SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 2000
or
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ______ to _______.
Commission file number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2633910
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
Number)
311 Woodworth Avenue, Alma, Michigan 48801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 463-3131
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15 (d) of the Securities 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
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock....4,595,027 shares outstanding as of October 31, 2000.
Exhibit Index is on page 17
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (UNAUDITED) page 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. page 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk. page 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K page 15
SIGNATURES page 16
EXHIBIT INDEX page 17
Page 2
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(Dollars in Thousands)
UNAUDITED
<TABLE>
September 30, December 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $22,704 $24,786
Short term investments 5,286 411
------------ ------------
Total cash and cash equivalents 27,990 25,197
Securities available for sale 77,294 90,266
Loans
Loans held for sale 377 1,117
Portfolio loans
Commercial 267,442 227,855
Real estate mortgage 230,154 204,062
Consumer 80,933 75,204
------------ ------------
Total loans 578,906 508,238
Less allowance for loan losses (9,943) (9,317)
------------ ------------
Net loans 568,963 498,921
Premises and equipment, net 15,523 14,929
Acquisition intangibles 8,698 8,838
Accrued interest receivable 4,327 3,489
Other assets 9,307 8,912
------------ ------------
TOTAL ASSETS $712,102 $650,552
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts 82,865 75,844
Interest bearing accounts:
Demand 128,103 136,196
Savings 70,533 70,527
Time 248,463 208,837
------------ ------------
Total deposits 529,964 491,404
Securities sold under agreements to
repurchase and overnight borrowings 36,654 51,819
Notes payable 72,536 38,384
Accrued interest and other liabilities 9,588 7,913
------------ ------------
Total liabilities 648,742 589,520
SHAREHOLDERS' EQUITY
Preferred stock; no par value, 300,000 shares authorized, none issued Common
stock; 10,000,000 shares authorized, 4,602,113 shares issued and
outstanding (4,693,756 as of December 1999) 53,250 55,263
Retained earnings 10,458 6,433
Unrealized loss on available for sale securities (348) (664)
------------ ------------
Total shareholders' equity 63,360 61,032
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $712,102 $650,552
============ ============
</TABLE>
See accountants' review report and notes to consolidated financial statements.
Page 3
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
SEPTEMBER 30, 2000 AND 1999
(Dollars in Thousands)
UNAUDITED
<TABLE>
Three months ended September 30,
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $12,788 $10,274
Investment securities
Taxable 832 918
Exempt from Federal Income Tax 363 414
Short term investments 77 47
------------- -------------
Total interest income 14,060 11,653
Interest expense:
Deposits 4,982 4,188
Notes payable and other 1,786 607
------------- -------------
Total interest expense 6,768 4,795
------------- -------------
Net interest income 7,292 6,858
Provision for loan losses 174 126
------------- -------------
Net interest income after provision for loan losses 7,118 6,732
Noninterest income:
Gain on sale of mortgage loans 149 230
Service charges on deposit accounts 438 406
Trust fees 93 91
Gain on sale of securities (3) (6)
Mortgage servicing 81 63
Other 630 436
------------- -------------
Total noninterest income 1,388 1,220
Noninterest expense:
Salaries and employee benefits 2,943 2,681
Occupancy 817 756
Amortization of intangibles 204 183
FDIC Insurance premium 25 18
Michigan Single Business Tax 162 216
Other 1,246 1,204
------------- -------------
Total noninterest expense 5,397 5,058
------------- -------------
Income before federal income taxes 3,109 2,894
Federal income taxes 967 883
------------- -------------
NET INCOME $2,142 $2,011
============= =============
Basic earnings per share $0.46 $0.43
============= =============
Diluted earnings per share $0.45 $0.42
============= =============
Dividends per share $0.17 $0.15
============= =============
</TABLE>
See accountants' review report and notes to consolidated financial statements.
Page 4
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
SEPTEMBER 30, 2000 AND 1999
(Dollars in Thousands)
UNAUDITED
<TABLE>
Nine months ended September 30,
2000 1999
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans $35,939 $29,697
Investment securities
Taxable 2,595 2,742
Exempt from Federal Income Tax 1,135 1,300
Short term investments 177 236
------------- -------------
Total interest income 39,846 33,975
Interest expense:
Deposits 13,851 12,727
Notes payable and other 4,604 1,509
------------- -------------
Total interest expense 18,455 14,236
------------- -------------
Net interest income 21,391 19,739
Provision for loan losses 562 378
------------- -------------
Net interest income after provision for loan losses 20,829 19,361
Noninterest income:
Gain on sale of mortgage loans 320 768
Service charges on deposit accounts 1,268 1,168
Trust fees 288 275
Gain on sale of securities 1 15
Mortgage servicing 229 131
Other 1,940 1,591
------------- -------------
Total noninterest income 4,046 3,948
Noninterest expense:
Salaries and employee benefits 8,329 7,775
Occupancy 2,368 2,282
Amortization of intangibles 547 525
FDIC Insurance premium 75 57
Michigan Single Business Tax 477 428
Other 3,778 3,737
------------- -------------
Total noninterest expense 15,574 14,804
------------- -------------
Income before federal income taxes 9,301 8,505
Federal income taxes 2,909 2,578
------------- -------------
NET INCOME $6,392 $5,927
============= =============
Basic earnings per share $1.37 $1.26
============= =============
Diluted earnings per share $1.35 $1.22
============= =============
Dividends per share $0.51 $0.46
============= =============
</TABLE>
See accountants' review report and notes to consolidated financial statements.
