| [X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
| For the quarterly period ended MARCH 31, 2003 | |
or
| [ ] | TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the transaction period from ______ to _______. | |
Commission file number: 0-14209
FIRSTBANK CORPORATION
(Exact name of registrant as specified in its charter)
|
Michigan (State or other jurisdiction of incorporation or organization) |
38-2633910 (I.R.S. Employer Identification Number) |
| 311 Woodworth Avenue, Alma, Michigan (Address of principal executive offices) |
48801 (Zip Code) |
Registrant's telephone number, including area code: (989) 463-3131
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to filing requirements for the past 90 days. [ X ] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common stock . . . 5,403,100 shares outstanding as of April 30, 2003.
1
INDEX
| PART I. FINANCIAL INFORMATION |
|
|
|
Item 1. Item 2. Item 3. Item4. |
Financial Statements (UNAUDITED) Management's Discussion and Analysis of Financial Condition and Results of Operations Quantitative and Qualitative Disclosures about Market Risk Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures (b) Changes in Internal Controls |
Page 3 Page 9 Page 12 Page 13 |
| PART II. OTHER INFORMATION | |
|
|
Item 5. Item 6. |
Other Information Exhibits and Reports on Form 8-K |
Page 14 Page 14 |
|
SIGNATURES CERTIFICATIONS EXHIBITS |
Page 15 Page 16, 17 Page 18 |
|
2
Item 1: Financial Statements (UNAUDITED)
FIRSTBANK CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2003 AND DECEMBER 31, 2002
(Dollars in thousands)
March 31, December 31,
2003 2002
---- ----
ASSETS
Cash and due from banks $24,525 $29,945
Short term investments 40,845 30,602
------ ------
Total Cash and Cash Equivalents 65,370 60,547
Securities available for sale 75,446 63,451
Federal Home Loan Bank stock 4,746 4,746
Loans held for sale 5,960 9,663
Loans, net of allowance for loan losses of $11,691 in 2003 and 575,476 589,859
$11,536 in 2002
Premises and equipment, net 17,378 17,514
Acquisition goodwill 4,880 4,880
Other intangibles 2,919 3,158
Accrued interest receivable and other assets 13,717 13,702
------- --------
TOTAL ASSETS $765,892 $767,520
======= =======
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Deposits:
Noninterest bearing accounts $85,950 $98,148
Interest bearing accounts:
Demand 186,228 177,018
Savings 87,477 83,020
Time 215,061 218,723
------- --------
Total Deposits $574,716 $576,909
Securities sold under agreements to repurchase and overnight borrowings $27,829 $30,358
FHLB advances and notes payable 68,558 68,584
Accrued interest and other liabilities 12,154 11,488
------- --------
Total Liabilities $683,257 $687,339
SHAREHOLDER'S EQUITY
Preferred stock; no par value, 300,000 shares authorized, none issued
Common Stock; 10,000,000 shares authorized, 5,392,373 shares
issued and outstanding (5,368,100 in December 2002) 69,249 68,934
Retained earnings 12,028 9,755
Accumulated other comprehensive income 1,358 1,492
------- --------
Total Shareholder's Equity 82,635 80,181
------- --------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $765,892 $767,520
======= =======
See notes to consolidated financial statements.
