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_________________________________________________________________________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1995
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
[No Fee Required]
For the transition period from ____________________ to
____________________
Commission File Number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2633910
(State of Incorporation) (I.R.S. Employer Identification No.)
311 Woodworth Avenue
Alma, Michigan 48801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 463-3131
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
State the aggregate market value of the voting stock held by nonaffiliates
of the registrant. The aggregate market value shall be computed by
reference to the price at which the stock was sold, or the average bid and
asked prices of such stock, as of a specified date within 60 days prior to
the date of filing.
Aggregate Market Value as of March 8, 1996: $43,509,294
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
Common stock outstanding at March 8, 1996: 1,542,844 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the year
ended December 31, 1995, are incorporated by reference in Parts I and II.
Portions of the definitive proxy statement for the registrant's annual
shareholders' meeting to be held April 22, 1996, are incorporated by
reference in Part III.
__________________________________________________________________________
PART I
ITEM 1. BUSINESS.
Firstbank Corporation (the "Corporation") is a bank holding
company. The Corporation owns all of the outstanding stock of Bank of
Alma, Firstbank (Mount Pleasant), and 1st Bank (West Branch).
The Corporation's business is concentrated in a single
industry segment--commercial banking. Each subsidiary bank of the
Corporation is a full-service, community bank. The subsidiary banks
offer all customary banking services, including the acceptance of
checking, savings, and time deposits, and the making of commercial,
mortgage (principally single family), home improvement, automobile, and
other consumer loans. Bank of Alma also offers trust services.
The principal sources of revenues for the Corporation and
its subsidiaries are interest and fees on loans. On a consolidated
basis, interest and fees on loans accounted for approximately
79 percent of total revenues in 1995, 75 percent in 1994, and
70 percent in 1993. In addition, interest income from investment
securities accounted for approximately 12 percent of total revenues on
a consolidated basis in 1995, 13 percent in 1994, and 17 percent in
1993. No other single source of revenue accounted for 15 percent or
more of the Corporation's total revenues in any of the last three
years. The Corporation has no foreign assets and no income from
foreign sources. The business of the subsidiary banks of the
Corporation is not seasonal to any material extent.
Bank of Alma is a Michigan state-chartered bank. It and its
predecessors have operated continuously in Alma, Michigan, since 1880.
Its main office and one branch are located in Alma. Bank of Alma also
has one full service branch located in each of the following
communities near Alma: Ashley, Ithaca, Pine River Township,
Riverdale, St. Charles, St. Louis, and Vestaburg.
Firstbank is a Michigan state-chartered bank which was
incorporated in 1894. Its main office and one branch are located in
Mount Pleasant, Michigan. Firstbank also has one full service branch
located in each of the following communities near Mount Pleasant:
Clare, Shepherd, Union Township, and Winn.
On June 16, 1995, Firstbank acquired an office from Standard
Federal Bank, F.S.B., located in Mt. Pleasant, Michigan. Firstbank
assumed the deposits and other specified liabilities associated with
the office and, in exchange, acquired the office's fixed assets, other
assets, and cash. At the effective date, approximately $11 million in
deposit liabilities were assumed by Firstbank.
1st Bank is a Michigan state-chartered bank which was
incorporated in 1980. Its main office is located in West Branch,
Michigan. 1st Bank also has one full service branch located in each
of the following communities near West Branch: Fairview, Hale,
Higgins Lake, Rose City, St. Helen, and West Branch Township.
The following table shows comparative information concerning
the Corporation's subsidiary banks:
DECEMBER 31, 1995
BANK OF ALMA FIRSTBANK 1ST BANK
(In thousands of Dollars)
Assets $ 172,504 $ 80,637 $ 99,260
Deposits 144,604 72,867 90,114
Loans 122,972 60,326 81,549
As of December 31, 1995, the Corporation and its
subsidiaries employed 202 persons on a full-time equivalent basis.
Banking in the Corporation's market areas and in the State
of Michigan is highly competitive. In addition to competition from
other commercial banks, banks face significant competition from
nonbank financial institutions. Savings and loan associations are
able to compete aggressively with commercial banks for deposits and
loans. Credit unions and finance companies are also significant
factors in the consumer loan market. Insurance companies, investment
firms, and retailers are significant competitors for investment
products. Banks compete for deposits with a broad spectrum of other
types of investments such as mutual funds, debt securities of
corporations, and debt securities of the federal government, state
governments, and their respective agencies. The principal methods of
competition for financial services are price (interest rates paid on
deposits, interest rates charged on loans, and fees charged for
services) and service (the convenience and quality of services
rendered to customers).
The Corporation's subsidiary banks compete directly with
other banks, thrift institutions, credit unions, and other
nondepository financial institutions in three geographic banking
markets where their offices are located. Bank of Alma primarily
competes in Gratiot, Montcalm, and Saginaw Counties; Firstbank
primarily in Isabella and Clare Counties; and 1st Bank primarily in
Iosco, Oscoda, Ogemaw, and Roscommon Counties.
Banks and bank holding companies are extensively regulated.
The Corporation is a bank holding company that is regulated by the
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Federal Reserve System. Bank of Alma, Firstbank, and 1st Bank are
chartered under state law and are supervised, examined, and regulated
by the Federal Deposit Insurance Corporation and the Financial
Institutions Bureau of the Michigan Department of Commerce. None of
the banks are members of the Federal Reserve System. All of the
banks' deposits are insured by the Federal Deposit Insurance
Corporation to the maximum extent provided by law.