Page 5
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Dollars in Thousands)
UNAUDITED
<TABLE>
Accumulated
Other
Common Retained Comprehensive Comprehensive
Stock Earnings Income Income (Loss) TOTAL
-------------- ------------- -------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1998 $52,796 $5,875 $1,104 $59,775
Other comprehensive income
Net income for 1999 8,036 $8,036 8,036
Other comprehensive income (loss)
Net change in unrealized appreciation
(depreciation) on available for
sale securities (1,768) (1,768) (1,768)
--------------
Comprehensive income $6,268
==============
Cash dividends - $.61 per share (2,874) (2,874)
Issuance of 50,310 shares of common stock
through exercise of stock options 817 817
Issuance of 44,246 shares of common stock
through dividend reinvestment plan 1,098 1,098
Issuance of 19,807 shares of common stock
through supplemental purchase under
dividend reinvestment plan 528 528
5% stock dividend - 224,526 shares 4,603 (4,604) (1)
Purchase of 180,150 shares of stock (4,793) (4,793)
Issuance of 7,770 shares of stock 214 214
---------------- --------------- -------------- ------------ -----------
BALANCES AT DECEMBER 31, 1999 $55,263 $6,433 ($664) $61,032
================ =============== ============== ============ ===========
Other comprehensive income
Net income for year to date 6,392 $6,392 6,392
Other comprehensive income (loss)
Net change in unrealized appreciation
on available for sale securities 316 316 316
--------------
Comprehensive income $6,708
==============
Cash dividends - $.51 per share (2,367) (2,367)
Issuance of 12,708 shares of common stock
through exercise of stock options 170 170
Issuance of 48,180 shares of common stock
through dividend reinvestment plan 913 913
Issuance of 12,345 shares of common stock
through supplemental purchase under
dividend reinvestment plan 246 246
Purchase of 173,946 shares of stock (3,522) (3,522)
Issuance of 9,061 shares of stock 180 180
---------------- --------------- -------------- -------------- -----------
BALANCES AT September 30, 2000 $53,250 $10,458 ($348) $63,360
================ =============== ============== ============== ===========
</TABLE>
See accountants' review report and notes to consolidated financial statements.
Page 6
<PAGE>
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2000 and 1999
(Dollars in Thousands)
UNAUDITED
<TABLE>
Nine months ended
September 30,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $6,392 $5,927
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 562 378
Depreciation of premises and equipment 1,128 990
Net amortization of security premiums/discounts 131 247
Gain on sale of securities (1) (15)
Amortization of goodwill and other intangibles 547 524
Gain on sale of mortgage loans (320) (768)
Proceeds from sales of mortgage loans 28,871 47,803
Loans originated for sale (27,811) (42,193)
Increase in accrued interest receivable and other assets (1,802) (1,232)
Increase (decrease) in accrued interest payable and other liabilities 1,675 (325)
-------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,372 11,336
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 3,345 7,018
Proceeds from maturities of securities available for sale 21,251 24,214
Purchases of securities available for sale (11,276) (23,441)
Net increase in portfolio loans (71,344) (45,104)
Net purchases of premises and equipment (1,722) (1,534)
-------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (59,746) (38,847)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 38,560 (4,576)
Increase (decrease) in securities sold under agreements
to repurchase and other short term borrowings (15,165) 17,076
Increase of note payable 34,152 2,352
Repurchase of common stock (3,522) (3,701)
Cash proceeds from issuance of common stock 1,509 2,156
Cash dividends (2,367) (2,157)
-------------- -------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 53,167 11,150
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,793 (16,361)
Cash and cash equivalents at beginning of period 25,197 35,492
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $27,990 $19,131
============== =============
Supplemental Disclosure
Interest Paid $18,546 $14,384
Income Taxes Paid $3,622 $2,900
</TABLE>
See accountants' review report and notes to consolidated financial statements.
Page 7
<PAGE>
FIRSTBANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
NOTE A - FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine month period ended September 30,
2000, are not necessarily indicative of the results that may be expected for the
year ended December 31, 2000. The balance sheet and statement of shareholders'
equity at December 31, 1999, have been derived from the audited financial
statements at that date. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Corporation's annual
report on Form 10-K for the year ended December 31, 1999.