3
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS
OF INCOME
MARCH 31, 2003 AND 2002
(Dollars in
thousands except per share data)
UNAUDITED
Three Months Ended March 31,
2003 2002
---- ----
Interest Income:
Interest and fees on loans $10,562 $11,459
Securities
Taxable 497 607
Exempt from Federal Income Tax 264 300
Short term investments 122 131
------- -------
Total Interest Income 11,445 12,497
Interest Expense:
Deposits 2,469 3,263
FHLB advances and other 1,020 1,113
Total Interest Expense 3,489 4,376
Net Interest Income 7,956 8,121
Provision for loan losses 210 372
------- -------
Net Interest Income after provision for loan losses 7,746 7,749
Noninterest Income:
Gain on sale of mortgage loans 2,370 1,174
Service charges on deposit accounts 605 543
Gain (loss) on sale of securities 7 (7)
Mortgage servicing, net of amortization (265) (60)
Other 1,372 1,101
------- -------
Total Noninterest Income 4,089 2,751
Noninterest Expense:
Salaries and employee benefits 3,762 3,546
Occupancy and equipment 949 935
Amortization of intangibles 112 89
FDIC insurance premium 23 24
Michigan single business tax 61 24
Other 1,973 1,844
------- -------
Total Noninterest Expense 6,880 6,462
Income before federal income taxes 4,955 4,038
Federal income taxes 1,660 1,341
------- -------
NET INCOME $ 3,295 $ 2,697
======= =======
Comprehensive Income $ 3,161 $ 2,458
======= =======
Basic Earnings Per Share $0.61 $0.50
===== =====
Diluted Earnings Per Share $0.59 $0.49
===== =====
Dividends Per Share $0.19 $0.17
===== =====
See notes to consolidated financial statements.
4
FIRSTBANK CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED
MARCH 31, 2003 AND 2002
(Dollars in thousands)
UNAUDITED
Three months ended March 31,
2003 2002
---- ----
OPERATING ACTIVITIES
Net income $ 3,295 $ 2,697
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses 210 372
Depreciation of premises and equipment 425 405
Net amortization of security premiums/discounts 178 74
(Gain) loss on sale of securities (7) 7
Amortization of goodwill and other intangibles 112 91
Gain on sale of mortgage loans (2,370) (1,002)
Proceeds from sales of mortgage loans 104,792 69,109
Loans originated for sale (98,720) (65,327)
Decrease (increase) in accrued interest receivable and other assets 179 (362)
Increase (decrease) in accrued interest payable and other liabilities 666 (210)
------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 8,760 5,854
INVESTING ACTIVITIES
Proceeds from sale of securities available for sale 107 993
Proceeds from maturities of securities available for sale 4,601 15,863
Purchases of securities available for sale (17,074) (16,419)
Net decrease in portfolio loans 14,173 13,623
Net purchases of premises and equipment (289) (399)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES 1,518 13,661
FINANCING ACTIVITIES
Net decrease in deposits (2,193) (6,676)
Decrease in securities sold under agreements to repurchase and other (2,529) (3,411)
short term borrowings
Decrease of notes payable (26) (6,226)
Cash proceeds from issuance of common stock 756 448
Purchase of common stock (441) (12)
Cash dividends (1,022) (923)
-------- --------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES (5,455) (16,800)
INCREASE IN CASH AND CASH EQUIVALENTS 4,823 2,715
Cash and cash equivalents at beginning of period 60,547 45,814
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $65,370 $48,529
======= =======
Supplemental Disclosure
Interest Paid $ 3,756 $ 4,288
Income Taxes Paid $ 700 $ 1,725
See notes to consolidated financial statements.
5
FIRSTBANK CORPORATION
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
MARCH 31, 2002
UNAUDITED
NOTE A – STOCK COMPENSATION
Employment compensation expense under stock options is reported using the intrinsic value method. No stock-based compensation cost is reflected in net income as all options granted had an exercise price equal to or greater than the market price of the underlying common stock at date of grant. The following table illustrates the effect on net income and earnings per share if expense was measured using the fair value recognition provisions of FASB Statement No. 123, Accounting for Stock-Based Compensation.