Laws that govern banks significantly limit their business
activities in a number of respects. Prior approval of the Federal
Reserve Board, and in some cases various other governing agencies, is
required for the Corporation to acquire control of any additional
banks or branches. The business activities of the Corporation and its
subsidiaries are limited to banking and to other activities which are
determined by the Federal Reserve Board to be closely related to
banking. Transactions among the Corporation and the Corporation's
subsidiary banks are significantly restricted. In addition, bank
regulations govern the ability of the subsidiary banks to pay
dividends or make other distributions to the Corporation.
In addition to laws that affect businesses in general, banks
are subject to a number of federal and state laws and regulations
which have a material impact on their business. These include, among
others, state usury laws, state laws relating to fiduciaries, the
Truth In Lending Act, the Truth in Savings Act, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds
Availability Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act, the Real Estate Settlement Procedures Act, the Bank
Secrecy Act, the Community Development and Regulatory Improvement Act,
the Financial Institutions Reform, Recovery and Enforcement Act, the
FDIC Improvement Act of 1991 (the "FDIC Improvement Act"), electronic
funds transfer laws, redlining laws, antitrust laws, environmental
laws, and privacy laws.
The instruments of government monetary policy, as determined
by the Federal Reserve Board, may influence the growth and
distribution of bank loans, investments, and deposits, and may also
affect interest rates on loans and deposits. These policies have a
significant effect on the operating results of banks.
Under applicable laws, regulations, and policies, the
Corporation is expected to act as a source of financial strength to
each subsidiary bank and to commit resources to support each
subsidiary bank. Any insured depository institution owned by the
Corporation may be assessed for losses incurred by the Federal Deposit
Insurance Corporation (the "FDIC") in connection with assistance
provided to, or the failure of, any other insured depository
institution owned by the Corporation.
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The FDIC has authority to impose special assessments on
insured depository institutions to repay FDIC borrowings from the
United States Treasury or other sources and to establish periodic
assessment rates on Bank Insurance Fund ("BIF") member banks so as to
maintain the BIF at the designated reserve ratio defined in the FDIC
Improvement Act. Firstbank also holds deposits that are insured by
the Savings Association Insurance Fund ("SAIF") administered by the
FDIC. Deposit insurance premiums on those deposits are paid to the
SAIF at rates applicable to that fund. The FDIC has implemented a
system of risk-based premiums for deposit insurance pursuant to which
the premiums paid by a depository institution will be based on the
perceived probability that the insurance funds will incur a loss in
respect of that institution.
During 1995, the FDIC reduced the deposit insurance
assessment rate on BIF-insured deposits held by the Corporation's bank
subsidiaries from $.23 to $.04 per $100 of deposits effective June 1,
1995, and further reduced assessments to the minimum of $2,000 per
institution for well capitalized banks for the first six months of
1996. The FDIC did not reduce the assessment rate on SAIF-insured
deposits, which remain at $.23 per $100 of deposits.
The Omnibus Budget Reconciliation Act of 1993 requires,
among other things, that the cost of all intangible assets purchased
in an acquisition, including core deposit premiums and goodwill, must
be amortized ratably over 15 years. Under prior law, acquired
intangible assets were amortized only if they had a limited useful
life that could be determined with reasonable accuracy. In addition,
no amortization deduction was allowed under prior law for goodwill.
The new provision for the amortization of intangibles applies to
property acquired after August 10, 1993, although a business may elect
to apply the new provision to all intangible property acquired after
July 25, 1991.
Currently, the Corporation is authorized to acquire
subsidiary banks in any state in which state laws permit such
acquisition. Also, out-of-state bank holding companies in any state
are now permitted to acquire banks and bank holding companies located
in Michigan if the laws of the state in which the out-of-state bank
holding company is located authorize a bank holding company in
Michigan to acquire ownership of banks and bank holding companies in
that state on a reciprocal basis. Accordingly, the Corporation could
now acquire, and could be acquired by, financial institutions in a
significant number of states.
Under the Interstate Banking and Branching Efficiency Act of
1994, bank holding companies may make certain interstate acquisitions
beginning September 30, 1995, even if state law would otherwise
prohibit it. Beginning June 1, 1997, the Act generally allows a bank
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in one state to acquire a bank in another state unless one of the
states has enacted legislation prohibiting interstate bank
acquisitions. An interstate acquisition may occur earlier if the
states of the buying and selling banks both have enacted laws
permitting interstate acquisitions by all out-of-state banks. The Act
also permits a bank to establish a DE NOVO branch in another state if
the state has a law that expressly permits all out-of-state banks to
establish de novo branches in that state. In November 1995, the State
of Michigan enacted legislation permitting a Michigan bank to sell one
or more of its branches to an out-of-state bank if that bank's state
law permits a Michigan bank to purchase branches of banks located in
that state. The Michigan legislation also permits a Michigan bank to
purchase one or more branches of an out-of-state bank, but the
Michigan bank must receive the approval of the Financial Institutions
Bureau of the Michigan Department of Commerce before operating the
purchased branch or branches. No out-of-state acquisitions or
branching by the Corporation or its subsidiary banks are presently
under consideration.
