>
Due in one year or less $19,535,614 $19,573,244
Due after one year through five years 40,109,099 39,726,547
Due after five years through ten years 21,108,184 20,544,434
Due after ten years 8,212,421 8,113,753
----------- -----------
Total 88,965,318 87,957,978
Equity securities 2,308,239 2,308,239
----------- -----------
Total securities $91,273,557 $90,266,217
========== ==========
</TABLE>
At December 31, 1999, securities with a carrying value approximating $59,108,000
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.
<PAGE>
NOTE E--SECONDARY MORTGAGE MARKET ACTIVITIES
Loans serviced for others, which are not reported as assets, total $233,660,000
and $215,308,000 at 1999 and 1998.
Activity for capitalized mortgage servicing rights was as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Servicing rights:
Beginning of year $ 997,226 $ 503,370
Additions 598,983 969,416
Amortized to expense (372,012) (475,560)
---------- --------
End of year $1,224,197 $ 997,226
========= ========
</TABLE>
Management has determined that a valuation allowance is not necessary at
December 31, 1999 or 1998.
NOTE F-LOANS
Loans at year-end were as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Commercial $132,640,574 $117,351,858
Mortgage loans on real estate:
Residential 205,593,791 173,420,825
Loans held for sale 1,117,160 5,454,928
Commercial 131,323,729 109,412,665
Construction 25,918,504 23,415,773
Consumer 72,976,468 70,136,552
Credit Card 6,919,651 6,519,740
------------ -------------
Subtotal 576,489,877 505,712,341
Less:
Allowance for loan losses 9,317,000 9,048,000
Net deferred loan fees 52,276 9,764
Undisbursed loan funds 68,199,183 64,674,655
------------ ------------
Loans, net $498,921,418 $431,979,922
=========== ===========
</TABLE>
Activity in the allowance for loan losses for the year was as follows:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Beginning balance $9,048,000 $8,114,000 $6,247,000
Lakeview allowance at acquisition 1,326,000
Provision for loan losses 514,000 1,177,000 1,398,000
Loans charged-off (799,000) (712,000) (1,270,000)
Recoveries 554,000 469,000 413,000
--------- ---------- ----------
Ending balance $9,317,000 $9,048,000 $8,114,000
========= ========= =========
</TABLE>
Impaired loans were as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Year-end loans with no allocated allowance for loan losses $ 534,000 $ 504,000
Year-end loans with allocated allowance for loan losses 4,139,000 1,102,000
--------- ---------
Total $4,673,000 $1,606,000
========= =========
</TABLE>
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Amount of the allowance for loan losses allocated $ 329,000 $ 118,000 $ 48,000
Loans past due over 90 days still on accrual $ 663,000 $ 621,000 $ 1,215,158
Average of impaired loans during the year $ 5,133,000 $ 1,879,000 $ 972,000
Interest income recognized during impairment $ 284,000 $ 128,000 $ 87,000
Cash-basis interest income recognized $ 112,000 $ 31,000 $ 0
</TABLE>
Approximately $57,300,000 of commercial loans were pledged to the Federal
Reserve Bank of Chicago at December 31, 1999, to secure overnight borrowings.
<PAGE>
NOTE G--PREMISES AND EQUIPMENT
Year end premises and equipment were as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Land $ 3,230,319 $ 3,174,570
Buildings 12,306,250 11,594,443
Furniture, fixtures and equipment 9,194,568 8,206,337
----------- -----------
24,731,137 22,975,350
Less: Accumulated depreciation (9,802,710) (8,917,731)
----------- -----------
$14,928,427 $14,057,619
========== ==========
</TABLE>
Rent expense for 1999 was $105,620 and for 1998 was $115,801. Rent commitments
under noncancellable operating leases were as follows, before considering
renewal options that generally are present.
<TABLE>
<S> <C>
2000 $104,306
2001 102,365
2002 105,706
2003 107,234
2004 96,064
--------
Total $515,675
========
</TABLE>
NOTE H--FEDERAL INCOME TAXES
Federal income taxes consist of the following:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Current expense $3,835,000 $3,473,000 $2,536,000
Deferred benefit (305,000) (356,000) (285,000)
--------- --------- ---------
Total $3,530,000 $3,117,000 $2,251,000
========= ========= =========
</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>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Tax at statutory rate $3,932,000 $ 3,543,000 $2,655,000
Effect of surtax exemption 16,000 4,000
Effect of tax-exempt interest (544,000) (550,000) (619,000)
Other 126,000 120,000 215,000
---------- ----------- ---------
Federal income taxes $3,530,000 $ 3,117,000 $2,251,000
========= ========== =========
Effective tax rate 31% 30% 29%
</TABLE>
The components of deferred tax assets and liabilities consist of the following
at December 31:
<TABLE>
Deferred tax assets: 1999 1998
---- ----
<S> <C> <C>
Allowance for loan losses $2,799,000 $2,603,000
Unrealized loss on securities available for sale 342,000
Deferred compensation 951,000 708,000
Other 395,000 588,000
---------- -----------
Total deferred tax assets 4,487,000 3,899,000
--------- ----------
Deferred tax liabilities:
Fixed assets (1,417,000) (1,491,000)
Unrealized gain on securities available for sale (569,000)
Mortgage servicing rights (416,000) (380,000)
Purchase accounting adjustment (517,000) (559,000)
Other (94,000) (73,000)
----------- -----------
Total deferred tax liabilities (2,444,000) (3,072,000)
---------- ----------
Net deferred tax asset $ 2,043,000 $ 827,000
========== ===========
</TABLE>
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, 1999 or 1998.
