ITEM 1. Business.
Firstbank Corporation (the "Corporation") is a bank holding company. The Corporation owns all of the outstanding stock of Bank of Alma, Firstbank (Mount Pleasant), 1st Bank (West Branch), and Bank of Lakeview. The Corporation has applied to form a new community bank in St. Johns, Michigan, to be known as "Firstbank - St. Johns." The opening of the bank is subject to approval by the FDIC and the Michigan Financial Institutions Bureau. Assuming receipt of such approvals, it is expected that the bank will open in June or July of 2000.
The Corporation's business is concentrated in a single industry segment -- commercial banking. Each subsidiary bank of the Corporation is a full-service, community bank. The subsidiary banks offer all customary banking services, including the acceptance of checking, savings, and time deposits, and the making of commercial, mortgage (principally single family), home improvement, automobile, and other consumer loans. Bank of Alma also offers trust services.
1st Bank owns 1st Armored, Incorporated, an armored car service provider and 1st Collections, Incorporated, a collection service. 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 78 percent of total revenues in 1999, 76 percent of total revenues in 1998, and 80 percent in 1997. In addition, interest income from investment securities accounted for approximately 10 percent of total revenues on a consolidated basis in 1999, 12 percent of total revenues on a consolidated basis in 1998, and 11 percent of total revenues on a consolidated basis in 1997. No other single source of revenue accounted for 15 percent or more of the Corporation's total revenues in any of the last three years. The Corporation has no foreign assets and no income from foreign sources. The business of the subsidiary banks of the Corporation is not seasonal to any material extent.
Bank of Alma is a Michigan state chartered bank. It and its predecessors have operated continuously in Alma, Michigan, since 1880. Its main office and one branch are located in Alma. Bank of Alma also has one full service branch located in each of the following communities near Alma: Ashley, Auburn, Ithaca, Merrill, Pine River Township, Riverdale, St. Charles, St. Louis, and Vestaburg.
Firstbank is a Michigan state chartered bank which was incorporated in 1894. Its main office and one branch are located in Mount Pleasant, Michigan. Firstbank also has 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.
1st Bank is a Michigan state chartered bank which was incorporated in 1980. Its main office and one branch are located in West Branch, Michigan. 1st Bank also has one full service branch located in each of the following communities near West Branch: Fairview, Hale, Higgins Lake, Rose City, St. Helen, and West Branch Township. 1st Bank also operates a loan production office in Roscommon, Michigan.
Bank of 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).
The following table shows comparative information concerning the Corporation's subsidiary banks at December 31, 1999:
As of December 31, 1999, the Corporation and its subsidiaries employed 300 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. Bank of Alma primarily competes in Gratiot, Midland, Montcalm, and Saginaw Counties; Firstbank primarily in Isabella and Clare Counties; 1st Bank primarily in Iosco, Oscoda, Ogemaw, and Roscommon Counties; and Bank of Lakeview primarily in Mecosta and Montcalm Counties.
Banks and bank holding companies are extensively regulated. The Corporation is a bank holding company that is regulated by the Federal Reserve System. Bank of Alma, Firstbank, 1st Bank, and Bank of Lakeview are chartered under state law and are supervised, examined, and regulated by the Federal Deposit Insurance Corporation and the Financial Institutions Bureau of the Michigan Department of Consumer and Industry 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.
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. Bank of Alma and Firstbank 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
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, 1999.
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:
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.
The following tables provide information concerning the business of the registrant.
Distribution of Assets, Liabilities, and Shareholders' Equity
(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 $1,312,400, $1,726,000, and $1,387,300 respectively. Interest on nonaccrual loans is not included.
Volume/Rate Analysis(1)
(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%.
Investment Portfolio
The carrying values of investment securities as of the dates indicated are summarized as follows:
Analysis of Investment Securities Portfolio
The following table shows, by class of maturities at December 31, 1999, the amounts and weighted average yields of such investment securities (1):
(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:
Analysis of Investment Securities Portfolio (cont.)
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, 1999.
