Firstbank Corporation Announces Fourth Quarter and Full Year 2013 Results

Firstbank Corporation Announces Fourth Quarter and Full Year 2013 Results                               Highlights Include:    *For the full year 2013, diluted earnings per share were $1.45, increasing     25% from $1.16 in 2012   *For the fourth quarter of 2013, diluted earnings per share were $0.39,     increasing from $0.35 for the fourth quarter of 2012   *Merger related expenses reduced full year 2013 eps by $0.08 per share   *Provision expense in fourth quarter of 2013 continued at zero due to     continued improvement in asset quality metrics and strong level of     reserves   *Non-accrual loans reduced 10% in the quarter and 36% less than year-ago;     other real estate owned reduced 15% from the prior quarter and 37% less     than year-ago   *Merger with Mercantile Bank Corporation approved by shareholders of both     companies and awaiting regulatory approval   *Equity ratios remained strong with affiliate banks continuing to exceed     regulatory well-capitalized requirements  ALMA, Mich., Jan. 28, 2014 (GLOBE NEWSWIRE) -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (Nasdaq:FBMI), announced net income of $3,159,000 for the fourth quarter of 2013, increasing 5.4% from $2,998,000 for the fourth quarter of 2012, with net income available to common shareholders of $3,159,000 in the fourth quarter of 2013 increasing 13.5% from $2,783,000 in the fourth quarter of 2012. Diluted earnings per share were $0.39 in the fourth quarter of 2013 compared to $0.35 in the fourth quarter of 2012. Returns on average assets and average equity for the fourth quarter of 2013 were 0.85% and 9.2%, respectively, compared to 0.79% and 8.1% respectively in the fourth quarter of 2012.  For full year 2013, net income of $12,234,000 increased 16.1% from $10,534,000 for 2012, with net income available to common shareholders of $11,753,000 in 2013 increasing 26.9% from $9,259,000 in 2012. Diluted earnings per share were $1.45 in 2013 compared to $1.16 in 2012. Returns on average assets and average equity for full year 2013 were 0.82% and 8.7%, respectively, compared to 0.70% and 7.0% respectively in 2012.  Expenses related to the pending merger with Mercantile Bank Corporation in the amount of $133,000 in the fourth quarter of 2013 and $738,000 in the third quarter of 2013 were recorded. These expenses reduced after tax earnings and net income available to common shareholders by $117,000 in the fourth quarter, $569,000 in the third quarter, and $686,000 for the full year. Correspondingly, they reduced diluted earnings per share by $0.01 in the fourth quarter, $0.07 in the third quarter, and $0.08 for the full year.  Mr. Sullivan stated, "Two factors stand out as important in our fourth quarter results. First, we continued to make great progress on reducing non-accrual loans and other real estate owned. Resolving these situations and getting these non-performing assets removed from our balance sheet allow our lending staff to focus more on developing new relationships and serving existing good customers. Second, we have achieved growth in portfolio loans now for three consecutive quarters, which helps our earning asset mix and is a sign of an improving economic environment. The improving asset mix helps to combat more competitive pricing pressure on new and renewed loans and will eventually be the key to maintaining and improving net interest margin.  "We were gratified with the robust approval by the shareholders of both companies, at the special shareholder meetings held during the fourth quarter, of the previously announced merger with Mercantile Bank Corporation. We are now awaiting the completion of the regulatory approval process. Our merger and integration teams, comprised of key members of management from both companies, have completed most of the tasks needed for a merger consummation.  "Strong improvement in our earnings and asset quality metrics, and our exciting plans for the future are the result of much hard work and dedication to our customers and company by our wonderful staff, and we thank them for their efforts."  Provision for Loan Losses. The provision for loan losses was zero in the fourth quarter of 2013 (and third quarter of 2013), compared to the $1,338,000 amount required in the fourth quarter of 2012. Net charge-offs of $1,609,000 in the fourth quarter of 2013 represented loans that had been provided for previously, and the improving risk measures and strong level of allowance for loan losses made it unnecessary to provide additional amounts to the allowance in the quarter.  Net Interest Income. Net interest income, at $13,042,000 in the fourth quarter of 2013 was 2.3%, lower than in the fourth quarter of 2012, as a result of a 7 basis point lower net interest margin compared to the year-ago quarter. Net interest margin in the fourth quarter of 2013 increased to 3.84% from 3.82% in the third quarter of 2013. Average portfolio loans grew in the fourth quarter of 2013, helping to improve earning asset mix. The yield on average earning assets decreased by only 1 basis point, to 4.25% in the fourth quarter of 2013 from 4.26% in the third quarter of 2013. The cost of funds to average earning assets declined by 3 basis point, to 0.41% in the fourth quarter of 2013 from 0.44% in the third quarter of 2013.  