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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 For the fiscal year ended December 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] For the transition period
from ______________ to ______________
Commission File Number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-2633910
(State of Incorporation) (I.R.S. Employer Identification No.)
311 Woodworth Avenue
Alma, Michigan 48801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (517) 463-3131
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and asked prices of such
stock, as of a specified date within 60 days prior to the date of filing.
Aggregate Market Value as of March 1, 2001: $79,959,576
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 1, 2001: 4,773,706 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's annual report to shareholders for the year ended
December 31, 2000, are incorporated by reference in Part II.
Portions of the definitive proxy statement for the registrant's annual
shareholders' meeting to be held April 23, 2001, are incorporated by reference
in Part III.
FORWARD LOOKING STATEMENTS
This annual report on Form 10-K including, without limitation, management's
discussion and analysis of financial conditions and results of operations and
other sections of the Corporation's Annual Report to Shareholders which are
incorporated by reference in this report contain forward looking statements that
are based on management's beliefs, assumptions, current expectations, estimates
and projections about the financial services industry, the economy, and about
the Corporation itself. Words such as "anticipate, " "believe," "determine,"
"estimate," "expect," "forecast," "intend," "is likely," "plan," "project,"
"opinion," variations of such terms, and similar expressions are intended to
identify such forward looking statements. The presentations and discussions of
the provision and allowance for loan losses, and determinations as to the need
for other allowances presented or incorporated by reference in this report are
inherently forward looking statements in that they involve judgments and
statements of belief as to the outcome of future events. These statements are
not guarantees of future performance and involve certain risks, uncertainties,
and assumptions that are difficult to predict with regard to timing, extent,
likelihood, and degree of occurrence. Therefore, actual results and outcomes may
materially differ from what may be expressed or forecasted in such forward
looking statements. Internal and external factors that may cause such a
difference include changes in interest rates and interest rate relationships;
demand for products and services; the degree of competition by traditional and
non-traditional competitors; changes in banking regulations; changes in tax
laws; changes in prices, levies, and assessments; the impact of technological
advances; governmental and regulatory policy changes; the outcomes of pending
and future litigation and contingencies; trends in customer behavior and
customer ability to repay loans; software failure; errors or miscalculations;
changes in accounting principles, policies and guidelines; and the vicissitudes
of the national economy. The Corporation undertakes no obligation to update,
amend or clarify forward looking statements, whether as a result of new
information, future events, or otherwise.
PART I
ITEM 1. Business.
Firstbank Corporation (the "Corporation") is a bank holding company. The
Corporation owns all of the outstanding stock of Firstbank - Alma, Firstbank
(Mount Pleasant), Firstbank - West Branch, Firstbank - Lakeview, Firstbank - St.
Johns, and Gladwin Land, Co. (a real estate appraisal company).
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. Firstbank - Alma also offers trust
services.
Firstbank - West Branch owns 1st Armored, Incorporated (an armored car
service provider), 1st Collections, Incorporated (a collection service), 1st
Title, Incorporated (a title insurance company), and 1st Real Estate,
Incorporated (which became C.A. Hanes Realty, Incorporated as of January 2,
2001). Each of the subsidiary banks also offers securities brokerage services at
their main offices through arrangements with third party brokerage firms.
The principal sources of revenues for the Corporation and its subsidiaries
are interest and fees on loans. On a consolidated basis, interest and fees on
loans accounted for approximately 82 percent of total revenues in 2000, 78
percent of total revenues in 1999, and 76 percent of total revenues in 1998. In
addition, interest income from investment securities accounted for approximately
8 percent of total revenues on a consolidated basis in 2000, 10 percent of total
revenues on a consolidated basis in 1999, and 10.4 percent of total revenues on
a consolidated basis in 1998. 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.
Firstbank - 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. Firstbank - Alma also has one full
service branch located in each of the following communities near Alma: Ashley,
Auburn, Ithaca, Merrill, Pine River Township, Riverdale, St. Charles, St. Louis,
and Vestaburg.
-1-
Firstbank (Mount Pleasant) is a Michigan state chartered bank which was
incorporated in 1894. Its main office and one branch are located in Mount
Pleasant, Michigan. Firstbank also has two full service offices in Union
Township and one full service branch located in each of the following
communities near Mount Pleasant: Clare, Shepherd and Winn.
Firstbank - West Branch is a Michigan state chartered bank which was
incorporated in 1980. Its main office and two branches are located in West
Branch, Michigan. Firstbank - West Branch 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.
Firstbank - Lakeview is a Michigan state chartered bank which was
established in 1904. Its main office and one branch are located in Lakeview, and
it has branches in Howard City, Morley, Remus, and Canadian Lakes (Morton
Township).
Firstbank - St. Johns is a Michigan state chartered bank which was
established in 2000. Its main office is located in downtown St. Johns. It plans
to establish its first branch office in the St. Johns area during the year 2001.
The following table shows comparative information concerning the
Corporation's subsidiary banks at December 31, 2000:
Firstbank - Firstbank - Firstbank - Firstbank -
Alma Firstbank West Branch Lakeview St. Johns
----------- --------- ----------- -------- ---------
(In Thousands of Dollars)
Assets $258,527 $163,961 $187,723 $125,670 $22,244
Deposits 177,947 125,325 152,746 82,987 17,721
Loans 174,094 145,248 159,690 105,076 16,658
As of December 31, 2000, the Corporation and its subsidiaries employed 267
persons on a full time equivalent basis.
Banking in the Corporation's market areas and in the State of Michigan is
highly competitive. In addition to competition from other commercial banks,
banks face significant competition from nonbank financial institutions. Savings
and loan associations are able to compete aggressively with commercial banks for
deposits and loans. Credit unions and finance companies are also significant
factors in the consumer loan market. Insurance companies, investment firms, and
retailers are significant competitors for investment products. Banks compete for
deposits with a broad spectrum of other types of investments such as mutual
funds, debt securities of corporations, and debt securities of the federal
government, state governments, and their respective agencies. The principal
methods of competition for financial services are price (interest rates paid on
deposits, interest rates charged on loans, and fees charged for services) and
service (the convenience and quality of services rendered to customers).
The Corporation's subsidiary banks compete directly with other banks,
thrift institutions, credit unions and other nondepository financial
institutions in four geographic banking markets where their offices are located.
Firstbank - Alma primarily competes in Gratiot, Midland, Montcalm, and Saginaw
Counties; Firstbank (Mount Pleasant) primarily in Isabella and Clare Counties;
Firstbank - West Branch primarily in Iosco, Oscoda, Ogemaw, and Roscommon
Counties; Firstbank - Lakeview primarily in Mecosta and Montcalm Counties, and
Firstbank - St. Johns primarily in Clinton County.
Banks and bank holding companies are extensively regulated. The Corporation
is a bank holding company that is regulated by the Federal Reserve System.
Firstbank - Alma, Firstbank (Mount Pleasant), Firstbank - West Branch, Firstbank
- - Lakeview, and Firstbank - St. Johns are chartered under state law and are
supervised, examined, and regulated by the Federal Deposit Insurance Corporation
and the Division of Financial Institutions of the Michigan Office of Financial
and Insurance Services.
Laws that govern banks significantly limit their business activities in a
number of respects. Prior approval of the Federal Reserve Board, and in some
cases various other governing agencies, is required for the Corporation to
acquire control of any additional banks or branches. The business activities of
the Corporation and its subsidiaries are limited to banking and to other
activities which are determined by the Federal Reserve Board to be closely
related to banking. Transactions among the Corporation and the Corporation's
subsidiary banks are significantly restricted. In addition, bank regulations
govern the ability of the subsidiary banks to pay dividends or make other
distributions to the Corporation.
-2-
In addition to laws that affect businesses in general, banks are subject to
a number of federal and state laws and regulations which have a material impact
on their business. These include, among others, state usury laws, state laws
relating to fiduciaries, the Truth In Lending Act, the Truth in Savings Act, the
Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Expedited Funds
Availability Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act, the Real Estate Settlement Procedures Act, the Bank Secrecy Act, the
Community Development and Regulatory Improvement Act, the Financial Institutions
Reform, Recovery and Enforcement Act, the FDIC Improvement Act of 1991 (the
"FDIC Improvement Act"), electronic funds transfer laws, redlining laws,
antitrust laws, environmental laws, and privacy laws.
The enactment of the Gramm-Leach-Bliley Act of 1999 (the "GLB Act")
represents a pivotal point in the history of the financial services industry.
The GLB Act sweeps away large parts of a regulatory framework that had its
origins in the Depression Era of the 1930s. Effective March 11, 2000, new
opportunities became available for banks, other depository institutions,
insurance companies and securities firms to enter into combinations that permit
a single financial services organization to offer customers a more complete
array of financial products and services. The GLB Act provides a new regulatory
framework for regulation through the "financial holding company," which will
have as its umbrella regulator the Federal Reserve Board. Functional regulation
of the financial holding company's separately regulated subsidiaries will be
conducted by their primary functional regulator. In order to qualify as a
financial holding company, a bank holding company must file an election to
become a financial holding company and each of its banks must be "well
capitalized" and "well managed." In addition, the GLB Act makes satisfactory or
above Community Reinvestment Act compliance for insured depository institutions
and their financial holding companies necessary in order for them to engage in
new financial activities. The GLB Act provides a federal right to privacy of
non-public personal information of individual customers. The Corporation and its
subsidiary banks are also subject to certain state laws that deal with the use
and distribution of non-public personal information.
The Corporation believes that the GLB Act could significantly increase
competition in its business and is evaluating the desirability of electing to
become a financial holding company. The Corporation believes that it is
qualified to elect financial holding company status but has not yet decided to
do so.
The instruments of government monetary policy, as determined by the Federal
Reserve Board, may influence the growth and distribution of bank loans,
investments, and deposits, and may also affect interest rates on loans and
deposits. These policies have a significant effect on the operating results of
banks.
Under applicable laws, regulations, and policies, the Corporation is
expected to act as a source of financial strength to each subsidiary bank and to
commit resources to support each subsidiary bank. Any insured depository
institution owned by the Corporation may be assessed for losses incurred by the
Federal Deposit Insurance Corporation (the "FDIC") in connection with assistance
provided to, or the failure of, any other insured depository institution owned
by the Corporation.
The FDIC has authority to impose special assessments on insured depository
institutions to repay FDIC borrowings from the United States Treasury or other
sources and to establish periodic assessment rates on Bank Insurance Fund
("BIF") member banks so as to maintain the BIF at the designated reserve ratio
defined in the FDIC Improvement Act. Firstbank - Alma and Firstbank (Mount
Pleasant) also hold deposits that are insured by the Savings Association
Insurance Fund ("SAIF") administered by the FDIC. Deposit insurance premiums on
those deposits are paid to the SAIF at rates applicable to that fund. The FDIC
has implemented a system of risk-based premiums for deposit insurance pursuant
to which the premiums paid by a depository institution will be based on the
perceived probability that the insurance funds will incur a loss in respect of
that institution.
Federal law allows bank holding companies to acquire banks located in any
state in the United States without regard to geographic restrictions or
reciprocity requirements imposed by state law and to establish interstate branch
networks through acquisitions of other banks. Michigan and federal law permits
both U.S. and non U.S. banks to establish branch offices in Michigan. The
Michigan Banking Code permits, in appropriate circumstances and with the
approval of the Commissioner: (i) acquisition of Michigan banks by FDIC insured
banks, savings banks, or savings and loan associations located in other states;
(ii) sale by a Michigan bank of branches to an FDIC insured bank, savings bank,
or savings and loan association located in a state in which a Michigan bank
could purchase branches of the purchasing entity; (iii) consolidation of
Michigan banks and FDIC insured banks, savings banks, or
-3-
savings and loan associations located in other states having laws permitting
such consolidation; (iv) establishment of branches in Michigan by FDIC insured
banks located in other states, the District of Columbia, or U.S. territories or
protectorates having laws permitting a Michigan bank to establish a branch in
such jurisdiction; and (v) establishment by foreign banks of branches located in
Michigan.
Risk based capital and leverage standards apply to all banks under federal
regulations. The risk-based capital ratio standards establish a systematic
analytical framework that is intended to make regulatory capital requirements
sensitive to differences in risk profiles among banking organizations, take off
balance sheet liability exposures into explicit account in assessing capital
adequacy, and minimize disincentives to hold liquid, low risk assets. Risk-based
capital ratios are determined by allocating assets and specified off-balance
sheet commitments into risk-weighting categories. Higher levels of capital are
required for categories perceived as representing greater risk.
Failure to meet minimum capital ratio standards could subject a bank to a
variety of enforcement remedies available to the federal regulatory authorities,
including restrictions on certain kinds of activities, restrictions on asset
growth, limitations on the ability to pay dividends, the issuance of a directive
to increase capital, and the termination of deposit insurance by the FDIC.
Maintaining capital at "well capitalized" levels is one condition to the
assessment of federal deposit insurance premiums at the lowest available rate.
Each of the Corporation's subsidiary banks, and the Corporation itself on a
consolidated basis, maintains capital at levels which exceed both the minimum
and well capitalized levels under currently applicable regulatory requirements.
The following table summarizes compliance with regulatory capital ratios by the
Corporation and each of its subsidiary banks at December 31, 2000.
Tier 1 Tier 1 Total
Leverage Capital Risk-based
Ratio Ratio Capital
----- ----- -------
Minimum regulatory requirement 4% 4% 8%
Well capitalized regulatory level 5% 6% 10%
Firstbank Corporation-Consolidated 7.77% 10.03% 11.28%
Firstbank - Alma 8.21% 11.08% 12.34%
Firstbank (Mt. Pleasant) 8.17% 9.88% 11.10%
Firstbank - West Branch 7.24% 9.54% 10.80%
Firstbank - Lakeview 9.00% 12.42% 13.68%
Firstbank - St. Johns 19.08% 24.46% 25.54%
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
Capital Balances at December 31, 2000 $54,820 $54,820 $61,691
Required regulatory capital 28,205 21,868 43,736
------ ------ ------
Capital in excess of regulatory minimums $26,615 $32,952 $17,955
====== ====== ======
-4-
The nature of the business of the Corporation's subsidiaries is such that
they hold title, on a temporary or permanent basis, to a number of parcels of
real property. These include property owned for branch offices and other
business purposes as well as properties taken in or in lieu of foreclosures to
satisfy loans in default. Under current state and federal laws, present and past
owners of real property may be exposed to liability for the cost of remediation
of contamination on or originating from such properties, even though they are
wholly innocent of the actions which caused the contamination. Such liabilities
can be material and can exceed the value of the contaminated property.
-5-
The following tables provide information concerning the business of the
registrant.
Distribution of Assets, Liabilities, and Shareholders' Equity
Year Ended Year Ended Year Ended
December 31, 2000 December 31, 1999 December 31, 1998
-------------------------------------------------------------------------------
Average Average Average Average Average Average
(In Thousands of Dollars) Balance Interest Rate Balance Interest Rate Balance Interest Rate
Average Assets
Interest earning assets:
Taxable securities $ 52,590 $ 3,365 6.40% $ 60,033 $ 3,651 6.08% $ 55,861 $ 3,431 6.15%
Tax exempt securities (1) 29,584 2,267 7.66 33,307 2,572 7.72 33,455 2,589 7.74
-------- ------- ------- ------- ------- -------
Total securities 82,174 5,632 6.85 93,340 6,223 6.67 89,316 6,020 6.74
Loans (1) (2) 551,357 49,237 8.93 462,516 40,467 8.75 412,884 38,768 9.39
Federal funds sold 3,290 209 6.35 4,190 208 4.96 13,446 728 5.41
Interest bearing deposits 496 26 5.24 999 55 5.50 809 42 5.20
---------- --------- --------- --------- --------- ---------
Total earning assets 637,317 55,104 8.65 561,045 46,953 8.37 516,455 45,558 8.82
Nonaccrual loans 1,844 2,034 1,432
Less allowance for loan loss (9,754) (9,213) (8,543)
Cash and due from banks 20,160 18,877 19,173
Other non earning assets 37,623 34,700 32,421
-------- -------- --------
Total Average Assets $687,190 $607,443 $560,938
======= ======= =======
Average Liabilities
Interest bearing liabilities:
Demand $131,998 $ 4,409 3.34% $143,828 $ 4,662 3.24% $126,030 $4,440 3.52%
Savings 70,461 1,668 2.37 72,412 1,776 2.45 67,085 1,734 2.58
Time 231,367 13,044 5.64 204,417 10,485 5.13 211,243 11,718 5.55
Federal funds purchased and
repurchase agreements 41,901 2,277 5.43 29,343 1,385 4.72 17,601 757 4.30
Notes payable 63,692 4,129 6.48 17,777 975 5.49 11,464 704 6.14
-------- ------- -------- -------- --------- -------
Total interest bearing liabilities 539,419 25,527 4.73 467,777 19,283 4.12 433,423 19,353 4.47
Demand deposits 76,368 70,711 63,257
-------- -------- --------
Total funds 615,787 538,488 496,680
Other non interest bearing liabilities 8,728 8,203 8,000
--------- --------- ---------
Total liabilities 624,515 546,691 504,680
Average shareholders' equity 62,675 60,752 56,258
-------- -------- --------
Total liabilities and
shareholders' equity $687,190 $607,443 $560,938
======= ======= =======
Net interest income (1) $ 29,577 $27,670 $26,205
======= ====== ======
Rate spread (1) 3.92% 4.25% 4.35%
==== ==== ====
Net interest margin (percent of
average earning assets) (1) 4.63% 4.92% 5.06%
==== ==== ====
(1) Presented on a fully taxable equivalent basis using a federal income tax
rate of 34%.
(2) Interest income includes amortization of loan fees of $1,302,000,
$1,312,400, and $1,726,000 respectively. Interest on nonaccrual loans is
not included.