March 31,
2003 2002
---- ----
Net Income as Reported $3,295,000 $2,697,000
Deduct Stock-Based Compensation Expense Determined Under
Fair Value Based Method $ 27,000 $ 34,000
--------- ---------
Pro Forma Net Income $3,268,000 $2,663,000
Basic Earnings per Share as Reported $ 0.61 $ 0.50
Pro Forma Basic Earnings per Share $ 0.61 $ 0.49
Diluted Earnings per Share as Reported $ 0.59 $ 0.49
Pro Forma Diluted Earnings per Share $ 0.59 $ 0.49
NOTE B — FINANCIAL STATEMENTS
The accompanying unaudited financial information presented is for Firstbank Corporation (“Corporation”) and its wholly owned subsidiaries: Firstbank — Alma, Firstbank (Mt. Pleasant), Firstbank — West Branch (including its wholly owned subsidiaries; 1st Armored, Inc., 1st Title, Inc., and its majority holding in C.A. Hanes Realty, Inc.), Firstbank — Lakeview, Firstbank — St. Johns (collectively the “Banks”) and Gladwin Land Company, Inc. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2003, are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. The balance sheet at December 31, 2002, has been derived from the audited financial statements at that date. For further information, refer to the consolidated financial statements and footnotes thereto included in the Corporation’s annual report on Form 10-K for the year ended December 31, 2002.
NOTE C — SECURITIES
Individual securities held in the security portfolio are classified as securities available for sale. Securities might be sold prior to maturity due to changes in interest rates, prepayment risks, yield, availability of alternate investments, liquidity needs, or other factors. Securities classified as available for sale are reported at their fair value and the related unrealized holding gain or loss is reported, net of related income tax effects, as a separate component of shareholders’ equity until realized.
6
NOTE D — LOAN COMMITMENTS
Loan commitments (including unused lines of credit and letters of credit) are made to accommodate the financial needs of the Banks’ customers. The commitments have credit risk essentially the same as that involved in extending loans to customers and are subject to the Corporation’s normal credit policies and collateral requirements. Loan commitments, which are predominately at variable rates, were approximately $145,529,000 and $129,011,000 at March 31, 2003 and December 31, 2002, respectively.
NOTE E – NONPERFORMING LOANS AND ASSETS
Nonperforming Loans and Assets
The following table summarizes nonaccrual and past due loans at the dates indicated:
(Dollars in thousands) March 31, December 31,
2003 2002
---- ----
Nonperforming loans:
Nonaccrual loans $1,087 $ 630
Loans 90 days or more past due 670 3,130
Renegotiated loans 53 53
Total nonperforming loans $1,810 $3,813
Property from defaulted loans $ 567 $ 578
Nonperforming loans as a percent of total loans* 0.31% 0.64%
Nonperforming loans + ORE as a percent of total loans* + ORE 0.40% 0.73%
Nonperforming assets as a percent of total assets 0.31% 0.57%
Analysis of the Allowance for Loan Losses
- -----------------------------------------
(Dollars in Thousands) Three Months Ended March 31,
2003 2002
---- ----
Balance at beginning of period $11,536 $11,038
Charge-offs (129) (400)
Recoveries 74 97
------ ------
Net (charge-offs) recoveries (55) (303)
Additions from the provision for loan losses 210 372
------ ------
Balance at end of period $11,691 $11,107
====== ======
Average total loans* outstanding during the period $592,495 $589,433
Allowance for loan loss as a percent of total loans* 1.99% 1.89%
Allowance for loan loss as a percent of nonperforming loans 646% 291%
Net Charge-offs^ as a percent of average loans* 0.04% 0.21%
*All loan ratios exclude loans held
for sale
^Annualized
7
NOTE F — RECLASSIFICATION
Certain 2002 amounts have been reclassified to conform to the 2003 presentation.
NOTE G – BASIC AND DILUTED EARNINGS PER SHARE
(Dollars in Thousands Except for per Share Data) Three Months Ended March 31,
2003 2002
---- ----
Earnings per share
Net income $3,295 $2,697
Weighted average common shares outstanding 5,376 5,377
Basic Earnings per Share $ 0.61 $ 0.50
==== ====
Earnings per share assuming dilution
Net income $3,295 $2,697
Weighted average common shares outstanding 5,376 5,377
Add dilutive effect of assumed exercises of options 169 119
--- ---
Weighted average common and dilutive potential common 5,545 5,496
shares outstanding
Diluted Earnings per Share $ 0.59 $ 0.49
==== ====
Stock options for 85,894 shares were not considered in computing diluted earnings per share for the three month period of 2002
because they were antidilutive. There were no antidilutive stock option shares at March 31, 2003.