Risk-based capital and leverage standards apply to all banks
under federal regulations. The risk-based capital ratio standards
establish a systematic analytical framework that is intended to make
regulatory capital requirements sensitive to differences in risk
profiles among banking organizations, take off-balance sheet liability
exposures into explicit account in assessing capital adequacy, and
minimize disincentives to hold liquid, low-risk assets. Risk-based
capital ratios are determined by allocating assets and specified off-balance
sheet commitments into risk-weighting categories. Higher
levels of capital are required for categories perceived as
representing greater risk.
Failure to meet minimum capital ratio standards could
subject a bank to a variety of enforcement remedies available to the
federal regulatory authorities, including restrictions on certain
kinds of activities, restrictions on asset growth, limitations on the
ability to pay dividends, the issuance of a directive to increase
capital, and the termination of deposit insurance by the FDIC.
Maintaining capital at "well capitalized" levels is one condition to
the assessment of federal deposit insurance premiums at the lowest
available rate.
Each of the Corporation's subsidiary banks and the
Corporation itself, on a consolidated basis, maintains capital at
levels which exceed both the minimum and well capitalized levels under
currently applicable regulatory requirements. The following table
summarizes compliance with regulatory capital ratios by the
Corporation and each of its subsidiary banks at December 31, 1995.
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TIER 1
LEVERAGE TIER 1 TOTAL RISK-BASED
RATIO CAPITAL RATIO CAPITAL RATIO
Minimum regulatory requirement 4.00% 4.00% 8.00%
Well capitalized regulatory level 5.00% 6.00% 10.00%
Firstbank Corporation-Consolidated 8.08% 9.94% 11.20%
Bank of Alma 8.37% 10.78% 12.02%
Firstbank 8.14% 9.46% 10.72%
1st Bank 7.42% 9.16% 10.42%
The following table shows the amounts by which the
Corporation's capital (on a consolidated basis) exceeds current
regulatory requirements on a dollar amount basis:
TOTAL
TIER 1 TIER 1 RISK-BASED
LEVERAGE CAPITAL CAPITAL
(In Thousands of Dollars)
Capital balances
at December 31, 1995 $ 26,578 $ 26,578 $ 29,938
Required regulatory
capital 13,144 10,691 21,383
Capital in excess
of regulatory
minimums $ 13,434 $ 15,887 $ 8,555
The nature of the business of the Corporation's subsidiaries
is such that they hold title, on a temporary or permanent basis, to a
number of parcels of real property. These include property owned for
branch offices and other business purposes as well as properties taken
in or in lieu of foreclosures to satisfy loans in default. Under
current state and federal laws, present and past owners of real
property may be exposed to liability for the cost of remediation of
contamination on or originating from such properties, even though they
are wholly innocent of the actions which caused the contamination.
Such liabilities can be material and can exceed the value of the
contaminated property.
A parcel of vacant land owned by Firstbank, adjacent to its
Winn Branch, was formerly occupied by a gasoline service station.
Soil on that parcel is contaminated by petroleum compounds. Tests of
water in nearby wells have also shown groundwater contamination.
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Response activities at this site are proceeding under a state approved
remediation plan. The site has been approved for reimbursement of
response costs by the Michigan Underground Storage Tank Financial
Assurance Act Fund (the "Fund"). As the owner of a registered tank
approved for reimbursement, Firstbank is entitled to reimbursement of
reasonable remediation costs up to a maximum amount of $1,000,000,
after a $10,000 deductible payment, which has been made. Although the
site has been approved for reimbursement, it is possible that future
developments associated with this site could have a materially adverse
affect on the financial condition and results of operations of the
Company. Such developments could include, for example: (i) depletion
of the resources of the Fund; (ii) changes in law or regulation which
would eliminate the Fund as a source of remediation funding; (iii) a
determination that remediation expenses incurred have not been
reasonable; (iv) remediation costs exceeding Fund coverage;
(v) reversal of the decision that the site is eligible for
reimbursement from the Fund; and (vi) assertion of claims of a type
which is not eligible for Fund reimbursements. However, based on
facts presently known to management, the Company believes that the
probability that response costs associated with the Winn site will be
material is remote.
The following tables provide information concerning the
business of the registrant.
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DISTRIBUTION OF ASSETS, LIABILITIES AND STOCKHOLDERS' EQUITY
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994 DECEMBER 31, 1993
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
(Dollars in Thousands)
AVERAGE ASSETS:
Interest earning assets:
Securities available for
sale
Taxable Securities $ 30,198 $ 1,945 6.45% $ 26,532 $ 1,360 5.10% $ 40,956 $ 2,144 5.23%
Tax-exempt securities 28,026 2,355 8.04 28,476 2,398 8.13 26,139 2,238 8.29
Total Securities 58,224 4,300 7.21 55,008 3,758 6.69 67,095 4,382 6.43
Loans 243,806 23,482 9.64 191,385 17,323 9.06 158,417 15,118 9.53
Federal funds sold 6,028 359 5.93 4,449 226 5.06 6,338 190 3.00
Interest-bearing deposits 235 16 8.37 31 3 8.37 31 3 8.27
Total earning assets 308,293 28,157 9.11% 250,873 21,310 8.48% 231,881 19,693 8.48%
Nonaccrual loans 100 186 492
Less allowance for loan loss (4,458) (3,657) (2,747)
Cash and due from banks 12,706 10,926 8,552
Other nonearning assets 13,438 9,882 9,482
Total assets $330,079 $268,210 $247,660
AVERAGE LIABILITIES:
Interest-bearing deposits:
Demand $ 61,201 2,047 3.35% $ 55,152 1,494 2.71 $ 53,296 1,461 2.74
Savings 54,879 1,533 2.80 50,447 1,407 2.79 46,086 1,428 3.10
Time 135,926 7,672 5.64 96,549 4,415 4.57 90,453 4,216 4.66
Federal funds purchased and
repurchase agreements 10,401 550 5.29 5,828 239 4.11 5,750 199 3.46
Notes payable 0 0 0.00 2,790 152 5.44
Total interest-
bearing liabilities 262,407 11,802 4.50% 207,976 7,555 3.63% 198,375 7,456 3.76%
Demand deposits 36,686 32,398 27,786
Total funds 299,093 240,374 226,161
Other liabilities 3,417 3,049 3,228
Total liabilities 302,510 243,423 229,389
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Average Shareholders'
Equity 27,569 24,787 18,271
Total liabilities and
shareholders' equity $330,079 $268,210 $247,660
NET INTEREST INCOME $ 16,355 $ 13,755 $ 12,237
RATE SPREAD 4.61% 4.85% 4.72%
NET INTEREST MARGIN (PERCENT
OF AVERAGE EARNING ASSETS) 5.29% 5.47% 5.27%
Presented on a fully taxable equivalent basis using a federal income
tax rate of 34%.