Non-interest Income. Total non-interest income, at $2,434,000 in the fourth quarter of 2013, was 28.6% lower than in the fourth quarter of 2012, as mortgage refinance volume continued at much lower levels than year-ago. Gain on sale of mortgages, at $514,000 in the fourth quarter of 2013, decreased 42.5% compared to the third quarter of 2013 and was 69.9% less than the year-ago level. The category of "other" non-interest income, at $482,000 in the fourth quarter of 2013, was 8.6% more than the amount in the third quarter of 2013, primarily due to greater gains on sale of other real estate properties and valuation adjustments on mortgage commitments partially offset by lesser miscellaneous income on commercial loans. This category of "other" non-interest income was 31.4% less than in the fourth quarter of 2012, primarily due to lower gain on sale of other real estate and lesser valuation adjustments on mortgage commitments when compared to that quarter. Net gain on sale of other real estate in the fourth quarter of 2013 was $173,000, and net gains have been recorded in all four quarters of 2013.  Non-interest Expense. Total non-interest expense, at $10,935,000 in the fourth quarter of 2013, was 2.1% lower than the level in the fourth quarter of 2012, even with the above mentioned merger related expenses included, and salaries and employee benefits increasing 3.1% over the level in the fourth quarter of 2012. Occupancy and equipment costs were 3.6% more than the amount in last year's fourth quarter mostly due to upgrades of computer equipment. FDIC insurance premium expense, at $221,000 in the fourth quarter of 2013, was 13.7% less than the level in the fourth quarter of 2012 due to the timing of expense recognition related to the FDIC's change in methodology for assessing premiums based on assets rather than deposits. The category of "other" non-interest expense, totaling $3,365,000 in the fourth quarter of 2013 included a $450,000 expense for adding to the reserve for potential put-back claims related to mortgages previously sold in the secondary market. During the fourth quarter of 2013, $644,000 was paid to the Federal Home Loan Mortgage Company (FHLMC) and charged against the reserve in settlement of claims stemming from loans originated prior to January 1 of 2009. At December 31, 2013, this reserve stands at $806,000. In spite of these additional expenses, the category of "other" non-interest expense decreased 13.7% compared to the fourth quarter of 2012, as various other miscellaneous expenses declined and as write-downs of valuations of other real estate owned (OREO) included in the category were only $4,000 in the fourth quarter of 2013, well below the $193,000 amount in the fourth quarter of 2012, and expenses related to the maintenance of OREO properties declined to $60,000 compared to $177,000.  Total Assets. Total assets of Firstbank Corporation at December 31, 2013, were $1.480 billion, a decrease of 1.3% from year-ago. Total portfolio loans of $987 million increased 0.5% from the level at September 30, 2013, and reached a level 2.4% above year-ago. Total portfolio loans have grown for three consecutive quarters. Commercial and commercial real estate loans increased 0.9% in the fourth quarter of 2013, and were 3.9% more than year ago, and real estate construction loans decreased 10.9% from year ago, in spite of a 6.0% increase in the fourth quarter of 2013. Residential mortgage loans decreased 0.4% in the fourth quarter of 2013, but were 2.3% more than year ago. Consumer loans decreased 2.2% in the fourth quarter of 2013 but were 3.3% above year ago. Firstbank continues to have ample capital and funding resources to increase loans on its balance sheet. Total deposits as of December 31, 2013, were $1.233 billion, compared to $1.241 billion at December 31, 2012, a decrease of 0.7%. Core deposits at December 31, 2013, were 0.8% below the year-ago level, and they were flat in the fourth quarter of 2013.  Net Charge-offs. Net charge-offs were $1,609,000 in the fourth quarter of 2013, increasing from $633,000 in the third quarter of 2013 and increasing from $1,331,000 in the fourth quarter of 2012. In the fourth quarter of 2013, net charge-offs annualized represented 0.65% of average loans, compared to 0.26% in the third quarter of 2013 and 0.55% in the fourth quarter of 2012. For full year 2013, net charge-offs declined 30% to $5,173,000 from $7,370,000 in 2012, representing 0.53% of average loans in 2013, improved from 0.75% of loans in 2012.  Allowance and Asset Quality. Asset quality metrics continued to improve in the fourth quarter of 2013, indicating a lesser need for reserves. At the end of the fourth quarter of 2013 the ratio of the allowance for loan losses to loans was 1.82%, compared to 2.00% at September 30, 2013, and 2.21% at December 31, 2012. Performing adjusted loans (troubled debt restructurings, or TDRs) remained at a stable level and were $20,697,000 at December 31, 2013, compared to $20,170,000 at September 30, 2013, and $20,720,000 at December 31, 2012. Loans past due over 90 days and accruing interest were zero at December 31, 2013, compared to $26,000 at September 30, 2013, and reduced from the $37,000 amount at December 31, 2012. Non-accrual loans were $10,077,000 at December 31, 2013, a decrease of 10.1% from the level at September 30, 2013, and a decrease of 35.7% from the $15,668,000 amount at December 31, 2012.  