<PAGE>
Deferred tax assets at December 31, 1999 and 1998, are included in other assets
in the accompanying consolidated balance sheets.
Federal income tax laws require recapture of the tax loan loss reserve when
average assets of the group exceed $500 million. The recapture occurs over a
four year period in amounts equal to 10%, 20%, 30% and 40% of the tax loan loss
reserve. The total amount subject to recapture is $1,548,000 and will be
recaptured as follows: $155,000 in 1998; $310,000 in 1999; $464,000 in 2000; and
$619,000 in 2001.
NOTE I--DEPOSITS
Time deposits of $100,000 or more were $41,996,000 and $39,798,000 at year-end
1999 and 1998.
Scheduled maturities of time deposits were as follows:
<TABLE>
Year Amount
---- ------
<S> <C>
2000 $160,324,534
2001 26,066,891
2002 11,274,229
2003 6,646,585
2004 4,496,756
2005 and after 27,837
------------
Total $208,836,832
</TABLE>
NOTE J--BORROWINGS
Information relating to securities sold under agreements to repurchase follows:
<TABLE>
At December 31: 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Outstanding balance $21,519,000 $18,678,000 $12,932,000
Average interest rate 4.17% 3.88% 4.23%
Daily average for the year:
Outstanding balance $19,495,000 $15,618,000 $10,894,000
Average interest rate 4.05% 4.15% 4.36%
Maximum outstanding at any month end $21,519,000 $18,678,000 $13,911,000
</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 Company and are primarily held in safekeeping by correspondent
banks. Repurchase agreements are offered principally to certain large deposit
customers as deposit equivalent investments.
At year-end, advances from the Federal Home Loan Bank were as follows:
<TABLE>
1999 1998
---- ----
<S> <C> <C>
Maturities January 2000 through October 2017 primarily
fixed rate at rates from 4.64% to 7.30% averaging 5.73% $38,185,266 $14,103,412
</TABLE>
Each Federal Home Loan Bank advance is payable at its maturity date, with a
prepayment penalty. The advances were collateralized by at least $61,096,000 and
$22,565,000 of first mortgage loans under a blanket lien arrangement at year-end
1999 and 1998.
<TABLE>
Maturities over the next five years are:
<S> <C>
2000 $ 27,470,000
2001 250,000
2002 0
2003 7,000,000
2004 0
2005 and after 3,465,266
-----------
$38,185,266
===========
</TABLE>
<PAGE>
NOTE K--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 1999, 1998, and 1997 matching 401(k)
contributions charged to expense were $275,796, $264,441, and $204,165
respectively. The percent of the Company's matching contributions to the 401(k)
is determined annually by the Board of Directors.
The Board of Directors established the Firstbank Corporation Affiliated Deferred
Compensation Plan (Plan). Directors of the holding company and each affiliate
bank are eligible to participate in the Plan. In addition, key management of the
holding company and affiliate banks as designated by the Board of Directors, are
eligible to participate. The Plan is a nonqualified plan as defined by the
Internal Revenue Code. As such, all contributions are invested at the direction
of the participant and are assets of the Company. The Company recognizes a
corresponding liability to each participant. The Plan allows Directors to defer
their director fees and key management to defer a portion of their salaries into
the Plan.
NOTE L--STOCK OPTIONS
The Firstbank Corporation Stock Option Plans of 1993 and 1997 ("Plans") provide
for the grant of 281,420 and 231,525 shares of stock, respectively, in either
restricted form or under option. Options may be either incentive stock options
or nonqualified stock options. The Plan of 1993 will terminate April 26, 2003.
The 1997 Plan will terminate April 28, 2007. The Board, at its discretion, may
terminate either or both Plans prior to the Plans' termination dates.
Each option granted under the Plans may be exercised in whole or in part during
such period as is specified in the option agreement governing that option.
Options are issued with exercise prices equal to the stock's market value at
date of issuance. A nonqualified stock option may not be exercised after fifteen
years from the grant date. Incentive stock options may not be exercised after
ten years from the grant date.
The following is a summary of option transactions which occurred during 1997,
1998 and 1999:
<TABLE>
Number Weighted
of Shares Average
--------- -------
<S> <C> <C>
Outstanding - December 31, 1996 219,904 $10.38
Granted 92,379 19.76
Granted pursuant to acquisition 47,301 9.71
Exercised (12,847) 8.44
Canceled (4,968) 12.70
--------
Outstanding - December 31, 1997 341,769 12.92
Granted 94,099 29.03
Exercised (15,115) 10.76
Canceled (10,945) 15.78
--------
Outstanding - December 31, 1998 409,808 16.58
Granted 43,365 21.67
Exercised (52,750) 10.29
Canceled (12,303) 20.90
--------
Outstanding - December 31, 1999 388,120 17.86
Available for exercise -- December 31, 1999 177,067 14.92
Available for grant -- December 31, 1999 38,966
</TABLE>
<PAGE>
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation
(SFAS 123) establishes a fair value based method of accounting for employee
stock options. Accordingly, the following pro forma information presents net
income and earnings per share information as if SFAS 123 had been adopted. No
compensation cost was actually recognized for stock options in 1999, 1998, or
1997.