NOTE B - SECURITIES
Individual securities held in the security portfolio are classified as
securities available for sale. Securities might be sold prior to maturity due to
changes in interest rates, prepayment risks, yield, availability of alternate
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 is reported, net of related income tax effects, as a
separate component of shareholders' equity until realized.
NOTE C - LOAN COMMITMENTS
Loan commitments (including unused lines of credit and letters of credit) are
made to accommodate the financial needs of the Banks' customers. The commitments
have credit risk essentially the same as that involved in extending loans to
customers, and are subject to the Banks' normal credit policies and collateral
requirements. Loan commitments, which are predominately at variable rates, were
approximately $61,321,661 and $68,199,183 at September 30, 2000, and December
31, 1999, respectively.
See accountants' review report.
Page 8
<PAGE>
NOTE D - NONPERFORMING LOANS AND ALLOWANCE FOR LOAN LOSSES
Nonperforming Loans and Assets
The following table summarizes nonaccrual and past due loans at the dates
indicated:
<TABLE>
September 30, December 31,
(Dollars in thousands) 2000 1999
------------------------------------------- ------------- ------------
<S> <C> <C>
Nonperforming loans:
Nonaccrual loans $1,513 $2,165
Loans 90 days or more past due 723 663
Renegotiated loans 53 55
------ ------
Total nonperforming loans $2,289 $2,883
====== ======
Property from defaulted loans $ 645 $ 511
====== ======
Nonperforming loans as a percent of:
Total loans .40% .57%
====== ======
Allowance for loan losses 23.02% 30.94%
====== ======
</TABLE>
Analysis of the Allowance for Loan Losses
The following table summarizes changes in the allowance for loan losses arising
from loans charged off, recoveries on loans previously charged off, and
additions to the allowance which have been charged to expense.
<TABLE>
Nine Twelve
months months
ended ended
September 30, December 31,
(Dollars in thousands) 2000 1999
---------------------------------------------- -------------- -------------
<S> <C> <C>
Balance at beginning of period $9,317 $9,048
Charge-offs (462) (799)
Recoveries 526 554
----- -------
Net (charge-offs) recoveries 64 (245)
Additions to allowance for
loan losses 562 514
----- -----
Balance at end of period $9,943 $9,317
===== =====
Average loans outstanding
during the period $541,541 $464,581
======= =======
Loans outstanding at end of period $578,906 $508,238
======= =======
Allowance as a percent of:
Total loans at end of period 1.72% 1.83%
==== ====
Nonperforming loans at end of period 434% 323%
=== ===
Net charge-offs (recoveries) as a percent of:
Average loans outstanding (.01)% .05%
==== ===
Average Allowance for loan losses (.66)% 2.66%
==== ====
</TABLE>
See accountants' review report.
Page 9
<PAGE>
NOTE E - RECLASSIFICATION
Certain 1999 amounts have been reclassified to conform to the 2000 presentation.
See accountants' review report.
Page 10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The consolidated financial information presented is for Firstbank Corporation
("Corporation") and its wholly owned subsidiaries, Bank of Alma (Alma),
Firstbank (Mt. Pleasant), 1st Bank (West Branch), Bank of Lakeview (Lakeview),
and Firstbank - St. Johns (St. Johns) (collectively the "Banks") and Gladwin
Land Company, Inc.
Financial Condition
During the first nine months of 2000, total assets grew by $62 million, or
9.46%. Securities available for sale decreased $13 million. Proceeds realized
from maturing securities have been used to help fund loan demand.
Total loans grew $71 million, or 13.90%, during the first three quarters of
2000. All categories of loans increased with the largest growth in terms of both
percentage and dollars in the commercial portfolio, which grew $40 million, or
17.37%. Mortgage loans also experienced double digit growth with increases of
$26 million, or 12.79%. The mortgage growth was experienced in all markets
serviced by Firstbank Corporation banks.
The allowance for loan losses increased $626,000, or 6.72%, during the first
three quarters of 2000. As a percent of outstanding loans, the allowance for
loan loss was 1.72% at September 30, 2000, compared to 1.83% at December 31,
1999. The allowance as a percent of non performing loans was 434% and 323% at
September 30, 2000, and December 31, 1999, respectively. During the first nine
months of 2000, the allowance for loan losses was increased by a provision of
$562,000 and net recoveries of $64,000. Management continues to maintain the
allowance for loan losses at a level considered appropriate to absorb losses in
the portfolio. The allowance for loan losses balance is established after
considering past loan loss experience, current economic conditions, volume,
growth and composition of the loan portfolio, delinquencies and other relevant
factors.
Total deposits increased $39 million, or 7.85%, during the nine month period
ending September 30, 2000. Certificates of deposit grew $40 million during this
time period. Total deposits at the affiliate bank opened in June 2000 account
for $12 million of the deposit totals. All of the banks have been successful in
increasing their time deposits.