-6-
Volume/Rate Analysis(1)
2000/1999 1999/1998
--------- ---------
Change in Interest Due to: Change in Interest Due to:
-------------------------------------------------------------------------------
Average Average Net Average Average Net
Volume Rate Change Volume Rate Change
------ ---------- ------ ------ ---------- ------
(Dollars in thousands)
Interest Income:
Securities
Taxable securities $ (469) $183 $ (286) $ 253 $ (33) $ 220
Tax-exempt securities(2) (285) (20) (305) (11) (6) (17)
------ ---- ----- ------- --------- --------
Total securities (754) (163) (591) 242 (39) 203
Loans(2) 7,918 852 8,770 4,457 (2,758) 1,699
Federal funds Sold (50) 51 1 (464) (56) (520)
Interest bearing deposits (26) (3) (29) 10 3 13
------ ------- ------ ------- ---------- --------
Total interest income on earning assets 7,088 1,063 8,151 4,245 (2,850) 1,395
Interest Expense:
Deposits
Interest paying demand (392) 139 (253) 595 (373) 222
Savings (47) (61) (108) 133 (91) 42
Time 1,461 1,098 2,559 (370) (863) (1,233)
----- ----- ----- ------ ------- ------
Total deposits 1,022 1,176 2,198 358 (1,327) (969)
Federal funds purchased and securities
sold under agreements to repurchase 659 233 892 548 80 628
Notes payable 2,946 208 3,154 353 (82) 271
----- ------ ----- ------ -------- -------
Total interest expense on liabilities 4,627 1,617 6,244 1,259 (1,329) (70)
----- ----- ----- ----- ------ -------
Net Interest Income $2,461 $ (554) $1,907 $2,986 $(1,521) $ 1,465
===== ===== ===== ===== ====== ======
(1) Changes in volume/rate have been allocated between the volume and rate
variances on the basis of the ratio that the volume and rate variances bear
to each other.
(2) Interest is presented on fully taxable equivalent basis using a federal
income tax rate of 34%.
-7-
Investment Portfolio
The carrying values of investment securities as of the dates indicated are
summarized as follows:
December 31,
---------------------------------------
2000 1999 1998
---- ---- ----
(Dollars in thousands)
Taxable
US Treasury $ 4,032 $ 8,002 $ 9,250
US Government agencies 22,056 24,787 22,932
States and political subdivisions 5,616 5,654 4,839
Mortgage Backed Securities 1,001 2,175 3,614
Corporate and other 14,494 19,004 24,819
------ ------ --------
Total taxable 47,199 59,622 65,454
Tax-exempt
States and political subdivisions 28,976 30,644 36,257
------ ------ --------
Total $76,175 $90,266 $101,711
====== ====== =======
-8-
Analysis of Investment Securities Portfolio
The following table shows, by class of maturities at December 31, 2000, the
amounts and weighted average yields of such investment securities (1):
Carrying Average
Value Yield(2)
----- --------
(In Thousands of Dollars)
U.S. Treasuries:
One year or less $ 2,517 6.1497%
Over one through five years 1,515 6.3755
-------
Total $ 4,032 6.2346%
U.S. Agencies:
One year or less $ 1,715 5.8679%
Over one through five years 10,075 5.4815
Over five through ten years 7,806 6.2047
Over ten years 2,460 6.0767
-------
Total $22,056 5.8339%
States & Political subdivisions:
One year or less $ 4,484 9.5817%
Over one through five years 11,871 8.2814
Over five through ten years 16,732 8.3331
Over ten years 1,505 9.0982
-------
Total $34,592 8.5105%
Corporate and Other:
One year or less $10,966 8.7438%
Over one through five years 3,528 6.3889
-------
Total $14,494 8.1706%
Collateralized Mortgage Obligations
Over five through ten years $ 102 5.7013%
Over ten years 899 6.5567
-------
Total $ 1,001 6.4698%
TOTAL $76,175 7.5235%
======
(1) Calculated on the basis of the cost and effective yields weighted for the
scheduled maturity of each security.
(2) Weighted average yield has been computed on a fully taxable equivalent
basis. The rates shown on securities issued by states and political
subdivisions have been presented, assuming a 34% tax rate. The amount of
the adjustment, due to the fully tax equivalent basis of presentation, is
as follows:
-9-
Analysis of Investment Securities Portfolio (cont.)
Rate on
Taxable
Tax-exempt Equivalent
Rate Adjustment Basis
---------- ---------- ----------
One year or less 6.32% 3.25% 9.57%
Over 1 through 5 years 5.21 2.68 7.89
Over 1 through 10 years 5.42 2.79 8.21
Over 10 years 6.00 3.09 9.09
Total 5.51% 2.84% 8.34%
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, 2000.
-10-
Loan Portfolio
The following table presents the loans outstanding at December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands of Dollars)
Loan categories:
Lonas held for sale $ 1,018 $ 1,117 $ 5,455 $ 3,917 $ 6,756
Commercial and agricultural 279,060 227,855 192,212 158,219 122,934
Real estate mortgages 238,899 204,062 171,554 167,931 115,849
Consumer 81,790 75,204 71,807 74,741 69,081
Total $600,767 $508,238 $441,028 $404,808 $314,620
======= ======= ======= ======= =======
The following table shows the maturity of commercial and agricultural and real
estate construction loans outstanding at December 31, 2000. Also provided are
the amounts due after one year classified according to their sensitivity to
changes in interest rates.
One year One year to After
or less five years five years Total
------- ---------- ---------- -----
(In Thousands of Dollars)
Commercial and agricultural $112,222 $143,129 $23,709 $279,060
Real Estate Construction 17,052 4,960 1,548 23,560
--------- -------- -------- ---------
Total $129,274 $148,089 $25,257 $302,620
======= ======= ====== =======
Loans due after one year:
With pre-determined rate $121,772 $22,790 $144,562
With adjustable rates 26,317 2,467 28,784
-------- -------- ---------
Total $148,089 $25,257 $173,346
======= ====== =======
-11-
Nonperforming Loans and Assets
The following table summarizes nonaccrual, troubled debt restructurings, and
past-due loans at December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands of Dollars)
Nonperforming loans:
Nonaccrual loans:
Commercial and agricultural $ 834 $ 701 $ 584 $ 447 $ 127
Real estate mortgages 876 1,454 186 800 79
Consumer 4 10 20 27 12
-------- ------- ------- ------- -------
Total 1,714 2,165 790 1,274 218
Accruing Loans 90 days or more past due:
Commercial and agricultural 254 561 359 752 178
Real estate mortgages 91 74 241 426 475
Consumer 20 28 21 37 36
------- ------- ------- ------- -------
Total 365 663 621 1,215 689
Renegotiated loans:
Commercial and agricultural 53 55 86 121 150
Real estate mortgages 0 0 0 0 0
-------- -------- -------- -------- --------
Total 53 55 86 121 150
Total nonperforming loans 2,132 2,883 1,497 2,610 1,057
Property from defaulted loans 513 511 527 663 130
------ ------ ------ ------ ------
Total nonperforming assets $2,645 $3,394 $2,024 $3,273 $1,187
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, 2000, 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 $51,730. The
amount of interest income on those loans that was included in net income for the
period was $140,614.
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, 2000, the Corporation had $18,644,000 in commercial and mortgage
loans for which payments are presently current although the borrowers are
experiencing financial difficulties. Those loans are subject to special
attention and their status is reviewed on a monthly basis.
As of December 31, 2000, there were no concentrations of loans exceeding 10
percent of total loans which are not otherwise disclosed as a category of loans
in the consolidated balance sheets of the Corporation contained in the
Corporation's Annual Report to shareholders for the year ended December 31,
2000.
-12-
Analysis of the Allowance for Loan Losses
The following table summarizes changes in the allowance for loan losses arising
from loans charged off and recoveries on loans previously charged off by loan
category and additions to the allowance which were charged to expense at
December 31,
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands of Dollars)
Balance at beginning of period $9,317 $9,048 $8,114 $6,247 $4,876
Charge-offs:
Commercial and agricultural 369 240 71 211 110
Real estate mortgages 25 67 60 79 45
Consumer 431 492 581 980 625
------ ------ ----- ----- -----
Total charge-offs 825 799 712 1,270 780
Recoveries:
Commercial and agricultural 355 234 97 97 83
Real estate mortgages 2 20 47 7 28
Consumer 272 300 325 309 202
------ ------ ----- ----- -----
Total recoveries 629 554 469 413 313
Net charge-offs 196 245 243 857 467
------ ------ ----- ----- ------
Additions to allowance for loan losses 736 514 1,177 2,724 (1) 1,838
------ ------ ----- ----- -----
Balance at end of period $9,857 $9,317 $9,048 $8,114 $6,247
===== ===== ===== ===== =====
Net charge-offs as a percent of average loans .03% .05% .06% .24% .16%
(1) Includes the allowance of Firstbank - Lakeview at date of acquisition of
$1,326.
The allowance for loan losses is based on management's evaluation of the
portfolio, past loan loss experience, current economic conditions, volume,
growth, and composition of the loan portfolio, and other relevant factors. The
allowance is increased by provisions for loan losses that have been charged to
expense and reduced by net charge-offs.
Allocation of the Allowance for Loan Losses
The allowance for loan losses was allocated to provide for possible losses
within the following loan categories as of December 31,
2000 1999 1998 1997 1996
---------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------
Commercial &
agricultural $5,749 44% $5,344 45% $4,758 44% $3,806 39% $2,763 39%
Real estate
mortgages 769 43% 539 40 476 40 516 42 364 39
Consumer 1,600 13% 1,521 15 1,690 16 1,621 19 1,576 22
Unallocated 1,739 1,913 2,124 2,171 1,544
----- ---- ----- ---- ----- ---- ----- ---- ----- ----
Total $9,857 100% $9,317 100% $9,048 100% $8,114 100% $6,247 100%
===== ==== ===== ==== ===== ==== ===== === ===== ===
-13-
Average Deposits
The daily average deposits and rates paid on such deposits for the years ending
December 31,
2000 1999 1998
---- ---- ----
Amount Rate Amount Rate Amount Rate
------ ---- ------ ---- ------ ----
(In Thousands of Dollars)
Average Balance:
Noninterest-bearing demand deposits $ 76,368 $ 70,711 $ 63,257
Interest-bearing demand deposits 131,998 3.34% 143,828 3.24% 126,030 3.52%
Other savings deposits 70,461 2.37% 72,412 2.45% 67,085 2.58%
Other time deposits 231,367 5.64% 204,417 5.13% 211,243 5.55%
------- ---- ------- ---- ------- ----
Total average deposits $510,194 3.75% $491,368 3.44% $467,615 3.83%
======= ==== ======= ==== ======= ====
The time remaining until maturity of time certificates of deposit and other time
deposits of $100,000 or more at December 31, 2000, was as follows (In Thousands
of Dollars):
Three months or less $27,853
Over three through six months 9,086
Over six through twelve months 14,686
Over twelve months 5,871
-------
Total $57,496
======
Return on Equity and Assets
The following table sets forth certain financial ratios for the years ended:
2000 1999 1998
---- ---- ----
Financial ratios:
Return on average total assets 1.24% 1.32% 1.30%
Return on average equity 13.63% 13.23% 12.98%
Average equity to average total assets 9.12% 10.00% 10.03%
Dividend payout ratio 36.73% 35.76% 34.16%
-14-
Short Term Borrowed Funds
Included in short term borrowed funds are repurchase agreements as described in
Note J to the consolidated financial statements in the Corporation's Annual
Report to shareholders for the year ended December 31, 2000, which consist of
the following:
2000 1999 1998
---- ---- ----
Amounts outstanding at the end of the year $21,657 $21,519 $18,678
Weighted average interest rate at the end of the year 4.88% 4.17% 3.88%
Longest maturity 5-18-01 1-18-00 1-20-99
Maximum amount outstanding at any month end during year $26,374 $21,519 $18,678
Approximate average amounts outstanding during the year $23,649 $19,495 $15,618
Approximate weighted average interest rate for the year 4.62% 4.05% 4.15%
The weighted average interest rates are derived by dividing the
interest expense for the period by the daily average balance during the
period.
-15-
ITEM 2. Properties.
The offices of the Corporation and the main office of Firstbank - Alma are
located at 311 Woodworth Avenue, Alma, Michigan. Firstbank - Alma occupies
approximately 24,000 square feet of this building owned by Firstbank - Alma. The
Corporation's Operations Center is housed in a 14,800 square foot building
located in Alma and owned by Firstbank - Alma. The main office of Firstbank
(Mount Pleasant) is located at 102 South Main, Mount Pleasant, Michigan. The
5,600 square foot facility is leased. The lease will expire in 2006 . Firstbank
has an option to extend the term for an additional five years. The main office
of Firstbank - West Branch is located at 502 West Houghton Avenue, West Branch,
Michigan in an approximately 3,600 square foot building owned by the Bank. The
executive offices of Firstbank - West Branch and a full service branch are
located in a 10,000 square foot building owned by the Bank and located at 601
West Houghton Avenue, West Branch, Michigan. The main office of Firstbank -
Lakeview, which is owned by the Bank, is located in a brick and block frame
building of approximately 16,000 square feet at 506 South Lincoln Avenue,
Lakeview, Michigan. The main office of Firstbank - St. Johns, which is owned by
the Bank, is located in a 3,400 square foot building at 201 North Clinton, St.
Johns, Michigan. The subsidiary banks operate a total of 30 branch facilities,
all but two of which are owned and most of which are full service facilities and
which range in size from 1,200 to 3,200 square feet used for banking purposes.
In several instances, branch facilities contain more space than required for
current banking operations. This excess space, totaling approximately 17,000
square feet, is leased to unrelated businesses.
Management considers the properties and equipment of the Corporation and
its subsidiaries to be well maintained, in good operating condition, and
adequate for their operations.
-16-
ITEM 3. Legal Proceedings.
The Corporation and its subsidiaries are parties, as plaintiff or as
defendant, to routine litigation arising in the normal course of their business.
In the opinion of management, the liabilities arising from these proceedings, if
any, will not be material to the Corporation's consolidated financial condition.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Supplemental Item. Executive Officers of the Registrant.
The following information concerning executive officers of the Corporation
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 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.
William L. Benear (age 54) became President & CEO of Firstbank -
Lakeview on January 1, 2000. He was also appointed a Vice President of the
Corporation. Prior to becoming Lakeview's President & CEO, Mr. Benear had
been Executive Vice President of Firstbank - Lakeview since 1994.
David L. Miller (age 35) was named a Vice President of the Corporation
December 8, 2000. Prior to this appointment, Mr. Miller was a Senior Vice
President of Firstbank - Lakeview, having been employed at Lakeview since
1992. Mr. Miller serves in the Human Resources Department for the
Corporation and its subsidiaries.
Dale A. Peters (age 58) has been Vice President of the Corporation and
President, Chief Executive Officer, and a director of Firstbank - West
Branch since 1987. He has been Chairman of the Board of Firstbank - West
Branch since 1988.
Samuel G. Stone (age 55) was appointed Vice President, CFO, Secretary
and Treasurer of the Corporation in November 2000. From 1998 until his
appointment to Firstbank Corporation, Mr. Stone served as Senior Vice
President - Corporate Planning of National City Corporation (successor to
First of America). Previous positions Mr. Stone held during his 28-year
tenure with First of America included Senior Vice President and Treasurer,
Vice President - Director of Corporate Planning, and Vice President - Trust
Investments.
Thomas R. Sullivan (age 50) was appointed President & CEO of the
Corporation on January 1, 2000. He has also served as President, CEO, and
director of Firstbank (Mt. Pleasant) since 1991. Mr. Sullivan had been
Executive Vice President of the Corporation since 1996 and served as Vice
President of the Corporation from 1991 to 1996.
James M. Taylor (age 59), was appointed as the President & CEO of
Firstbank - St. Johns in March 2000. Prior to that appointment, Mr. Taylor
had been Senior Vice President at Firstbank (Mt. Pleasant) since 1989.
James E. Wheeler, II (age 41), was appointed President & CEO of
Firstbank - Alma on January 1, 2000. Mr. Wheeler had been Executive Vice
President of Firstbank - Alma since 1999. From 1994 to 1999, Mr. Wheeler
served as Senior Vice President and Chief Loan Officer of Firstbank - Alma.
-17-
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, 2000,
is here incorporated by reference.
ITEM 6. Selected Financial Data.
The information under the heading "Financial Highlights" on page 3 in the
registrant's annual report to shareholders for the year ended December 31, 2000,
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 11 in the
registrant's annual report to shareholders for the year ended December 31, 2000,
is here incorporated by reference.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk.
Information under the headings "Liquidity and Interest Rate Sensitivity" on
page 8 and "Quantitative and Qualitative Disclosure About Market Risk" on pages
9 and 10 in the registrant's annual report to shareholders for the year ended
December 31, 2000, 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 17 and the quarterly results of operations on
page 30 in the registrant's annual report to shareholders for the year ended
December 31, 2000, are here incorporated by reference.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-18-
PART III
ITEM 10. Directors and Executive Officers of the Registrant.
The information under the captions "Board of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the registrant's definitive proxy
statement for its annual meeting of shareholders to be held Apri1 23, 2001, is
here incorporated by reference.
ITEM 11. Executive Compensation.
Information contained under the captions "Compensation of Directors and
Executive Officers" and "Compensation Committee Interlocks and Insider
Participation" in the registrant's definitive proxy statement for its annual
meeting of shareholders to be held April 23, 2001, is here incorporated by
reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management.
The information under the caption "Voting Securities" in the registrant's
definitive proxy statement for its annual meeting of shareholders to be held
Apri1 23, 2001, 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 23, 2001, is here incorporated
by reference.
-19-
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(l) Financial Statements.
The following consolidated financial statements of the Corporation and its
subsidiaries and report of independent auditors are incorporated by reference
from the registrant's annual report to shareholders for the year ended December
31, 2000, in Item 8:
Page Number in
Statement or Report Annual Report
------------------- --------------
Report of Independent Auditors 13
Consolidated Balance Sheets as of December 31, 2000
and 1999 14
Consolidated Statements of Income and Comprehensive
Income for the years ended December 31, 2000, 1999, and 1998 15
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 2000, 1999, and 1998 16
Consolidated Statements of Cash Flows for the years
ended December 31, 2000, 1999, and 1998 17
Notes to Consolidated Financial Statements 18 - 30
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, 2000.