Including loan fees of $1,060,700, $897,700, and $1,187,300,
respectively. Interest is not included in nonaccrual loans.
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VOLUME/RATE ANALYSIS*
1995/1994 1994/1993 1993/1992
CHANGE IN INTEREST DUE TO: CHANGE IN INTEREST DUE TO: CHANGE IN INTEREST DUE TO:
AVERAGE AVERAGE NET AVERAGE AVERAGE NET AVERAGE AVERAGE NET
VOLUME RATE CHANGE VOLUME RATE CHANGE VOLUME RATE CHANGE
(In Thousands of Dollars)
INTEREST INCOME:
Securities available for sale
Taxable securities $ 226 $ 359 $ 585 $ (602) $ (181) $ (783) $ (46) $ (336) $ (382)
Tax-exempt Securities (18) (26) (44) 202 (42) 160 343 (86) 257
Total securities 208 333 541 (400) (223) (623) 297 (422) (125)
Loans 4,633 1,363 5,996 2,786 (291) 2,495 1,656 (825) 831
Federal funds sold 94 39 133 (96) 132 36 (37) (38) (75)
Interest-bearing deposits 13 13 (12) 4 (8)
Loan fees 163 163 (290) (290) 153 153
Total interest-
earning assets 5,111 1,735 6,846 2,000 (382) 1,618 2,057 (1,281) 776
INTEREST EXPENSE:
Interest-paying demand 203 350 553 39 (6) 33 75 (346) (271)
Savings deposits 18 108 126 120 (140) (20) 450 (180) 270
Time deposits 2,216 1,041 3,257 277 (78) 199 (64) (759) (823)
Total interest-
paying deposits 2,437 1,499 3,936 436 (224) 212 (461) (1,285) (824)
Federal funds
purchased and
securities sold
under agreements
to repurchase 233 77 310 (202) 90 (112) 26 (80) (54)
Notes payable (9) (25) (34)
Total interest-
bearing liabilities 2,670 1,576 4,246 234 (134) 100 478 (1,390) (912)
NET INTEREST INCOME $2,441 $ 159 $2,600 $ 1,766 $ (248) $ 1,518 $1,579 $ 109 $ 1,688
Changes in volume/rate have been allocated between the volume
and rate variances on the basis of the ratio that the volume
and rate variances bear to each other.
Interest is presented on a fully taxable equivalent basis
using a federal income tax rate of 34%.
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INVESTMENT PORTFOLIO
The carrying values of investment securities as of the dates indicated
are summarized as follows:
DECEMBER 31,
1995 1994 1993
(In Thousands of Dollars)
Taxable
U.S. Treasury $ 6,108 $ 6,855 $ 6,691
U.S. Government agencies 17,713 16,066 13,846
Mortgage Backed Securities 1,205 1,560 4,376
Corporate and other 6,728 9,887 9,117
31,754 34,368 34,030
Tax-exempt
States and political
subdivisions 29,512 28,865 27,879
Total $61,266 $63,233 $61,909
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ANALYSIS OF INVESTMENT SECURITIES PORTFOLIO
The following table shows, by class of maturities at December 31,
1995, the amounts and weighted average yields of such investment
securities :
CARRYING AVERAGE
VALUE YIELD
(Dollars in Thousands)
U.S. Treasury
One year or less $ 999 4.88%
Over one through five 5,109 6.63
Total 6,108 6.34
U.S. Agencies
One year or less 5,193 7.74%
Over one through five years 10,022 7.00
Over five through ten years 1,313 8.03
Over ten years 1,185 7.58
Total 17,713 7.33
States and Political
subdivisions:
One year or less 3,607 7.87
Over one through five years 17,024 9.13
Over five through ten years 7,851 9.49
Over ten years 1,029 10.87
Total 29,511 9.14
Corporate and Other:
One year or less 5,149 7.54
Over one through five years 1,579 8.63
Over five through ten years 0 0.00
Over ten years 0 0.00
Total 6,728 7.80
Collateralized Mortgage Obligations
One year or less 0 0.00
Over one through five years 0 0.00
Over five through ten years 498 5.50
Over ten years 708 6.87
Total 1,206 6.30
Total $61,266 8.13
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NOTES:
Calculated on the basis of the cost and effective yields weighted
for the scheduled maturity of each security.