Loan Portfolio
The following table presents the loans outstanding at December 31,
The following table shows the maturity of commercial and agricultural and real estate construction loans outstanding at December 31, 1999. Also provided are the amounts due after one year classified according to their sensitivity to changes in interest rates.
Nonperforming Loans and Assets
The following table summarizes nonaccrual, troubled debt restructurings, and past-due loans at December 31,
(1) 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, 1999, 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 $134,545. The amount of interest income on those loans that was included in net income for the period was $247,948.
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, 1999, the Corporation had $15,847,000 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, 1999, 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, 1999.
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,
(1) Includes the allowance of Bank of 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,
Average Deposits
The daily average deposits and rates paid on such deposits for the years ending December 31,
The time remaining until maturity of time certificates of deposit and other time deposits of $100,000 or more at December 31, 1999, was as follows (Dollars in Thousands):
Return on Equity and Assets
The following table sets forth certain financial ratios for the years ended:
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, 1999, which consist of the following:
(1) The weighted average interest rates are derived by dividing the interest expense for the period by the daily average balance during the period.
ITEM 2.
ITEM 2. Properties.
The offices of the Corporation and the main office of Bank of Alma are located at 311 Woodworth Avenue, Alma, Michigan. Bank of Alma occupies approximately 24,000 square feet of this building owned by Bank of Alma. The Corporation's Operations Center is housed in a 14,800 square foot building located in Alma and owned by Bank of Alma. The main office of Firstbank -- Mt. Pleasant is located at 102 South Main, Mount Pleasant, Michigan. The 5,600 square foot facility is leased. The lease will expire in 2001. Firstbank has an option to extend the term for an additional five years. The main office of 1st Bank 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 1st Bank 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 Bank of 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 subsidiary banks operate a total of 29 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.
ITEM 3.
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.
ITEM 4. Submission of Matters to a Vote of Security Holders.
Not applicable.
Supplemental Item. Executive Officers of the Registrant.
The following information concerning executive officers of the Corporation who are not directors has been omitted from the registrant's proxy statement pursuant to Instruction 3 to Regulation S-K, Item 401(b).
Officers of the Corporation are appointed annually by the Board of Directors of the Corporation and serve at the pleasure of the Board of Directors. Information concerning the executive officers of the Corporation who are not also directors or nominees for election to the Board of Directors of the Corporation is given below. Except as otherwise indicated, all existing officers have had the same principal employment for over 5 years.
Mary D. Deci (age 53) has been Chief Financial Officer, Secretary, and Treasurer of the Corporation since 1994. Ms. Deci has been Executive Vice President of Bank of Alma since 1999, and Controller of Bank of Alma since 1988. She had been Senior Vice President of Bank of Alma from 1994 - 1999. Ms. Deci has been Vice President of the Corporation and of Bank of Alma since 1989 and has been an officer of Bank of Alma since 1988.
Richard L. Jarvis (age 62) has been Executive Vice President of Firstbank since 1991 and has been Vice President of the Corporation and an officer of Firstbank since 1987. Mr. Jarvis served as a director of Firstbank from 1987 to 1991.
Dale A. Peters (age 57) has been Vice President of the Corporation and President, Chief Executive Officer, and a director of 1st Bank since 1987. He has been Chairman of the Board of 1st Bank since 1988.
Richard J. Schurtz (age 63) has been Vice President of the Corporation since the acquisition of Bank of Lakeview in August of 1997. Mr. Schurtz has been President and Chief Executive Officer and a director of Bank of Lakeview since 1994. Mr. Schurtz retired on January 7, 2000.
Thomas R. Sullivan (age 49) was named President Elect of the Corporation in June 1999, and became President on January 1, 2000. He has also served as President, Chief Executive Officer and a 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 E. Wheeler, II (age 40), has been Vice President of the Corporation and Chief Loan Officer of Bank of Alma since 1989. Mr. Wheeler was named President and CEO elect of Bank of Alma in July 1999. Mr. Wheeler has been Executive Vice President of Bank of Alma since 1999. From 1994 to 1999, Mr. Wheeler served as Senior Vice President of Bank of Alma.
PART II
ITEM 5.
ITEM 5. Market for Registrant's Common Equity and Related Shareholder Matters.