(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) Exhibits (Numbered in accordance with Item 601 of Regulation S-K)
The Exhibit Index is located on the final page of this report on Form
10-K.
(b) Reports on Form 8-K.
The registrant filed a Current Report on Form 8-K during the last quarter
of the period covered by this report. The Form 8-K was dated November 22,
2000, and reported that Mr. Samuel G. Stone had been appointed as Vice
President and Chief Financial Officer of the registrant.
-20-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, dated March 26, 2001.
FIRSTBANK CORPORATION
/s/ Thomas R. Sullivan
Thomas R. Sullivan
President, Chief Executive Officer
(Principal Executive Officer)
/s/ Samuel G. Stone
Samuel G. Stone
Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant and
in the capacities and on the date indicated. Each director of the Registrant,
whose signature appears below, hereby appoints Thomas R. Sullivan and Samuel G.
Stone, and each of them severally, as his attorney-in-fact, to sign in his name
and on his behalf, as a director of the Registrant, and to file with the
Commission any and all Amendments to this Report on Form 10-K.
Signature Date
--------- ----
/s/ Duane A. Carr March 26, 2001
Duane A. Carr
/s/ William E. Goggin March 26, 2001
William E. Goggin
/s/ Edward B. Grant March 26, 2001
Edward B. Grant
/s/ Charles W. Jennings March 26, 2001
Charles W. Jennings
________________________________ March 26, 2001
Benson S. Munger
/s/ Phillip G. Peasley March 26, 2001
Phillip G. Peasley
/s/ David D. Roslund March 26, 2001
David D. Roslund
/s/ Thomas R. Sullivan March 26, 2001
Thomas R. Sullivan
-21-
Number Exhibit
3(a) Articles of Incorporation. Previously filed as an exhibit to
registrant's Form 10-Q for the quarter ended March 31, 1997. Here
incorporated by reference.
3(b) Bylaws. Previously filed as an exhibit to the registrant's
Registration Statement on Form S-2 (Registration No. 33-68432) filed
on September 3, 1993. Here incorporated by reference.
10(a)* Form of Indemnity Agreement with Directors and Officers. Previously
filed as an exhibit to the registrant's Registration Statement on Form
S-2 (Registration No. 33-68432) filed on September 3, 1993. Here
incorporated by reference.
10(b)* Deferred Compensation Plan. Previously filed as an exhibit to the
registrant's Form 10-K for the year ended December 31, 1995. Here
incorporated by reference.
10(c)* Trust under Deferred Compensation Plan. Previously filed as an exhibit
to the registrant's Form 10-K for the year ended December 31, 1995.
Here incorporated by reference.
10(d)* Stock Option and Restricted Stock Plan of 1993. Previously filed as an
appendix to the registrant's definitive proxy statement for its annual
meeting of shareholders held April 26, 1993. Here incorporated by
reference.
10(e)* Stock Option and Restricted Stock Plan of 1997. Previously filed as an
appendix to the registrant's definitive proxy statement for its annual
meeting of shareholders on April 28, 1997. Here incorporated by
reference.
10(f) Employee Stock Purchase Plan of 1999. Previously filed as an exhibit
to the registrant's Registration Statement on Form S-8 (Registration
No. 333-89771) filed on October 27, 1999. Here incorporated by
reference.
10(g)* Form of Change of Control Severance Agreement. Filed as exhibit 10 to
registrant's report on Form 10-Q for the quarter ended September 30,
2000. Here incorporated by reference.
13 2000 Annual Report to Shareholders. (This report, except for those
portions which are expressly incorporated by reference in this filing,
is furnished for the information of the Securities and Exchange
Commission and is not deemed "filed" as part of this filing.) This
report was delivered to the registrant's shareholders as an appendix
to the registrant's proxy statement dated March 27, 2001, relating to
the April 23, 2001, annual meeting of shareholders, which was
delivered to the registrant's shareho9lders in compliance with Rule
14(a)-3 under the Securities Exchange Act of 1934.
21 Subsidiaries of Registrant.
23 Consent of Crowe, Chizek and Company LLP.
24 Powers of Attorney. Contained on the signature page of this report.
99 Firstbank Corporation 401(k) Plan Performance Table.
*Management contract or compensatory plan.
The registrant will furnish a copy of any exhibit listed above to any
shareholder of the registrant without charge upon written request to Samuel G.
Stone, Secretary, Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029,
Alma, Michigan 48801.
-22-
Exhibit 13
Rule 14a-3 Annual Report to Security Holders
2000
Annual Report
This 2000 Annual Report contains audited financial statements and a detailed
financial review. This is Firstbank Corporation's 2000 annual report to
shareholders. Although attached to our proxy statement, this report is not part
of our proxy statement, is not deemed to be soliciting material, and is not
deemed to be filed with the Securities and Exchange Commission (the "SEC")
except to the extent that it is expressly incorporated by reference in a
document filed with the SEC.
The 2000 Report to Shareholders accompanies this proxy statement. That report
presents information concerning the business and financial results of Firstbank
Corporation in a format and level of detail that we believe shareholders will
find useful and informative. Shareholders who would like to receive even more
detailed information than that contained in this 2000 Annual Report are invited
to request our Annual Report on Form 10-K.
Firstbank Corporation's Form 10-K Annual Report to the Securities and Exchange
Commission will be provided to any shareholder without charge upon written
request. Requests should be addressed to Samuel G. Stone, Chief Financial
Officer, Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029, Alma,
Michigan 48801-6029.
PRESIDENT'S MESSAGE
TO OUR SHAREHOLDERS:
On behalf of the employees, officers, and directors of Firstbank Corporation, I
am pleased to report that we enjoyed record profits and growth during 2000,
which was a year marked by steadily rising interest rates, stock market
volatility, and further consolidation within the financial services industry. We
achieved these results by maintaining our focus on asset quality, balance sheet
growth, and customer service, while continuing to position ourselves as the
community banking alternative to regional and national providers.
This report will highlight some of our achievements during 2000, and will
introduce you to several of the individuals who serve as directors on the boards
of our subsidiary banks. These individuals, along with all of their fellow
directors, provide unique links to our communities and customers that give us a
market advantage over our larger competitors. Their contributions to the growth
and success of our banks, our Company, and the communities we serve, are
sincerely appreciated.
Earnings. Net income for 2000 was $8,543,000 which was the highest level of
earnings ever achieved by our Company. These earnings represent $1.73 diluted
earnings per share adjusted for the 5% stock dividend paid in December 2000, a
9.50% increase over the $1.58 diluted earnings per share in 1999. These record
earnings improved our return on average equity to 13.63% from the 13.23% posted
in 1999.
Asset Quality. We maintained our focus on asset quality during 2000 realizing
that an economic downturn may occur in the near future. Net charge offs during
2000 were very low, representing only .04% of average loans. The reserve for
loan losses now exceeds $9,857,000 which represents 1.64% of total loans at year
end. Our net charge off ratio continues to compare favorably with our peer
banks. When coupled with our high quality loan portfolio, strong independent
loan review program, and sustained history of low loan losses, we believe our
reserves for potential loan losses appropriately reflect the inherent risks.
Growth. Total assets and total loans reached record levels on December 31, 2000.
Total assets increased 13% during the year to $733 million at year end. Total
loans increased to $601 million, an 18.3% increase when compared with total
loans of $508 million at year end 1999. In addition to strong growth within our
current markets, growth was stimulated by two specific initiatives within the
Company. Our newest bank subsidiary, Firstbank - St. Johns, opened in June 2000
and had over $22 million of total assets by year end, which was substantially
ahead of our initial projections. Firstbank in Mt. Pleasant continued to
emphasize the "Commercial Loan Participation" program, introduced in September
1999, through which other banks may service their large customer loan requests
in cooperation with Firstbank. Over $25 million of loans were approved through
this program during 2000. In addition to generating high quality earning assets
for our Company, this program has helped to establish and improve our
relationships with other Michigan community banks.
Expansion. In addition to establishing Firstbank - St. Johns we entered several
new lines of business during 2000 in an effort to enhance and expand our
mortgage lending business. In March of 2000 we opened 1st Title, which is a
title insurance agency providing service to customers of all five of our banks
as well as to other real estate professionals. In June we acquired Gladwin Land
Company, Inc. which provides real estate appraisal services throughout central
and northeastern Michigan. In November we formed 1st Realty, Inc., in order to
acquire a real estate agency in West Branch, and in January 2001 we merged 1st
Realty with C.A. Hanes Real Estate Company, a leading real estate agency in that
area of Michigan. These organizations all complement our core banking business,
and provide us the tools to more quickly and economically serve the needs of
customers involved in real estate transactions. We believe that our ability to
be a "one stop" source of real estate services for both our customers, and the
customers of other lenders doing business in our markets, will result in
additional fee income in the future.
Efficiency. During 2000 we continued to closely monitor all of our costs in an
effort to operate as economically as possible. A centralized purchasing function
was established, and the adoption of the "Firstbank" name and logo by each of
our bank affiliates will reduce future costs while simultaneously improving our
customer service and brand recognition.
Management. We continue to have strong management teams at each of our
subsidiaries, and the holding Company staff has been strengthened during the
year to assure the highest level of service to all of our customers. Mr. Samuel
G. Stone joined the Company in November 2000 as Vice President and Chief
Financial Officer with substantial financial experience in a regional bank
holding company. His particular knowledge in the areas of capital management,
strategic planning, and mergers and acquisitions will serve us well in the
future. Mr. David Miller, who had been serving as Senior Vice President of
Firstbank - Lakeview, was appointed Vice President of the Company in December
2000 and is now responsible for human resources, training, sales, and marketing.
Shareholder Return. During 2000 the total return to Firstbank Corporation
shareholders (including reinvestment of cash dividends) was 5.1%, bringing the
compound average annual return to 21.1% during the last five years. An
investment in the S&P 500 for that same five year period has produced a compound
average annual return of 18.3%, while the KBW 50 and NASDAQ Bank indexes (which
are composites of large bank and smaller bank results) had five year returns of
21.0% and 19.2%, respectively. Our stock price has reflected the volatility of
the stock market during the past few years, but as these returns indicate, our
total return to shareholders compares favorably to the benchmarks. Be assured
that we remain committed to increasing shareholder value, and that our focus on
growth, asset quality and earnings should result in improved valuation of our
stock over the long term.
Strategy. Our Company's fundamental strategy is that community banks which have
strong local boards and management teams, focused on growth and asset quality,
will outperform regional and national competitors, to the benefit of
shareholders, customers, communities, and employees. Continued consolidation
within the industry will present us with additional opportunities for further
expansion of our concept of community banking, and we look forward to a bright
future.
In conclusion, I would like to thank Chuck Jennings and Bob Smith for their 13
years of service as directors of our West Branch bank and Alan Stone for his
eight years of service as a director of our Alma bank. The dedication of these
individuals has been greatly appreciated. We would also like to thank Chuck
Jennings for his services as a corporate board member for the past 12 years. We
wish these gentlemen well in their retirement.
I would like to thank our dedicated and hard-working staff members. Now over 400
strong, they have made our success possible. It is the quality of our people
that allows us to provide the products and the services that retain and attract
customers to our Company. Their efforts are sincerely appreciated.
Thank you for your investment in Firstbank Corporation. We appreciate the
support and encouragement of our shareholders, and always welcome your comments
or suggestions.
Respectfully submitted,
/s/ Thomas R. Sullivan
Thomas R. Sullivan
President & Chief Executive Officer
FINANCIAL HIGHLIGHTS
Firstbank Corporation
For the year: 2000 1999 1998 1997 1996
---- ---- ---- ---- ----
(In Thousands of Dollars, except per share data)
Interest income $54,332 $46,062 $44,484 $37,864 $31,016
Net interest income 28,805 26,779 25,131 21,334 17,735
Provision for loan losses 736 514 1,177 1,398 1,838
Noninterest income 5,431 5,369 5,868 3,697 3,297
Noninterest expense 21,052 20,068 19,402 15,825 12,790
Net income 8,543 8,036 7,303 5,558 4,643
At year end:
Total assets 733,267 650,552 603,014 536,322 404,571
Total earning assets 679,322 598,915 555,254 486,949 372,777
Loans 600,767 508,238 441,028 404,808 314,620
Deposits 537,224 491,404 494,053 445,666 358,669
Other borrowings 122,259 90,203 40,894 28,823 9,072
Shareholders' equity 64,204 61,032 59,775 54,532 33,088
Average balances:
Total assets 687,190 607,443 560,938 460,439 372,829
Total earning assets 637,317 561,045 516,455 427,640 350,500
Loans 553,201 464,550 414,316 353,061 290,181
Deposits 510,194 491,368 467,615 395,883 324,135
Other borrowings 105,593 47,120 29,065 17,948 14,145
Shareholders' equity 62,675 60,752 56,258 41,240 30,640
Per share:(1)
Basic earnings 1.76 1.62 1.47 1.28 1.18
Diluted earnings 1.73 1.58 1.41 1.24 1.16
Cash dividends .65 .58 .50 .41 .32
Shareholders' equity 13.46 13.00 11.97 10.97 8.36
Financial ratios:
Return on average assets 1.24% 1.32% 1.30% 1.21% 1.25%
Return on average equity 13.63% 13.23% 12.98% 13.48% 15.15%
Average equity to average assets 9.12% 10.00% 10.03% 8.96% 8.22%
Dividend payout ratio 36.73% 35.76% 34.16% 33.51% 27.94%
Firstbank - Lakeview results are included from August 8, 1997,
the date of acquisition
Firstbank - St. Johns results are included from June 16, 2000,
the date of inception
Gladwin Land Company results are included from May 8, 2000, the
date of acquisition
(1) All per share amounts adjusted for stock dividends and stock split
The Company's Form 10-K Annual Report to the Securities and Exchange Commission
will be provided to any shareholder without charge upon written request.
Requests should be addressed to Samuel G. Stone, Chief Financial Officer,
Firstbank Corporation, 311 Woodworth Avenue, P. O. Box 1029, Alma, Michigan
48801-6029.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of this section of the annual report is to provide a narrative
discussion about Firstbank Corporation's financial condition and results of
operations. Please refer to the consolidated financial statements and the
selected financial data presented in this report in addition to the following
discussion and analysis.
RESULTS OF OPERATIONS
Highlights
The Company posted record net earnings for the ninth consecutive year. Net
income of $8,543,000 exceeded 1999 results of $8,036,000 by 6.3%. For the past
five years, net income has increased at an annual compound growth rate of over
17%. The Company's results reflect continued strength of core banking activities
as opposed to the effect of nonrecurring or unusual factors. Contributing to the
record results of 2000 was an $80 million increase in earning assets.
Management believes that standard performance indicators help evaluate the
Company's performance. The Company posted a return on average assets of 1.24%,
1.32% and 1.30% for 2000, 1999 and 1998, respectively. Total average assets
increased $80 million in 2000, $47 million in 1999, and $100 million in 1998.
Return on average equity was 13.63% in 2000 compared to 13.23% and 12.98% in
1999 and 1998. Average equity increased $2 million in 2000. Basic earnings per
share were $1.76, $1.62 and $1.47 for 2000, 1999, and 1998. Diluted earnings per
share were $1.73, $1.58, and $1.41 for the same time periods. In 1999 and 2000,
the Company repurchased 180,150 and 258,319 shares of its common stock,
completing the Board authorized repurchase program. The interest cost of funding
the repurchase contributed to the decline in return on average assets in 2000.
However, the repurchase helped to maintain capital at the appropriate level and
allow growth in net income to result in increasing return on equity.
Net Interest Income
The core business of the Company is earning interest on loans and securities and
paying interest on deposits and borrowings. In successfully managing this
business, the Company has increased its net interest income by $2 million for
2000, for a 7.5% gain when compared to 1999. Net interest margin declined to
4.63% in 2000 compared to 4.92% in 1999 and 5.06% in 1998, but remains
competitive among peer performance. During 2000, the Company's loan to deposit
ratio was 104% compared to 93% in 1999 and 87% in 1998. Net end of period loans
grew $92 million or 18% during 2000.
A critical task of management is to price assets and liabilities so that the
spread between the interest earned on assets and the interest paid on
liabilities is maximized without unacceptable risks. While interest rates on
earning assets and interest bearing liabilities are subject to market forces, in
general the Company can exert more control over deposit costs than earning asset
rates. Loan products carry either fixed rates of interest or rates tied to
market indices determined independently. The Company sets its own rates on
deposits, providing management with some flexibility in determining the timing
and proportion of rate changes for the cost of its deposits. However,
competitive forces and the need to maintain and grow deposits as a funding
source place limitations on the degree of control over deposit rates.
The following table presents a summary of net interest income for 2000, 1999,
and 1998. In 2000, the average rate realized on earning assets was 8.65%, an
increase of 28 basis points from the 1999 results of 8.37%, and a 17 basis point
reduction from the rate of 8.82% realized in 1998. In 1998, the prime rate was
reduced 25 basis points three times during the fourth quarter. Prime rate
changes in 1999 reversed the 1998 actions with three increases of 25 basis
points each during the last half of 1999. During 2000, the prime rate increased
25 basis points twice in the first quarter, another 50 basis points in the
second quarter, then was unchanged for the balance of the year. As the prime
rate decreases, management expects the yield on earning assets to decrease. At
December 31, 2000, slightly over 18% of the loan portfolio was comprised of
variable rate instruments. Those loans will reprice monthly or quarterly as
rates change. The remaining 82% of the loan portfolio is made up of fixed rate
loans that do not reprice until maturity. Of the fixed rate loans, approximately
$121 million or 23% of the loan portfolio mature within the next twelve months
and are subject to rate adjustments at maturity.