NOTE H - INTANGIBLE AMORTIZATION
Acquired Intangible Assets
Acquired intangible assets were as follows:
March 31, 2003 December 31, 2002
-------------- -----------------
Gross Gross
Carrying Accumulated Carrying Accumulated
Amount Amortization Amount Amortization
------ ------------ ------ ------------
Core deposit premium resulting from branch
acquisitions $4,740 $1,830 $4,740 $1,756
Other customer relationship intangibles 17 8 346 172
----- ----- ----- -----
Total $4,757 $1,838 $5,086 $1,928
During the first quarter of 2003, the Corporation sold customer relationship intangibles with a gross carrying amount of $329,000 and accumulated amortization of $200,000, which resulted in a realized gain of $67,000.
Estimated amortization expense for each of the next five years is as follows:
2003 $334
2004 $298
2005 $298
2006 $298
2007 $297
8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The consolidated financial information presented is for Firstbank Corporation (“Corporation”) and its wholly owned subsidiaries; Firstbank — Alma, Firstbank (Mt. Pleasant), Firstbank — West Branch (including its wholly owned subsidiaries; 1st Armored, Inc., 1st Title, Inc. and its majority holding in C.A. Hanes Realty, Inc.), Firstbank — Lakeview, Firstbank — St. Johns (collectively the “Banks”) and Gladwin Land Company, Inc.
Financial Condition
Total assets showed little change during the first three months of 2003 decreasing $1.6 million, or less than 1%, when compared to December 31, 2002. Cash and cash equivalents increased $4.8 million, or nearly 8%, and securities available for sale increased $11.9 million, or 18.9%. This increase in liquidity resulted primarily from declines in the amount of mortgages held on the balance sheet. In the current low interest rate environment, when mortgages held on the balance sheet have been refinanced into new long-term, fixed rate mortgages, Firstbank has sold most of the new mortgages in the secondary market (while retaining servicing). This factor has been the primary cause of an increase in short-term investments and liquid assets.
Total gross loans decreased $14.2 million, or 2.4%, during the first quarter of 2003. Residential mortgages declined by $6.1 million, or 3.1%, primarily as a result of re-finance activity described above. The largest percentage decline was seen in real estate construction which decreased $4.7 million, or 9.9%, due to seasonal and economic factors. Loans to individuals decreased by $1.5 million, or 2.4%. Commercial and commercial real estate loans decreased by $2.0 million, or less than 1%, from December 31, 2002, although they were 4.1% above the year-ago level.
Net charge-offs of loans decreased to $55,000 in the first quarter of 2003 compared to $303,000 in the first quarter of 2002. The ratio of net charge-offs of loans (annualized) to average loans was .04% in the first quarter of 2003 compared to .21% in the first quarter of 2002. Both levels are considered favorable by industry standards. The provision for loan losses in the first quarter of 2003, at $210,000, was reduced from prior periods due to improvements in measures of asset quality, but exceeded the very low level of net charge-offs by $155,000, and resulted in an increase in the allowance for loan losses of $155,000, or 1.3%, during the first three months of 2003. At March 31, 2003, the allowance as a percentage of outstanding loans was 1.99% compared to 1.92% at year end 2002. Management continues to maintain 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 loan portfolio, delinquencies, and other relevant factors.