The information under the caption "Common Stock Data" on page 13 in the registrant's annual report to shareholders for the year ended December 31, 1999, is here incorporated by reference.
ITEM 6.
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, 1999, is here incorporated by reference.
ITEM 7.
ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The information under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 4 through 12 in the registrant's annual report to shareholders for the year ended December 31, 1999, is here incorporated by reference.
ITEM 7A.
ITEM 7A. 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 11 in the registrant's annual report to shareholders for the year ended December 31, 1999, is here incorporated by reference.
ITEM 8.
ITEM 8. Financial Statements and Supplementary Data.
The report of independent auditors and the consolidated financial statements on pages 14 through 32 and the quarterly results of operations on page 13 in the registrant's annual report to shareholders for the year ended December 31, 1999, are here incorporated by reference.
ITEM 9.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
PART III
ITEM 10.
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 24, 2000, is here incorporated by reference.
ITEM 11.
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 24, 2000, is here incorporated by reference.
ITEM 12.
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 24, 2000, is here incorporated by reference.
ITEM 13.
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 24, 2000, is here incorporated by reference.
PART IV
ITEM 14.
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, 1999, in Item 8: Page Number in Statement or Report Annual Report
Report of Independent Auditors 14 Consolidated Balance Sheets as of December 31, 1999 and 1998 15 Consolidated Statements of Income and Comprehensive Income for the years ended December 31, 1999, 1998, and 1997 16 Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 1999, 1998, and 1997 17 Consolidated Statements of Cash Flows for the years ended December 31, 1999, 1998, and 1997 18 Notes to Consolidated Financial Statements 19-32
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, 1999.
(2) Schedules to the consolidated financial statements required by Article 9 of Regulation S-X are not required under the related instructions or are inapplicable, and therefore have been omitted.
(3) The following exhibits are filed as part of this report:
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.
Number Exhibit
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.
13 1999 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 29, 2000, relating to the April 24, 2000, annual shareholders meeting, which was delivered to the Registrant's shareholders in compliance with Rule 14(a)-3 of the Securities Act of 1934, as amended.
21 Subsidiaries of Registrant.
23 Consent of Crowe, Chizek and Company LLP.
24 Powers of Attorney. Contained on the signature page of this report.
27 Financial Data Schedule for year ended December 31, 1999.
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 Mary D. Deci, Secretary, Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan 48801.
(b) Reports on Form 8-K.
The registrant filed no Current Reports on Form 8-K during the last quarter of the period covered by this report.
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 February 28, 2000.
FIRSTBANK CORPORATION
/s/ Thomas R. Sullivan Thomas R. Sullivan President, Chief Executive Officer (Principal Executive Officer)
/s/ Mary D. Deci Mary D. Deci 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 dates indicated. Each director of the Registrant, whose signature appears below, hereby appoints Thomas R. Sullivan and Mary D. Deci, 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 February 28, 2000 Duane A. Carr
/s/ William E. Goggin February 28, 2000 William E. Goggin
/s/ Edward B. Grant February 25, 2000 Edward B. Grant
/s/ Charles W. Jennings February 29, 2000 Charles W. Jennings
/s/ Phillip G. Peasley February 28, 2000 Phillip G. Peasley
/s/ David D. Roslund February 28, 2000 David D. Roslund
/s/ Thomas R. Sullivan February 28, 2000 Thomas R. Sullivan
EXHIBIT 13
Firstbank Corporation
Annual Report
This 1999 Annual Report contains audited financial statements and a detailed financial review. This is Firstbank Corporation's 1999 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 1999 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 1999 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 Mary Deci, Chief Financial Officer, Firstbank Corporation, 311 Woodworth Avenue, P.O. Box 1029, Alma, Michigan 48801-6029.
FIRSTBANK CORPORATION CONSOLIDATED BALANCE SHEETS
See notes to consolidated financial statements.
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
See notes to consolidated financial statements.
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
See notes to consolidated financial statements.
FIRSTBANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
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 $650 million as of December 31, 1999, primarily represent commercial and retail banking activity. Mortgage loans serviced for others of $234 million and trust assets of $74 million as of December 31, 1999, 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: Bank of Alma, Firstbank, 1st Bank, and Bank of Lakeview (the "Banks"), 1st Armored, Incorporated, and 1st Collections, Incorporated, after elimination of intercompany accounts and transactions.
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: 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 reduced by charge offs and 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 maintained at a level believed by management to be adequate to absorb inherent losses in the loan portfolio. 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 bad debt expense.
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 lower of cost or 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 life of the value of the acquired relationship. 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 bad debt expense.
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. The Company and its subsidiaries file a consolidated federal income tax return on a calendar year basis.
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 issue of the financial statements.
Comprehensive Income: Comprehensive income consists of net income and unrealized gains and losses on securities available for sale 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.
Supplemental Disclosure of Non-Cash Investing Activities: During 1997, the Company transferred $2,886,318 from loans held for sale to portfolio loans.
Reclassification: Certain 1998 and 1997 amounts have been reclassified to conform to the 1999 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. This is not expected to have a material effect; however, the actual effect will depend upon derivative holdings when the standard becomes effective.
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
The Company did not consummate any acquisitions during 1999. On August 8, 1997, the Company completed its acquisition of Lakeview Financial Corporation. The purchase price of the transaction was $17 million based on the Company's trading prices for a 20 day period ending six days prior to the merger. Over 98% of the common stock shareholders of Lakeview Financial Corporation elected to receive the Company's stock, resulting in the issuance of 898,830 shares. Cash of $681,000 and options for 23,594 shares with exercise prices of $6.59 to $9.74 completed the merger.
The acquisition was accounted for as a purchase transaction. Accordingly, the results of operations of Lakeview Financial Corporation are included with those of the Company for periods subsequent to the date of merger. Bank of Lakeview continues to operate as a community bank in the five communities (six locations) of their offices.
On April 1, 1999, the Company's Bank of 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, 1999 and 1998, were $2,765,000 and $2,759,000 respectively. These reserves do not earn interest.
NOTE D--SECURITIES
The carrying amounts of securities and their fair values were as follows:
Gross realized gains (losses) on sales and calls of securities were:
The amortized cost and fair value of securities at December 31, 1999, 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.
At December 31, 1999, securities with a carrying value approximating $59,108,000 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 $233,660,000 and $215,308,000 at 1999 and 1998.
Activity for capitalized mortgage servicing rights was as follows:
Management has determined that a valuation allowance is not necessary at December 31, 1999 or 1998.
NOTE F-LOANS
Loans at year-end were as follows:
Activity in the allowance for loan losses for the year was as follows:
Impaired loans were as follows:
Approximately $57,300,000 of commercial loans were pledged to the Federal Reserve Bank of Chicago at December 31, 1999, to secure overnight borrowings.
NOTE G--PREMISES AND EQUIPMENT
Year end premises and equipment were as follows:
Rent expense for 1999 was $105,620 and for 1998 was $115,801. Rent commitments under noncancellable operating leases were as follows, before considering renewal options that generally are present.
NOTE H--FEDERAL INCOME TAXES
Federal income taxes consist of the following:
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:
The components of deferred tax assets and liabilities consist of the following at December 31:
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, 1999 or 1998.
Deferred tax assets at December 31, 1999 and 1998, are included in other assets in the accompanying consolidated balance sheets.
Federal income tax laws require recapture of the tax loan loss reserve when average assets of the group exceed $500 million. The recapture occurs over a four year period in amounts equal to 10%, 20%, 30% and 40% of the tax loan loss reserve. The total amount subject to recapture is $1,548,000 and will be recaptured as follows: $155,000 in 1998; $310,000 in 1999; $464,000 in 2000; and $619,000 in 2001.
NOTE I--DEPOSITS
Time deposits of $100,000 or more were $41,996,000 and $39,798,000 at year-end 1999 and 1998.
Scheduled maturities of time deposits were as follows:
NOTE J--BORROWINGS
Information relating to securities sold under agreements to repurchase follows:
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.