Summary of Consolidated Net Interest Income
Year Ended Year Ended Year Ended
December 31, 2000 December 31, 1999 December 31, 1998
----------------- ----------------- -----------------
(In Thousands of Dollars) Average Average Average Average Average Average
Balance Interest Rate Balance Interest Rate Balance Interest Rate
Average Assets
Interest earning assets:
Taxable securities $ 52,590 $ 3,365 6.40% $ 60,033 $ 3,651 6.08% $ 55,861 $ 3,431 6.15%
Tax exempt securities (1) 29,584 2,267 7.66 33,307 2,572 7.72 33,455 2,589 7.74
-------- ------- ------- ------- ------- -------
Total securities 82,174 5,632 6.85 93,340 6,223 6.67 89,316 6,020 6.74
Loans (1) (2) 551,357 49,237 8.93 462,516 40,467 8.75 412,884 38,768 9.39
Federal funds sold 3,290 209 6.35 4,190 208 4.96 13,446 728 5.41
Interest bearing deposits 496 26 5.24 999 55 5.50 809 42 5.20
---------- --------- --------- --------- --------- ---------
Total earning assets 637,317 55,104 8.65 561,045 46,953 8.37 516,455 45,558 8.82
Nonaccrual loans 1,844 2,034 1,432
Less allowance for loan loss (9,754) (9,213) (8,543)
Cash and due from banks 20,160 18,877 19,173
Other non earning assets 37,623 34,700 32,421
-------- -------- --------
Total assets $687,190 $607,443 $560,938
======= ======= =======
Average Liabilities
Interest bearing liabilities:
Demand $131,998 $ 4,409 3.34% $143,828 $ 4,662 3.24% $126,030 $4,440 3.52%
Savings 70,461 1,668 2.37 72,412 1,776 2.45 67,085 1,734 2.58
Time 231,367 13,044 5.64 204,417 10,485 5.13 211,243 11,718 5.55
Federal funds purchased and
repurchase agreements 41,901 2,277 5.43 29,343 1,385 4.72 17,601 757 4.30
Notes payable 63,692 4,129 6.48 17,777 975 5.49 11,464 704 6.14
-------- ------- -------- -------- --------- -------
Total interest bearing liabilities 539,419 25,527 4.73 467,777 19,283 4.12 433,423 19,353 4.47
Demand deposits 76,368 70,711 63,257
-------- -------- --------
Total funds 615,787 538,488 496,680
Other non interest bearing liabilities 8,728 8,203 8,000
-------- --------- ---------
Total liabilities 624,515 546,691 504,680
Average shareholders' equity 62,675 60,752 56,258
-------- -------- --------
Total liabilities and
shareholders' equity $687,190 $607,443 $560,938
======= ======= =======
Net interest income (1) $ 29,577 $27,670 $26,205
======= ====== ======
Rate spread (1) 3.92% 4.25% 4.35%
==== ==== ====
Net interest margin (percent of
average earning assets) (1) 4.63% 4.92% 5.06%
==== ==== ====
(1) Presented on a fully taxable equivalent basis using a federal income tax
rate of 34%.
(2) Interest income includes amortization of loan fees of $1,302,000,
$1,312,400, and $1,726,000 respectively. Interest on nonaccrual loans is
not included.
As rates decline, maturing investment securities could not be replaced with
comparable securities bearing higher yields than available a year ago, although
yields would not necessarily be lower than the yields on maturing securities.
Much of the current investment portfolio was purchased in rate environments
similar to the current rate conditions. Although management expects to lose some
yield when replacing investment securities, they do not believe that the
decrease will equate to the basis point decline seen in the prime rate.
The average rate paid on interest bearing liabilities was 4.73% in 2000 compared
to 4.12% and 4.47% in 1999 and 1998 respectively. Deposit products have
experienced increases in cost over the past year as interest rates paid grew in
response to the rise in prime rate. As the prime rate increased in 2000, deposit
rates have also climbed, but not as fast or to the extent of the changes in the
prime rate. The company has funded a portion of its loan growth with borrowings
from the Federal Home Loan Bank. Average outstanding balances increased over $38
million in 2000. While these borrowings are an economical method of funding
loans, the cost is higher than the Company's core deposit costs. The average
rate of Federal Home Loan Bank funding increased 90 basis points in 2000 to
6.37% when compared to 1999 rates of 5.47%. However, Federal Home Loan Bank
rates have begun to decrease along with decreases in the Federal Funds rates.
The 2000 rate spread of 3.92% is 33 basis points lower than 1999 results of
4.25% and a 43 basis point reduction from 4.35% in 1998. Tax equivalent net
interest income increased $1.9 million in 2000 as total average earning assets
grew $76 million. Net interest margin of 4.63% for 2000 was 29 basis points less
than the 1999 results. Although net interest margin decreased, the Company is
performing competitively among peers in this critical measurement. Decreases in
both net interest margin and rate spread are the result of rates on average
earning assets increasing 28 basis points while the average cost of interest
bearing liabilities increased 61 basis points. Average earning assets
represented 93% and 92% of total average assets in 2000 and 1999.
Provision for Loan Losses
The provision for loan losses was $736,000 in 2000 compared to $514,000 in 1999
and $1.2 million in 1998. The increases in the provision for loan losses in 2000
reflect the growth in the loan portfolio, as net charge offs and nonperforming
loans remained at very low levels. At December 31, 2000, the allowance for loan
losses as a percent of total loans was 1.64% compared to 1.83% and 2.05% at
December 31, 1999, and December 31, 1998, respectively. Net charged off loans
totaled $196,000 in 2000 compared to $245,000 in 1999 and $243,000 in 1998.
During 2000, over $628,000 of recoveries were realized contributing to the
year's strong results. Recoveries in 1999 were $554,000 and in 1998 were
$469,000. Net charged off loans as a percent of average loans were .04% in 2000
compared to .05% in 1999 and .06% in 1998. Total nonperforming assets were .46%
of ending loans at December 31, 2000, compared to .67% and .46% at the two
previous year ends. Management maintains the allowance for loan losses at a
level considered appropriate to absorb losses in the portfolio. The allowance
balance is established after considering past loan loss experience, current
economic conditions, volume, growth and composition of the portfolio,
delinquencies and other relevant factors.
Noninterest Income
After a decrease of $499,000, or 8.5%, from 1998 to 1999, total noninterest
income increased $62,000 in 2000. Service charges on deposit accounts increased
$128,000, or 8.12%, from 1999 to 2000. Climbing interest rates in 1999 and the
level of interest rates in 2000 steeply curtailed the mortgage refinancing
market. Trust fees declined $3,000 in 2000, after having increased $53,000 in
1999, as market conditions and the distribution of certain trust assets offset
growth of fees in 2000.
Other noninterest income posted gains of $255,000, or 11%, when comparing 2000
to 1999. Of this increase over $137,000 was from the recognition of market gains
and dividends on the investments underlying the balances in the deferred
compensation accounts. A comparable entry is recorded in other noninterest
expense creating no impact on total net income. Excluding these gains and
dividends, other noninterest income increased $118,000, or 5%, in 2000.
Noninterest Expense
Salary and benefit expense increased $839,000, or 8.0%, during 2000. The
increase is the result of normal salary increments and merit raises, and, in
addition, the Company opened its new full service bank in St. Johns, Michigan,
during 2000, requiring the addition of personnel. The company employed
twenty-three more full time equivalent employees at the end of 2000 than at the
same time in 1999, resulting in the additional increase in salary and employee
benefit cost.
Amortization of intangibles increased $127,000 or 21% in 2000 when compared to
1999. Additional intangible expense was incurred due to the acquisition of
Gladwin Land, Inc., by Firstbank Corporation and a subsidiary's acquisition of a
real estate brokerage company, and the assets of another real estate brokerage
firm.
Other noninterest expense decreased by 3%, or $146,000 in 2000. Management
continues to search for more efficient means of delivering services.
Federal Income Tax
The company's effective tax rates were 31%, 31% and 30% for 2000, 1999 and 1998.
The principal difference between the effective tax rates and the statutory tax
rate of 34% is the Company's investment in securities and loans which provide
income exempt from federal income tax.
FINANCIAL CONDITION
Total assets at December 31, 2000, were $733 million, exceeding the December 31,
1999, assets of $651 million by $82 million or 13%. Loans grew $93 million or
18.2% during 2000 with commercial loans leading the advance by $51 million or
22.5%. Real estate mortgages grew by $35 million, or 16.9%, while consumer loans
posted a moderate $7 million increase or 8.8%. The start up bank and
acquisitions accounted for $22 million assets at Firstbank - St. Johns, $500,000
at Gladwin Land, and $620,000 at our real estate subsidiary, now known as C.A.
Hanes Realty, Incorporated ("C.A. Hanes").
The following table provides information on the changes in loan balances and
mortgages serviced for others during 2000:
(In Thousands of Dollars)
2000 1999 Change % Change
---- ---- ------ --------
Loans Held for Sale $ 1,018 $ 1,117 $ (99) (8.9%)
Commercial 279,060 227,855 51,205 22.5%
Real Estate Mortgages 238,899 204,062 34,837 17.1%
Consumer 81,790 75,204 6,586 8.8%
--------- --------- -------
Total $600,767 $508,238 $92,529 18.2%
Mortgages serviced for others $238,800 $233,660 $ 5,140 2.2%
A portion of the loan growth was funded by a $14 million or 15.6% reduction in
the investment securities portfolio.
Premises and equipment increased $753,000 after recognized depreciation of
$1,394,000. Several projects contributed to this increase. During 2000, the
Company opened a new affiliate bank and purchased Gladwin Land, Incorporated.
One affiliate converted a previously purchased property into a new branch which
opened in May, 2000, and one affiliate purchased 1st Realty, Incorporated (which
later merged with C.A. Hanes).
Total deposits increased at the end of 2000 to $537 million, an increase of
$45.8 million, or 9%. While interest demand accounts declined a modest .5%, or
$700,000, noninterest demand deposits increased $4.5 million or 6% for a net
increase in demand deposit products of $3.8 million. Savings accounts declined
$2 million, or 2.6%, while time deposits increased $44 million, or 21%.
Securities sold under agreements to repurchase remained constant at $22 million.
Notes payable increased $45.6 million at December 31, 2000, as compared to
December 31, 1999. As loan growth has outstripped deposit growth, the Company
used Federal Home Loan Bank borrowings and reductions in investments to fund the
increase in loans. Overnight borrowings decreased $13.6 million from year end
1999 to 2000. Note J has a more complete discussion of borrowings.
Asset Quality
Management continues to follow a conservative course in the recognition of
problem loans. In most cases, when a loan reaches 90 days past due, all income
earned but not collected is deducted from current income. Loans are carried at
an amount which management believes will be collected. A balance considered not
collectible is charged against (reduction of) the allowance for loan losses. In
2000, net charged off loans were $196,000 compared to $245,000 in 1999. Net
charged off loans as a percentage of average loans were .04% and .05% in 2000
and 1999.
Nonperforming loans are defined as nonaccrual loans, loans 90 days or more past
due, and any loans where the terms have been renegotiated. Total nonperforming
loans were $2.2 million and $2.9 million at December 31, 2000 and 1999. The
investment in impaired loans was $5.8 million at December 31, 2000, compared to
$4.7 million at December 31, 1999. Please refer to Note F to the consolidated
financial statements for more information on impaired loans. Total nonaccrual
loans were $1.7 million at December 31, 2000, compared to $2.2 million at the
end of 1999.
The allowance for loan losses increased $540,000 or 5.8% during 2000. The
allowance for loan losses represents 1.64% of outstanding loans at the end of
2000 as compared to 1.83% at December 31, 1999. Management maintains the
allowance at a level which they believe adequately provides for losses inherent
in the loan portfolio. Such losses are estimated by a variety of factors,
including specific examination of certain borrowing relationships and
consideration of historical losses incurred on certain types of credits.
Management focuses on early identification of problem credits through ongoing
review by management, loan personnel and an outside loan review specialist.
LIQUIDITY AND INTEREST RATE SENSITIVITY
Asset liability management aids the Company in achieving reasonable and
predictable earnings and liquidity while maintaining a balance between interest
earning assets and interest bearing liabilities. Liquidity management involves
the ability to meet the cash flow requirements of the Company's customers. These
customers may be either borrowers needing to meet their credit needs or
depositors wanting to withdraw funds. Management of interest rate sensitivity
attempts to avoid widely varying net interest margins and to achieve consistent
net interest income through periods of changing interest rates. The net interest
margin was 4.63% in 2000 compared to 4.92% in 1999. Loan yields were 8.93% in
2000 compared to 8.75% in 1999. Deposit costs increased 31 basis points from
4.10% in 1999 to 4.41% in 2000. Notes payable increased as a funding source,
with average balances of $63,692,000 in 2000 compared to $17,777,000 in 1999. In
2000, the average cost of funds on notes payable was 6.48%, compared to 4.41% on
deposits.
An increase in deposit rates affects most rates currently paid and, therefore,
has an immediate negative impact on net interest margin. With the exception of
variable rate loans, an increase in loan rates does not affect the yield until a
new loan is made. The prime rate increased 25 basis points twice during the
first quarter of 2000 and an additional 50 basis points during the second
quarter and then remained unchanged for the last two quarters. In addition to
the increased reliance on notes payable, competition for both loans and deposits
caused margins to shrink in 2000.
The principal sources of liquidity for the Company are maturing securities,
federal funds purchased or sold, loan payments by borrowers, investment
securities, loans held for sale and deposit or deposit equivalent growth.
Securities maturing within one year at December 31, 2000, were $26.6 million
compared to $26.8 million at December 31, 1999.
The following table shows the interest sensitivity gaps for five different
intervals as of December 31, 2000:
Maturity or repricing frequency
-------------------------------
(Dollars in millions)
2 days 4 mos. 13 mos.
through through through
1 day 3 mos. 12 mos. 5 yrs. 5+ yrs.
Interest earning assets:
Loans $ 94.9 $ 67.1 $ 87.8 $291.7 $59.2
Investment securities 4.4 6.7 6.9 31.5 26.7
Other earning assets 0.8
-------
Total 100.1 73.8 94.7 323.2 85.9
Interest bearing liabilities:
Deposits 284.9 72.6 130.5 49.2
Other bearing liabilities 16.7 21.4 5.9 22.8 55.5
------ ---- ------- ------ ----
Total 301.6 94.0 136.4 72.0 55.5
Interest sensitivity gap (201.5) (20.2) (41.7) 251.2 30.4
Cumulative gap (201.5) (221.7) (263.4) (12.2) 18.2
For the one day interval, maturities of interest bearing liabilities exceed
those of interest earning assets by $201.5 million. Included in the one day
maturity classification are $284.9 million savings and checking accounts which
are contractually available to the Company's customers immediately, but in
practice, function as core deposits with considerably longer maturities. The
pattern of interest sensitive liability maturities exceeding interest sensitive
assets changes through the five year time frame resulting in a cumulative effect
of $12.2 million through five years. For the time period greater than five
years, the positive trend continues so that interest sensitive assets exceed
interest sensitive liabilities by $18.2 million.
Showing a negative gap through the five year period in a rising rate scenario,
as the Company experienced in 2000, does not necessarily result in a
corresponding decline in net interest income. In practice, the affiliate banks
are able to ameliorate the adverse impact of rising prime rates by trailing the
prime rate increases with deposit rate increases, and adjusting interest paid
rates less than the total change in the prime rate.
Interest rate sensitivity varies with different types of interest earning assets
and interest bearing liabilities. Overnight investments, on which rates change
daily, and loans tied to the prime rate differ considerably from long term
investment securities and fixed rate loans. Time deposits over $100,000 and
money market accounts are more interest sensitive than regular savings accounts.
Comparison of the repricing intervals of interest earning assets to interest
bearing liabilities is a measure of the interest sensitivity gap. Balancing this
gap is a continual challenge in a changing rate environment. The Company uses a
sophisticated computer program to perform analysis of interest rate risk, assist
with its asset liability management, and model and measure interest rate
sensitivity.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company faces market risk to the extent that both earnings and the fair
values of its financial instruments are affected by changes in interest rates.
The Company manages this risk with static GAP analysis and simulation modeling.
Throughout 2000, the results of these measurement techniques were within the
Company's policy guidelines. While the Company did begin relying more on Federal
Home Loan Bank borrowings in 2000, the Company does not believe that there has
been a material change in the nature of the Company's primary market risk
exposures, including the categories of market risk to which the Company is
exposed and the particular markets that present the primary risk of loss to the
Company, or in how those exposures were managed in 2000 as compared to 1999. As
of the date of this annual report, the Company does not know of or expect there
to be any material change in the general nature of its primary market risk
exposure in the near term.
The Company's market risk exposure is mainly comprised of its vulnerability to
interest rate risk. Prevailing interest rates and interest rate relationships in
the future will be primarily determined by market factors which are outside of
the Company's control. All information provided in response to this item
consists of forward looking statements. Reference is made to the section
captioned "Forward Looking Statements" in this annual report for a discussion of
the limitations on the Company's responsibility for such statements.
The following tables provide information about the Company's financial
instruments that are sensitive to changes in interest rates as of December 31,
2000 and 1999. They show expected maturity date values for loans and investment
securities which were calculated without adjusting the instruments' contractual
maturity dates for expected prepayments. Maturity date values for interest
bearing core deposits were not based on estimates of the period over which the
deposits would be outstanding, but rather the opportunity for repricing. The
Company believes that repricing dates, as opposed to expected maturity dates may
be more relevant in analyzing the value of such instruments and are reported as
such in the following tables. Fair value is computed as the present value of
expected cash flows at rates in effect at the date indicated.