Total deposits declined $2.2 million, or 0.4%, from December 31, 2002 to March 31, 2003. Increases of $9.2 million, or 5.2%, in interest bearing demand deposits and of $4.5 million, or 5.4%, in savings deposits were offset by seasonal decreases of $12.2 million, or 12.4%, in non-interest bearing account balances and $3.7 million, or 1.7%, in time deposits. For the three month period ended March 31, 2003, securities sold under agreements to repurchase and overnight borrowings decreased $2.5 million, or 8.3%, due to normal fluctuations in customer cash flows. FHLB advances and notes payable decreased by regularly scheduled payments of $26,000. The reduced deposits and other funding sources were commensurate with the weak demand for funds from lending activities.
Total shareholder’s equity increased $2.5 million, or 3.0%, during the first three months of 2003. Net income of $3,295,000 and stock issuances of $756,000 increased shareholders’ equity, while stock repurchases of $441,000, dividends of $1,022,000, and net unrealized depreciation of securities available for sale of $134,000 decreased shareholders’ equity. Stock issuance was primarily related to dividend reinvestment and exercise of stock options. Book value was $15.32 per share at March 31, 2003, up from $14.94 at December 31, 2002.
9
The following table discloses compliance with current regulatory capital requirements on a consolidated basis:
(Dollars in Thousands) Total Risk-
Leverage Tier 1 Capital Base Capital
-------- -------------- ------------
Capital Balances at March 31, 2003 $73,257 $73,257 $80,266
Required Regulatory Capital $31,377 $22,688 $45,376
Capital in Excess of Regulatory Minimums $41,880 $50,569 $34,890
Capital Ratios at March 31, 2003 9.34% 12.92% 14.16%
Regulatory Capital Ratios - "Well Capitalized" Definition 5.00% 6.00% 10.00%
Regulatory Capital Ratios - Minimum Requirement 4.00% 4.00% 8.00%
Results of Operations
For the first quarter of 2003, net income was $3,295,000, basic earnings per share were $0.61, and diluted earnings per share were $0.59, compared to $2,458,000, $0.50, and $0.49 for the first quarter of 2002. The increase in earnings was led by the extraordinarily heavy re-finance activity that produced more than a two-fold increase in gain on sale of mortgage loans over the same period a year ago.
Average earning assets increased $13.2 million, or 1.9%, from the first quarter of 2002 to the same period of 2003. The yield on earning assets decreased 76 basis points, to 6.55%, for the quarter ended March 31, 2003, compared to 7.30% for the quarter ended March 31, 2002. The cost of funding related liabilities decreased 56 basis points when comparing the three month periods ended March 31st, from 2.53% in 2002, to 1.97% in 2003. Since the decrease in yield on earning assets was greater than the decrease in the cost of funds relative to earning assets, the net interest margin declined by 20 basis points, from 4.77% in 2002 to 4.57% in 2003. Net interest income decreased $165,000, or 2.0%, in the first three months of 2002 compared to the same period in 2002.
The provision for loan losses decreased $162,000, or 43.6%, when the first quarter of 2003 is compared to the first quarter of 2002. Management has developed a quantitative and qualitative methodology for analyzing factors which impact the allowance for loan losses consistently across its five banking subsidiaries. The process applies risk factors for historical charge-offs and delinquency experience, portfolio segment growth rates, and industry and regional factors and trends as they affect the banks’ portfolios. The consideration of exposures to industries potentially most affected by current risks in the economic and political environment and the review of potential risks in certain credits that are not considered part of the non-performing loan category contributed to the establishment of the allowance levels at each bank. Net charge-offs for the first three months of 2003 have declined by $248,000 to $55,000, when compared to $303,000 in the same period of 2002. Management believes that the analysis described above provides a consistent basis for the current provision levels.
