FBMI Firstbank Corp. (MM)

Firstbank Corporation Announces Third Quarter and Year-to-Date 2004 Results Highlights Include: * Earnings per share (diluted) of $0.49 for the third quarter of 2004 and $1.41 for the first nine months of 2004 * Completion of 600,000 share self tender offer for common stock during the third quarter, followed by issuance of $10 million trust preferred securities shortly after quarter-end * Annualized loan growth of 10.0% for the quarter and 10.9% versus year-ago * Continuing strong asset quality and capital ratios ALMA, Mich., Oct. 19 /PRNewswire-FirstCall/ -- Thomas R. Sullivan, President and Chief Executive Officer of Firstbank Corporation (NASDAQ:FBMI) announced net income of $2,656,000 for the quarter ended September 30, 2004, compared to $2,565,000 for the quarter ended June 30, 2004, an increase of 3.5%. Earnings per share were $0.49, up 8.9% from $0.45 for the second quarter of 2004. Returns on average assets and average equity for the third quarter of 2004 were 1.33% and 13.8%, respectively, compared with 1.33% and 12.2% respectively in the second quarter of 2004. Earnings in the third quarter of 2004 included benefit from a negative provision for loan losses of $374,000 as explained further below. All per share amounts are fully diluted amounts and have been adjusted to reflect the 5% stock dividend paid in December 2003. The third quarter 2004 earnings per share of $0.49 were even with the third quarter of 2003, although net income was 7.6% lower. Earnings per share benefited from Firstbank's 600,000 share common stock self tender offer which was completed in August of 2004. The lower level of net income in 2004 was primarily attributable to continuing volatility in the mortgage banking business and reduced levels of mortgage re-financings. Gain on sale of mortgages decreased 45% in the third quarter of 2004 compared to the second quarter of 2004 and was 82% lower than the year-ago level. Notwithstanding the slowdown in mortgage banking activity, Firstbank's mortgage servicing portfolio was basically unchanged from the second quarter with the principal balance of loans serviced for others increasing to $472.5 million as of September 30, 2004, from $471.1 million at June 30, 2004, and increasing 2.0% from $463.1 million at September 30, 2003. For the nine months of 2004, net income of $7,902,000 compared to $9,543,000 for the year-to-date period ended September 30, 2003, a decrease of 17.2%. Earnings per share were $1.41, down 14.0% from $1.64 for the nine months of 2003. Returns on average assets and average equity for the nine months of 2004 were 1.35% and 12.9%, respectively, compared with 1.67% and 15.4% respectively in the first nine months of 2003. Growth in Firstbank's balance sheet continued. Total portfolio loans grew 2.5%, or 10.0% annualized, in the third quarter of 2004 and were 10.9% above the level at September 30, 2003. Strength in loan portfolio growth was balanced between commercial and commercial real estate loans, which together increased 11.4% above the year-ago level, and residential mortgage loans, which increased 16.4%. Total deposits as of September 30, 2004, increased 2.1% from June 30, 2004, and were 4.9% above the year-ago level. Non-interest bearing deposits increased 5.8% from June 30, 2004, and were 8.7% over the level at September 30, 2003. Firstbank's net interest margin, at 4.44% in the third quarter of 2004, increased 0.03% from the 4.41% level achieved in the second quarter of 2004 and compared to 4.42% in the third quarter of 2003. Benefit from increases in the prime rate was partially offset by the interest cost of funds used to repurchase shares in the self tender offer and by increases in rates on other funding sources. Mr. Sullivan stated, "Our lenders continue to manage asset quality well, and we continue to believe that we have our banks' balance sheets positioned to benefit both net interest margin and earnings from increasing interest rates. During the third quarter and in the first weeks of October we made significant progress on our capital management strategies with the successful completion of our self tender offer and the issuance of trust preferred securities. We believe that these capital management strategies will enhance our ability to grow earnings per share in the future." Firstbank's salaries and employee benefits expense increased by 1.3% in the third quarter of 2004 compared