Weighted average yield has been computed on a fully taxable
equivalent basis. The rates shown on securities issued by states
and political subdivisions have been presented, assuming a 34%
tax rate. The amount of the adjustment, due to the fully tax
equivalent basis of presentation, is as follows:
RATE ON
TAXABLE
TAX-EXEMPT EQUIVALENT
RATE ADJUSTMENT BASIS
One year or less 5.20% 2.68% 7.87%
Over 1 through 5 years 6.03 3.11 9.13
Over 5 through 10 years 6.27 3.23 9.49
Over 10 years 7.17 3.70% 10.87%
Total 6.03% 3.11% 9.14%
The aggregate book value of the securities of no single issuer
except the U.S. Government or agencies exceeded ten percent of
the Corporation's consolidated shareholders' equity as of
December 31, 1995.
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LOAN PORTFOLIO
The following table presents the loans outstanding at the indicated
dates according to the type of loan:
DECEMBER 31,
1995 1994 1993 1992
1991
(In Thousands of Dollars)
Loan categories:
Commercial $115,779 $ 99,307 $ 81,085 $ 63,859 $
60,621
Real estate mortgages 90,753 73,760 56,770 44,574
45,765
Consumer 58,315 50,324 40,538 34,998
35,579
Total $264,847 $223,391 $178,393 $143,431
$141,965
Information concerning maturities and sensitivities of loans to
changes in interest rates in the Corporation's annual report to
shareholders for the year ended December 31, 1995, under the caption
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" at page 9, is here incorporated by reference.
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NONPERFORMING LOANS AND ASSETS
The following table summarizes nonaccrual, troubled debt restructurings,
and past-due loans at the dates indicated:
DECEMBER 31,
1995 1994 1993 1992 1991
(In Thousands of Dollars)
Nonperforming loans:
Nonaccrual loans:
Commercial and agricultural $ 47 $110 $258 $ 467 $ 480
Real estate mortgages 0 10 71 50 65
Consumer 0 0 12 87 136
Total 47 120 341 604 681
Accruing Loans 90 days or more past due:
Commercial and agricultural 0 49 0 137 129
Real estate mortgages 319 123 35 34 100
Consumer 67 92 12 43 95
Total 386 264 47 214 324
Renegotiated loans:
Commercial and agricultural 182 0 0 218 610
Real estate mortgages 0 213 182 0 0
Total 182 213 182 218 610
Total nonperforming loans 615 597 570 1,036 1,615
Property from defaulted loans 0 86 92 262 360
Total nonperforming assets $615 $683 $662 $1,298 $1,975
Nonperforming assets are defined as nonaccrual loans, loans 90 days
or more past due, property from defaulted loans, and renegotiated
loans.
The gross interest income that would have been recorded for the year
ended December 31, 1995, if the nonaccrual and renegotiated loans had
performed in accordance with their original terms and had been
outstanding throughout the period, or since origination if held for
part of the period, was $41,000. The amount of interest income on
those loans that was included in net income for the period was $7,000.
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Loan performance is reviewed regularly by external loan review
specialists, loan officers, and senior management. When reasonable
doubt exists concerning collectibility of interest or principal, the
loan is placed in nonaccrual status. Any interest previously accrued
but not collected at that time is reversed and charged against current
earnings.
At December 31, 1995, the Corporation had $8,550,000 in commercial and
mortgage loans for which payments are presently current although the
borrowers are experiencing financial difficulties. Those loans are
subject to constant attention and their status is reviewed on a
monthly basis.
As of December 31, 1995, there were no concentrations of loans
exceeding 10% of total loans which are not otherwise disclosed as a
category of loans in the consolidated balance sheets of the
Corporation contained in the Corporation's annual report to
shareholders for the year ended December 31, 1995.
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ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
The following table summarizes changes in the allowance for loan
losses arising from loans charged off and recoveries on loans
previously charged off by loan category and additions to the allowance
which were charged to expense.
DECEMBER 31,
1995 1994 1993 1992 1991
(Dollars in Thousands)
Balance at beginning of period $4,100 $3,254 $2,394 $1,746 $1,667
Charge-offs:
Commercial and agricultural 164 113 299 337 669
Real estate mortgages 81 0 44 8 55
Consumer 493 386 262 295 407
Total charge-offs 738 499 605 640 1,131
Recoveries:
Commercial and agricultural 97 143 129 96 94
Real estate mortgages 63 30 39 48 3
Consumer 269 172 158 164 128
Total recoveries 429 345 326 308 225
Net charge-offs 309 154 279 332 906
Additions to allowance for
loan losses 1,085 1,000 1,139 980 985
Balance at end of period $4,876 $4,100 $3,254 $2,394 $1,746
Net charge-offs as a percent
of average loans 0.13% 0.08% 0.18% 0.24% 0.64%
The allowance for loan losses is based on management's evaluation of
the portfolio, past loan loss experience, current economic conditions,
volume, growth, and composition of the loan portfolio, and other
relevant factors. The allowance is increased by provisions for loan
losses that have been charged to expense and reduced by net
charge-offs.