Securities sold under agreements to repurchase grew $3 million, or 13.03%, while
overnight borrowings decreased $18 million, or 59.31%, during the first three
quarters of 2000. Historically, securities sold under agreements to repurchase
experience increases into the early portion of the fourth quarter. Therefore,
this moderate increase may be cyclical. The decrease in overnight borrowings is
offset by an increase in notes payable of $34 million, or 88.97%. The proceeds
from the notes payable, used to fund loan increases, reduced the need for
overnight borrowings. At September 30, 2000, overnight borrowings were $12
million compared to $30 million at December 31, 1999.
Page 11
<PAGE>
Total shareholders' equity grew $2,328,000, or 3.81%, during the first nine
months of 2000. Net income of $6,392,000 and net change in unrealized
appreciation on available for sale securities of $316,000 increased
shareholders' equity while dividends of $2,367,000 and net repurchases of stock
of $2,013,000 reduced shareholders' equity. In January, 2000, the Board of
Directors authorized the continuation of the Corporation's stock repurchase plan
with the approval of the acquisition of up to 250,000 additional shares of
Firstbank Corporation stock. As of September 30, 2000, the Corporation acquired
173,946 shares as a result of the repurchase plan. Book value was $13.77 per
share on September 30, 2000, compared to $13.00 at December 31, 1999.
The following table discloses compliance with current regulatory capital
requirements on a consolidated basis:
<TABLE>
Total
Tier 1 Risk-based
(Dollars in thousands) Leverage Capital Capital
----------------------------------------- -------- ------- --------
<S> <C> <C> <C>
Capital balances at September 30, 2000 $54,622 $54,622 $61,299
Required regulatory minimum capital 28,195 21,235 42,470
------- ------- -------
Capital in excess of regulatory minimums 26,427 33,387 18,829
======= ======= =======
Capital ratios at September 30, 2000 7.75% 10.29% 11.55%
Regulatory capital ratios -- "well capitalized" 5.00% 6.00% 10.00%
definition
Regulatory capital ratios -- minimum requirement 4.00% 4.00% 8.00%
</TABLE>
The Corporation acquired Gladwin Land Company, Inc. (a real estate appraisal
company), on May 8, 2000. The acquisition was accounted for using the purchase
method of accounting. Firstbank - St. Johns received final regulatory approval
and opened for business on June 16, 2000. The results of both of these
affiliates are included in the consolidated financial statements from the dates
of the acquisition and the opening.
Results of Operations
For the three months ending September 30, 2000, net income was $2,142,000, basic
earnings per share were $0.46 and diluted earnings per share $0.45, compared to
$2,011,000, $0.43, and $0.42 for the third quarter of 1999. Net income for the
first nine months of 2000 was $6,392,000, with basic earnings per share $1.37
and diluted earnings per share $1.35 compared to $5,927,000, $1.26, and $1.22
for the same period in 1999. Net income for the first three quarters of 2000 is
$465,000, or 7.85%, greater than the same period in 1999. For the nine month
period ending September 30, 2000, basic earnings per share were $0.11, or 8.73%,
higher and diluted earnings per share were $0.13, or 10.66%, higher than the
same period in 1999.
Average earning assets increased $74 million, or 13.36%, in the twelve months
ended September 30, 2000. The yield on earning assets increased 23 basis points
to 8.59% during this same period. During the same twelve month period, average
deposits increased $13 million, average securities sold under agreement to
repurchase grew $5 million and average advances and notes payable increased $45
million. The cost of funding these rate related liabilities increased 46 basis
points in the twelve month period from September 30, 1999, to September 30,
2000. Net interest margin declined 24 basis points from 4.90% for the nine
months ended September 30, 1999, to 4.66% for the nine
Page 12
<PAGE>
months ending September 30, 2000. Net interest income before the provision for
loan losses increased $1,652,000, or 8.37%, for the first three quarters of 2000
and $434,000, or 6.33%, for the third quarter of 2000 compared to the same
periods in 1999. The provision for loan losses increased $184,000 to $562,000
for the first three quarters of 2000, and $48,000 to $174,000 for the third
quarter of 2000. The increases in the provision for loan losses reflect the
recognition of strong loan growth as opposed to concern over loan quality.
Total noninterest income increased 2.48%, or $98,000, during the first three
quarters of 2000 when compared to the same period of 1999. The gains on the sale
of mortgage loans posted a decline of 58.33%, or $448,000, when comparing these
same periods. Mortgage volume for loans originated for sale during the first
nine months of 2000 was about 60% of that experienced during the first nine
months of 1999. The increase in mortgage rates and the fact that many real
estate agencies are using affiliate mortgage processors combine to cause this
reduction. Other noninterest income increased 21.94% or $349,000 during the
first three quarters of 2000 as compared to the same time period in 1999. Over
$300,000 of this increase is noninterest income from the real estate appraisal
company, title company, and the new bank.