December 31, 2000 (In Thousands of Dollars) Fair Value
- ----------------- 2001 2002 2003 2004 2005 Thereafter Total 12/31/00
---- ---- ---- ---- ---- ---------- ----- --------
Rate sensitive assets:
Fixed interest rate loans 120,718 83,055 96,225 62,427 56,460 72,315 491,200 489,710
Average interest rate 8.19% 8.46% 8.35% 8.06% 8.28% 8.32%
Variable interest rate loans 53,178 7,642 10,645 7,503 17,166 13,433 109,567 109,836
Average interest rate 9.87% 10.31% 10.13% 10.29% 9.74% 9.51%
Fixed interest rate securities 14,385 10,909 6,784 8,371 4,628 30,880 75,957 75,957
Average interest rate 6.31% 5.99% 7.29% 6.64% 6.76% 5.76%
Variable interest rate securities 218 218 218
Average interest rate 7.51%
Other interest bearing assets 2,380 2,380 2,380
Average interest rate 5.08%
Rate sensitive liabilities:
Savings & interest bearing checking 204,108 204,108 204,108
Average interest rate 2.94%
Time deposits 203,394 28,218 11,130 5,212 4,028 839 252,821 254,987
Average interest rate 5.96% 6.09% 5.90% 5.65% 6.45% 5.91%
Fixed interest rate borrowings 31,850 1,500 7,000 0 11,304 48,948 100,602 96,174
Average interest rate 7.10% 6.85% 6.04% 0% 5.70% 5.55%
Variable interest rate borrowings (0) (0) 0
Average interest rate 0%
Repurchase Agreements 21,657 21,657 19,194
Average interest rate 4.05%
December 31, 1999 (In Thousands of Dollars) Fair Value
- ----------------- 2000 2001 2002 2003 2004 Thereafter Total 12/31/99
---- ---- ---- ---- ---- ---------- ----- --------
Rate sensitive assets:
Fixed interest rate loans $103,084 $67,718 $76,174 $57,290 $53,702 $62,682 $420,650 $413,094
Average interest rate 8.36% 8.56% 8.33% 8.29% 8.16% 8.46%
Variable interest rate loans $ 40,910 $ 8,642 $ 8,274 $ 8,791 $ 9,583 $11,388 $ 87,588 $ 86,024
Average interest rate 9.08% 9.28% 9.55% 9.38% 9.24% 9.17%
Fixed interest rate securities $ 19,163 $15,143 $10,583 $ 6,481 $ 7,891 $30,785 $ 90,046 $ 90,046
Average interest rate 6.76% 5.93% 6.08% 6.09% 5.82% 5.77%
Variable interest rate securities $ 220 $ 220 $ 220
Average interest rate 6.32%
Other interest bearing assets $ 411 $ 411 $ 411
Average interest rate 4.63%
Rate sensitive liabilities:
Savings & interest bearing checking $206,723 $206,723 $206,723
Average interest rate 2.99%
Time deposits $160,325 $26,067 $11,274 $ 6,647 $ 4,497 $ 27 $208,837 $207,705
Average interest rate 5.02% 5.45% 5.67% 5.43% 5.57% 6.23%
Fixed interest rate borrowings $ 48,550 $ 250 $ 7,000 $ 3,664 $ 59,464 $ 58,953
Average interest rate 5.70% 5.56% 5.08% 6.04%
Variable interest rate borrowings $ 9,220 $ 9,220 $ 9,142
Average interest rate 5.44%
Repurchase Agreements $ 21,519 $ 21,519 $ 21,519
Average interest rate 4.05%
CAPITAL RESOURCES
The Company obtains funds for its operating expenses and dividends to
shareholders through dividends from its subsidiary banks. In general, the
subsidiary banks pay only those amounts required to meet holding company cash
requirements. No excess liquidity is accumulated at the holding company, rather
capital is maintained at the subsidiary banks to support growth.
Bank regulators have established risk based capital guidelines for banks and
bank holding companies. Minimum capital levels are established under these
guidelines. Each asset category is assigned a perceived risk weighting. Off
balance sheet items, such as loan commitments and standby letters of credit,
also require capital allocations.
As of December 31, 2000, the Company's total capital to risk weighted assets
exceeded the minimum requirement for capital adequacy purposes of 8% by 3.28%,
or $18 million, Tier 1 capital to risk weighted assets exceeded the minimum of
4% by 6.03%, or $33 million, and Tier 1 capital to average assets exceeded the
minimum of 4% by 3.77%, or $26 million. For a more complete discussion of
capital requirements, please refer to Note R to the consolidated financial
statements.
The Federal Deposit Insurance Corporation insures specified customer deposits
and assesses premium rates based on defined criteria. Insurance assessment rates
may vary from bank to bank based on the factors that measure the perceived risk
of a financial institution. One condition for maintaining the lowest risk
assessment, and therefore the lowest insurance rate, is the maintenance of
capital at the "well capitalized" level. Each of the Company's affiliate banks
has exceeded the regulatory criteria for a "well capitalized" financial
institution, and is paying the lowest assessment rate assigned by FDIC.
A certain level of capital growth is desirable to maintain a good ratio of
equity to total assets. The compound annual growth rate for total average assets
for the past five years was 15.8%. The compound annual growth rate for average
equity over the same period was 17.9%.
Management has determined one way of maintaining capital adequacy is to maintain
a reasonable rate of internal capital growth. The percentage return on average
equity times the percentage of earnings retained after dividends equals the
internal growth percentage. The following table illustrates this relationship:
2000 1999 1998
---- ---- ----
Return on Equity 13.63% 13.23% 12.98%
multiplied by
Percentage of Earnings Retained 63.27% 64.22% 65.84%
equals
Internal Capital Growth 8.63% 8.49% 8.55%
The Company has retained between 63% and 66% of its earnings from 1998 to 2000.
To maintain sufficient capital, management has determined that the rate of
internal capital growth should exceed 5% and keep pace with asset growth over
time. To achieve the goal of acceptable internal capital growth, management
intends to continue its efforts to increase the Company's return on average
equity while maintaining a reasonable cash dividend.
As an additional enhancement to capital growth, the Company offers a dividend
reinvestment program. The Firstbank Corporation Dividend Reinvestment Plan was
first offered in 1988. At December 31, 1988, 123 owners holding 209,856 shares
participated in the Plan. By the end of 2000, 1,225 owners holding 1,870,849
shares were participating in the Plan.
The Company is not aware of any recommendations by regulatory authorities at
December 31, 2000, which are likely to have a material effect on Firstbank
Corporation's liquidity, capital resources or operations.
FORWARD LOOKING STATEMENTS
This annual report including, without limitation, management's discussion and
analysis of financial condition and results of operations and other sections of
the Company's Annual Report to Shareholders contain forward-looking statements
that are based on management's beliefs, assumptions, current expectations,
estimates and projections about the financial services industry, the economy,
and about the Corporation itself. Words such as "anticipate," "believe,"
"determine," "estimate," "expect," "forecast," "intend," "is likely," "plan,"
"project," "opinion," "should," variations of such terms, and similar
expressions are intended to identify such forward-looking statements.
These statements are not guarantees of future performance and involve certain
risks, uncertainties, and assumptions that are difficult to predict with regard
to timing, extent, likelihood, and degree of occurrence. Therefore, actual
results and outcomes may materially differ from what may be expressed or
forecasted in such forward looking statements. Internal and external factors
that may cause such a difference include changes in interest rates and interest
rate relationships; demand for products and services; the degree of competition
by traditional and non-traditional competitors; changes in banking regulations;
changes in tax laws; changes in prices, levies, and assessments; the impact of
technological advances; governmental and regulatory policy changes; the outcomes
of pending and future litigation and contingencies; trends in customer behavior
and customer ability to repay loans; software failure, errors or
miscalculations; the ability of the Corporation to locate and correct all data
sensitive computer code; and the vicissitudes of the national economy. The
Corporation undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events, or otherwise.
COMMON STOCK DATA
Firstbank Corporation Common Stock was held by 1,646 shareholders of record as
of December 31, 2000. Total shareholders number approximately 2100 including
those whose shares are held in nominee name through brokerage firms. The
Company's shares are listed Over the Counter Bulletin Board under the symbol
FBMI and are traded by several brokers. The range of bid prices for shares of
common stock for each quarterly period during the past two years is as follows:
Low and High Bid Quotations
---------------------------
2000 1999
---- ----
First Quarter $18.33 - $19.29 $26.30 - $24.94
Second Quarter $18.57 - $18.93 $24.94 - $24.94
Third Quarter $18.81 - $19.40 $22.90 - $24.94
Fourth Quarter $19.00 - $20.24 $16.19 - $22.90
The prices quoted above were obtained from the Bloomberg System through the
Company's market makers. The over the counter market quotations reflect
interdealer prices without retail mark up, mark down, or commission, and may not
necessarily represent actual transactions. Prices have been adjusted to reflect
stock dividends.
The following table summarizes cash dividends paid per share (adjusted for stock
dividends) of common stock during 2000 and 1999.
2000 1999
---- ----
First Quarter $.1619 $.1451
Second Quarter $.1619 $.1451
Third Quarter $.1619 $.1451
Fourth Quarter $.1619 $.1451
----- -----
$.6476 $.5804
===== =====
The Company's principal sources of funds to pay cash dividends are the earnings
of and dividends paid by the subsidiary banks. Under current regulations, the
subsidiary banks are restricted in their ability to transfer funds in the form
of cash dividends, loans and advances to the Company (See Note P). As of January
1, 2001, approximately $11,646,000 of the subsidiaries' retained earnings were
available for transfer in the form of dividends to the Company without prior
regulatory approval. In addition, the subsidiaries' 2001 earnings will be
available for distributions as dividends to the Company.
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Firstbank Corporation
Alma, Michigan
We have audited the consolidated balance sheets of Firstbank Corporation as of
December 31, 2000 and 1999, and the related consolidated statements of income
and comprehensive income, changes in shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Firstbank
Corporation at December 31, 2000 and 1999, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2000, in conformity with generally accepted accounting principles.
/s/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
February 1, 2001
Grand Rapids, Michigan
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS (000's)
December 31
-----------
2000 1999
---- ----
ASSETS
Cash and due from banks $ 25,716 $ 24,786
Short term investments 2,380 411
--------- ----------
Total cash and cash equivalents 28,096 25,197
Securities available for sale 76,175 90,266
Loans held for sale 1,018 1,117
Loans, net 589,892 497,804
Premises and equipment, net 15,682 14,929
Intangibles 8,974 8,917
Accrued interest receivable 4,623 3,489
Other assets 8,807 8,833
--------- ---------
TOTAL ASSETS $733,267 $650,552
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest bearing demand accounts $ 80,295 $ 75,844
Interest bearing accounts:
Demand 135,467 136,196
Savings 68,641 70,527
Time 252,821 208,837
------- -------
Total deposits 537,224 491,404
Securities sold under agreements to
repurchase and overnight borrowings 38,307 51,819
Notes payable 83,952 38,384
Accrued interest payable 1,977 1,255
Other liabilities 7,603 6,658
--------- ---------
Total liabilities 669,063 589,520
SHAREHOLDERS' EQUITY
Preferred stock; no par value,
300,000 shares authorized, none issued
Common stock; 10,000,000 shares authorized; 4,767,877 and 4,693,765
shares issued and outstanding in 2000 and 1999 respectively 56,550 55,262
Retained earnings 7,286 6,434
Accumulated other comprehensive income (loss) 368 (664)
---------- ---------
Total shareholders' equity 64,204 61,032
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $733,267 $650,552
======= =======
See notes to consolidated financial statements.
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(In Thousands of Dollars, except for per share data)
Year Ended December 31
2000 1999 1998
---- ---- ----
Interest income:
Loans, including fees $49,237 $40,451 $38,498
Securities:
Taxable 3,364 3,651 3,467
Exempt from federal income tax 1,496 1,697 1,791
Short term investments 235 263 728
-------- -------- --------
Total interest income 54,332 46,062 44,484
Interest expense:
Deposits 19,121 16,923 17,892
Notes payable and other 6,406 2,360 1,461
------- ------- -------
Total interest expense 25,527 19,283 19,353
------ ------ ------
Net interest income 28,805 26,779 25,131
Provision for loan losses 736 514 1,177
-------- -------- -------
Net interest income after
provision for loan losses 28,069 26,265 23,954
Noninterest income:
Service charges on deposit accounts 1,705 1,577 1,499
Gain on sale of mortgage loans 466 883 2,100
Mortgage servicing, net of amortization 302 202 (15)
Trust fees 378 381 328
Gain (loss) on sale of securities (2) (1) 3
Other 2,582 2,327 1,953
------- ------- -------
Total noninterest income 5,431 5,369 5,868
Noninterest expense:
Salaries and employee benefits 11,344 10,505 9,768
Occupancy 3,103 3,037 2,970
Amortization of intangibles 744 617 756
FDIC Insurance premium 100 76 72
Michigan Single Business tax 639 565 390
Other 5,122 5,268 5,446
------- ------- --------
Total noninterest expense 21,052 20,068 19,402
------ ------ -------
Income before federal income taxes 12,448 11,566 10,420
Federal income taxes 3,905 3,530 3,117
------- ------- --------
NET INCOME $ 8,543 $ 8,036 $ 7,303
Other comprehensive income:
Change in unrealized gain (loss) on
securities, net of tax and reclassification effects 1,032 (1,767) 216
------- ------ ------
COMPREHENSIVE INCOME $ 9,575 $ 6,269 $ 7,519
======= ===== =====
Basic earnings per share $1.76 $1.62 $1.47
==== ==== ====
Diluted earnings per share $1.73 $1.58 $1.41
==== ==== ====
See notes to consolidated financial statements.
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (000's)
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Accumulated
Other
Common Retained Comprehensive
Stock Earnings Income(Loss) Total
----- -------- ------------ -----
Balances at January 1, 1998 $46,224 $7,421 $ 887 $54,532
Net income for 1998 7,303 7,303
Cash dividends-$.50 per share (2,495) (2,495)
5% stock dividend-226,157 shares 6,353 (6,354) (1)
Issuance of 15,115 shares of common
stock through exercise of stock options 252 252
Issuance of 23,097 shares of common stock
through the dividend reinvestment plan 636 636
Issuance of 17,584 shares of common stock from
supplemental shareholder investments 482 482
Net change in unrealized appreciation (depreciation) on
securities available for sale, net of tax of $112,000 216 216
Purchase of 36,740 shares of stock (1,213) (1,213)
Issuance of 1,584 shares of common stock 63 63
--------- --------- -------- ---------
BALANCES AT DECEMBER 31, 1998 52,797 5,875 1,103 59,775
Net income for 1999 8,036 8,036
Cash dividends-$.58 per share (2,874) (2,874)
5% stock dividend-224,526 shares 4,602 (4,603) (1)
Issuance of 50,310 shares of common
stock through exercise of stock options 817 817
Issuance of 44,246 shares of common stock
through the dividend reinvestment plan 1,098 1,098
Issuance of 19,807 shares of common stock from
supplemental shareholder investments 527 527
Purchase of 180,150 shares of stock (4,793) (4,793)
Issuance of 7,770 shares of common stock 214 214
Net change in unrealized appreciation
(depreciation) on securities available
for sale, net of tax of ($912,000) (1,767) (1,767)
----------- --------- ----- ------
BALANCES AT DECEMBER 31, 1999 55,262 6,434 (664) 61,032
Net income for 2000 8,543 8,543
Cash dividends-$.65 per share (3,138) (3,138)
5% stock dividend- 227,504 shares 4,550 (4,553) (3)
Issuance of 14,002 shares of common
stock through exercise of stock options 191 191
Issuance of 64,008 shares of common stock
through the dividend reinvestment plan 1,244 1,244
Issuance of 15,164 shares of common stock from
supplemental shareholder investments 301 301
Purchase of 258,319 shares of stock (5,227) (5,227)
Issuance of 11,753 shares of common stock 229 229
Net change in unrealized appreciation
on securities available for sale, net of tax of $532,000 1,032 1,032
-------- ------- ----- -------
BALANCES AT DECEMBER 31, 2000 $56,550 $7,286 $ 368 $64,204
======== ======= ====== ======
See notes to consolidated financial statements.
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
(000's)
Year Ended December 31
----------------------
2000 1999 1998
---- ---- ----
OPERATING ACTIVITIES
Net income $ 8,543 $ 8,036 $ 7,303
Adjustments to reconcile net income to net cash from operating activities:
Provision for loan losses 736 514 1,177
Depreciation of premises and equipment 1,394 1,342 1,481
Net amortization of security premiums/discounts 161 303 122
Loss (gain) on sale of securities 2 1 (3)
Amortization of intangibles 744 617 756
Gain on sale of mortgage loans (466) (883) (2,100)
Proceeds from sales of mortgage loans 43,859 57,566 152,674
Loans originated for sale (43,294) (52,345) (152,112)
Deferred federal income tax benefit (790) (305) (356)
Increase in accrued interest receivable and other assets (1,462) (866) (694)
Increase (decrease) in accrued interest payable and other liabilities 1,478 (379) 916
--------- -------- ----------
NET CASH FROM OPERATING ACTIVITIES 10,905 13,601 9,164
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 5,137 7,018 609
Proceeds from maturities of securities available for sale 38,413 29,481 28,935
Purchases of securities available for sale (28,057) (28,038) (48,468)
Net increase in portfolio loans (92,825) (71,793) (34,925)
Net purchases of premises and equipment (2,147) (2,213) (2,121)
---------- -------- ----------
NET CASH FROM INVESTING ACTIVITIES (79,479) (65,545) (55,970)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 45,820 (2,649) 48,387
Net increase (decrease) in securities sold under
agreements to repurchase and overnight borrowings (13,512) 25,242 5,345
Retirement of notes payable (14) (14) (13)
Proceeds from Federal Home Loan Bank borrowings 115,794 31,720 14,750
Proceeds from notes payable 6,700
Retirement of Federal Home Loan Bank borrowings (76,912) (7,638) (8,011)
Cash dividends and cash paid in lieu of fractional shares on stock dividend (3,141) (2,875) (2,495)
Purchase of common stock (5,227) (4,793) (1,214)
Net proceeds from issuance of common stock 1,965 2,656 1,433
--------- ------- ---------
NET CASH FROM FINANCING ACTIVITIES 71,473 41,649 58,182
-------- ------ --------
INCREASE IN CASH AND CASH EQUIVALENTS 2,899 (10,295) 11,376
Cash and cash equivalents at beginning of year 25,197 35,492 24,116
-------- ------ --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,096 $25,197 $ 35,492
======== ====== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 24,805 $19,340 $ 19,349
Income taxes 4,050 4,000 3,150
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations: Firstbank Corporation (the "Company") is a bank holding
company. Each subsidiary bank of the Company is a full service community bank.