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income as reported $8,036,033 $7,302,570 $5,557,731
Pro forma net income $7,922,573 $7,222,719 $5,507,459
Basic earnings per share as reported $1.70 $1.54 $1.34
Pro forma basic earnings per share $1.68 $1.52 $1.32
Diluted earnings per share as reported $1.66 $1.48 $1.30
Pro forma diluted earnings per share $1.64 $1.47 $1.29
</TABLE>
In future years, the pro forma effect under this standard is expected to
increase as additional options are granted.
The fair value of options granted during 1999, 1998, and 1997 is estimated using
the Black-Scholes model and the following weighted average information: risk
free interest rate of 6.28%, 5.06% and 5.86%; expected life of 7 years; expected
volatility of stock price of 36.2%, 33.9% and 27.4%; and expected dividends of
3% per year. The fair value of the options granted in 1999, 1998, and 1997, were
$235,000, $207,000 and $227,000 respectively. For options outstanding at
December 31, 1999, the range of exercise prices was $7.73 to $29.03, and the
weighted average remaining contractual life was 12.4 years.
NOTE M--RELATED PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates in 1999 were as
follows:
<TABLE>
<S> <C>
Beginning balance $ 14,833,310
New loans 26,286,835
Effect of changes in related parties (314,356)
Repayments (20,122,206)
----------
Ending balance $ 20,683,583
===========
</TABLE>
Deposits from principal officers, directors, and their affiliates at year end
1999 and 1998 were $8,217,000 and $7,772,000.
Directors have deferred some of their fees for future payment, including
interest. Amounts deferred are expensed, and were $62,600 and $62,400 for 1999
and 1998.
NOTE N--FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off balance sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.
Financial instruments with off-balance-sheet risk were as follows at year end:
<TABLE>
1999 1998
---- ----
Fixed Rate Variable Rate Fixed Rate Variable Rate
<S> <C> <C> <C> <C>
Commitments to make loans
(at market rates) $5,410,972 $3,763,841 $6,970,298 $ 0
Unused lines of credit and
letters of credit $9,026,298 $49,998,072 $4,534,424 $53,169,933
</TABLE>
Commitments to make loans are generally made for periods of 60 days or less. The
fixed rate loan commitments have interest rates ranging from 5.9% to 12.0% and
maturities ranging from 15 years to 30 years.
<PAGE>
NOTE O--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 outstanding claims
considered by management to be material at December 31, 1999.
NOTE P--DIVIDEND LIMITATION OF SUBSIDIARIES
The subsidiary banks are restricted in their ability to pay dividends to the
Company by regulatory requirements. For 2000, approximately $12,710,000 of the
subsidiaries' retained earnings (in addition to their 2000 net income) is
available for transfer in the form of dividends without prior regulatory
approval.
NOTE Q--CAPITAL ADEQUACY
The Company and its subsidiary banks are subject to regulatory capital
requirements administered by federal regulatory agencies. Capital adequacy
guidelines and prompt corrective action regulations involve quantitative
measures of assets, liabilities, and certain off balance sheet items calculated
under regulatory accounting practices. Capital amounts and classifications are
also subject to qualitative judgments by regulators about components, risk
weightings, and other factors. The regulators can lower classifications in
certain cases. Failure to meet various capital requirements can initiate
regulatory action that could have a direct material effect on the financial
statements.
The prompt corrective action regulations provide five classifications, including
well capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The capital ratios of
the Company and each of its affiliate banks exceed the requirements to be
considered well capitalized. The minimum requirements are:
<TABLE>
Capital to risk-weighted assets Tier 1 capital
Total Tier 1 to adjusted total assets
----- ------ ------------------------
<S> <C> <C> <C>
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 4%
Undercapitalized 6% 3% 3%
</TABLE>
At December 31, 1999, actual capital levels were:
<TABLE>
Total Tier 1 Tier 1
Risk-Based Risk-Based Leverage
Capital Ratio Capital Ratio Ratio
------------- ------------- -----
<S> <C> <C> <C>
Firstbank Corporation -- Consolidated 12.24% 10.98% 8.49%
Bank of Alma 12.63% 11.37% 8.72%
Firstbank 10.29% 9.04% 7.96%
1st Bank 11.23% 9.97% 7.47%
Lakeview 15.17% 13.92% 9.98%
</TABLE>
The following tables show the dollar amounts, in thousands, of the Company's
capital and the amounts that exceed current regulatory requirements:
<TABLE>
Total Tier 1
Risk-Based Risk-Based Tier 1
Capital Capital Leverage
---------- ---------- ---------
<S> <C> <C> <C>
Actual Capital balances at December 31, 1999
Firstbank Corporation -- Consolidated $58,780 $52,735 $52,735
Bank of Alma 20,428 18,383 18,383
Firstbank 11,431 10,042 10,042
1st Bank 14,328 12,720 12,720
