Firstbank Corporation Announces Fourth Quarter and Full Year 2012 Results

Firstbank Corporation Announces Fourth Quarter and Full Year 2012 Results                               Highlights Include:    *For 2012, diluted earnings per share of $1.16 were 132% over the $0.50 for     2011, as earnings per share of $0.35 in the fourth quarter of 2012     exceeded the $0.22 of the fourth quarter of 2011 and were the highest     level since 2007   *Increases in book value per share, tangible book value per share, and     dividends   *Provision expense of $1.3 million in the fourth quarter of 2012 decreased     by $1.3 million from year ago fourth quarter   *Fourth quarter 2012 net charge-offs declined to $1.3 million compared to     $3.0 million in fourth quarter 2011   *Ratio of allowance for loan losses to loans increased to 2.21% at December     31, 2012, compared to 2.14% a year ago, as provision exceeded net     charge-offs in 2012   *Other real estate owned declined to $2.9 million at December 31, 2012,     compared to $5.3 million at December 31, 2011   *Implementing plans to streamline the legal structure of the company   *Equity ratios remained strong with all affiliate banks continuing to     exceed regulatory well-capitalized requirements  ALMA, Mich., Jan. 29, 2013 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced net income of $2,998,000 for the fourth quarter of 2012, increasing 39% from $2,150,000 for the fourth quarter of 2011, with net income available to common shareholders of $2,783,000 in the fourth quarter of 2012 increasing 61% from $1,731,000 in the fourth quarter of 2011. Earnings per share were $0.35 in the fourth quarter of 2012 compared to $0.22 in the fourth quarter of 2011. Returns on average assets and average equity for the fourth quarter of 2012 were 0.79% and 8.1%, respectively, compared to 0.55% and 5.5% respectively in the fourth quarter of 2011.  For the twelve months of 2012, net income of $10,534,000 increased 87% over the $5,623,000 earned in 2011. Net income available to common shareholders of $9,259,000 increased 135%, and diluted earnings per share of $1.16 increased 132% over the $0.50 per share earned in 2011.  Firstbank plans to effect the consolidation of its four Firstbank charters into one bank charter on February 1, 2013, with Keystone Community Bank continuing as a separate charter. All regulatory approvals have been received.  Fourth quarter 2012 results included one-time non-recurring expenses of $600,000 related to closing five branches of the Firstbank banks, certain supplies inventory adjustments, and other consolidation costs. For the full year, 2012 results also included, as previously disclosed, one-time non-recurring expenses of $170,000 (non-tax-deductible) related to the auction and repurchase of preferred shares, $154,000 related to another branch closing, and $750,000 to establish a reserve for mortgage put-backs. Some of this expense was partially offset by a one-time non-recurring income item of $178,000 (non-taxable) related to a director benefit plan of an affiliate bank.  Book value per share and tangible book value per share increased in the fourth quarter of 2012 as earnings exceeded dividends, including the special dividend of $0.20 per share paid to common shareholders on December 31^st. In the first quarter of 2012 a dividend of $0.06 was paid of which $0.05 was identified as relating to 2011. Ignoring the $0.05 attributed to 2011, the special dividend in the fourth quarter of 2012 would bring total dividends per share paid in 2012 to $0.24, equal to 21% of earnings per share for the year. Book value per share increased to $16.37 at December 31, 2012, from $16.24 at September 30, 2012, and $15.53 at December 31, 2011. Tangible book value per share increased to $11.78 at December 31, 2012, from $11.64 at September 30, 2012, and $10.85 at December 31, 2011.  The provision for loan losses, at $1,338,000 in the fourth quarter of 2012, was 1.9% less than the amount required in the third quarter of 2012 and was 49% less than the amount in the year-ago fourth quarter. The provision expense of $1,338,000 exceeded fourth quarter net charge-offs of $1,331,000, and the total provision in 2012 of $7,690,000 exceeded net charge-offs of $7,370,000. The level of provision expense and other expenses related to management and collection of the loan portfolio continue to be the major impediments to higher levels of profitability.  Net interest income, at $13,344,000 in the fourth quarter of 2012 decreased 3.7% compared to the fourth quarter of 2011. Net interest income decreased as a result of a 16 basis point decline in net interest margin compared to the year-ago fourth quarter.  