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ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses was allocated to provide for possible
losses within the following loan categories at the dates indicated:
DECEMBER 31,
1995 1994 1993 1992 1991
ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF ALLOWANCE % OF
FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO FOR LOANS TO
LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL LOAN TOTAL
LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS LOSSES LOANS
(Dollars in Thousands)
Commercial &
agricultural $2,232 44% $2,069 44% $1,782 45% $1,460 45% $1,128 43%
Real estate
mortgages 880 34 492 33 276 32 177 31 217 32
Consumer 1,050 22 927 23 594 23 493 24 356 25
Unallocated 714 612 602 264 45
Total $4,876 100% $4,100 100% $3,254 100% $2,394 100% $1,746 100%
-18-
AVERAGE DEPOSITS
The daily average deposits and rates paid on such deposits for the
periods indicated were:
YEAR ENDED DECEMBER 31,
1995 1994 1993
AMOUNT RATE AMOUNT RATE AMOUNT RATE
(Dollars in Thousands)
Average Balance:
Noninterest-bearing demand deposits $ 36,686 $ 32,398 $ 27,786
Interest-bearing demand deposits 61,201 3.35% 55,152 2.71% 53,296 2.74%
Other savings deposits 54,879 2.80 50,447 2.79 46,086 3.10
Other time deposits 135,926 5.64 96,549 4.57 90,453 4.66
Total average deposits $288,692 3.89% $ 234,546 3.12% $217,621 3.27%
The time remaining until maturity of time certificates of deposit and
other time deposits of $100,000 or more at December 31, 1995, was as
follows:
Three months or less $ 7,194
Over three through six months 6,696
Over six through twelve months 4,388
Over twelve months 3,190
Total $21,468
-19-
RETURN ON EQUITY AND ASSETS
The following table sets forth certain financial ratios for the years
ended:
1995 1994 1993
Financial ratios:
Return on average total assets 1.17% 1.20% 1.15%
Return on average equity 14.02 12.99 15.55
Average equity to average total assets 8.35 9.24 7.38
Dividend payout ratio 26.23 26.09 22.77
SHORT-TERM BORROWED FUNDS
Included in short-term borrowed funds are repurchase agreements as
described in Note I to the consolidated financial statements in the
Corporation's annual report to shareholders for the year ended
December 31, 1995, which consist of the following:
1995 1994 1993
(Dollars in Thousands)
Amounts outstanding at the
end of the year $ 8,442 $10,144 $ 8,042
Weighted average interest rate
at the end of the year 4.98% 3.97% 3.19%
Longest maturity 10-29-96 10-21-96 6-30-94
Maximum amount outstanding at
any month-end during year $10,714 $10,144 $15,560
Approximate average amounts
outstanding during the year 8,905 3,883 4,812
Approximate weighted average
interest rate for the year 5.16% 3.95% 3.50%
The weighted average interest rates are derived by dividing the
interest expense for the period by the daily average balance
during the period.
-20-
ITEM 2. PROPERTIES.
The offices of the Corporation and the main office of Bank
of Alma are located at 311 Woodworth Avenue, Alma, Michigan. Bank of
Alma occupies approximately 24,000 square feet of this brick building.
The remaining 900 square feet are rented as office space to an
unrelated business. Bank of Alma owns this property, as well as a
parcel of real estate adjacent to the main office which is presently
being used as a parking lot. Bank of Alma also owns a parcel of
vacant land at 218 East Center Street, Alma, Michigan, which is
currently available for sale.
Bank of Alma owns and operates one 3-lane drive-up branch in
Alma, Michigan. Also located on the Alma branch property is a garage
used to house the bank's vehicles and for general storage. A 960
square foot building owned by Bank of Alma in Pine River Township has
three inside tellers in addition to the three outside stations.
Bank of Alma also owns the facilities for six full-service
branches and leases the facilities for one other full-service branch.
Each of the Ashley, Ithaca, Pine River Township, Riverdale, St.
Charles, and Vestaburg branches is owned by Bank of Alma and housed in
buildings having slightly less than 2,000 square feet. Bank of Alma
leases the facility for the St. Louis branch. The leased facility is
approximately 900 square feet consisting of wood frame construction.
The lease expires May 31, 1996.
The main office of Firstbank is located at 102 South Main,
Mt. Pleasant, Michigan. The 4,760 square foot facility is leased.
The lease began in April of 1991. The initial lease period is for
five years with two options to renew for five years each.
Firstbank operates a branch located in Shepherd, Michigan.
The bank owns and occupies approximately 5,800 square feet of space in
a brick building. Approximately half the building is used for bank
purposes and the other half is leased to other tenants for office
purposes. The bank operates a two-lane drive-up facility that is
attached to the building and covered by a canopy. Firstbank also owns
a parcel that is adjacent to the office which is used as a parking
lot.
Firstbank operates a branch located in Clare, Michigan. The
branch is housed in a brick building containing approximately 4,800
square feet of space. The bank owns the building and adjacent real
estate used for parking. The bank also operates a two-lane drive-up
facility that is attached to the building and covered by a canopy.
-21-
Firstbank operates a branch located in Mt. Pleasant,
Michigan. The branch is housed in a brick building containing
approximately 1,600 square feet of space. The bank owns the building
and adjacent real estate used for parking and operates a single-lane
drive-up facility attached to the building.
Firstbank operates a branch located in Winn, Michigan. This
branch facility is housed in a wood frame structure having
approximately 1,000 square feet. Firstbank owns the building.
Firstbank also owns the parcel of real estate which is adjacent to the
Winn branch site.
Firstbank also operates a branch located in Union Township,
Michigan. The branch located in Union Township is housed in a 3,200
square foot building. The building is owned by Firstbank. The Union
Township property houses a three-lane drive-up service.