Lakeview 12,031 11,037 11,037
</TABLE>
<PAGE>
<TABLE>
Total Tier 1
Risk-Based Risk-Based Tier 1
Capital Capital Leverage
---------- ---------- --------
<S> <C> <C> <C>
Adequate regulatory capital level
Firstbank Corporation -- Consolidated $38,427 $19,213 $24,844
Bank of Alma 12,937 6,468 8,436
Firstbank 8,885 4,442 5,046
1st Bank 10,205 5,102 6,808
Lakeview 6,344 3,172 4,421
Well capitalized regulatory capital level
Firstbank Corporation -- Consolidated $48,034 $28,820 $31,056
Bank of Alma 16,171 9,703 10,545
Firstbank 11,106 6,664 6,307
1st Bank 12,756 7,653 8,510
Lakeview 7,930 4,758 5,527
</TABLE>
At December 31, 1998, actual capital levels were:
<TABLE>
Total Tier 1 Tier 1
Risk-Based Risk-Based Leverage
Capital Ratio Capital Ratio Ratio
------------- ------------- --------
<S> <C> <C> <C>
Firstbank Corporation -- Consolidated 12.47% 11.21% 8.33%
Bank of Alma 11.35% 10.09% 7.94%
Firstbank 11.91% 10.66% 8.75%
1st Bank 11.96% 10.69% 7.31%
Lakeview 15.09% 13.83% 10.01%
</TABLE>
The following tables show the dollar amounts, in thousands, of the Company's
capital and the amounts that exceed current regulatory requirements:
<TABLE>
Total Tier 1
Risk-Based Risk-Based Tier 1
Capital Capital Leverage
<S> <C> <C>
Actual Capital balances at December 31, 1998
Firstbank Corporation -- Consolidated $54,534 $49,025 $49,025
Bank of Alma 18,936 16,832 16,832
Firstbank 10,614 9,498 9,498
1st Bank 12,875 11,512 11,512
Lakeview 11,171 10,240 10,240
Adequate regulatory capital level
Firstbank Corporation -- Consolidated $34,975 $17,487 $23,534
Bank of Alma 13,341 6,670 8,483
Firstbank 7,128 3,564 4,342
1st Bank 8,611 4,305 6,303
Lakeview 5,922 2,961 4,091
Well capitalized regulatory capital level
Firstbank Corporation -- Consolidated $43,719 $26,232 $29,418
Bank of Alma 16,677 10,006 10,604
Firstbank 8,910 5,346 5,428
1st Bank 10,764 6,459 7,879
Lakeview 7,403 4,442 5,114
</TABLE>
<PAGE>
NOTE R--FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amount and estimated fair values of financial instruments were as
follows at year-end:
<TABLE>
1999 1998
---- ----
Carrying Carrying
(Dollars in thousands) or Notional Fair or Notional Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Financial assets:
Cash and cash equivalents $ 25,197 $ 25,197 $ 35,492 $ 35,492
Securities available for sale 90,266 90,266 101,711 101,711
Loans, net 498,922 489,801 431,980 438,963
Accrued interest receivable 3,489 3,489 3,464 3,464
Financial liabilities:
Deposits $(491,404) $(490,272) $(494,053) $(494,685)
Securities sold under agreements to repurchase
and overnight borrowings (51,819) (51,560) (26,578) (26,996)
Notes payable (38,384) (38,053) (14,317) (15,049)
Accrued interest payable (1,225) (1,225) (1,311) (1,311)
Off-balance sheet credit-related items:
Loan commitments $ 68,199 ---- $ 64,675 ----
</TABLE>
The methods and assumptions used to estimate fair value are described as
follows.
Carrying amount is the estimated fair value for cash and cash equivalents, short
term borrowings, Federal Home Loan Bank stock, accrued interest receivable and
payable, demand deposits, short term debt, and variable rate loans or deposits
that reprice frequently and fully. Security fair values are based on market
prices or dealer quotes, and if no such information is available, on the rate
and term of the security and information about the issuer. For fixed rate loans
or deposits and for variable rate loans or deposits with infrequent repricing or
repricing limits, fair value is based on discounted cash flows using current
market rates applied to the estimated life and credit risk. Fair values for
impaired loans are estimated using discounted cash flow analysis or underlying
collateral values. Fair value of loans held for sale is based on market quotes.
Fair value of debt is based on current rates for similar financing. The fair
value of off balance sheet items is based on the current fees or cost that would
be charged to enter into or terminate such arrangements.
NOTE S-BASIC AND DILUTED EARNINGS PER SHARE
<TABLE>
Year Ended December 31
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Earnings per share
Net income $8,036,033 $7,302,570 $5,557,731
Weighted average common shares outstanding 4,723,081 4,745,845 4,155,724
========= ========= =========
Earnings per share $1.70 $1.54 $1.34
==== ---- ====
Earnings per share assuming dilution
Net income $8,036,033 $7,302,570 $5,557,731
========= ========= =========
Weighted average common shares outstanding 4,723,081 4,745,845 4,155,724
Add dilutive effects of assumed exercises of options 116,135 181,001 114,942
---------- ---------- ----------
Weighted average common and dilutive potential
common shares outstanding 4,839,216 4,926,846 4,270,666
========= ========= =========
Earnings per share
Assuming dilution $1.66 $1.48 $1.30
==== ==== ====
</TABLE>
Stock options for 89,468 and 92,436 shares of common stock were not considered
in computing diluted earnings per share for 1999 and 1997 because they were
antidulitive.