Noninterest expense increased $770,000, or 5.20%, during the first nine months
of 2000 compared to the nine month period ended September 30, 1999. Nearly three
quarters of the increase falls into the salary and benefit line item. Salary and
benefit increases reflect the annual salary adjustments as well as the addition
of staff to accommodate both a branch that opened in the fall of 1999, the
addition of a real estate appraisal company in May of 2000, and the new bank
that opened in June 2000.
FORWARD LOOKING STATEMENTS
This report contains 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 presentations and discussions of the provision
and allowance for loan losses, and determinations as to the need for other
allowances presented in this report are inherently forward-looking statements in
that they involve judgements 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; 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.
Page 13
<PAGE>
Item 3. 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. Firstbank's
annual report is filed as Exhibit 13 to its Form 10-K annual report for its
fiscal year ended December 31, 1999.
Firstbank faces market risk to the extent that both earnings and the fair values
of its financial instruments are affected by changes in interest rates. The
Corporation manages this risk with static GAP analysis and simulation modeling.
Throughout the third quarter of 2000, the results of these measurement
techniques were within the Corporation's policy guidelines. The Corporation does
not believe that there has been a material change in the nature of the
Corporation's primary market risk exposures, including the categories of market
risk to which the Corporation is exposed and the particular markets that present
the primary risk of loss to the Corporation. As of the date of this Form 10-Q
Quarterly Report, the Corporation does not know of or expect there to be any
material change in the general nature of its primary market risk exposure in the
near term.
The methods by which the Corporation manages its primary market risk exposures,
as described in the sections of its Form 10-K Annual Report incorporated by
reference in response to this item, have not changed materially during the
current year. As of the date of this Form 10-Q quarterly report, the Corporation
does not expect to change those methods in the near term. However, the
Corporation may change those methods in the future to adapt to changes in
circumstances or to implement new techniques.
The Corporation's market risk exposure is mainly comprised of its vulnerability
to interest rate risk. Prevailing interest rates and interest rate relationships
in the future will be primarily determined by market factors which are outside
of Firstbank's control. All information provided in response to this item
consists of forward looking statements. Reference is made to the section
captioned "Forward Looking Statements" on page 13 of this Form 10-Q quarterly
report for a discussion of the limitations on Firstbank's responsibility for
such statements.
Page 14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10 - Form of Change of Control Severance Agreement
Exhibit 27 - Financial Data Schedule
Exhibit 99 - Report on Review by Independent Certified Public
Accountants
(b) Reports on Form 8-K
During the quarter the registrant filed a report on form 8-K
dated August 7, 2000, which reported the resignation of the
registrant's Vice President & Chief Financial Officer, Mary D.
Deci.
Page 15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTBANK CORPORATION
(Registrant)
Date: November 10, 2000 \s\ Thomas R. Sullivan
Thomas R. Sullivan
President & Chief Executive Officer
(Principal Executive & Financial Officer)
Date: November 10, 2000 \s\ James E. Wheeler, II
James E. Wheeler, II
Vice President & Secretary
Page 16
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FIRSTBANK CORPORATION
(Registrant)
Date: November 10, 2000 /s/ Thomas R. Sullivan
Thomas R. Sullivan
President & Chief Executive Officer
(Principal Executive & Financial Officer)
Date: November 10, 2000 /s/ James E. Wheeler, II
James E. Wheeler, II
Vice President & Secretary
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EXHIBIT INDEX
Exhibit 10 - Form of Change of Control Severance Agreement page 18
Exhibit 27 - Financial Data Schedule page 26
Exhibit 99 - Report on Review by Independent Certified
Public Accountant page 25
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EXHIBIT 10
FORM OF CHANGE OF CONTROL SEVERANCE AGREEMENT
The following individuals have entered into a Change of Control Severance
Agreement with the Registrant in the attached form, all of which are identical
except for the names and dates of the respective agreement for each such
individual employee: Daniel Grenier, Mark B. Perry, Dale A. Peters, Thomas R.
Sullivan, James M. Taylor, and James E. Wheeler, II.
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AGREEMENT
This agreement entered into this day of , 2000, by and between FIRSTBANK
CORPORATION, hereinafter referred to as "FIRSTBANK", and , hereinafter referred
to as "EXECUTIVE".