The subsidiary banks offer all customary banking services, including the
acceptance of checking, savings and time deposits, and the making of commercial,
agricultural, real estate, personal, home improvement, automobile and other
installment and consumer loans. Trust services are provided throughout the
Company's service area by one of its subsidiary banks. The consolidated assets
of the Company of $733 million as of December 31, 2000, primarily represent
commercial and retail banking activity. Mortgage loans serviced for others of
$239 million and trust assets of $59 million as of December 31, 2000, are not
included in the Company's consolidated balance sheet.
Principles of Consolidation: The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries: Firstbank - Alma;
Firstbank (Mt. Pleasant); Firstbank - West Branch; Firstbank - Lakeview; and
Firstbank - St. Johns (the "Banks"); 1st Armored, Incorporated; 1st Collections,
Incorporated; Gladwin Land Company; 1st Title, Incorporated; and 1st Realty
Incorporated; after elimination of intercompany accounts and transactions. (See
Note B regarding 1st Realty Incorporated.)
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Certain Significant Estimates: The primary estimates incorporated into the
Company's financial statements which are susceptible to change in the near term
include the allowance for loan losses and the determination and carrying value
of certain financial instruments.
Current Vulnerability Due to Certain Concentrations: The Company's business is
concentrated in the mid-central section of the lower peninsula of Michigan.
Management is of the opinion that no concentrations exist that make the Company
vulnerable to the risk of a near term severe impact. While the loan portfolio is
diversified, the customers' ability to honor their debts is partially dependent
on the local economies. The Company's service area is primarily dependent on the
manufacturing (automotive and other), agricultural and recreational industries.
Most commercial and agricultural loans are secured by business assets, including
commercial and agricultural real estate and federal farm agency guarantees.
Generally, consumer loans are secured by various items of personal property and
mortgage loans are secured by residential real estate. The Company's funding
sources include time deposits and other deposit products which bear interest.
Periods of rising interest rates result in an increase in the cost of funds to
the Company.
Cash and Cash Equivalents: Cash and cash equivalents include cash on hand,
amounts due from banks, and short term investments which include interest
bearing deposits with banks, federal funds sold, and overnight money market fund
investments. Generally, federal funds and overnight money market funds are
purchased for a one day period. The Company reports customer loan transactions,
deposit transactions, and repurchase agreements and overnight borrowings on a
net cash flow basis.
Securities Available for Sale: Securities available for sale consist of bonds
and notes which might be sold prior to maturity due to changes in interest
rates, prepayment risks, yield and availability of alternative investments,
liquidity needs or other factors. Securities classified as available for sale
are reported at their fair value and the related unrealized holding gain or loss
(the difference between the fair value and amortized cost of the securities so
classified) is reported, net of related income tax effects, as a separate
component of shareholders' equity until realized. Gains and losses on sales are
determined using the specific identification method. Premium and discount
amortization is recognized in interest income using the level yield method over
the period to maturity.
Mortgage Banking Activities: Servicing rights are recognized as assets for
purchased rights and for the allocated value of retained servicing rights on
loans sold. Servicing rights are expensed in proportion to, and over the period
of, estimated net servicing revenues. Impairment is evaluated based on the fair
value of the rights, using groupings of the underlying loans as to interest
rates and then, secondarily, as to geographic and prepayment characteristics.
Any impairment of a grouping is reported as a valuation allowance.
Loans: Loans receivable, for which management has the intent and ability to hold
for the foreseeable future or payoff, are reported at their outstanding unpaid
principal balances net of any deferred fees or costs on originated loans, or
unamortized premiums or discounts. Loan origination fees and certain origination
costs are capitalized and recognized as an adjustment of the yield of the
related loan. Loans held for sale are reported at the lower of cost or market,
on an aggregate basis.
Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses. Management's determination of the
adequacy of the allowance is based on an evaluation of the portfolio, past loan
loss experience, current economic conditions, volume, growth and composition of
the loan portfolio and other relevant factors. The allowance is increased by
provisions for loan losses charged to expense and reduced by charge offs, net of
recoveries.
The valuation of loans is reviewed on an ongoing basis for impairment. A loan is
impaired when it is probable that the Company will be unable to collect all
amounts due according to the contractual terms of the loan agreement. Impaired
loans are measured based on the present value of expected cash flows discounted
at the loan's effective interest rate or, as a practical expedient, at the
loan's observable market price or at the fair value of collateral if the loan is
collateral dependent. Loans considered to be impaired are reduced to the present
value of expected future cash flows or to the fair value of collateral, by
allocating a portion of the allowance for loan losses to such loans. If these
allocations cause an increase in the allowance for loan losses, such increase is
reported as provision for loan loss.
Smaller balance homogeneous loans such as residential first mortgage loans
secured by one to four family residences, residential construction loans,
automobile, home equity and second mortgage loans are collectively evaluated for
impairment. Commercial loans and first mortgage loans secured by other
properties are evaluated individually for impairment. When credit analysis of
the borrower's operating results and financial condition indicates the
underlying ability of the borrower's business activity is not sufficient to
generate adequate cash flow to service the business' cash needs, including the
Company's loans to the borrower, the loan is evaluated for impairment. Often
this is associated with a delay or shortfall in payments of 90 days or less.
Commercial loans are rated on a scale of 1 to 8, with grades 1 to 4 being pass
grades, 5 being special attention or watch, 6 substandard, 7 doubtful and 8
loss. Loans graded 6, 7 and 8 are considered for impairment. Loans are generally
moved to nonaccrual status when 90 days or more past due. These loans are often
considered impaired. Impaired loans, or portions thereof, are charged off when
deemed uncollectible.
Premises and Equipment: Premises and equipment are stated on the basis of cost,
less accumulated depreciation. Depreciation is computed over the estimated
useful lives of the assets, primarily by accelerated methods for income tax
purposes, and by the straight line method for financial reporting purposes.
Other Real Estate: Other real estate (included as a component of other assets)
includes properties acquired through either a foreclosure proceeding or
acceptance of a deed in lieu of foreclosure and is initially recorded at fair
value at the date of foreclosure, establishing a new cost basis. These
properties are evaluated periodically and are carried at the lower of cost or
estimated fair value less estimated costs to sell.
Acquisition Intangibles: The acquisition of purchased subsidiaries and branches
has included amounts related to the value of customer deposit relationships
("core deposit intangibles") and excess of cost over estimated fair value of net
assets acquired ("goodwill"). The core deposit intangibles are amortized over
the expected lives of the acquired relationships. The goodwill is amortized
using the straight line method for periods of not less than 15 years or more
than 20 years.
Interest Income: Interest on loans is accrued over the term of the loans based
upon the principal outstanding. The carrying value of impaired loans is
periodically adjusted to reflect cash payments, revised estimates of future cash
flows and increases in the present value of expected cash flows due to the
passage of time. Cash payments representing interest income are reported as such
and other cash payments are reported as reductions in carrying value. Increases
or decreases in carrying value due to changes in estimates of future payments or
the passage of time are reported as reductions or increases in the provision for
loan losses.
Income Taxes: The Company records income tax expense based on the amount of
taxes due on its tax return plus the change in deferred taxes computed, based on
the future tax consequences of temporary differences between the carrying
amounts and tax bases of assets and liabilities, using enacted tax rates.
Earnings Per Share: Basic earnings per share is based on weighted average common
shares outstanding. Diluted earnings per share includes the dilutive effect of
additional common shares issuable under stock options. All per share amounts are
restated for stock dividends and stock splits through the date of issuance of
the financial statements.
Comprehensive Income: Comprehensive income consists of net income and unrealized
gains and losses on securities available for sale, net of tax, which is also
recognized as a separate component of equity. Accumulated other comprehensive
income consists of unrealized gains and losses on securities available for sale,
net of tax.
Reclassification: Certain 1999 and 1998 amounts have been reclassified to
conform to the 2000 presentation.
Future Accounting Changes: Beginning January 1, 2001, a new accounting standard
will require all derivatives to be recorded at fair value. Unless designated as
hedges, changes in these fair values will be recorded in the income statement.
Fair value changes involving hedges will generally be recorded by offsetting
gains and losses on the hedge and on the hedged item, even if the fair value of
the hedged item is not otherwise recorded. Adoption of this standard on January
1, 2001, did not have a material effect on the consolidated financial
statements.
Segment Information: While the Company's chief decision makers monitor the
revenue streams of various products and services, operations are managed and
financial performance is evaluated on a company wide basis. Accordingly, all of
the Company's banking operations are considered by Management to be aggregated
in one reportable operating segment.
NOTE B - ACQUISITIONS/DIVESTURES
On October 20, 2000, Firstbank Corporation, through its affiliate Firstbank -
West Branch, completed the acquisition of Real Estate One, which was re-named
1st Realty, Inc. On January 2, 2001, also through its Firstbank - West Branch
affiliate, Firstbank Corporation completed the acquisition of C.A. Hanes Real
Estate in a transaction that merged C.A. Hanes with 1st Realty, Inc. Firstbank -
West Branch maintains a 55% ownership of the new company which will do business
as C.A. Hanes Realty Inc. This real estate subsidiary complements the prior
acquisitions of Gladwin Land Company and 1st Title, Inc., and these subsidiaries
provide service to all five banks of Firstbank Corporation and position the
banks to provide the full spectrum of services related to real estate
transactions. This acquisition did not have a material effect on the Company's
consolidated financial statements.
On April 1, 1999, the Company's Firstbank - Alma subsidiary sold its insurance
agency, Niles Agency, Incorporated, to an unrelated third party. Operating
results of the Niles Agency are included in consolidated results until the date
of sale. A gain of $59,000 was recognized on the sale of the agency, and is
included in other income of the consolidated statements of income and
comprehensive income. The effect of the operation and sale of the Niles Agency
was not material to the consolidated financial statements of the Company.
NOTE C - RESTRICTIONS ON VAULT CASH AND DUE FROM BANK ACCOUNTS
The Company's subsidiary banks are required to maintain average reserve balances
in the form of cash and noninterest bearing balances due from the Federal
Reserve Bank. The average reserve balances required to be maintained at December
31, 2000 and 1999, were $2,886,000 and $2,765,000 respectively. These balances
do not earn interest.
NOTE D - SECURITIES
The carrying amounts of securities and their fair values were as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---- ----- ------ -----
Securities available for sale: (In Thousands of Dollars)
December 31, 2000:
U.S. Treasury 4,021 13 (2) 4,032
U.S. governmental agency 21,997 163 (104) 22,056
States and political subdivisions 34,104 575 (87) 34,592
Collateralized mortgage obligations 1,004 0 (3) 1,001
Corporate 10,121 15 (13) 10,123
Equity 4,371 0 0 4,371
------- ----- ------ -------
$75,618 $766 $ (209) $76,175
====== ===== ====== ======
December 31, 1999:
U.S. Treasury $ 8,028 $ 13 $ (39) $ 8,002
U.S. governmental agency 25,386 8 (607) 24,787
States and political subdivisions 36,538 247 (487) 36,298
Collateralized mortgage obligations 2,186 2 (13) 2,175
Corporate 16,828 2 (134) 16,696
Equity 2,308 0 0 2,308
------- ----- ------- -------
$91,274 $272 $(1,280) $90,266
====== ===== ===== ======
Gross realized gains (losses) on sales and calls of securities were:
2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Gross realized gains $ 21 $ 38 $ 5
Gross realized losses (23) (39) (2)
-- -
Net realized gains (losses) $(2) $( 1) $ 3
== === ==
The amortized cost and fair value of securities at December 31, 2000, by stated
maturity are shown below. Actual maturities may differ from stated maturities
because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties.
Securities Available for Sale
-----------------------------
(In Thousands of Dollars)
Amortized Fair
Cost Value
---- -----
Due in one year or less $13,611 $13,610
Due after one year through five years 31,209 31,468
Due after five years through ten years 18,348 18,557
Due after ten years 8,079 8,169
------- -------
Total 71,247 71,804
Equity securities 4,371 4,371
------- -------
Total securities $75,618 $76,175
====== ======
At December 31, 2000, securities with a carrying value approximating $48,344,000
were pledged to secure public and trust deposits, securities sold under
agreements to repurchase, and for such other purposes as required or permitted
by law.
NOTE E - SECONDARY MORTGAGE MARKET ACTIVITIES
Loans serviced for others, which are not reported as assets, total $238,800,000
and $233,660,000 at 2000 and 1999.
Activity for capitalized mortgage servicing rights was as follows:
2000 1999
---- ----
Servicing rights: (In Thousands of Dollars)
Beginning of year $1,224 $ 997
Additions 251 599
Amortized to expense (310) (372)
----- -----
End of year $1,165 $1,224
===== =====
Management has determined that a valuation allowance is not necessary at
December 31, 2000 or 1999.
NOTE F - LOANS Loans at year-end were as follows:
2000 1999
---- ----
(In Thousands of Dollars)
Commercial $157,418 $132,641
Mortgage loans on real estate:
Residential 248,665 205,594
Commercial 158,118 131,324
Construction 31,773 25,918
Consumer 75,277 72,976
Credit Card 4,910 6,920
--------- ---------
Subtotal 676,161 575,373
Less:
Allowance for loan losses 9,857 9,317
Net deferred loan costs 183 53
Undisbursed loan funds 76,229 68,199
-------- --------
Loans, net $589,892 $497,804
======= =======
Activity in the allowance for loan losses for the year was as follows:
2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Beginning balance $9,317 $9,048 $8,114
Provision for loan losses 736 514 1,177
Loans charged-off (825) (799) (712)
Recoveries 629 554 469
------ ------ ------
Ending balance $9,857 $9,317 $9,048
===== ===== =====
Impaired loans were as follows:
2000 1999
---- ----
(In Thousands of Dollars)
Year-end loans with no allocated allowance for loan losses $4,716 $ 534
Year-end loans with allocated allowance for loan losses 1,062 4,139
----- -----
Total $5,778 $4,673
===== =====
2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Amount of the allowance for loan losses allocated $ 48 $ 329 $ 118
Loans past due over 90 days still on accrual at year end 462 663 621
Average of impaired loans during the year 5,939 5,133 1,879
Interest income recognized during impairment 488 284 128
Cash-basis interest income recognized 10 112 31
Approximately $71,205,000 of commercial loans were pledged to the Federal
Reserve Bank of Chicago at December 31, 2000, to secure overnight borrowings.
NOTE G - PREMISES AND EQUIPMENT
Year end premises and equipment were as follows: 2000 1999
---- ----
(In Thousands of Dollars)
Land $ 3,464 $ 3,230
Buildings 13,314 12,306
Furniture, fixtures and equipment 10,100 9,195
------- -------
26,878 24,731
Less: Accumulated depreciation (11,196) (9,802)
------- ------
$ 15,682 $14,929
======= ======
Rent expense for 2000 was $130,000 and for 1999 was $106,000. Rental commitments
for the next five years under noncancellable operating leases were as follows,
before considering renewal options that generally are present.
2001 $130,000
2002 131,000
2003 130,000
2004 127,000
2005 127,000
-------
Total $645,000
=======
NOTE H - FEDERAL INCOME TAXES
Federal income taxes consist of the following: 2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Current expense $4,055 $3,835 $3,473
Deferred benefit (150) (305) (356)
----- ----- -----
Total $3,905 $3,530 $3,117
===== ===== =====
A reconciliation of the difference between federal income tax expense and the
amount computed by applying the federal statutory tax rate of 34% is as follows:
2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Tax at statutory rate $4,244 $3,932 $3,543
Effect of surtax exemption 24 16 4
Effect of tax-exempt interest (463) (544) (550)
Other 100 126 120
------ ------ ------
Federal income taxes $3,905 $3,530 $3,117
===== ===== =====
Effective tax rate 31% 31% 30%
The components of deferred tax assets and liabilities consist of the following
at December 31:
2000 1999
---- ----
Deferred tax assets: (In Thousands of Dollars)
Allowance for loan losses $3,141 $2,799
Unrealized loss on securities available for sale 0 342
Deferred compensation 896 951
Other 305 395
------ ------
Total deferred tax assets 4,342 4,487
----- -----
Deferred tax liabilities:
Fixed assets (1,386) (1,417)
Mortgage servicing rights (396) (416)
Purchase accounting adjustment (517) (517)
Unrealized gain on securities available for sale (190) 0
Other (192) (94)
------ -------
Total deferred tax liabilities (2,681) (2,444)
------ ------
Net deferred tax asset $1,661 $2,043
===== =====
A valuation allowance related to deferred tax assets is required when it is
considered more likely than not that all or part of the benefits related to such
assets will not be realized. Management has determined that no such allowance is
required at December 31, 2000 or 1999.
Deferred tax assets at December 31, 2000 and 1999, are included in other assets
in the accompanying consolidated balance sheets.
NOTE I - DEPOSITS
Time deposits of $100,000 or more were $57,496,000 and $41,996,000 at year-end
2000 and 1999.
Scheduled maturities of time deposits were as follows:
Year Amount
---- ------
(In Thousands of Dollars)
2001 $203,394
2002 28,218
2003 11,130
2004 5,212
2005 4,028
2006 and after 839
---------
Total $252,821
NOTE J - BORROWINGS
Information relating to securities sold under agreements to repurchase follows:
At December 31: 2000 1999 1998
---- ---- ----
(In Thousands of Dollars)
Outstanding balance $21,657 $21,519 $18,678
Average interest rate 4.88% 4.17% 3.88%
Daily average for the year:
Outstanding balance $23,649 $19,495 $15,618
Average interest rate 4.62% 4.05% 4.15%
Maximum outstanding at any month end $26,374 $21,519 $18,678
Securities sold under agreements to repurchase (repurchase agreements) generally
have original maturities of less than one year. Repurchase agreements are
treated as financings and the obligations to repurchase securities sold are
reflected as liabilities. Securities involved with the agreements are recorded
as assets of the Company and are primarily held in safekeeping by correspondent
banks. Repurchase agreements are offered principally to certain large deposit
customers as deposit equivalent investments.