<PAGE>
NOTE T--FIRSTBANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
<TABLE>
December 31
1999 1998
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 364,520 $ 1,262,996
Securities available for sale 17,247 15,349
Investment in and advances to banking subsidiaries 55,635,013 53,673,418
Other assets 7,940,804 7,433,588
----------- -----------
Total assets $63,957,584 $62,385,351
========== ==========
LIABILITIES AND EQUITY
Accrued expenses and other liabilities $ 2,925,534 $ 2,610,407
Shareholders' equity 61,032,050 59,774,944
---------- ----------
Total liabilities and shareholders' equity $63,957,584 $62,385,351
========== ==========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
Years ended December 31 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Dividends from banking subsidiaries $4,890,000 $3,138,000 $1,638,000
Other income 330,264 191,428 67,223
Other expense (1,052,615) (862,439) (497,248)
--------- --------- ---------
Income before income tax and undistributed subsidiary income 4,167,649 2,466,989 1,207,975
Income tax benefit 139,000 121,000 83,612
Equity in undistributed subsidiary income 3,729,384 4,714,581 4,266,144
--------- --------- ----------
Net income 8,036,033 7,302,570 5,557,731
Change in unrealized gain(loss) on securities,
net of tax and classification effects (1,767,785) 216,541 323,720
--------- --------- ---------
Comprehensive income $6,268,248 $7,519,111 $5,881,451
--------- ========= =========
</TABLE>
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
Years ended December 31 1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net income $8,036,033 $7,302,570 $5,557,731
Adjustments:
Equity in undistributed subsidiary income (3,729,384) (4,714,581) (4,266,144)
Change in other assets (507,216) (509,086) (675,823)
Change in other liabilities 315,127 868,030 1,068,773
----------- ----------- ---------
Net cash from operating activities 4,114,560 2,946,933 1,684,537
Cash flows from investing activities
Purchases of securities available for sale (1,898) (7,101)
------------ ------------
Net cash from investing activities (1,898) (7,101)
Cash flows from financing activities
Cash used for acquisition (680,774)
Proceeds from stock issuance 2,656,106 1,433,182 1,045,896
Purchase of common stock (4,792,687) (1,213,670)
Dividends paid and cash paid in lieu of
fractional shares on stock dividend (2,874,557) (2,495,573) (1,872,649)
--------- --------- ---------
Net cash from financing activities (5,011,138) (2,276,061) (1,507,527)
--------- --------- ---------
Net change in cash and cash equivalents (898,476) 663,771 177,010
Beginning cash and cash equivalents 1,262,996 599,225 422,215
----------- ----------- -----------
Ending cash and cash equivalents $ 364,520 $ 1,262,996 $ 599,225
============ ========== ===========
</TABLE>
<PAGE>
NOTE U--OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
<TABLE>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Unrealized holding gains and losses on available-for-sale securities $(2,680,844) $ 331,418 $460,754
Less reclassification adjustments for gains and losses later recognized in income (1,385) 3,329 (29,732)
----------- --------- --------
Net unrealized gains and losses (2,679,459) 328,089 490,486
Tax effect 911,674 (111,548) (166,766)
----------- -------- --------
Other comprehensive income $(1,767,785) $ 216,541 $323,720
========= ======== ========
</TABLE>
NOTE V - SUBSEQUENT EVENTS
The Board of Directors of the Company has approved the formation of a new bank
subsidiary in St. Johns, Michigan. The bank will be known as Firstbank -- St.
Johns, and is expected to open during the second quarter of 2000. Applications
to regulatory agencies have been filed and a President and Chief Executive
Officer has been named. Negotiations are nearing conclusion for the purchase of
a facility to house the new bank.
On January 1, 2000, John McCormack retired as President and Chief Executive
Officer and member of the Board of Directors of Firstbank Corporation. Thomas R.
Sullivan has been appointed to fill these vacancies. Mr. Sullivan has been
President, Chief Executive Officer, and a director of Firstbank, Mt. Pleasant,
since 1991. He served as Vice President of the Corporation from 1991 to 1996,
and as Executive Vice President of the Corporation since 1996.
<PAGE>
FIRSTBANK CORPORATION
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman John McCormack 1
Chairman, Bank of Alma President and Chief Executive Officer
Attorney, Goggin & Baker
Thomas R. Sullivan
Duane A. Carr Executive Vice President and President
Attorney, Carr & Mullendore, PC Elect
Edward B. Grant Mary D. Deci
Chairman, Firstbank Vice President, Secretary, Treasurer
Director, Public Broadcasting, and Chief Financial Officer
Central Michigan University
Richard L. Jarvis
Charles W. Jennings Vice President
Attorney, Jennings & Ellias, PC
Dale A. Peters
John McCormack 1 Vice President
President and Chief Executive
Officer, Firstbank Corporation Richard J. Schurtz 2
President, Chief Executive Officer Vice President
and Trust Officer, Bank Of Alma
James E. Wheeler, II
Phillip G. Peasley Vice President
Operations Manager, Peasley's
Hardware & Carpeting Inc. (Retail)
David D. Roslund, CPA
Administrator, Wilcox Health Care
Center (Long-Term Care Facility)
Small Business Investor and Manager
- --------------------------------------------------------------------------------
FIRSTBANK CORPORATION
311 Woodworth Avenue Firstbank Corporation Operations Center
P. O. Box 1029 308 Woodworth Avenue
Alma, Michigan 48801 Alma, Michigan 48801
(517) 463-3131
1 Retired 1/1/00
2 Retired 1/7/00
<PAGE>
BANK OF ALMA
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman John McCormack 1
Chairman, Firstbank Corporation President, Chief Executive Officer
Attorney, Goggin & Baker and Trust Officer
Bob M. Baker James E. Wheeler, II
President and CEO, Gratiot Executive Vice President,
Community Hospital Loan Officer, and President Elect
Sally M. (Peggy) Bever 2 Mary D. Deci
Business Manager Executive Vice President,
Controller, Cashier and Chief
Sandra S. Brooks Financial Officer
Chief Operating Officer, Powell
Fabrication & Manufacturing Timothy P. Clark
Vice President and Senior Trust
Donald W. Crumbaugh Officer
Agriculture
Steven E. Canole
Paul C. Lux Vice President
Owner, Lux Funeral Homes, Inc.