Total non-interest income increased $1,338,000, or 48.6%, when the first three months of 2003 are compared to the same period in 2002. Strong mortgage refinance activity continued into the first quarter of 2003 and resulted in an increase of $1,196,000, or 101.9%, in gains on sale of mortgage loans over the same period in 2002. Service charges on deposit accounts for the three month period ended March 31, 2003 posted an increase of $62,000, or 11.4%, over the March 31, 2002 figure. Improved rates of collection and management of fee waivers contributed to this increase. Miscellaneous non-interest income increased by $271,000, or 24.6%, when the first quarter of 2003 is compared to the same period of 2002. Increases in income among the non-bank subsidiaries (1st Title, Inc, 1st Armored, Inc. and Gladwin Land, Inc.) accounted for $179,000 of the increase. Other additions to non-interest income included $140,000 related to gains on sale of a small book of brokerage business and sale of certain real estate properties owned.
Certain categories of non-interest income declined, most notably mortgage servicing income, which declined $205,000, from a negative $60,000 for the first quarter of 2002, to a negative $265,000 for the first quarter of 2003. The negative amounts in both periods are due to the impact of refinances and other pre-payments, which require that remaining mortgage servicing rights on a prepaid or refinanced mortgage be written off against mortgage servicing income at the same time that new mortgage servicing rights are created for the refinanced mortgage and recorded as part of gain on sale of mortgages. The increased size of the negative amount in the first quarter of 2003 was related to the increased level of mortgage refinance activity.
10
Total non-interest expense increased $418,000, or 6.5%, when comparing the three month periods ended March 31, 2003 and 2002. Salaries and employee benefits increased $216,000, or 6.1%, over the 2002 level. Approximately one half of this increase was the result of additional staff at two new full-service branch facilities which were not in operation during the first quarter of 2002. The remainder of the increase was due to yearly merit raises and an increase in part-time staff necessary to meet the needs related to the high volume in the mortgage business. Amortization of intangible assets increased by $23,000, or 25.9%, due to the sale of a brokerage customer list, and write-off of the remaining intangible assets related to that customer list, and certain other customer accounts that had been acquired at the same time. Michigan Single Business tax increased $37,000, or 154.2%, over the 2002 expense due to the tax effect of the large increase in non-interest income. Other miscellaneous non-interest expense increased $129,000, or 7.0%, when the first three months of 2003 are compared to the same period of 2002. Increases in commissions and contracted services for real estate title and appraisal work at two non-bank subsidiaries accounted for more than 60% of this increase.
Federal Income tax expense increased $319,000, or 23.8%, in response to the increased earnings.
This report contains forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation itself. Words such as “anticipate,” “believe,” “determine,” “estimate,” “expect,” “forecast,” “intend,” “is likely,” “plan,” “project,” “opinion,” variations of such terms, and similar expressions are intended to identify such forward-looking statements. The presentations and discussions of the provision and allowance for loan losses, and determinations as to the need for other allowances presented in this report, are inherently forward-looking statements in that they involve 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; 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.
11
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Information under the headings, “Liquidity and Interest Rate Sensitivity” on pages 8 and 9 and “Quantitative and Qualitative Disclosure About Market Risk” on pages 9 through 10 in the registrant’s annual report to shareholders for the year ended December 31, 2002, is here incorporated by reference. Firstbank’s annual report is filed as Exhibit 13 to its Form 10-K annual report for its fiscal year ended December 31, 2002.
Firstbank faces market risk to the extent that both earnings and the fair values of its financial instruments are affected by changes in interest rates. The Corporation manages this risk with static GAP analysis and simulation modeling. The Corporation does not believe that there has been a material change in the nature of the Corporation’s primary market risk exposures, including the categories of market risk to which the Corporation is exposed and the particular markets that present the primary risk of loss to the Corporation. As of the date of this Form 10-Q Quarterly Report, the Corporation does not know of nor expect there to be any material change in the general nature of its primary market risk exposure in the near term.
The methods by which the Corporation manages its primary market risk exposures, as described in the sections of its Form 10-K Annual Report incorporated by reference in response to this item, have not changed materially during the current year. As of the date of this Form 10-Q quarterly report, the Corporation does not expect to change those methods in the near term. However, the Corporation may change those methods in the future to adapt to changes in circumstances or to implement new techniques.