WITNESSETH:
WHEREAS, FIRSTBANK is a Michigan Banking Corporation with subsidiaries in
Alma, Mt. Pleasant, West Branch and Lakeview, and
WHEREAS, EXECUTIVE is an executive officer of FIRSTBANK, or one of its
subsidiaries, whose continued employment has been deemed to be beneficial to
FIRSTBANK by its Board of Directors, and
WHEREAS, EXECUTIVE's knowledge of the day to day operations of FIRSTBANK,
or its subsidiaries, and the existing banking relationships with customers of
FIRSTBANK is such that EXECUTIVE's termination of employment with FIRSTBANK and
commencement of employment with a direct competitor of FIRSTBANK could have
severe detrimental effects upon the business successes of FIRSTBANK, and
WHEREAS, EXECUTIVE is knowledgeable of the continuing possibility that
FIRSTBANK may at some time in the future be purchased, merged into, or acquired
by another banking organization, and
WHEREAS, EXECUTIVE is aware that such a purchase, merger or acquisition of
FIRSTBANK might thereafter jeopardize EXECUTIVE's continued employment as a
result of downsizing, consolidation, or differences in operational philosophies,
and
WHEREAS, FIRSTBANK desires to enter into a non competition agreement with
EXECUTIVE which, under certain terms and conditions, will prevent EXECUTIVE from
leaving employment with FIRSTBANK and commencing employment with a competitor of
FIRSTBANK, and
WHEREAS, EXECUTIVE is willing to enter into such a non competition
agreement with FIRSTBANK in exchange for a guarantee from FIRSTBANK of certain
severance benefits, in the event of the purchase, merger or acquisition of
FIRSTBANK by banking another organization.
IT IS HEREBY AGREED AS FOLLOWS:
1. The initial term of this agreement shall be for a period commencing on
the 16th , day of August , 2000 and continuing until either party gives the
required notice in writing that the agreement is to be terminated. This notice
must be given at least two years prior to the anniversary date of this agreement
when termination is to be effective. It is the intention of this paragraph that
the terms of this agreement will remain in effect until notice of termination is
given by either party at least two (2) years prior to the anniversary date of
this agreement upon which termination of the agreement shall become effective.
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2. EXECUTIVE's rights for severance benefits established hereunder shall be
applicable only if a CHANGE OF CONTROL occurs during the time this agreement
remains in effect. A CHANGE OF CONTROL shall be defined as a purchase, merger,
buy out, consolidation or other reorganization under the terms of which more
than 50 percent of the combined voting power of the outstanding stock of
FIRSTBANK becomes held by any group of less than ten (10) individuals, a banking
entity, a trust, a corporation, an LLC, a joint venture, or any other business
entity.
3. In the event a CHANGE OF CONTROL occurs, then if EXECUTIVE's employment
is involuntarily terminated for any reason other than for CAUSE within six (6)
months before, or two (2) years after the date of the CHANGE OF CONTROL,
EXECUTIVE shall be entitled to the severance benefits set forth in paragraph 4.
In addition, if a CHANGE OF CONTROL occurs, and the terms or conditions of
EXECUTIVE's employment "substantially change" during a time period defined as
commencing six (6) months prior to the effective date of the CHANGE OF CONTROL
and ending two (2) years after the effective date of the CHANGE OF CONTROL, then
if EXECUTIVE elects to voluntarily terminate employment and said voluntary
termination occurs within one (1) year of the occurrence of the "substantial
change", EXECUTIVE shall be entitled to severance benefits set forth in
paragraph 4. If EXECUTIVE's employment is terminated, or is in the process of
being terminated, at any time for CAUSE (as that term is defined in paragraph 5
below) EXECUTIVE shall not under any circumstances be entitled to any of the
severance benefits set forth in paragraph 4. A "substantial change" in
EXECUTIVE's employment shall be deemed to have occurred if any of the following
occur:
a. EXECUTIVE's employment is involuntarily terminated without CAUSE.
b. EXECUTIVE is assigned duties which result in a significant
reduction or material change in EXECUTIVE's authority or responsibility.
c. EXECUTIVE's total base salary is reduced or EXECUTIVE is given
bonuses or salary increases in a manner that is substantially less than the
those provided to other executive officers of FIRSTBANK.
d. EXECUTIVE is relocated to a place in excess of 25 miles from the
location where EXECUTIVE is based on the date of this agreement.
e. FIRSTBANK or its successor fails to provide EXECUTIVE with
substantially the same fringe benefits as other executives in similar
positions with FIRSTBANK or its successors.
4. If eligible under the terms established in paragraph 3 above, the
EXECUTIVE shall receive the following severance benefits upon termination:
a. A lump sum cash amount equal to 150% EXECUTIVE's annual base salary
at the highest annual rate in effect during the 12 month period prior to
the date of termination.
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b. 150% of any incentive bonus that may have been earned to date of
termination by EXECUTIVE.
c. Continued health care coverage for a period of two (2) years that
is equivalent to the best coverage available for EXECUTIVE during the 12
month period prior to termination.
d. Continued life, accidental death and dismemberment coverage for a
period of two (2) years equivalent to the best coverage provided for
EXECUTIVE during the 12 month period prior to termination.
e. Continued disability insurance coverage for a period of two (2)
years equivalent to the best coverage available to EXECUTIVE during the 12
month period prior to termination.