Firstbank's net interest margin was 3.91% in the fourth quarter of 2012, decreasing from 3.99% in the third quarter of 2012 and 4.07% in the fourth quarter of 2011. Loan demand remains weak, resulting in the allocation of more earning assets to the investment portfolio versus the higher-yielding loan portfolio. Also, competitive pricing pressure is forcing yields lower on some loan renewals. The cost of funds to average earning assets declined by 7 basis points, to 0.52% in the fourth quarter of 2012 from 0.59% in the third quarter of 2012, while the yield on average earning assets declined by a greater 15 basis points, to 4.42% in the fourth quarter of 2012 from 4.57% in the third quarter of 2012.  Total non-interest income, at $3,411,000 in the fourth quarter of 2012, was 12.7% higher than in the fourth quarter of 2011. Mortgage refinance activity remains at a very strong level. Gain on sale of mortgages, at $1,707,000 in the fourth quarter of 2012, increased 2.8% compared to the third quarter of 2012 and was 2.7% above the year-ago level. The category of "other" non-interest income, at $703,000 in the fourth quarter of 2012, was 74% greater than the amount in the third quarter of 2012 and 109% more than in the fourth quarter of 2011. Included in this category of income was a $214,000 net gain on sale of other real estate owned in the fourth quarter of 2012, compared to a net gain of $64,000 in the third quarter of 2012 and a net gain of $18,000 in the fourth quarter of 2011. Adjustments to the fair value of loan rate and sale commitments contributed $104,000 to this category of income in the fourth quarter of 2012.  Total non-interest expense, at $11,174,000 in the fourth quarter of 2012, was 2.2% lower than the level in the third quarter of 2012 and was 0.5% lower than the level in the fourth quarter of 2011. Salaries and employee benefits were 3.2% lower than in the third quarter of 2012 and increased 6.3% compared to the year-ago quarter. For the fourth quarter of 2012 compared to the prior quarter, the salary and wage component decreased 0.6%, and benefits decreased 13.5%, with the decline in benefits expense mostly due to the ability to reduce expense accruals in the self-insured medical plan. Occupancy and equipment costs were 1.4% less than the amount in last year's fourth quarter. FDIC insurance premium expense, at $256,000 in the fourth quarter of 2012, was 28% less than the level in the fourth quarter of 2011 due to the timing of expense recognition in 2011 related to the FDIC's change in methodology for assessing premiums based on assets rather than deposits. In 2012 FDIC insurance premium expense was down 22% from year ago due to that change in the FDIC's method of calculation. The category of "other" non-interest expense, totaling $3,899,000 in the fourth quarter of 2012, decreased 0.6% compared to the third quarter of 2012 and decreased 5.4% compared to the fourth quarter of 2011, due to several factors. There was no additional amount expensed to add to the reserve for potential losses on mortgage put-backs, compared to $500,000 that was expensed in the third quarter of 2012. Offsetting this beneficial comparison was a $600,000 one-time charge to cover the costs of closing five branches as previously announced, certain adjustments to supplies inventory, and other consolidation related expenses. Write-downs of valuations of other real estate owned (OREO) and expenses related to OREO also vary quarter to quarter and impact the other expense category. Write-downs of valuations of other real estate owned were $193,000 in the fourth quarter of 2012, decreased significantly from $341,000 in the third quarter of 2012 and $759,000 in the fourth quarter of 2011.  Mr. Sullivan stated, "The fourth quarter was a good capstone to a year of significant accomplishments for our company. We significantly improved our credit quality metrics, significantly reduced net charge-offs of loans and provision expense, significantly reduced our other real estate owned, and completely exited the TARP/CPP program with private investors having the confidence in our company to purchase $17 million of our preferred stock. We also significantly increased earnings and earnings per share, restored our dividend on common stock to an annual rate of $0.24 per share – a level which gives our stock a 2.2% dividend yield based on recent market prices, positioned the company for the future by acting to reduce regulatory burden through consolidation of bank charters, and saw our stock price increase 108% on the year.  "We are enthusiastic about the opportunities for 2013 and the potential to see further improvement in credit metrics, allowing reduced provision and other costs related to managing problem loans. We are very pleased with the planning for the bank charter consolidations and confident that we have designed a structure for operating the company that will preserve our community bank nature, our way of serving our customers' needs, and the input and guidance of directors in our local markets. The whole industry and indeed the nation face economic challenges, but we feel very well positioned to succeed in the environment that lies ahead and to continue improvements in profitability.  "All of our dedicated employees and directors deserve much credit for their hard work and service to our customers and shareholders, and we thank them for their efforts and success."  Total assets of Firstbank Corporation at December 31, 2012, were $1.499 billion, an increase of 0.9% from year-ago. Evidencing the weak loan demand in our markets, total portfolio loans of $964 million decreased 1.4% from September 30, 2012, and decreased 2.0% from December 31, 2011. Commercial and commercial real estate loans decreased 2.8% from year ago, including a 1.8% decrease in the fourth quarter of 2012, and real estate construction loans decreased 2.9% from year ago, including a 4.8% increase in the fourth quarter of 2012. Residential mortgage loans decreased 2.4% from year ago, including a 1.7% decrease in the fourth quarter of 2012. Consumer loans increased 6.9% from year ago, including a 1.6% decrease in the fourth quarter of 2012. While Firstbank has ample capital and funding resources to increase loans on its balance sheet, demand for funds for new ventures by quality borrowers remains weak. Also, the strong mortgage refinance activity has resulted in many mortgage loans being financed in the secondary market rather than on the balance sheet of the company. Total deposits as of December 31, 2012, were $1.241 billion, compared to $1.221 billion at December 31, 2011, an increase of 1.7%. Core deposits at December 31, 2012, were 1.7% above the year-ago level, and they increased $17.6 million in the fourth quarter of 2012, mostly in non-interest bearing deposits.  Net charge-offs were $1,331,000 in the fourth quarter of 2012, reduced from $1,554,000 in the third quarter of 2012 and $2,975,000 in the fourth quarter of 2011. In the fourth quarter of 2012, net charge-offs annualized represented 0.55% of average loans, reduced from 0.63% in the third quarter of 2012 and 1.21% in the fourth quarter of 2011. For all of 2012, net charge-offs represented 0.75% of average loans, down from 1.37% in 2011.  At the end of the fourth quarter of 2012 the ratio of the allowance for loan losses to loans was 2.21%, up from 2.18% at September 30, 2012, and increased from 2.14% at December 31, 2011. Performing adjusted loans (troubled debt restructurings, or TDRs) were $20,722,000 at December 31, 2012, compared to $19,619,000 at September 30, 2012, and $18,929,000 at December 31, 2011. Loans past due over 90 days were $37,000 at December 31, 2012, down from $655,000 at September 30, 2012, and the $419,000 amount at December 31, 2011. Non-accrual loans were $15,668,000 at December 31, 2012, a decrease of 2.8% from the level at September 30, 2012, and a significant decrease of 31% from the $22,707,000 amount at December 31, 2011.  Other real estate owned was reduced to $2,925,000 at December 31, 2012, down 2.5% from the $3,001,000 level at September 30, 2012, and down 44% from the $5,251,000 level at December 31, 2011.  The ratio of average equity to average assets was a strong 9.7% in the third and fourth quarters of 2012. The decline in this ratio from 10.1% in the fourth quarter of 2011 reflects the repurchase earlier in the year of $16 million of the original $33 million outstanding of preferred stock and the repurchase and retirement of all outstanding warrants. All of Firstbank Corporation's affiliate banks continue to meet regulatory well-capitalized requirements.  Firstbank Corporation, headquartered in Alma, Michigan, is a bank holding company using a community bank local decision-making format with assets of $1.5 billion and 51 banking offices serving Michigan's Lower Peninsula.  This press release contains certain forward-looking statements that involve risks and uncertainties. When used in this press release the words "anticipate," "believe," "expect," "hopeful," "potential," "should," and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning the consolidation of existing banks and branches, future business growth, changes in interest rates, loan charge-off rates, demand for new loans, future profitability, and the resolution of problem loans. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental, regulatory and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release.   FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands except per share data) UNAUDITED                                                                                                   Three Months Ended:     Twelve Months Ended:                                  Dec 31  Sep 30  Dec 31  Dec 31     Dec 31                                  2012    2012    2011    2012       2011 Interest income:                                                  Interest and fees on loans        $13,769 $14,145 $14,958 $56,975    $61,465 Investment securities                                             Taxable                           1,004   1,104   1,249   4,512      4,888 Exempt from federal income tax    324     272     274     1,169      1,118 Short term investments            49      53      35      210        173 Total interest income             15,146  15,574  16,516  62,866     67,644                                                                  Interest expense:                                                 Deposits                          1,428   1,588   2,206   6,626      10,891 Notes payable and other borrowing 374     444     452     1,748      2,081 Total interest expense            1,802   2,032   2,658   8,374      12,972                                                                  Net interest income               13,344  13,542  13,858  54,492     54,672 Provision for loan losses         1,338   1,364   2,611   7,690      13,337 Net interest income after         12,006  12,178  11,247  46,802     41,335 provision for loan losses                                                                  Noninterest income:                                               Gain on sale of mortgage loans    1,707   1,661   1,662   6,523      3,683 Service charges on deposit        1,053   1,048   1,095   4,219      4,492 accounts Gain (loss) on trading account    3       (5)     (18)    4          (10) securities Gain (loss) on sale of AFS        2       2       (37)    44         (38) securities Mortgage servicing                (57)    (95)    (13)    (231)      108 Other                             703     405     337     2,111      1,440 Total noninterest income          3,411   3,016   3,026   12,670     9,675                                                                  Noninterest expense:                                              Salaries and employee benefits    5,677   5,865   5,343   22,680     21,263 Occupancy and equipment           1,240   1,267   1,257   5,152      5,311 Amortization of intangibles       102     109     160     482        698 FDIC insurance premium            256     265     356     1,220      1,560 Other                             3,899   3,923   4,120   15,148     14,721 Total noninterest expense         11,174  11,429  11,236  44,682     43,553                                                                  Income before federal income      4,243   3,765   3,037   14,790     7,457 taxes Federal income taxes              1,245   1,050   887     4,256      1,834 Net Income                       2,998   2,715   2,150   10,534     5,623 Preferred Stock Dividends         215     220     419     1,275      1,679 Net Income available to Common    $2,783  $2,495  $1,731  $9,259     $3,944 Shareholders                                                                  Fully Tax Equivalent Net Interest $13,538 $13,719 $14,019 $55,176    $55,347 Income                                                                  Per Share Data:                                                   Basic Earnings                    $0.35   $0.31   $0.22   $1.17      $0.50 Diluted Earnings                  $0.35   $0.31   $0.22   $1.16      $0.50 Dividends Paid                    $0.21   $0.01   $0.01   $0.29      $0.04                                                                  Performance Ratios:                                               Return on Average Assets (a)      0.79%   0.72%   0.55%   0.70%      0.38% Return on Average Equity (a)      8.1%    7.4%    5.5%    7.0%       3.8% Net Interest Margin (FTE) (a)     3.91%   3.99%   4.07%   3.99%      4.06% Book Value Per Share (b)          $16.26  $16.24  $15.53  $16.26     $15.53 Tangible Book Value per Share (b) $11.71  $11.64  $10.85  $11.71     $10.85 Average Equity/Average Assets     9.7%    9.7%    10.1%   10.0%      10.1% Net Charge-offs                   $1,331  $1,554  $2,975  $7,370     $13,749 Net Charge-offs as a % of Average 0.55%   0.63%   1.21%   0.75%      1.37% Loans (c)(a)                                                                  (a)Annualized                                                   (b)Period End                                         `           (c)Total loans less loans held                                   for sale    FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands) UNAUDITED                                                                                                                Dec 31     Sep 30     Dec 31                                              2012       2012       2011 ASSETS                                                                                                                               Cash and cash equivalents:                                         Cash and due from banks                       $38,544    $29,710    $40,151 Short term investments                        63,984     45,192     35,665 Total cash and cash equivalents               102,528    74,902     