At year-end, advances from the Federal Home Loan Bank were as follows:
Each Federal Home Loan Bank advance is payable at its maturity date, with a prepayment penalty. The advances were collateralized by at least $61,096,000 and $22,565,000 of first mortgage loans under a blanket lien arrangement at year-end 1999 and 1998.
NOTE K--BENEFIT PLANS
The Company established an Employee Stock Ownership Plan (ESOP) effective January 1, 1988, covering substantially all employees. 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. The Company's 1999, 1998, and 1997 matching 401(k) contributions charged to expense were $275,796, $264,441, and $204,165 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 L--STOCK OPTIONS
The Firstbank Corporation Stock Option Plans of 1993 and 1997 ("Plans") provide for the grant of 281,420 and 231,525 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 1997, 1998 and 1999:
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 1999, 1998, or 1997.
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 1999, 1998, and 1997 is estimated using the Black-Scholes model and the following weighted average information: risk free interest rate of 6.28%, 5.06% and 5.86%; expected life of 7 years; expected volatility of stock price of 36.2%, 33.9% and 27.4%; and expected dividends of 3% per year. The fair value of the options granted in 1999, 1998, and 1997, were $235,000, $207,000 and $227,000 respectively. For options outstanding at December 31, 1999, the range of exercise prices was $7.73 to $29.03, and the weighted average remaining contractual life was 12.4 years.
NOTE M--RELATED PARTY TRANSACTIONS
Loans to principal officers, directors, and their affiliates in 1999 were as follows:
Deposits from principal officers, directors, and their affiliates at year end 1999 and 1998 were $8,217,000 and $7,772,000.
Directors have deferred some of their fees for future payment, including interest. Amounts deferred are expensed, and were $62,600 and $62,400 for 1999 and 1998.
NOTE N--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:
Commitments to make loans are generally made for periods of 60 days or less. The fixed rate loan commitments have interest rates ranging from 5.9% to 12.0% and maturities ranging from 15 years to 30 years.
NOTE O--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, 1999.
NOTE P--DIVIDEND LIMITATION OF SUBSIDIARIES
The subsidiary banks are restricted in their ability to pay dividends to the Company by regulatory requirements. For 2000, approximately $12,710,000 of the subsidiaries' retained earnings (in addition to their 2000 net income) is available for transfer in the form of dividends without prior regulatory approval.
NOTE Q--CAPITAL ADEQUACY
The Company and its subsidiary banks are subject to regulatory capital requirements administered by federal regulatory agencies. Capital adequacy guidelines and 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 about components, risk weightings, and other factors. The regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.
The prompt corrective action regulations provide five classifications, including 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 plans for capital restoration are required. The capital ratios of the Company and each of its affiliate banks exceed the requirements to be considered well capitalized. The minimum requirements are:
At December 31, 1999, actual capital levels were:
The following tables show the dollar amounts, in thousands, of the Company's capital and the amounts that exceed current regulatory requirements:
At December 31, 1998, actual capital levels were:
The following tables show the dollar amounts, in thousands, of the Company's capital and the amounts that exceed current regulatory requirements:
NOTE R--FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amount and estimated fair values of financial instruments were as follows at year-end:
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.
NOTE S-BASIC AND DILUTED EARNINGS PER SHARE
Stock options for 89,468 and 92,436 shares of common stock were not considered in computing diluted earnings per share for 1999 and 1997 because they were antidulitive.
NOTE T--FIRSTBANK CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
CONDENSED STATEMENTS OF CASH FLOWS
NOTE U--OTHER COMPREHENSIVE INCOME
Other comprehensive income components and related taxes were as follows:
NOTE V - SUBSEQUENT EVENTS
The Board of Directors of the Company has approved the formation of a new bank subsidiary in St. Johns, Michigan. The bank will be known as Firstbank -- St. Johns, and is expected to open during the second quarter of 2000. Applications to regulatory agencies have been filed and a President and Chief Executive Officer has been named. Negotiations are nearing conclusion for the purchase of a facility to house the new bank.