5. Nothing in this agreement shall be deemed to establish any right to
continued employment by EXECUTIVE, and severance benefits shall be payable to
EXECUTIVE only if all of the specific circumstances provided for herein are met.
In the event EXECUTIVE is terminated for CAUSE, EXECUTIVE shall not be entitled
to receive the severance benefits provided for herein. The term CAUSE shall be
defined to mean:
a. The willful commission by the EXECUTIVE of a criminal or other act
that causes or is likely to cause substantial economic damage or
substantial injury to the business reputation of FIRSTBANK, or one of its
subsidiaries.
b. Commission by EXECUTIVE of an act of fraud in the performance of
EXECUTIVE's duties on behalf of FIRSTBANK or one of its subsidiaries.
c. The continuing willful failure of EXECUTIVE to perform the duties
of such EXECUTIVE to FIRSTBANK, one of its subsidiaries, or its successors.
6. Maximum Payments. Notwithstanding any provision in this agreement to the
contrary, if part or all of any amount to be paid to EXECUTIVE by FIRSTBANK
under this agreement or otherwise constitute a "parachute payment" (or payments)
under Section 280G or any other similar provision of the Internal Revenue Code
of 1986, as amended (the "Code"), the following limitation shall apply:
If the aggregate present value of such parachute payments (the "Parachute
Amount") exceeds 2.99 times EXECUTIVE's "base amount" as defined in Section
280G of the Code, the amount otherwise payable to or for the benefit of the
EXECUTIVE subsequent to the termination of his employment, and taken into
account in calculating the Parachute Amount (the "termination payment"),
shall be reduced and/or delayed, as further described below, to the extent
necessary so that the Parachute Amount is equal to 2.99 times the
EXECUTIVE's "base amount".
Any determination or calculation described in this Paragraph 6 shall be
made by FIRSTBANK's independent accountants. Such determination, and any
proposed reduction and/or delay in termination
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payments shall be furnished in writing promptly by the accountants to the
EXECUTIVE. The EXECUTIVE may then elect, in his sole discretion, which and how
much of any particular termination payment shall be reduced and/or delayed and
shall advise FIRSTBANK in writing of his election, within thirty (30) days of
the accountant's determination, of the reduction or delay in termination
payments. If no such election is made by the EXECUTIVE within such 30 days
period, FIRSTBANK may elect which and how much of any termination payment shall
be reduced and/or delayed and shall notify the EXECUTIVE promptly of such
election. As promptly as practicable following such determination and the
elections hereunder, FIRSTBANK shall pay to or distribute to or for the benefit
of the EXECUTIVE such amounts as are then due to the EXECUTIVE.
Any disagreement regarding a reduction or delay in termination payments
will be subject to arbitration under paragraph 9 of this agreement. Neither the
EXECUTIVE's designation of specific payments to be reduced or delayed, nor the
EXECUTIVE's acceptance of reduced or delayed payments, shall waive the
EXECUTIVE's right to contest such reduction or delay.
7. Non Competition. The EXECUTIVE acknowledges that he/she has had and by
the nature of his/her employment will have access to privileged, confidential,
and proprietary information concerning FIRSTBANK and its subsidiaries. Under all
circumstances and regardless of the reason for, or date of, termination of
EXECUTIVE's employment, the EXECUTIVE will maintain the confidentiality of and
will not disclose to anyone or any entity other than FIRSTBANK or its
subsidiaries said information. In addition, if (1) EXECUTIVE's employment is
involuntarily terminated for CAUSE or if (2) EXECUTIVE voluntarily terminates
employment at any time this agreement remains in effect, but when neither a
CHANGE OF CONTROL nor a "substantial change" of EXECUTIVE's employment have
occurred, then EXECUTIVE may not for a period of two years after the effective
date of termination of EXECUTIVE's employment:
a. Consult with, advise, manage, operate, control or be employed in
any capacity by any business enterprise competing with FIRSTBANK, or one of
its subsidiaries, in any aspect of business actively being engaged in by
FIRSTBANK or one of its subsidiaries as of the date of termination. This
non-competition restriction shall extend to all geographical areas defined
by a twenty-five (25) mile radius from the location of FIRSTBANK's home
office and the home offices of all subsidiaries of FIRSTBANK that exist as
of the date of termination. Employment by the EXECUTIVE for a banking
institution or similar business that happens to maintain a branch office
within the restricted territory shall not be deemed to be a violation of
this non-competition provision so long as the location of the EXECUTIVE's
personal office, and the territory or business locations being served,
supervised or managed by the EXECUTIVE in said new employment, are not
located within the restricted area and so long as EXECUTIVE does not
directly or indirectly solicit or attempt to cause individuals or business
entities that are customers of FIRSTBANK to change or modify their banking
or business relationships with FIRSTBANK in any manner.