The main office of 1st Bank is located at 502 West Houghton
Avenue, West Branch, Michigan. The bank occupies approximately 3,565
square feet of office space. 1st Bank owns this property, as well as
one lot adjacent to the main office. The lot has a 1,800 square foot
single family residence and separate garage. The house is currently
rented but is available for future expansion of the bank and for
parking needs.
1st Bank owns and operates branches located in Fairview,
Higgins Lake, and Rose City containing approximately 1,500 to 2,300
square feet. 1st Bank owns each of those branches. Each of those
branches occupies a wood frame building.
1st Bank also owns and operates branches located in St.
Helen and West Branch, Michigan. 1st Bank owns those properties.
Each branch occupies a wood frame building having approximately 900
square feet.
1st Bank operates a branch located in Hale, Michigan. 1st
Bank leases the property. The branch occupies a wood frame building
containing approximately 2,000 square feet and sublets approximately
1,200 square feet to an unrelated business.
1st Bank operates a courier service from a 8,500 square foot
brick and steel building. 1st Bank owns the building. Approximately
2,000 square feet of the building are leased to unrelated businesses.
Management considers the properties and equipment of the
Corporation and its subsidiaries to be well maintained, in good
operating condition, and adequate for their operations.
-22-
ITEM 3. LEGAL PROCEEDINGS.
The Corporation and its subsidiaries are parties, as
plaintiff or as defendant, to routine litigation arising in the normal
course of their business. In the opinion of management, the
liabilities arising from these proceedings, if any, will not be
material to the Corporation's financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
SUPPLEMENTAL ITEM. EXECUTIVE OFFICERS OF THE REGISTRANT.
The following information concerning executive officers of
the Corporation who are not directors has been omitted from the
registrant's proxy statement pursuant to Instruction 3 to
Regulation S-K, Item 401(b).
Officers of the Corporation are appointed annually by the
Board of Directors of the Corporation and serve at the pleasure of the
Board of Directors. Information concerning the executive officers of
the Corporation who are not also directors or nominees for election to
the Board of Directors of the Corporation is given below. Except as
otherwise indicated, all existing officers have had the same principal
employment for over 5 years.
MARY D. DECI (age 49) has been Chief Financial Officer,
Secretary, and Treasurer of the Corporation since 1994. Ms. Deci
has been Senior Vice President of Bank of Alma since 1994, and
Controller of Bank of Alma since 1988. Ms. Deci has been Vice
President of the Corporation and of Bank of Alma since 1989 and
has been an officer of Bank of Alma since 1988.
RICHARD L. JARVIS (age 58) has been Executive Vice President
of Firstbank since December, 1991, and has been Vice President of
the Corporation since 1987. Mr. Jarvis served as President and
Chief Executive Officer of Firstbank from 1987 until December,
1991. Mr. Jarvis served as a director of Firstbank from 1987 to
1991.
DALE A. PETERS (age 53) has been Vice President of the
Corporation and President, Chief Executive Officer, and a
director of 1st Bank since 1987. He has been Chairman of the
Board of 1st Bank since 1988.
-23-
THOMAS R. SULLIVAN (age 45) has been Vice President of the
Corporation and President, Chief Executive Officer, and a
director of Firstbank since December, 1991. From 1988 to 1991,
he was President of the Battle Creek region of Old Kent Bank of
Kalamazoo.
JAMES E. WHEELER, II (age 36), has been Vice President of
the Corporation and Senior Vice President and Chief Loan Officer
of Bank of Alma since 1989.
-24-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS.
The information under the caption "Common Stock Data" on
page 12 in the registrant's annual report to shareholders for the year
ended December 31, 1995, is here incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information under the caption "Selected Financial Data"
on page 3 in the registrant's annual report to shareholders for the
year ended December 31, 1995, is here incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations" on
pages 4 through 12 in the registrant's annual report to shareholders
for the year ended December 31, 1995, is here incorporated by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The report of independent auditors and the consolidated
financial statements on pages 13 through 29 and the quarterly results
of operations on page 12 in the registrant's annual report to
shareholders for the year ended December 31, 1995, are here
incorporated by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
-25-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information under the caption "Board of Directors" in
the registrant's definitive proxy statement for its annual meeting of
shareholders to be held April 22, 1996, is here incorporated by
reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information contained under the captions "Compensation of
Directors and Executive Officers" and "Compensation Committee
Interlocks and Insider Participation" in the registrant's definitive
proxy statement for its annual meeting of shareholders to be held on
April 22, 1996, is here incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information under the caption "Voting Securities" in the
registrant's definitive proxy statement for its annual meeting of
shareholders to be held April 22, 1996, is here incorporated by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information under the caption "Compensation Committee
Interlocks and Insider Participation" in the registrant's definitive
proxy statement for its annual meeting of shareholders to be held
April 22, 1996, is here incorporated by reference.
-26-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a)(1) FINANCIAL STATEMENTS.