The Company had $16,650,000 and $30,300,000 in overnight borrowings at December
31, 2000, and 1999.
The Company established a line of credit agreement with Citizens Bank, Flint,
Michigan, on May 24, 2000. This agreement allows for a revolving line of credit
up to an aggregate principal amount of $20,000,000 and has a termination date of
June 30, 2001. The collateral for this agreement consists of all outstanding
capital stock of Firstbank - West Branch, Firstbank - Alma, and Firstbank (Mt.
Pleasant).
At December 31, 2000, the Company has drawn $6,700,000 against the line of
credit at an interest rate of 8.45% which is fixed until March 1, 2001. This
borrowing was made primarily to establish the new bank in St. Johns, Michigan,
and to fund the stock repurchase program.
NOTE K - FEDERAL HOME LOAN BANK ADVANCES
Long term borrowings have been secured from the Federal Home Loan Bank to fund
the Company's loan growth. At year-end, advances from the Federal Home Loan Bank
were as follows:
2000 1999
---- ----
Maturities January 2001 through December 2020 primarily (In Thousands of Dollars)
fixed rate at rates from 4.98% to 7.3% averaging 5.87% $77,067 $38,185
Each Federal Home Loan Bank advance is payable at its maturity date, with a
prepayment penalty. The advances were collateralized by $176,497,000 and
$173,597,000 of first mortgage loans under a blanket lien arrangement at
year-end 2000 and 1999.
Maturities over the next five years are: (In Thousands of Dollars)
2001 $ 8,500
2002 1,500
2003 7,000
2004 0
2005 11,304
2006 and after 48,763
------
$77,067
NOTE L - BENEFIT PLANS
The ESOP is a qualified stock bonus plan, a qualified 401(k) salary deferral
plan and a qualified employee stock ownership plan. Both employee and employer
contributions may be made to the ESOP. At year-end 2000 and 1999, there were
191,655 and 220,315 ESOP shares outstanding with a market value of $3,665,404
and $4,241,067. The Company's 2000, 1999, and 1998 matching 401(k) contributions
charged to expense were $274,000, $276,000, and $264,000 respectively. The
percent of the Company's matching contributions to the 401(k) is determined
annually by the Board of Directors.
The Board of Directors established the Firstbank Corporation Affiliated Deferred
Compensation Plan (Plan). Directors of the holding company and each affiliate
bank are eligible to participate in the Plan. In addition, key management of the
holding company and affiliate banks as designated by the Board of Directors, are
eligible to participate. The Plan is a nonqualified plan as defined by the
Internal Revenue Code. As such, all contributions are invested at the direction
of the participant and are assets of the Company. The Company recognizes a
corresponding liability to each participant. The Plan allows Directors to defer
their director fees and key management to defer a portion of their salaries into
the Plan.
NOTE M - STOCK OPTIONS
The Firstbank Corporation Stock Option Plans of 1993 and 1997 ("Plans") provide
for the grant of 295,491 and 243,101 shares of stock, respectively, in either
restricted form or under option. Options may be either incentive stock options
or nonqualified stock options. The Plan of 1993 will terminate April 26, 2003.
The 1997 Plan will terminate April 28, 2007. The Board, at its discretion, may
terminate either or both Plans prior to the Plans' termination dates.
Each option granted under the Plans may be exercised in whole or in part during
such period as is specified in the option agreement governing that option.
Options are issued with exercise prices equal to the stock's market value at
date of issuance. A nonqualified stock option may not be exercised after fifteen
years from the grant date. Incentive stock options may not be exercised after
ten years from the grant date.
The following is a summary of option transactions which occurred during 1998,
1999 and 2000:
Number Weighted
of Shares Average
--------- ---------
Outstanding - December 31, 1997 358,857 $12.30
Granted 98,804 $27.65
Exercised (15,871) $10.25
Canceled (11,492) $15.03
--------
Outstanding - December 31, 1998 430,298 $15.79
Granted 45,533 $20.64
Exercised (55,388) $ 9.80
Canceled (12,917) $19.90
--------
Outstanding - December 31, 1999 407,526 $17.01
Granted 54,600 $19.05
Exercised (14,702) $ 8.78
Canceled (21,845) $18.86
--------
Outstanding - December 31, 2000 425,579 $17.45
Available for exercise - December 31, 2000 230,067 $15.60
Available for grant - December 31, 2000 6,087
Financial Accounting Standards No. 123, Accounting for Stock Based Compensation
(SFAS 123) establishes a fair value based method of accounting for employee
stock options. Accordingly, the following pro forma information presents net
income and earnings per share information as if SFAS 123 had been adopted. No
compensation cost was actually recognized for stock options in 2000, 1999, or
1998.
2000 1999 1998
---- ---- ----
Net income as reported $8,543,000 $8,036,000 $7,303,000
Pro forma net income $8,424,000 $7,923,000 $7,223,000
Basic earnings per share as reported $1.76 $1.62 $1.47
Pro forma basic earnings per share $1.73 $1.60 $1.45
Diluted earnings per share as reported $1.73 $1.58 $1.41
Pro forma diluted earnings per share $1.71 $1.56 $1.46
In future years, the pro forma effect under this standard is expected to
increase as additional options are granted.
The fair value of options granted during 2000, 1999, and 1998, is estimated
using the Black-Scholes model and the following weighted average information:
risk free interest rate of 5.71%, 6.28%, and 5.06%; expected life of 7 years;
expected volatility of stock price of 19.8%, 36.2%, and 33.9%; and expected
dividends of 3% per year. The fair value of the options granted in 2000, 1999,
and 1998, were $254,000, $235,000, and $207,000 respectively. For options
outstanding at December 31, 2000, the range of exercise prices was $7.36 to
$27.64 and the weighted average remaining contractual life was 6.9 years.
NOTE N - RELATED PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates in 2000 were as
follows:
(In Thousands of Dollars)
Beginning balance $20,684
New loans 21,923
Effect of changes in related parties (102)
Repayments (17,769)
------
Ending balance $24,736
======
Deposits from principal officers, directors, and their affiliates at year end
2000 and 1999 were $10,710,000 and $8,217,000.
Directors have deferred some of their fees for future payment, including
interest. Amounts deferred are expensed, and were $61,000, $63,000, and $62,000
for 2000, 1999, and 1998.
NOTE O - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK
Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates. Commitments may expire without being used. Off balance sheet
risk to credit loss exists up to the face amount of these instruments, although
material losses are not anticipated. The same credit policies are used to make
such commitments as are used for loans, including obtaining collateral at
exercise of the commitment.
Financial instruments with off-balance-sheet risk were as follows at year end:
2000 1999
---- ----
(In Thousands of Dollars)
Fixed Rate Variable Rate Fixed Rate Variable Rate
Commitments to make loans
(at market rates) $6,830 $5,057 $5,411 $3,764
Unused lines of credit and
letters of credit $10,690 $53,652 $9,026 $49,998
Commitments to make loans are generally made for periods of 60 days or less. The
fixed rate loan commitments have interest rates ranging from 6.0% to 12.0% and
maturities ranging from 15 years to 30 years.
NOTE P - CONTINGENCIES
From time to time certain claims are made against the Company and its banking
subsidiaries in the normal course of business. There were no outstanding claims
considered by management to be material at December 31, 2000.
NOTE Q - DIVIDEND LIMITATION OF SUBSIDIARIES
The subsidiary banks are restricted in their ability to pay dividends to the
Company by regulatory requirements. At December 31, 2000, approximately
$11,646,000 of the subsidiaries' retained earnings is available for transfer in
the form of dividends without prior regulatory approval.
NOTE R - CAPITAL ADEQUACY
Banks and bank holding companies are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and,
additionally for banks, prompt corrective action regulations involve
quantitative measures of assets, liabilities, and certain off-balance-sheet
items calculated under regulatory accounting practices. Capital amounts and
classifications are also subject to qualitative judgments by regulators. Failure
to meet capital requirements can initiate regulatory action.
Prompt corrective action regulations provide five classifications: well
capitalized, adequately capitalized, undercapitalized, significantly
undercapitalized, and critically undercapitalized, although these terms are not
used to represent overall financial condition. If adequately capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.
To Be Well
Actual and required capital amounts at year end Minimum Required Capitalized Under
(in thousands of dollars) and ratios are presented below: For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
2000 Amount Ratio Amount Ratio Amount Ratio
- ---- ------ ----- ------ ----- ------ -----
Total Capital to risk weighted assets
Consolidated $61,691 11.28% $43,736 8.00% $54,669 10.00%
Firstbank - Alma 21,387 12.34% 13,860 8.00% 17,324 10.00%
Firstbank (Mt. Pleasant) 14,340 11.10% 10,337 8.00% 12,922 10.00%
Firstbank - West Branch 15,361 10.80% 11,383 8.00% 14,229 10.00%
Firstbank - Lakeview 12,158 13.68% 7,112 8.00% 8,890 10.00%
Firstbank - St. Johns 3,940 25.54% 1,234 8.00% 1,542 10.00%
Tier 1 (Core) Capital to risk weighted assets
Consolidated $54,820 10.03% $21,868 4.00% $32,802 6.00%
Firstbank - Alma 19,199 11.08% 6,930 4.00% 10,395 6.00%
Firstbank (Mt. Pleasant) 12,761 9.88% 5,169 4.00% 7,753 6.00%
Firstbank - West Branch 13,570 9.54% 5,692 4.00% 8,538 6.00%
Firstbank - Lakeview 11,043 12.42% 3,556 4.00% 5,334 6.00%
Firstbank - St. Johns 3,773 24.46% 617 4.00% 925 6.00%
Tier 1 (Core) Capital to average assets
Consolidated $54,820 7.77% $28,205 4.00% $35,257 5.00%
Firstbank - Alma 19,199 8.21% 9,359 4.00% 11,698 5.00%
Firstbank (Mt. Pleasant) 12,761 8.17% 6,244 4.00% 7,806 5.00%
Firstbank - West Branch 13,570 7.24% 7,497 4.00% 9,371 5.00%
Firstbank - Lakeview 11,043 9.00% 4,909 4.00% 6,136 5.00%
Firstbank - St. Johns 3,773 19.08% 791 4.00% 989 5.00%
To Be Well
Minimum Required Capitalized Under
For Capital Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
1999 Amount Ratio Amount Ratio Amount Ratio
- ---- ------ ----- ------ ----- ------ -----
Total Capital to risk weighted assets
Consolidated $58,780 12.24% $38,427 8.00% $48,034 10.00%
Firstbank - Alma 20,428 12.63% 12,937 8.00% 16,171 10.00%
Firstbank (Mt. Pleasant) 11,431 10.29% 8,885 8.00% 11,106 10.00%
Firstbank - West Branch 14,328 11.23% 10,205 8.00% 12,756 10.00%
Firstbank - Lakeview 12,031 15.17% 6,344 8.00% 7,930 10.00%
Tier 1 (Core) Capital to risk weighted assets
Consolidated $52,735 10.98% $19,213 4.00% $28,820 6.00%
Firstbank - Alma 18,383 11.37% 6,468 4.00% 9,703 6.00%
Firstbank (Mt. Pleasant) 10,042 9.04% 4,442 4.00% 6,664 6.00%
Firstbank - West Branch 12,720 9.97% 5,102 4.00% 7,653 6.00%
Firstbank - Lakeview 11,037 13.92% 3,172 4.00% 4,758 6.00%
Tier 1 (Core) Capital to average assets
Consolidated $52,735 8.49% $24,844 4.00% $31,056 5.00%
Firstbank - Alma 18,383 8.72% 8,436 4.00% 10,545 5.00%
Firstbank (Mt. Pleasant) 10,042 7.96% 5,046 4.00% 6,307 5.00%
Firstbank - West Branch 12,720 7.47% 6,808 4.00% 8,510 5.00%
Firstbank - Lakeview 11,037 9.98% 4,421 4.00% 5,527 5.00%
NOTE S - FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amount and estimated fair values of financial instruments were as
follows at year-end:
2000 1999
---- ----
Carrying Carrying
(In Thousands of Dollars) or Notional Fair or Notional Fair
Amount Value Amount Value
------ ----- ------ -----
Financial assets:
Cash and cash equivalents $ 28,096 $ 28,096 $ 25,197 $ 25,197
Securities available for sale 76,175 76,175 90,266 90,266
Loans held for sale 1,018 1,018 1,117 1,117
Loans, net 589,892 588,671 497,804 488,684
Accrued interest receivable 4,623 4,623 3,489 3,489
Financial liabilities:
Deposits $(537,224) $(539,347) $(491,404) $(490,272)
Securities sold under agreements to repurchase
and overnight borrowings (38,307) (38,307) (51,819) (51,819)
Notes payable (83,952) (79,524) (38,384) (38,053)
Accrued interest payable (1,977) (1,977) (1,255) (1,255)
The methods and assumptions used to estimate fair value are described as
follows.
Carrying amount is the estimated fair value for cash and cash equivalents, short
term borrowings, Federal Home Loan Bank stock, accrued interest receivable and
payable, demand deposits, short term debt, and variable rate loans or deposits
that reprice frequently and fully. Security fair values are based on market
prices or dealer quotes, and if no such information is available, on the rate
and term of the security and information about the issuer. For fixed rate loans
or deposits and for variable rate loans or deposits with infrequent repricing or
repricing limits, fair value is based on discounted cash flows using current
market rates applied to the estimated life and credit risk. Fair values for
impaired loans are estimated using discounted cash flow analysis or underlying
collateral values. Fair value of loans held for sale is based on market quotes.
Fair value of debt is based on current rates for similar financing. The fair
value of off balance sheet items is based on the current fees or cost that would
be charged to enter into or terminate such arrangements. The fair value of off
balance sheet items were not material to the consolidated financial statements
at December 31, 2000 and 1999.
NOTE T - BASIC AND DILUTED EARNINGS PER SHARE
(In Thousands of Dollars, except per share data) Year Ended December 31
2000 1999 1998
---- ---- ----
Basic earnings per share
Net income $8,543 $8,036 $7,303
Weighted average common shares outstanding 4,864 4,959 4,983
----- ----- -----
Basic earnings per share $ 1.76 $ 1.62 $ 1.47
====== ====== ------
Diluted earnings per share
Net income $8,543 $8,036 $7,303
Weighted average common shares outstanding 4,864 4,959 4,983
Add dilutive effects of assumed exercises of options 74 121 190
------- ------ ------
Weighted average common and dilutive potential
common shares outstanding 4,939 5,081 5,173
----- ----- -----
Diluted earnings per share $1.73 $1.58 $1.41
==== ==== ====
Stock options for 261,014 and 93,941 shares of common stock were not considered
in computing diluted earnings per share for 2000 and 1999 because they were
antidulitive.
NOTE U - FIRSTBANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION (000's)
CONDENSED BALANCE SHEETS December 31
2000 1999
---- ----
ASSETS
Cash and cash equivalents $ 258 $ 365
Securities available for sale 26 17
Investment in and advances to banking subsidiaries 65,381 55,635
Other assets 7,948 7,941
------- -------
Total assets $73,613 $63,958
====== ======
LIABILITIES AND EQUITY
Accrued expenses and other liabilities $ 2,709 $ 2,926
Notes Payable 6,700
Shareholders' equity 64,204 61,032
------ ------
Total liabilities and shareholders' equity $73,613 $63,958
====== ======
CONDENSED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
Years ended December 31 2000 1999 1998
---- ---- ----
Dividends from banking subsidiaries $6,323 $4,890 $3,138
Other income 137 330 191
Other expense (1,457) (1,052) (862)
----- ----- -----
Income before income tax and undistributed subsidiary income 5,003 4,168 2,467
Income tax benefit 342 139 121
Equity in undistributed subsidiary income 3,198 3,729 4,715
----- ----- -----
Net income 8,543 8,036 7,303
Change in unrealized gain(loss) on securities,
net of tax and classification effects 1,032 (1,767) 216
----- ----- ------
Comprehensive income $9,575 $6,269 $7,519
===== ----- =====
CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31 2000 1999 1998
---- ---- ----
Cash flows from operating activities
Net income $8,543 $8,036 $7,303
Adjustments:
Equity in undistributed subsidiary income (3,198) (3,729) (4,715)
Change in other assets (7) (507) (509)
Change in other liabilities (218) 315 868
----- ------ ------
Net cash from operating activities 5,120 4,115 2,947
Cash flows from investing activities
Purchases of securities available for sale (9)
Payments for investments in subsidiaries (5,515) (2) (7)
----- ------- -------
Net cash from investing activities (5,524) (2) (7)
Cash flows from financing activities
Proceeds from issuance of long-term debt 6,700
Proceeds from stock issuance 1,965 2,656 1,433
Purchase of common stock (5,227) (4,793) (1,214)
Dividends paid and cash paid in lieu of
fractional shares on stock dividend (3,141) (2,874) (2,495)
----- ----- -----
Net cash from financing activities 297 (5,011) (2,276)
------ ----- -----
Net change in cash and cash equivalents (107) (898) 664
Beginning cash and cash equivalents 365 1,263 599
------ ----- -------
Ending cash and cash equivalents $ 258 $ 365 $1,263
====== ====== =====
NOTE V - OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
2000 1999 1998
---- ---- ----
Unrealized holding gains and losses on available-for-sale securities $1,562 $(2,680) $331
Less reclassification adjustments for gains and losses later recognized in income (2) (1) 3
-------- ------- -----
Net unrealized gains and losses 1,564 (2,679) 328
Tax effect (532) 912 (112)
------ ------ ---
Other comprehensive income $1,032 $(1,767) $216
===== ===== ===
NOTE W - QUARTERLY FINANCIAL DATA (UNAUDITED) (In Thousands of Dollars, except
per share data)
2000
----
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Interest income $12,554 $13,232 $14,060 $14,486 $54,332
Net interest income 6,967 7,132 7,292 7,414 28,805
Income before federal income taxes 3,022 3,170 3,109 3,147 12,448
Net income 2,110 2,140 2,142 2,151 8,543
Basic earnings per share 0.43 0.44 0.44 0.45 1.76
Diluted earnings per share 0.42 0.44 0.43 0.44 1.73
1999
----
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Year
------- ------- ------- ------- ----
Interest income $11,008 $11,314 $11,653 $12,087 $46,062
Net interest income 6,270 6,612 6,858 7,039 26,779
Income before federal income taxes 2,769 2,843 2,894 3,060 11,566
Net income 1,936 1,981 2,011 2,108 8,036
Basic earnings per share .39 .40 .41 .42 1.62
Diluted earnings per share .38 .38 .40 .42 1.58
All per share amounts have been adjusted for stock dividends and stock splits.