to the second quarter of 2004, as seasonal needs were met. Total non-interest expense for the third quarter of 2004 was 9.8% below the level in the third quarter of 2003. Non-interest expense in the third quarter of 2004 includes approximately $101,000 associated with Firstbank's self tender offer. In the third quarter of 2004, as previously announced, Firstbank completed the repurchase of 600,000 shares of its common stock through its self tender offer. No other shares were repurchased during the quarter. Primarily as a result of the self tender offer, shareholders' equity decreased 18.0% in the third quarter of 2004. The ratio of average equity to average assets stood at 9.6% in the third quarter of 2004, compared to 10.9% in the second quarter of 2004 and 11.0% in the third quarter of 2003. Firstbank's asset quality measures remained strong. The ratio of non- performing loans to loans was 0.37% as of September 30, 2004, compared to 0.37% at June 30, 2004, and 0.16% at September 30, 2003. Net charge-offs in the third quarter of 2004 were $64,000, or 0.04% annualized as a percentage of average loans, compared to $119,000, or 0.07% annualized as a percentage of average loans in the second quarter of 2004, and compared to $193,000, or 0.13% annualized in the third quarter of 2003. These measures of asset quality remain at low levels and continue to be at levels considered in the industry to be favorable. During the third quarter of 2004, one of Firstbank Corporation's banks received substantially full pay-off of a $557,000 loan that was classified as non-performing due to delinquency, as reported at the time of the release of second quarter earnings. Specific reserve related to this loan was reversed in the third quarter. Two additional credits having specific reserves experienced partial pay downs and transactions involving collateral that resulted in release of additional specific reserve. As a result, on a consolidated basis Firstbank had negative provision for loan losses related to these loans of $480,000 and a total provision for loan losses for the quarter of negative $374,000. Firstbank Corporation, headquartered in Alma, Michigan is currently a five bank financial services company with assets of $799 million and 35 banking offices located in central and northeast Michigan. Bank subsidiaries include: Firstbank - Alma; Firstbank (Mt. Pleasant); Firstbank - West Branch; Firstbank - Lakeview; and Firstbank - St. Johns. Other corporate affiliates include 1st Armored, Inc.; 1st Title; Gladwin Land Company, Inc.; and C. A. Hanes Realty, Inc. Investment services are available through affiliations with Citizens Bank Wealth Management N.A., MML Investors Services, Inc., and Raymond James Financial Services Inc. This press release contains certain forward-looking statements that involve risks and uncertainties. When used in this press release the words "anticipate," "believe," "expect," "potential," "should," and similar expressions identify forward-looking statements. Forward-looking statements include, but are not limited to, statements concerning future business growth, increases in interest rates and positioning of balance sheets to benefit net interest margins and earnings. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services, interest rates and fees for services. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Dollars in thousands except per share data) UNAUDITED Three months Ended: Nine Months Ended: Sep 30 Jun 30 Sep 30 Sep 30 Sep 30 2004 2004 2003 2004 2003 Interest income: Interest and fees on loans $10,378 $10,058 $10,071 $30,616 $30,942 Investment securities Taxable 449 380 439 $1,212 $1,419 Exempt from federal income tax 234 228 255 $704 781 Short term investments 30 32 113 86 343 Total interest income 11,091 10,698 10,878 32,618 33,485 Interest expense: Deposits 1,878 1,815 2,000 $5,479 6,721 Notes payable and other 1,097 995 1,020 3,122 3,065 Total interest expense 2,975 2,810 3,020 8,601 9,786 Net interest income 8,116 7,888 7,858 24,017 23,699 Provision for loan losses (374) 60 115 (505) 445 Net interest income after provision for loan losses 8,490 7,828 7,743 24,522 23,254 Noninterest income: Gain on sale of mortgage loans 467 847 2,561 2,098 8,045 Service charges on deposit accounts 730 703 653 2,082 1,904 Gain on sale of securities 10 11 0 21 9 Mortgage servicing 34 (56) (470) (42) (1,164) Other 1,197 1,316 1,575 3,465 4,411 Total noninterest