75,816                                                                   Securities available for sale                 353,684    350,231    346,618 Federal Home Loan Bank stock                  7,266      7,266      7,266 Loans:                                                             Loans held for sale                           2,921      3,813      349 Portfolio loans:                                                   Commercial                                   149,265    151,252    156,551 Commercial real estate                       357,831    365,402    365,029 Residential mortgage                          331,896    337,587    340,060 Real estate construction                      58,530     55,855     60,280 Consumer                                      66,240     67,314     61,989 Total portfolio loans                         963,762    977,410    983,909 Less allowance for loan losses                (21,340)   (21,332)   (21,019) Net portfolio loans                           942,422    956,078    962,890                                                                   Premises and equipment, net                   24,356     24,926     25,087 Goodwill                                      35,513     35,513     35,513 Other intangibles                             965        1,068      1,448 Other assets                                  29,107     28,313     30,312 TOTAL ASSETS                                  $1,498,762 $1,482,110 $1,485,299                                                                   LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                 LIABILITIES                                                                                                                          Deposits:                                                          Noninterest bearing accounts                  $251,109   $229,437   $214,904 Interest bearing accounts:                                         Demand                                        348,598    348,712    340,942 Savings                                       265,323    262,314    241,603 Time                                          358,791    365,745    405,385 Wholesale CD's                                17,580     18,653     17,708 Total deposits                                1,241,401  1,224,861  1,220,542                                                                   Securities sold under agreements              42,785     45,927     46,784 torepurchase and overnight borrowings FHLB Advances and notes payable               22,493     19,558     19,457 Subordinated Debt                            36,084     36,084     36,084 Accrued interest and other liabilities        8,941      9,591      7,055 Total liabilities                             1,351,704  1,336,021  1,329,922                                                                   SHAREHOLDERS' EQUITY                                               Preferred stock; no par value, 300,000shares 16,908     16,904     32,792 authorized, 33,000 outstanding Common stock; 20,000,000 shares authorized    115,621    115,228    115,734 Retained earnings                             10,921     9,812      3,955 Accumulated other comprehensive income/(loss) 3,608      4,145      2,896 Total shareholders' equity                    147,058    146,089    155,377 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY    $1,498,762 $1,482,110 $1,485,299                                                                   Common stock shares issued and outstanding   8,001,903  7,952,502  7,892,486 Principal Balance of Loans Serviced for       $608.2     $594.8     $599.3 Others ($mil)                                                                   Asset Quality Information:                                         Performing Adjusted Loans (TDRs) (b)          20,722    19,619    18,929 Loans Past Due over 90 Days                   37        655       419 Non-Accrual Loans                             15,668    16,112    22,707 Other Real Estate Owned                       2,925      3,001      5,251 Allowance for Loan Loss as a % of Loans (a)  2.21%      2.18%      2.14%                                                                   Quarterly Average Balances:                                        Total Portfolio Loans (a)                     $968,509   $982,144   $983,875 Total Earning Assets                          1,381,004  1,371,768 1,369,931 Total Shareholders' Equity                    145,186    143,805   151,442 Total Assets                                  1,496,135  1,483,546  1,492,870 Diluted Shares Outstanding                   7,994,996  7,987,968  7,875,613                                                                   (a) Total Loans less loans held for sale (b) Troubled Debt Restructurings in Call Reports  CONTACT: Samuel G. Stone          Executive Vice President and          Chief Financial Officer          (989) 466-7325