On January 1, 2000, John McCormack retired as President and Chief Executive Officer and member of the Board of Directors of Firstbank Corporation. Thomas R. Sullivan has been appointed to fill these vacancies. Mr. Sullivan has been President, Chief Executive Officer, and a director of Firstbank, Mt. Pleasant, since 1991. He served as Vice President of the Corporation from 1991 to 1996, and as Executive Vice President of the Corporation since 1996.
FIRSTBANK CORPORATION
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman John McCormack 1 Chairman, Bank of Alma President and Chief Executive Officer Attorney, Goggin & Baker Thomas R. Sullivan Duane A. Carr Executive Vice President and President Attorney, Carr & Mullendore, PC Elect
Edward B. Grant Mary D. Deci Chairman, Firstbank Vice President, Secretary, Treasurer Director, Public Broadcasting, and Chief Financial Officer Central Michigan University Richard L. Jarvis Charles W. Jennings Vice President Attorney, Jennings & Ellias, PC Dale A. Peters John McCormack 1 Vice President President and Chief Executive Officer, Firstbank Corporation Richard J. Schurtz 2 President, Chief Executive Officer Vice President and Trust Officer, Bank Of Alma 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
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FIRSTBANK CORPORATION 311 Woodworth Avenue Firstbank Corporation Operations Center P. O. Box 1029 308 Woodworth Avenue Alma, Michigan 48801 Alma, Michigan 48801
(517) 463-3131
1 Retired 1/1/00 2 Retired 1/7/00
BANK OF ALMA
BOARD OF DIRECTORS OFFICERS
William E. Goggin, Chairman John McCormack 1 Chairman, Firstbank Corporation President, Chief Executive Officer Attorney, Goggin & Baker and Trust Officer
Bob M. Baker James E. Wheeler, II President and CEO, Gratiot Executive Vice President, Community Hospital Loan Officer, and President Elect
Sally M. (Peggy) Bever 2 Mary D. Deci Business Manager Executive Vice President, Controller, Cashier and Chief Sandra S. Brooks Financial Officer Chief Operating Officer, Powell Fabrication & Manufacturing Timothy P. Clark Vice President and Senior Trust Donald W. Crumbaugh Officer Agriculture Steven E. Canole Paul C. Lux Vice President Owner, Lux Funeral Homes, Inc. Gregory A. Daniels John McCormack Vice President Retired Former President and Chief Marita A. Harkness Executive Officer, Firstbank Vice President Corporation Former President, Chief Executive Gerald E. Kench Officer and Trust Officer, Bank Vice President of Alma Timothy M. Lowe Phillip G. Peasley Vice President 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
1 Retired 1/1/00 2 Deceased
FIRSTBANK
BOARD OF DIRECTORS OFFICERS
Edward B. Grant, Chairman Thomas R. Sullivan Director, Public Broadcasting, President and Chief Executive Officer Central Michigan University Richard L. Jarvis Ralph E. Baumgarth Executive Vice President Dentist Mark B. Perry Ralph M. Berry Senior Vice President Owner, Berry Funeral Home James M. Taylor Kenneth C. Bovee, CPM Senior Vice President Partner, Keystone Property Management, Inc. Robert L. Wheeler Senior Vice President Glen D. Blystone Certified Public Accountant, Daniel J. Timmins Blystone & Bailey, CPAs, PC Vice President
Sibyl M. Ellis President, Someplace Special, Inc.
Keith A. Gaede Pharmacist, Punches Pharmacy
Douglas N. LaBelle Partner, LaBelle Management
William M. McClintic Attorney, W.M. McClintic, P.C.
John McCormack 1 President & CEO, Firstbank Corporation President & CEO, Bank of Alma
Phillip R. Seybert President, P.S. Equities, Inc.
Thomas R. Sullivan President and Chief Executive Officer, Firstbank Executive Vice President and President Elect, Firstbank Corporation
Arlene A. Yost Secretary and Treasurer, Jay's Sporting Goods, Inc.