Gregory A. Daniels
John McCormack Vice President
Retired
Former President and Chief Marita A. Harkness
Executive Officer, Firstbank Vice President
Corporation
Former President, Chief Executive Gerald E. Kench
Officer and Trust Officer, Bank Vice President
of Alma
Timothy M. Lowe
Phillip G. Peasley Vice President
Operations Manager, Peasley's
Hardware & Carpeting Inc.
David D. Roslund, CPA
Administrator, Wilcox Health Care
Center
Small Business Investor and Manager
Victor V. Rozas, M.D.
Physician
Alan J. Stone
President, Alma College
<TABLE>
- ---------------------------------------------------------------------------------------------------------
OFFICE LOCATIONS
<S> <C> <C> <C>
Alma Ashley Merrill St. Louis
7455 N. Alger Rd. 114 S. Sterling St. 125 W. Saginaw St. 135 W. Washington Ave.
(517) 463-3134 (517) 847-2394 (517) 643-7253 (517) 681-5758
230 Woodworth Ave. Auburn Riverdale Vestaburg
(517) 463-3131 4710 S. Garfield Rd. 6716 N. Lumberjack Rd. 8846 Third St.
(517) 662-4459 (517) 833-7331 (517) 268-5445
311 Woodworth Ave.
(517) 463-3131 Ithaca St. Charles
219 E. Center St. 102 Pine St.
(517) 875-4107 (517) 865-9918
</TABLE>
1 Retired 1/1/00
2 Deceased
<PAGE>
FIRSTBANK
BOARD OF DIRECTORS OFFICERS
Edward B. Grant, Chairman Thomas R. Sullivan
Director, Public Broadcasting, President and Chief Executive Officer
Central Michigan University
Richard L. Jarvis
Ralph E. Baumgarth Executive Vice President
Dentist
Mark B. Perry
Ralph M. Berry Senior Vice President
Owner, Berry Funeral Home
James M. Taylor
Kenneth C. Bovee, CPM Senior Vice President
Partner, Keystone Property
Management, Inc. Robert L. Wheeler
Senior Vice President
Glen D. Blystone
Certified Public Accountant, Daniel J. Timmins
Blystone & Bailey, CPAs, PC Vice President
Sibyl M. Ellis
President, Someplace Special, Inc.
Keith A. Gaede
Pharmacist, Punches Pharmacy
Douglas N. LaBelle
Partner, LaBelle Management
William M. McClintic
Attorney, W.M. McClintic, P.C.
John McCormack 1
President & CEO, Firstbank Corporation
President & CEO, Bank of Alma
Phillip R. Seybert
President, P.S. Equities, Inc.
Thomas R. Sullivan
President and Chief Executive Officer,
Firstbank
Executive Vice President and President
Elect, Firstbank Corporation
Arlene A. Yost
Secretary and Treasurer, Jay's Sporting
Goods, Inc.
- --------------------------------------------------------------------------------