FIRSTBANK CORPORATION
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman Thomas R. Sullivan
Chairman, Firstbank - Alma President & Chief Executive Officer
Attorney, Goggin & Baker
William L. Benear
Duane A. Carr Vice President
Attorney, Carr & Mullendore, PC
David L. Miller
Edward B. Grant Vice President
Chairman, Firstbank (Mt. Pleasant)
Director, Public Broadcasting, Dale A. Peters
Central Michigan University Vice President
Charles W. Jennings Samuel G. Stone
Attorney, Jennings, Engemann & Vice President, Chief Financial
Benson PC Officer, Secretary & Treasurer
Benson S. Munger, Ph.D. James M. Taylor
Chairman, Firstbank - St. Johns Vice President
Vice President, Data Harbor Inc.
James E. Wheeler, II
Phillip G. Peasley Vice President
Operations Manager, Peasley's
Hardware & Carpeting Inc. (Retail)
David D. Roslund, CPA
Administrator, Wilcox Health Care
Center (Long-Term Care Facility)
Small Business Investor and Manager
Thomas R. Sullivan
President & Chief Executive Officer,
Firstbank Corporation
President & Chief Executive Officer,
Firstbank (Mt. Pleasant)
NON-BANK SUBSIDIARY
Gladwin Land Company
- --------------------------------------------------------------------------------
FIRSTBANK CORPORATION Firstbank Corporation Operations Center
311 Woodworth Avenue 308 Woodworth Avenue
P. O. Box 1029 Alma, Michigan 48801
Alma, Michigan 48801
(517) 463-3131
FIRSTBANK - ALMA
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman James E. Wheeler, II
Chairman, Firstbank Corporation President & Chief Executive Officer
Attorney, Goggin & Baker
Gregory A. Daniels
Bob M. Baker Vice President
President and CEO, Gratiot
Community Hospital Marita A. Harkness
Vice President
Sandra S. Brooks
Chief Operating Officer, Powell Gerald E. Kench
Fabrication & Manufacturing Vice President
Donald W. Crumbaugh Timothy M. Lowe
Agriculture Vice President
Paul C. Lux Harmony L. Nowlin
Owner, Lux Funeral Homes, Inc. Vice President
John McCormack Joan S. Welke
Former President & CEO, Vice President
Firstbank Corporation
Former President & CEO,
Firstbank - Alma
Phillip G. Peasley
Operations Manager, Peasley's Hardware
& Carpeting Inc.
David D. Roslund, CPA
Administrator, Wilcox Health Care Center
Small Business Investor and Manager
Victor V. Rozas, M.D.
Physician
Alan J. Stone
President, Alma College
Thomas R. Sullivan
President & Chief Executive Officer,
Firstbank Corporation
President & Chief Executive Officer,
Firstbank (Mt. Pleasant)
James E. Wheeler, II
President & Chief Executive Officer,
Firstbank - Alma
- -------------------------------------------------------------------------------------------------------------------------
OFFICE LOCATIONS
Alma Ashley Auburn Ithaca
7455 N. Alger Rd. 114 S. Sterling St. 4710 S. Garfield Rd. 219 E. Center St.
(517) 463-3134 (517) 847-2394 (517) 662-4459 (517) 875-4107
230 Woodworth Ave. Merrill Riverdale St. Charles
(517) 463-3131 125 W. Saginaw St. 6716 N. Lumberjack Rd. 102 Pine St.
(517) 643-7253 (517) 833-7331 (517) 865-9918
311 Woodworth Ave.
(517) 463-3131 St. Louis Vestaburg
135 W. Washington Ave. 8846 Third St.
(517) 681-5758 (517) 268-5445
FIRSTBANK
BOARD OF DIRECTORS OFFICERS
Edward B. Grant, Chairman Thomas R. Sullivan
Director, Public Broadcasting, President and Chief Executive Officer
Central Michigan University
Mark B. Perry
Ralph E. Baumgarth Senior Vice President
Dentist
Robert L. Wheeler
Ralph M. Berry Senior Vice President
Owner, Berry Funeral Home
James L. Binder
Kenneth C. Bovee, CPM Vice President
Partner, Keystone Property
Management, Inc. Brian M. Gooding
Vice President
Glen D. Blystone
Certified Public Accountant, Douglas J. Ouellette
Blystone & Bailey, CPAs, PC Vice President
Sibyl M. Ellis Daniel J. Timmins
President, Someplace Special, Inc. Vice President
Keith A. Gaede Roger L. Trudell
Pharmacist, Punches Pharmacy Vice President
Douglas N. LaBelle
Partner, LaBelle Management
William M. McClintic
Attorney, W.M. McClintic, P.C.
Phillip R. Seybert
President, P.S. Equities, Inc.
Thomas R. Sullivan
President & Chief Executive Officer,
Firstbank Corporation
President & Chief Executive Officer,
Firstbank (Mt. Pleasant)
Arlene A. Yost
Secretary and Treasurer, Jay's Sporting Goods, Inc.
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OFFICE LOCATIONS
Mt. Pleasant Clare Shepherd Winn
102 S. Main St. 806 N. McEwan Ave. 258 W. Wright Ave. 2783 Blanchard Rd.
(517) 773-2600 (517) 386-7313 (517) 828-6625 (517) 866-2210
4699 E. Pickard St.
(517) 773-2335
2013 S. Mission St.
(517) 773-3959
1925 E. Remus Rd.
(517) 775-8528
FIRSTBANK - WEST BRANCH
BOARD OF DIRECTORS OFFICERS
Dale A. Peters, Chairman Dale A. Peters
President and Chief Executive President and Chief Executive Officer
Officer, Firstbank - West Branch
Vice President, Firstbank Corporation Daniel H. Grenier
Senior Vice President
Bryon A. Bernard
CEO, Bernard Building Center Michael F. Ehinger
Vice President
Joseph M. Clark
Owner, Morse Clark Furniture Danny J. Gallagher
Vice President
Timothy H. Eyth
Owner, West Branch Veterinary Services Rosalind A. Heideman
Vice President
David W. Fultz
Owner, Fultz Insurance Agency Eileen S. McGregor
Vice President
Robert T. Griffin
Owner and President, Griffin Beverage W. John Powell
Company, Northern Beverage Co., and Vice President
West Branch Tank & Trailer
Larry M. Schneider
Charles W. Jennings Vice President
Attorney, Jennings, Engemann &
Benson PC Marie A. Wilkins
Vice President
Norman J. Miller
Owner, Miller Farms, and Miller
Dairy Equipment and Feed
SUBSIDIARIES
Jeffrey C. Schubert 1st Armored, Incorporated
Dentist 1st Collections, Incorporated
1st Title, Incorporated
Robert R. Smith 1st Real Estate (now C.A. Hanes Realty)
Insurance Consultant
Camila J. Steckling
Weinlander, Fitzhugh
Certified Public Accountants & Consultants
Thomas R. Sullivan
President & Chief Executive Officer,
Firstbank Corporation
President & Chief Executive Officer,
Firstbank (Mt. Pleasant)
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OFFICE LOCATIONS
West Branch Fairview Hale Higgins Lake
502 W. Houghton 1979 Miller 3281 M-65 4522 W. Higgins Lake
(517) 345-7900 (517) 848-2243 (517) 728-7566 (517) 821-9231
601 W. Houghton Rose City St. Helen
(517) 345-7900 505 S. Bennett 2040 N. St. Helen
(517) 685-3909 (517) 389-1311
2087 S. M-76
(517) 345-5050
2375 M-30
(517) 345-6210
FIRSTBANK - LAKEVIEW
BOARD OF DIRECTORS OFFICERS
Gerald L. Nielsen, Chairman William L. Benear
Owner, Nielsen's TV & Appliances President and Chief Executive Officer
William L. Benear Kim D. vonKronenberger
Vice President, Firstbank Corporation Vice President
President and Chief Executive Officer,
Firstbank - Lakeview
Duane A. Carr
Attorney, Carr & Mullendore
John B. Crawford
Agriculture, Crawford Farms
V. Dean Floria
Sheridan Township Supervisor
Chalmer Gale Hixson
Owner, Country Corner Supermarket
Owner, A Flair for Hair
Owner, Harry Chalmers, Inc.
Owner, Powderhorn Ranch
Thomas R. Sullivan
President & Chief Executive Officer,
Firstbank Corporation
President & Chief Executive Officer,
Firstbank
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OFFICE LOCATIONS
Lakeview Canadian Lakes Howard City Morley
506 Lincoln Avenue 10049 Buchanan Road 20020 Howard City/Edmore Road 101 E 4th Street
(517) 352-7271 Stanwood, MI (231) 937-4383 (231) 856-7652
(231) 972-4200
9531 N Greenville Road Remus
(517) 352-8180 201 W Wheatland Avenue
(517) 967-3602
FIRSTBANK - ST. JOHNS
BOARD OF DIRECTORS OFFICERS
Benson S. Munger, Ph.D., Chairman James M. Taylor
Vice President, Data Harbor, Inc. President and Chief Executive Officer
Ann M. Flermoen
Dentist
William G. Jackson
Attorney, William G. Jackson, P.C.
Donald A. Rademacher
Owner, RSI Home Improvement, Inc.
John M. Sirrine
Owner, John M. Sirrine & Associates, Inc., Accountants
Samuel A. Smith
Owner, Smith Funeral Homes, Inc.
Thomas R. Sullivan
President & Chief Executive Officer, Firstbank Corporation
President & Chief Executive Officer, Firstbank (Mt. Pleasant)
James M. Taylor
President & Chief Executive Officer, Firstbank - St. Johns
Robert E. Thompson
Consultant
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OFFICE LOCATIONS
St. Johns
201 N. Clinton Ave
(517) 227-8383
BUSINESS OF THE COMPANY
Firstbank Corporation (the "Company") is a bank holding company. As of December
31, 2000, the Company's wholly owned subsidiaries are Firstbank - Alma,
Firstbank (Mt. Pleasant), Firstbank - West Branch, Firstbank - Lakeview,
Firstbank - St. Johns, 1st Armored, Incorporated, 1st Collections, Incorporated,
Gladwin Land Company, 1st Title, Incorporated, and 1st Real Estate. As of
December 31, 2000, the Company and its subsidiaries employed 267 people on a
full-time equivalent basis.
The Company is in the business of banking. Each subsidiary bank of the Company
is a full service community bank. The subsidiary banks offer all customary
banking services, including the acceptance of checking, savings and time
deposits, and the making of commercial, agricultural, real estate, personal,
home improvement, automobile and other installment and consumer loans. Firstbank
- - Alma also offers trust services. Deposits of each of the banks are insured by
the Federal Deposit Insurance Corporation.
The banks obtain most of their deposits and loans from residents and businesses
in Bay, Clare, Gratiot, Iosco, Isabella, Mecosta, Midland, Montcalm, Ogemaw,
Oscoda, Roscommon, Saginaw and parts of Clinton County. Firstbank - Alma has its
main office and one branch in Alma, Michigan, and one branch located in each of
the following areas: Ashley, Auburn, Ithaca, Merrill, Pine River Township (near
Alma), Riverdale, St. Charles, St. Louis, and Vestaburg, Michigan. Firstbank
(Mt. Pleasant) has its main office in Mt. Pleasant, Michigan, two branches
located in Union Township (near Mt. Pleasant), and one branch located in each of
the following areas: Clare, Mt. Pleasant, Shepherd, and Winn, Michigan.
Firstbank - West Branch has its main office in West Branch, Michigan, and one
branch located in each of the following areas: Fairview, Hale, Higgins Lake,
Rose City, St. Helen, and West Branch Township (near West Branch), Michigan.
Firstbank -Lakeview has its main office and one branch in Lakeview, Michigan,
and one branch located in each of the following areas: Canadian Lakes, Howard
City, Morley, and Remus. The banks have no material foreign assets or income.
The principal sources of revenues for the Company and its subsidiaries are
interest and fees on loans. On a consolidated basis, interest and fees on loans
accounted for approximately 82% of total revenues in 2000, 78% in 1999, and
76%in 1998. Interest on investment securities accounted for approximately 8% of
total revenues in 2000, 10% in 1999, and 12% in 1998. No other single source of
revenue accounted for 8% of the Company's total revenues in any of the last 3
years.
CORPORATE INFORMATION
Annual Meeting Stock Information:
The annual meeting of shareholders
will be held on Monday, April 23, 2001, Firstbank Corporation shares are
5:00 p.m., at the Comfort Inn, Alma, listed Over the Counter Bulletin
Michigan Board under the symbol FBMI.
Independent Auditors McDonald Investments
Crowe, Chizek & Company LLP Chris Turner
Grand Rapids, Michigan 1-800-548-6011
General Counsel Morgan Stanley Dean Witter
Varnum Riddering Schmidt & Howlett LLP Ted Vogt
Grand Rapids, Michigan 1-800-788-9640
Transfer Agent Raymond James Financial
Firstbank - Alma Shareholder Services Louis Parks
Department (517) 466-7336 or 800-248-8863
toll free shareholder hotline:
(888) 637-0590
Robert W. Baird & Company
Mike Pniewski & Ken Bauman
1-800-888-6200
Stifel, Nicolaus & Company, Inc.
Pete VanDer Schaaf
1-800-676-0477
Tucker Anthony
Jack Korff
1-888-861-2200
EXHIBIT 21
FIRSTBANK CORPORATION SUBSIDIARIES
NAME STATE OF INCORPORATION OWNERSHIP
Firstbank -Alma Michigan 100%
Firstbank Michigan 100%
Firstbank - West Branch Michigan 100%
Firstbank - Lakeview Michigan 100%
Firstbank - St. Johns Michigan 100%
Gladwin Land Company Michigan 100%
1st Armored, Inc. Michigan 100% by Firstbank - West Branch
1st Collections, Inc. Michigan 100% by Firstbank - West Branch
1st Title, Inc. Michigan 100% by Firstbank - West Branch
C.A. Hanes Realty, Inc. Michigan 55% by Firstbank - West Branch
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Firstbank Corporation on Form S-8 (File Nos. 333-60190, 333-95427, 333-89771
and 333-53957) and Form S-3 (File No. 333-15131) of our report dated February 1,
2001 on the 2000 Consolidated Financial Statements of Firstbank Corporation,
which report is included in the 2000 Annual Report on Form 10-K of Firstbank
Corporation. [GRAPHIC OMITTED]
/s/ CROWE, CHIZEK AND COMPANY LLP
CROWE, CHIZEK AND COMPANY LLP
Grand Rapids, Michigan
March 9, 2001
EXHIBIT 99
Firstbank Corporation 401(k) Plan
Performance Table
INITIAL
INVESTMENT VALUE VALUE VALUE VALUE
ON AS OF AS OF AS OF AS OF
FUND 12/31/1996 12/31/1997 12/31/1998 12/31/1999 12/31/2000
- ---- ---------- ---------- ---------- ---------- ----------
Firstbank Corporation Common Stock $1,000.00 44.203% 26.495% -31.288% 5.37%
$1,442.03 $1,824.10 $1,253.37 $1,320.68
Federated Money Market for
U.S. Treasury Obligations $1,000.00 5.22% 5.11% 4.64% 5.33%
$1,052.20 $1,105.97 $1,157.28 $1,218.96
Federated Capital Preservation Fund $1,000.00 5.86% 5.64% 5.57% 5.97%
$1,058.60 $1,118.31 $1,180.59 $1,251.07
Vanguard Fixed Income
Total Bond Fund $1,000.00 9.44% 8.60% -.70% 10.72%
$1,094.40 $1,188.52 $1,180.20 $1,306.72
Vanguard Fixed Income
Long Term Corporate Bond Fund $1,000.00 13.79% 9.20% -6.23% 11.08%
$1,137.90 $1,242.59 $1,165.17 $1,294.27
Federated Stock $1,000.00 34.42% 17.26% 6.08% 2.82%
$1,344.20 $1,576.21 $1,672.04 $1,719.19
Vanguard Index 500 Fund $1,000.00 33.21% 28.60% 21.07% -9.06%
$1,332.10 $1,713.08 $2,074.03 $1,886.12
American Century 20th Century Ultra $1,000.00 23.13% 34.55% 41.46% -19.63%
$1,231.30 $1,656.71 $2,343.59 $1,883.54
Warburg Pincus
Emerging Growth Fund $1,000.00 21.27% 5.82% 41.81% -10.56%
$1,212.70 $1,283.28 $1,819.82 $1,627.65
T. Rowe Price International Stock
Fund $1,000.00 2.70% 16.14% 34.60% -16.57%
$1,027.00 $1,192.76 $1,605.45 $1,339.43
Vanguard International Growth Fund $1,000.00 4.12% 16.93% 26.30% -8.57%
$1,041.20 $1,217.48 $1,537.67 $1,405.89
Fidelity Overseas Fund $1,000.00 10.92% 12.84% 42.89% -18.44%
$1,109.20 $1,251.62 $1,788.44 $1,458.65
American Century 20th Century
International Discovery Fund $1,000.00 17.48% 17.86% 88.54% -14.29%
$1,174.80 $1,384.62 $2,610.56 $2,237.51