The following consolidated financial statements of the
Corporation and its subsidiaries and report of independent auditors
are incorporated by reference from the registrant's annual report to
shareholders for the year ended December 31, 1995, in Item 8:
PAGE NUMBER IN
STATEMENT OR REPORT ANNUAL REPORT
Report of Independent Auditors 13
Consolidated Balance Sheets as of December 31, 1995,
and 1994 14
Consolidated Statements of Income for the years ended
December 31, 1995, 1994, and 1993 15
Consolidated Statements of Changes in Shareholders'
Equity for the years ended December 31, 1995, 1994,
and 1993 16
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994, and 1993 17
Notes to Consolidated Financial Statements 18-29
The consolidated financial statements, notes to consolidated
financial statements, and report of independent auditors listed above
are incorporated by reference in Item 8 of this report from the
corresponding portions of the registrant's annual report to
shareholders for the year ended December 31, 1995.
(2) Schedules to the consolidated financial statements required
by Article 9 of Regulation S-X are not required under the related
instructions or are inapplicable, and therefore have been omitted.
(3) The following exhibits are filed as part of this report:
-27-
NUMBER EXHIBIT
3(a) ARTICLES OF INCORPORATION. Previously filed as an
exhibit to registrant's Registration Statement on
Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
3(b) BYLAWS. Previously filed as an exhibit to the
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(a)* FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND
OFFICERS. Previously filed as an exhibit to the
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(b) DIVIDEND REINVESTMENT PLAN. Previously filed as an
exhibit to the registrant's Registration Statement on
Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
10(c) MAIN OFFICE LEASE. Previously filed as an exhibit to
the registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(d)* DEFERRED COMPENSATION PLAN.
10(e)* TRUST UNDER DEFERRED COMPENSATION PLAN.
10(f)* STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993.
Previously filed as an appendix to the registrant's
definitive proxy statement for its annual meeting of
shareholders held April 26, 1993. Here incorporated by
reference.
13 1995 ANNUAL REPORT TO SHAREHOLDERS. (This report, except for
those portions which are expressly incorporated by reference
in this filing, is furnished for the information of the
Securities and Exchange Commission and is not deemed "filed"
as part of this filing.)
21 SUBSIDIARIES OF REGISTRANT.
23 CONSENT OF CROWE, CHIZEK AND COMPANY LLP.
24 POWERS OF ATTORNEY.
-28-
27 FINANCIAL DATA SCHEDULE.
*Management contract or compensatory plan.
The registrant will furnish a copy of any exhibit listed
above to any shareholder of the registrant without charge upon written
request to Mary D. Deci, Secretary, Firstbank Corporation,
311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan 48801.
(b) REPORTS ON FORM 8-K.
During the last quarter of the period covered by this
report, the registrant filed no Current Reports on Form 8-K.
-29-
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 27, 1996 FIRSTBANK CORPORATION
By /S/MARY D. DECI
Mary D. Deci
Vice President, Secretary,
Treasurer, and Chief Financial
Officer
-30-
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated.
March 27, 1996 /S/JOHN A. MCCORMACK
John A. McCormack
President, Chief Executive
Officer, and Director
(Principal executive officer)
March 27, 1996 /S/MARY D. DECI
Mary D. Deci
Vice President, Secretary, and Treasurer
(Principal financial and accounting
officer)
March 27, 1996 /S/WILLIAM E. GOGGIN*
William E. Goggin
Director
March 27, 1996 /S/EDWARD B. GRANT*
Edward B. Grant
Director
March 27, 1996 /S/CHARLES W. JENNINGS*
Charles W. Jennings
Director
March 27, 1996 /S/PHILLIP G. PEASLEY*
Phillip G. Peasley
Director
March 27, 1996 /S/DAVID D. ROSLUND*
David D. Roslund
Director
*By /S/MARY D. DECI
Mary D. Deci
(Attorney in Fact)
-31-
INDEX TO EXHIBITS
NUMBER EXHIBIT PAGE
3(a) ARTICLES OF INCORPORATION. Previously filed as an **
exhibit to the registrant's Registration Statement
on Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
3(b) BYLAWS. Previously filed as an exhibit to the **
registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(a)* FORM OF INDEMNITY AGREEMENT WITH DIRECTORS AND OFFICERS. **
Previously filed as an exhibit to the registrant's
Registration Statement on Form S-2 (Registration No.
33-68432) filed on September 3, 1993. Here incorporated
by reference.
10(b) DIVIDEND REINVESTMENT PLAN. Previously filed as an **
exhibit to the registrant's Registration Statement
on Form S-2 (Registration No. 33-68432) filed on
September 3, 1993. Here incorporated by reference.
10(c) MAIN OFFICE LEASE. Previously filed as an exhibit to **
the registrant's Registration Statement on Form S-2
(Registration No. 33-68432) filed on September 3, 1993.
Here incorporated by reference.
10(d)* DEFERRED COMPENSATION PLAN.
10(e)* TRUST UNDER DEFERRED COMPENSATION PLAN.
10(f)* STOCK OPTION AND RESTRICTED STOCK PLAN OF 1993. **
Previously filed as an appendix to the registrant's
definitive proxy statement for its annual meeting of
shareholders held April 26, 1993. Here incorporated by
reference.
13 1995 ANNUAL REPORT TO SHAREHOLDERS. (This report, except
for those portions which are expressly incorporated by
reference in this filing is furnished for the information
of the Securities and Exchange Commission and is not
deemed "filed" as part of this filing.)
21 SUBSIDIARIES OF REGISTRANT.
23 CONSENT OF CROW, CHIZEK AND COMPANY LLP.
-32-
24 POWERS OF ATTORNEY.
27 FINANCIAL DATA SCHEDULE.
________________________
*Management contract or compensatory plan.
**This Exhibit is filed by incorporation by reference to a prior
filing.
-33-