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1 Retired 1/1/00
1st BANK
BOARD OF DIRECTORS OFFICERS
Dale A. Peters, Chairman Dale A. Peters President and Chief Executive President and Chief Executive Officer Officer, 1st Bank 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 Richard L. Pfahl Company, Vice President Northern Beverage Co., and West Branch Tank & Trailer W. John Powell Vice President Charles W. Jennings Attorney, Jennings & Ellias, PC Larry M. Schneider Vice President John McCormack 1 President & CEO, Firstbank Corporation Marie A. Wilkins President & CEO, Bank of Alma Vice President
Norman J. Miller Owner, Miller Farms, and Miller Dairy Equipment and Feed
Jeffrey C. Schubert Dentist
Robert R. Smith SUBSIDIARIES Insurance Consultant 1st Armored, Incorporated 1st Collections, Incorporated Camila J. Steckling Weinlander, Fitzhugh Certified Public Accountants & Consultants
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1 Retired 1/1/00
BANK OF LAKEVIEW
BOARD OF DIRECTORS OFFICERS
V. Dean Floria, Chairman Richard J. Schurtz 2 Owner, Floria Parts Plus, Inc. President and Chief Executive Officer
Duane A. Carr William L. Benear Attorney, Carr & Mullendore Executive Vice President and President Elect John B. Crawford Agriculture, Crawford Farms David L. Miller Senior Vice President Chalmer Gale Hixson Owner, Country Corner Supermarket Kim D. vonKronenberger Owner, A Flair for Hair Vice President Owner, Harry Chalmers, Inc.
John McCormack 1 President and Chief Executive Officer, Firstbank Corporation President, Chief Executive Officer, & Trust Officer, Bank of Alma
Gerald L. Nielsen Owner, Nielsen's TV & Appliances
Richard J. Schurtz 2 President and Chief Executive Officer, Bank of Lakeview Vice President, Firstbank Corporation
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1 Retired 1/1/00 2 Retired 1/7/00
BUSINESS OF THE COMPANY
Firstbank Corporation (the "Company") is a bank holding company. As of December 31, 1999, the Company's wholly owned subsidiaries are Bank of Alma, Firstbank, 1st Bank, Bank of Lakeview, 1st Armored, Incorporated, and 1st Collections Incorporated. As of December 31, 1999, the Company and its subsidiaries employed 300 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. Bank of 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. Bank of 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 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. 1st Bank 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. Bank of 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 78% of total revenues in 1999, 76% in 1998, and 80% in 1997. Interest on investment securities accounted for approximately 10% of total revenues in 1999, 12% in 1998, and 11% in 1997. No other single source of revenue accounted for 10% of the Company's total revenues in any of the last 3 years.
CORPORATE INFORMATION Annual Meeting Stock Information
The annual meeting of shareholders Firstbank Corporation shares will be held on Monday, April 24, 2000, are listed Over the Counter 5:00 p.m., at the Comfort Inn, Alma, Bulleting Board under the Michigan. symbol FBMI.
First of Michigan Independent Auditors Mike Young Crowe Chizek and Company LLP 1-800-521-1197 Grand Rapids, Michigan McDonald Investments General Counsel Chris Turner Varnum Riddering Schmidt & Howlett LLP 1-800-548-6011 Grand Rapids, Michigan - and - Morgan Stanley Dean Witter Warner Norcross & Judd LLP Ted Vogt Grand Rapids, Michigan 1-800-788-9640
Transfer Agent Raymond James Financial Bank of Alma Shareholder Services Department Louis Parks (517) 463-3131 extension 7336 800-248-8863 Toll free shareholder hotline: (888) 637-0590 Robert W. Baird & Company Bill L. Ockerlund 1-888-202-5048
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 ---- ---------------------- --------- Bank of Alma Michigan 100%
Firstbank Michigan 100%
Bank of Lakeview Michigan 100%
1st Bank Michigan 100%
1st Armored Incorporated Michigan 100% by 1st Bank
1st Collections Incorporated Michigan 100% by 1st Bank
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 4, 2000 on the 1999 consolidated financial statements of Firstbank Corporation, which report is included in the 1999 Annual Report on Form 10-K of Firstbank Corporation.
Crowe, Chizek and Company LLP
Grand Rapids, Michigan March 27, 2000
EXHIBIT 99 Firstbank Corporation 401(k) Plan Performance Table