OFFICE LOCATIONS
<TABLE>
<S> <C> <C> <C>
Mt. Pleasant Mt. Pleasant Mt. Pleasant Mt. Pleasant
102 S. Main St. 4699 E. Pickard St. 2013 S. Mission St. 1925 E. Remus Rd.
(517) 773-2600 (517) 773-2335 (517) 773-3959 (517) 775-8528
Clare Shepherd Winn
806 N. McEwan Ave. 258 W. Wright Ave. 2783 Blanchard Rd.
(517) 386-7313 (517) 828-6625 (517) 866-2210
</TABLE>
1 Retired 1/1/00
<PAGE>
1st BANK
BOARD OF DIRECTORS OFFICERS
Dale A. Peters, Chairman Dale A. Peters
President and Chief Executive President and Chief Executive Officer
Officer, 1st Bank
Vice President, Firstbank Corporation Daniel H. Grenier
Senior Vice President
Bryon A. Bernard
CEO, Bernard Building Center Michael F. Ehinger
Vice President
Joseph M. Clark
Owner, Morse Clark Furniture Danny J. Gallagher
Vice President
Timothy H. Eyth
Owner, West Branch Veterinary Services Rosalind A. Heideman
Vice President
David W. Fultz
Owner, Fultz Insurance Agency Eileen S. McGregor
Vice President
Robert T. Griffin
Owner and President, Griffin Beverage Richard L. Pfahl
Company, Vice President
Northern Beverage Co., and West Branch
Tank & Trailer W. John Powell
Vice President
Charles W. Jennings
Attorney, Jennings & Ellias, PC Larry M. Schneider
Vice President
John McCormack 1
President & CEO, Firstbank Corporation Marie A. Wilkins
President & CEO, Bank of Alma Vice President
Norman J. Miller
Owner, Miller Farms, and Miller Dairy
Equipment and Feed
Jeffrey C. Schubert
Dentist
Robert R. Smith SUBSIDIARIES
Insurance Consultant 1st Armored, Incorporated
1st Collections, Incorporated
Camila J. Steckling
Weinlander, Fitzhugh
Certified Public Accountants &
Consultants
- --------------------------------------------------------------------------------
OFFICE LOCATIONS
<TABLE>
<S> <C> <C> <C>
West Branch Fairview Hale St. Helen
502 W. Houghton 1979 Miller 3281 M-65 2040 N. St. Helen
(517) 345-7900 (517) 848-2243 (517) 728-7566 (517) 389-1311
601 W. Houghton Roscommon Roscommon Rose City
(517) 345-7900 Higgins Lake Branch Loan Production Office 505 S. Bennett
4522 W. Higgins Lake P.O. Box 401 (517) 685-3909
2087 S. M-76 Roscommon, MI Roscommon, MI
(517) 345-5050 (517) 821-9231 (517) 275-8970
</TABLE>
1 Retired 1/1/00
<PAGE>
BANK OF LAKEVIEW
BOARD OF DIRECTORS OFFICERS
V. Dean Floria, Chairman Richard J. Schurtz 2
Owner, Floria Parts Plus, Inc. President and Chief Executive Officer
Duane A. Carr William L. Benear
Attorney, Carr & Mullendore Executive Vice President and President
Elect
John B. Crawford
Agriculture, Crawford Farms David L. Miller
Senior Vice President
Chalmer Gale Hixson
Owner, Country Corner Supermarket Kim D. vonKronenberger
Owner, A Flair for Hair Vice President
Owner, Harry Chalmers, Inc.
John McCormack 1
President and Chief Executive Officer,
Firstbank Corporation
President, Chief Executive Officer, &
Trust Officer, Bank of Alma
Gerald L. Nielsen
Owner, Nielsen's TV & Appliances
Richard J. Schurtz 2
President and Chief Executive Officer,
Bank of Lakeview
Vice President, Firstbank Corporation
- --------------------------------------------------------------------------------
OFFICE LOCATIONS
<TABLE>
<S> <C> <C> <C>
Lakeview Canadian Lakes Howard City Morley
506 Lincoln Avenue 10049 Buchanan Road 20020 Howard City/Edmore Road 101 E 4th Street
(517) 352-7271 Stanwood, MI (231) 937-4383 (231) 856-7652
(231) 972-4200
9531 N Greenville Road Remus
(517) 352-8180 201 W Wheatland Avenue
(517) 967-3602
</TABLE>
1 Retired 1/1/00
2 Retired 1/7/00
<PAGE>
BUSINESS OF THE COMPANY
Firstbank Corporation (the "Company") is a bank holding company. As of December
31, 1999, the Company's wholly owned subsidiaries are Bank of Alma, Firstbank,
1st Bank, Bank of Lakeview, 1st Armored, Incorporated, and 1st Collections
Incorporated. As of December 31, 1999, the Company and its subsidiaries employed
300 people on a full-time equivalent basis.
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 Bay, Clare, Gratiot, Iosco, Isabella, Mecosta, Midland, 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 areas: Ashley, Auburn, Ithaca, Merrill, Pine River Township (near
Alma), Riverdale, St. Charles, St. Louis, and Vestaburg, Michigan. Firstbank has
its main office in Mt. Pleasant, Michigan, two branches located in Union
Township (near Mt. Pleasant), and one branch located in each of the following
areas: Clare, Mt. Pleasant, Shepherd, and Winn, Michigan. 1st Bank has its main
office in West Branch, Michigan, and one branch located in each of the following
areas: Fairview, Hale, Higgins Lake, Rose City, St. Helen, and West Branch
Township (near West Branch), Michigan. Bank of Lakeview has its main office and
one branch in Lakeview, Michigan, and one branch located in each of the
following areas: Canadian Lakes, Howard City, Morley, and Remus. 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 78% of total revenues in 1999, 76% in 1998, and 80%
in 1997. Interest on investment securities accounted for approximately 10% of
total revenues in 1999, 12% in 1998, and 11% in 1997. No other single source of
revenue accounted for 10% of the Company's total revenues in any of the last 3
years.
CORPORATE INFORMATION
Annual Meeting Stock Information
The annual meeting of shareholders Firstbank Corporation shares
will be held on Monday, April 24, 2000, are listed Over the Counter
5:00 p.m., at the Comfort Inn, Alma, Bulleting Board under the
Michigan. symbol FBMI.
First of Michigan
Independent Auditors Mike Young
Crowe Chizek and Company LLP 1-800-521-1197
Grand Rapids, Michigan
McDonald Investments
General Counsel Chris Turner
Varnum Riddering Schmidt & Howlett LLP 1-800-548-6011
Grand Rapids, Michigan
- and - Morgan Stanley Dean Witter
Warner Norcross & Judd LLP Ted Vogt
Grand Rapids, Michigan 1-800-788-9640
Transfer Agent Raymond James Financial
Bank of Alma Shareholder Services Department Louis Parks
(517) 463-3131 extension 7336 800-248-8863
Toll free shareholder hotline: (888) 637-0590
Robert W. Baird & Company
Bill L. Ockerlund
1-888-202-5048
Stifel, Nicolaus & Company,
Inc.