Other real estate owned decreased to $1,838,000 at December 31, 2013, compared to the $2,161,000 level at September 30, 2013, and was down 37.2% from the $2,925,000 level at December 31, 2012.  Equity to Assets Ratio. The ratio of average equity to average assets remained a strong 9.3% in the fourth quarter of 2013, increasing from 9.1% in the third quarter of 2013 and in line with the 9.5% of the year-ago fourth quarter. Firstbank Corporation's affiliate banks continue to meet or exceed 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 46 banking offices serving Michigan's Lower Peninsula. Firstbank Corporation has a pending merger with the similarly sized Mercantile Bank Corporation.  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, timing of regulatory approvals and the completion of the merger, 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                         2013    2013    2012    2013       2012 Interest income:                                        Interest and fees on    $12,909 $13,012 $13,769 $52,604    $56,975 loans Investment securities                                   Taxable                 1,078   894     1,004   3,799      4,512 Exempt from federal     449     441     324     1,693      1,169 income tax Short term investments  32      36      49      178        210 Total interest income   14,468  14,383  15,146  58,274     62,866                                                        Interest expense:                                       Deposits                1,114   1,190   1,428   4,891      6,626 Notes payable and other 312     338     374     1,283      1,748 borrowing Total interest expense  1,426   1,528   1,802   6,174      8,374                                                        Net interest income     13,042  12,855  13,344  52,100     54,492 Provision for loan      0       0       1,338   1,830      7,690 losses Net interest income after provision for     13,042  12,855  12,006  50,270     46,802 loan losses                                                        Noninterest income:                                     Gain on sale of         514     894     1,707   4,436      6,523 mortgage loans Service charges on      1,029   1,043   1,053   4,136      4,219 deposit accounts Gain on trading account 10      (4)     3       12         4 securities Gain on sale of AFS     282     0       2       334        44 securities Mortgage servicing      117     109     (57)    63         (231) Other                   482     444     703     1,807      2,111 Total noninterest       2,434   2,486   3,411   10,788     12,670 income                                                        Noninterest expense:                                    Salaries and employee   5,853   5,805   5,677   23,281     22,680 benefits Occupancy and equipment 1,285   1,335   1,240   5,306      5,152 Amortization of         78      86      102     369        482 intangibles FDIC insurance premium  221     233     256     989        1,220 Other                   3,365   3,050   3,899   12,874     15,148 Merger related expense  133     738            871         Total noninterest       10,935  11,247  11,174  43,690     44,682 expense                                                        Income before federal   4,541   4,094   4,243   17,368     14,790 income taxes Federal income taxes    1,382   1,225   1,245   5,134      4,256 Net Income             3,159   2,869   2,998   12,234     10,534 Preferred Stock         0       0       215     481        1,275 Dividends Net Income available to $3,159  $2,869  $2,783  $11,753    $9,259 Common Shareholders                                                        Fully Tax Equivalent    $13,307 $13,122 $13,538            Net Interest Income                                                        Per Share Data:                                         Basic Earnings          $0.39   $0.36   $0.35   $1.46      $1.17 Diluted Earnings        $0.39   $0.35   $0.35   $1.45      $1.16 Dividends Paid          $0.06   $0.06   $0.21   $0.24      $0.29                                                        Performance Ratios:                                     Return on Average       0.85%   0.78%   0.79%   0.82%      0.70% Assets (a) Return on Average       9.2%    8.6%    8.1%    8.7%       7.0% Equity (a) Net Interest Margin     3.84%   3.82%   3.91%   3.84%      3.99% (FTE) (a) Book Value Per Share    $17.04  $16.75  $16.26  $17.04     $16.26 (b) Tangible Book Value per $12.57  $12.27  $11.71  $12.57     $11.71 Share (b) Average Equity/Average  9.3%    9.1%    9.7%    9.5%       10.0% Assets Net Charge-offs         $1,609  $633    $1,331  $5,173     $7,370 Net Charge-offs as a %  0.65%   0.26%   