income 2,438 2,821 4,319 7,624 13,205 Noninterest expense: Salaries and employee benefits 3,888 3,838 4,344 11,667 12,186 Occupancy and equipment 986 923 950 2,878 2,813 Amortization of intangibles 76 76 75 228 260 FDIC insurance premium 21 21 23 64 69 Michigan single business tax 28 24 57 73 192 Other 1,996 1,989 2,307 5,559 6,614 Total noninterest expense 6,995 6,871 7,756 20,469 22,134 Income before federal income taxes 3,933 3,778 4,306 11,677 14,325 Federal income taxes 1,277 1,213 1,431 3,775 4,782 Net Income $2,656 $2,565 $2,875 $7,902 $9,543 Fully Tax Equivalent Interest Income $8,258 $8,015 $8,005 $24,400 $24,173 Per Share Data: Basic Earnings $0.50 $0.46 $0.51 $1.44 $1.68 Diluted Earnings $0.49 $0.45 $0.49 $1.41 $1.64 Dividends Paid $0.21 $0.21 $0.19 $0.62 $0.56 Performance Ratios: Return on Average Assets* 1.33% 1.33% 1.47% 1.35% 1.67% Return on Average Equity* 13.8% 12.2% 13.4% 12.9% 15.4% Net Interest Margin (FTE) * 4.44% 4.41% 4.42% 4.45% 4.50% Book Value Per Share+ $14.11 $15.44 $15.20 $14.11 $15.20 Average Equity/Average Assets 9.6% 10.9% 11.0% 10.5% 10.8% Net Charge-offs $64 $119 $193 $327 $347 Net Charge-offs as a % of Average Loans^* 0.04% 0.07% 0.13% 0.07% 0.08% * Annualized + Period End ^ Total loans less loans held for sale FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS (Dollars in thousands) UNAUDITED Sep 30 Jun 30 Dec 31 Sep 30 2004 2004 2003 2003 ASSETS Cash and cash equivalents: Cash and due from banks $31,087 $24,070 $27,442 $24,325 Short term investments 4,136 10,807 5,703 34,954 Total cash and cash equivalents 35,223 34,877 33,145 59,279 Securities available for sale 63,327 66,256 70,731 69,889 Federal Home Loan Bank stock 5,303 5,241 4,929 4,857 Loans: Loans held for sale 434 1,400 4,160 3,296 Portfolio loans: Commercial 110,726 101,393 112,263 98,458 Commercial real estate 223,307 216,689 203,080 201,436 Residential mortgage 223,808 221,766 204,806 192,348 Real estate construction 50,682 51,442 55,160 49,346 Consumer 56,871 57,944 57,557 57,459 Credit card 1,832 1,828 2,587 2,583 Total portfolio loans 667,226 651,062 635,453 601,630 Less allowance for loan losses (10,795) (11,232) (11,627) (11,634) Net portfolio loans 656,431 639,830 623,826 589,996 Premises and equipment, net 17,860 17,923 18,103 17,470 Goodwill 4,880 4,880 4,880 4,880 Other intangibles 2,289 2,538 2,698 2,773 Other assets 13,055 13,111 14,028 12,198 TOTAL ASSETS $798,802 $786,056 $776,500 $764,638 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits: Noninterest bearing accounts 111,165 105,104 102,296 102,272 Interest bearing accounts: Demand 182,221 181,272 181,642 181,532 Savings 101,048 98,651 95,395 96,732 Time 207,514 204,341 188,221 193,269 Total deposits 601,948 589,368 567,554 573,805 Securities sold under agreements to repurchase and overnight borrowings 36,021 28,883 47,069 29,357 FHLB Advances and notes payable 81,462 72,475 67,255 66,286 Accrued interest and other liabilities 8,305 8,641 8,878 8,936 Total liabilities 727,736 699,367 690,756 678,384 SHAREHOLDERS' EQUITY Preferred stock; no par value, 300,000 shares authorized, none issued Common stock; 10,000,000 shares authorized * 56,662 74,115 75,591 68,704 Retained earnings 13,740 12,139 9,187 16,118 Accumulated other comprehensive income 664 435 966 1,432 Total shareholders' equity 71,066 86,689 85,744 86,254 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $798,802 $786,056 $776,500 $764,638 * Common stock shares issued and outstanding 5,037,995 5,615,224 5,642,304 5,672,596 Asset Quality Ratios: Non-Performing Loans / Loans^ 0.37% 0.37% 0.22% 0.16% Non-Perf. Loans + OREO / Loans^ + OREO 0.43% 0.39% 0.26% 0.25% Non-Performing Assets / Total Assets 0.36% 0.33% 0.21% 0.20% Allowance for Loan Loss as a % of Loans^ 1.62% 1.73% 1.83% 1.93% Allowance / Non-Performing Loans 438% 464% 822% 1204% Quarterly Average Balances: Total Portfolio Loans^ $661,813 $644,714 $615,474 $594,667 Total Earning Assets $741,979 $729,187 $714,907 $721,778 Total Shareholders' Equity $76,450 $84,977 $85,028 $84,774 Total Assets 793,781 779,826 763,503 770,108 Diluted Shares Outstanding 5,395,935 5,707,903 5,814,986 5,856,802 ^ Total Loans less loans held for sale DATASOURCE: Firstbank Corporation CONTACT: Samuel G. Stone, Executive Vice President and Chief Financial Officer of Firstbank Corporation, +1-989-466-7325 Web site: http://www.firstbank-corp.com/

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