Pete VanDer Schaaf
1-800-676-0477
Tucker Anthony
Jack Korff
1-888-861-2200
<PAGE>
EXHIBIT 21
FIRSTBANK CORPORATION SUBSIDIARIES
Name State of Incorporation Ownership
---- ---------------------- ---------
Bank of Alma Michigan 100%
Firstbank Michigan 100%
Bank of Lakeview Michigan 100%
1st Bank Michigan 100%
1st Armored Incorporated Michigan 100% by 1st Bank
1st Collections Incorporated Michigan 100% by 1st Bank
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements of
Firstbank Corporation on Form S-8 (File Nos. 333-60190, 333-95427, 333-89771 and
333-53957) and Form S-3 (File No. 333-15131) of our report dated February 4,
2000 on the 1999 consolidated financial statements of Firstbank Corporation,
which report is included in the 1999 Annual Report on Form 10-K of Firstbank
Corporation.
Crowe, Chizek and Company LLP
Grand Rapids, Michigan
March 27, 2000
<PAGE>
EXHIBIT 99
Firstbank Corporation 401(k) Plan
Performance Table
<TABLE>
INITIAL
INVESTMENT VALUE VALUE VALUE
ON AS OF AS OF AS OF
FUND 12/31/1996 12/31/1997 12/31/1998 12/31/1999
<S> <C> <C> <C> <C>
Firstbank Corporation Common Stock $1,000.00 44.203% 26.495% -31.288%
$1,442.03 $1,824.10 $1,253.37
Federated Money Market for U.S. Treasury Obligations $1,000.00 5.22% 5.11% 4.64%
$1,052.20 $1,105.97 $1,157.28
Federated Capital Preservation Fund $1,000.00 5.86% 5.64% 5.57%
$1,058.60 $1,118.31 $1,180.59
Vanguard Fixed Income Total Bond Fund $1,000.00 9.44% 8.60% -.70%
$1,094.40 $1,188.52 $1,180.20
Vanguard Fixed Income Long Term Corporate Bond Fund $1,000.00 13.79% 9.20% -6.23%
$1,137.90 $1,242.59 $1,165.17
Federated Stock $1,000.00 34.42% 17.26% 6.08%
$1,344.20 $1,576.21 $1,672.04
Vanguard Index 500 Fund $1,000.00 33.21% 28.60% 21.07%
$1,332.10 $1,713.08 $2,074.03
American Century 20th Century Ultra $1,000.00 23.13% 34.55% 41.46%
1,231.30 $1,656.71 $2,343.59
Warburg Pincus
Emerging Growth Fund $1,000.00 21.27% 5.82% 41.81%
$1,212.70 $1,283.28 $1,819.82
T. Rowe Price International Stock Fund $1,000.00 2.70% 16.14% 34.60%
$1,027.00 $1,192.76 $1,605.45
Vanguard International Growth Fund $1,000.00 4.12% 16.93% 26.30%
$1,041.20 $1,217.48 $1,537.67
Fidelity Overseas Fund $1,000.00 10.92% 12.84% 42.89%
$1,109.20 $1,251.62 $1,788.44
American Century 20th Century Intl Discovery Fund $1,000.00 17.48% 17.86% 88.54%
$1,174.80 $1,384.62 $2,610.56
</TABLE>
<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, 1999, and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 24,786
<INT-BEARING-DEPOSITS> 411
<FED-FUNDS-SOLD> 89
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 90,266
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 508,238
<ALLOWANCE> 9,317
<TOTAL-ASSETS> 650,552
<DEPOSITS> 491,404
<SHORT-TERM> 51,819
<LIABILITIES-OTHER> 7,913
<LONG-TERM> 38,384
0
0
<COMMON> 55,263
<OTHER-SE> 5,769
<TOTAL-LIABILITIES-AND-EQUITY> 650,552
<INTEREST-LOAN> 40,451
<INTEREST-INVEST> 5,348
<INTEREST-OTHER> 263
<INTEREST-TOTAL> 46,062
<INTEREST-DEPOSIT> 16,923
<INTEREST-EXPENSE> 19,283
<INTEREST-INCOME-NET> 26,779
<LOAN-LOSSES> 514
<SECURITIES-GAINS> (1)
<EXPENSE-OTHER> 20,067
<INCOME-PRETAX> 11,566
<INCOME-PRE-EXTRAORDINARY> 11,566
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,036
<EPS-BASIC> 1.70
<EPS-DILUTED> 1.66
<YIELD-ACTUAL> 8.21
<LOANS-NON> 2,240
<LOANS-PAST> 663
<LOANS-TROUBLED> 55
<LOANS-PROBLEM> 4,169
<ALLOWANCE-OPEN> 9,048
<CHARGE-OFFS> 799
<RECOVERIES> 554
<ALLOWANCE-CLOSE> 9,317
<ALLOWANCE-DOMESTIC> 7,404
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,913
</TABLE>