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b. Irrespective of the arbitration provisions of paragraph 9, the
parties to this agreement stipulate that Gratiot County, Michigan, shall be
the venue for resolution of disputes over the provisions of this paragraph
7. Likewise, the non-competition provisions of this paragraph may be
enforced through injunctive relief issued by the Circuit Court of Gratiot
County, Michigan.
It is understood that the noncompetition provisions of this agreement are NOT
meant to be effective if either EXECUTIVE's position is involuntarily terminated
without CAUSE or if EXECUTIVE voluntarily terminates employment within one (1)
year after both a CHANGE OF CONTROL has occurred and EXECUTIVE's position has
been "substantially changed" as defined in paragraph 3.
8. Withholding of Taxes. FIRSTBANK may withhold from any amounts payable
under this agreement all federal, state, city, or other taxes as required by
law.
9. Successors: Binding Agreements. This Agreement shall inure to the
benefit of and be enforceable by EXECUTIVE's personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. EXECUTIVE's rights and benefits under this Agreement may not be
assigned, except that if EXECUTIVE dies while benefits are being paid hereunder,
any amount that would still be payable to EXECUTIVE hereunder if EXECUTIVE had
continued to live, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement, to the beneficiaries designated by the
EXECUTIVE to receive benefits under this Agreement in a writing on file the
FIRSTBANK at the time of EXECUTIVE's death or, if there has been no such
beneficiary named, to EXECUTIVE's estate. FIRSTBANK will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise)
to all or substantially all of the business and/or assets of FIRSTBANK (or of
any division or subsidiary thereof employing EXECUTIVE) to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
FIRSTBANK would be required to perform if no such succession had taken place.
Failure of FIRSTBANK to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle EXECUTIVE to compensation from FIRSTBANK in the same manner and on
the same terms to which EXECUTIVE would be entitled hereunder if EXECUTIVE had
been involuntarily terminated without CAUSE following a CHANGE OF CONTROL.
10. Representations. As an inducement to FIRSTBANK to enter into and
perform under the Agreement, EXECUTIVE represents and warrants to FIRSTBANK that
to his/her knowledge all parts of this Agreement and the non-competition
restrictions imposed upon EXECUTIVE by this agreement are entered into to
protect FIRSTBANK and are reasonable and necessary under the circumstances and
are believed by EXECUTIVE to be so.
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11. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement, or at such
other addresses as the parties may designate in writing.
12. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by EXECUTIVE and such officer as may be specifically
designated by the Board of Directors of FIRSTBANK. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws of
the State of Michigan.
13. Employment Rights. This Agreement shall not confer upon EXECUTIVE any
right to continue in the employ of FIRSTBANK or its subsidiaries and shall not
in any way affect the right of FIRSTBANK or its subsidiaries to dismiss or
otherwise terminate EXECUTIVE's employment at any time with or without cause.
ANY AND ALL FINANCIAL BENEFITS PROVIDED TO EXECUTWE HEREIN ARE PAYABLE ONLY IN
THE EVENT OF A CHANGE OF CONTROL AS THAT TERM IS DEFINED HEREIN.
14. No Vested Interest. Neither EXECUTIVE nor EXECUTIVE's beneficiary shall
have any right, title, or interest in any benefit under this Agreement prior to
the occurrence of the right to the payment thereof, or in any property of
FIRSTBANK or its subsidiaries or affiliates.
WHEREFORE, the parties hereto have hereunto set their hands the day and
year first above written.
WITNESSES: FIRSTBANK
by
its
EXECUTIVE
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EXHIBIT 99
ANDREWS HOOPER & PAVLIK P.L.C.
Certified Public Accountants
Board of Directors and Shareholders
Firstbank Corporation
Alma, Michigan
We have reviewed the accompanying consolidated balance sheet of Firstbank
Corporation as of September 30, 2000, and the related consolidated statement of
income for the three-month and nine-month periods ended September 30, 2000 and
the consolidated statements of cash flows and changes in shareholders' equity
for the nine-month period ended September 30, 2000. These financial statements
are the responsibility of Firstbank Corporation's management. We did not make a
similar review of the consolidated statement of income for the three-month and
nine-month period ended September 30, 1999 and cash flows for the nine-month
period ended September 30, 1999.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the September 30, 2000 consolidated financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.
The consolidated balance sheet of Firstbank Corporation as of December 31, 1999,
and the related statements of income, changes in shareholders' equity, and cash
flows for the year then ended (not presented herein) were audited by other
auditors whose report dated February 4, 2000, expressed an unqualified opinion
on those statements. In our opinion, the information set forth in the
accompanying consolidated balance sheet and the related consolidated statement
of changes in shareholders' equity as of December 31, 1999, are fairly stated,
in all material respects, in relation to the consolidated balance sheet and
consolidated statement of changes in shareholders' equity from which it has been
derived.
/s/ Andrews Hooper & Pavlik P.L.C.
Saginaw, Michigan
November 3, 2000
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