The Corporation’s market risk exposure is mainly comprised of its vulnerability to interest rate risk. Prevailing interest rates and interest rate relationships in the future will be primarily determined by market factors which are outside of Firstbank’s control. All information provided in response to this item consists of forward looking statements. Reference is made to the section captioned “Forward Looking Statements” on page 11 of this Form 10-Q quarterly report for a discussion of the limitations on Firstbank’s responsibility for such statements.
12
Item 4. Controls and Procedures
| a) |
Evaluation of Disclosure Controls and Procedures On May 12, 2003, the Corporation’s Chief Executive Officer and Chief Financial Officer reported on the Corporation’s disclosure controls to the Audit Committee. The portion of that report which constitutes their conclusions about the effectiveness of the disclosure controls and procedures based on their evaluation as of May 6, 2003 is as follows: “Based on our knowledge and the most recent evaluation, we believe the controls to be reasonably effective and commercially practical in providing information for management of the Corporation and for fair reporting to the investing public.” |
| b) |
Changes in Internal Controls There were no significant changes in the Corporation’s internal controls or in other factors that could significantly affect internal controls subsequent to the date of the most recent evaluation. |
13
PART II. OTHER INFORMATION
Item 5. Other Information
The audit committee of the Board of Directors approved the categories of all non-audit services performed by the registrant’s independent accountants during the period covered by this report, except for certain miscellaneous services that meet the de minimus exception under current regulations.
| Item 6. |
Exhibits and Reports on Form 8-K. |
| (a) Exhibits |
|
| Exhibit. |
Description |
| 99.1 | Certificate of the President and Chief Executive Officer of Firstbank Corporation pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| 99.2 | Certificate of the Executive Vice President and Chief Financial Officer of Firstbank Corporation pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K Report on Form 8-K dated January 16, 2003, announcing 2002 fourth quarter and full year results. Report on Form 8-K dated January 28, 2003, reporting a cash dividend. |
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| FIRSTBANK CORPORATION (Registrant) |
|
| Date: May 13, 2003 |
\s\ Thomas R. Sullivan Thomas R. Sullivan President, Chief Executive Officer (Principal Executive Officer) |
| Date: May 13, 2003 |
\s\ Samuel G. Stone Samuel G. Stone Executive Vice President, Chief Financial Officer (Principal Accounting Officer) |
15
I, Thomas R. Sullivan, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q, of Firstbank Corporation; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| (a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and |
| (b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| (c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| (a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; |
| 6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: May 12, 2003
| /s/ Thomas R. Sullivan
Thomas R. Sullivan Chief Executive Officer |
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I, Samuel G. Stone, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q, of Firstbank Corporation; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; |
| 4. | The registrant’s other certifying officers and I, are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: |
| (a) | designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; and |
| (b) | evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and |
| (c) | presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; |
| 5. | The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function): |
| (a) | all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and |
| (b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; |
| 6. | The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. |
Date: May 13, 2003
| /s/ Samuel G. Stone
Samuel G. Stone Chief Financial Officer |
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EXHIBIT INDEX
| Exhibit | Description |
| 99.1 | Certificate of the Chief Executive Officer of Firstbank Corporation pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002. |
| 99.2 | Certificate of the Chief Financial Officer of Firstbank Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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I, Thomas R. Sullivan, Chief Executive Officer of Firstbank Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, which this statement accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
| (2) | the information contained in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of Firstbank Corporation. |
Date: May 12, 2003
| /s/ Thomas R. Sullivan
Thomas R. Sullivan Chief Executive Officer |
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I, Samuel G. Stone, Executive Vice President and Chief Financial Officer of Firstbank Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003, which this statement accompanies, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
| (2) | the information contained in the Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2003 fairly presents, in all material respects, the financial condition and results of operations of Firstbank Corporation. |
Date: May 13, 2003
| /s/ Samuel G. Stone
Samuel G. Stone Executive Vice President and Chief Financial Officer |
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