0.55%   0.53%      0.75% of Average 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     Mar 31     Dec 31                            2013       2013       2013       2012 ASSETS                                                                                                             Cash and cash equivalents:                                Cash and due from banks    $28,874    $30,384    $23,275    $38,544 Short term investments     46,724     31,019     90,419     63,984 Total cash and cash        75,598     61,403     113,694    102,528 equivalents                                                          Securities available for   343,620    357,429    360,942    353,684 sale Federal Home Loan Bank     7,266      7,266      7,266      7,266 stock Loans:                                                    Loans held for sale        401        732        3,022      2,921 Portfolio loans:                                          Commercial                167,047    159,199    150,845    149,265 Commercial real estate    359,920    363,059    358,957    357,831 Residential mortgage       339,608    340,877    329,428    331,896 Real estate construction   52,155     49,215     56,940     58,530 Consumer                   68,416     69,936     65,148     66,240 Total portfolio loans      987,146    982,286    961,318    963,762 Less allowance for loan    (17,997)   (19,608)   (20,848)   (21,340) losses Net portfolio loans        969,149    962,678    940,470    942,422                                                          Premises and equipment,    24,169     23,893     24,499     24,356 net Goodwill                   35,513     35,513     35,513     35,513 Other intangibles          596        675        863        965 Other assets               23,413     27,362     29,234     29,107 TOTAL ASSETS               $1,479,725 $1,476,951 $1,515,503 $1,498,762                                                          LIABILITIES AND                                           SHAREHOLDERS' EQUITY                                                          LIABILITIES                                                                                                        Deposits:                                                 Noninterest bearing        $267,405   $259,946   $243,126   $251,109 accounts Interest bearing accounts:                                Demand                     360,834    359,926    371,929    348,598 Savings                    282,341    276,783    281,043    265,323 Time                       302,998    317,440    343,495    358,791 Wholesale CD's             19,214     16,021     17,285     17,580 Total deposits             1,232,792  1,230,116  1,256,878  1,241,401                                                          Securities sold under agreements to repurchase   47,635     47,333     43,065     42,785 and overnight borrowings FHLB Advances and notes    19,790     19,861     19,959     22,493 payable Subordinated Debt         36,084     36,084     36,084     36,084 Accrued interest and other 5,798      8,242      10,150     8,941 liabilities Total liabilities          1,342,099  1,341,636  1,366,136  1,351,704                                                          SHAREHOLDERS' EQUITY                                      Preferred stock; no par value, 300,000shares      0          0          16,912     16,908 authorized, 33,000 outstanding Common stock; 20,000,000   116,640    116,466    115,861    115,621 shares authorized Retained earnings          20,739     18,064     13,085     10,921 Accumulated other          247        785        3,509      3,608 comprehensive income Total shareholders' equity 137,626    135,315    149,367    147,058 TOTAL LIABILITIES AND      $1,479,725 $1,476,951 $1,515,503 $1,498,762 SHAREHOLDERS' EQUITY                                                          Common stock shares issued 8,077,022  8,076,621  8,032,661  8,001,903 and outstanding Principal Balance of Loans $604.9     $609.1     $606.7     $608.2 Serviced for Others ($mil)                                                          Asset Quality Information:                                Performing Adjusted Loans  20,697    20,170    20,898    20,720 (TDRs) (b) Loans Past Due over 90     --        26        64        37 Days Non-Accrual Loans          10,077    11,204    12,872    15,668 Other Real Estate Owned    1,838      2,161      3,541      2,925 Allowance for Loan Loss as 1.82%      2.00%      2.17%      2.21% a % of Loans (a)                                                          Quarterly Average                                         Balances: Total Portfolio Loans (a)  $982,686   $977,069   $963,994   $968,509 Total Earning Assets       1,377,067  1,366,068 1,396,999 1,381,004 Total Shareholders' Equity 137,317    133,557   147,384   145,186 Total Assets               1,479,776  1,471,510  1,508,084  1,496,135 Diluted Shares             8,157,854  8,134,948  8,063,604  7,994,996 Outstanding                                                          (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  
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