Firstbank Cor­po­ra­tion earn­ings zoom

The Pak Banker - - Front Page -

ALMA, MICHI­GAN

Thomas R. Sul­li­van, Pres­i­dent and Chief Ex­ec­u­tive Of­fi­cer of Firstbank Cor­po­ra­tion, an­nounced net in­come of $2,715,000 for the third quar­ter of 2012, in­creas­ing 67% from $1,630,000 for the third quar­ter of 2011, with net in­come avail­able to com­mon share­hold­ers of $2,495,000 in the third quar­ter of 2012 in­creas­ing 106% from $1,210,000 in the third quar­ter of 2011. Earn­ings per share were $0.31 in the third quar­ter of 2012 com­pared to $0.15 in the third quar­ter of 2011. Earn­ings per share in the third quar­ter of 2012 were the high­est level since the third quar­ter of 2007. Re­turns on av­er­age as­sets and av­er­age eq­uity for the third quar­ter of 2012 were 0.72% and 7.4%, re­spec­tively, com­pared to 0.41% and 4.1% re­spec­tively in the third quar­ter of 2011.

In the first nine months of 2012, net in­come of $7,536,000 in­creased 117% over the $3,473,000 earned in the first nine months of 2011. Net in­come avail­able to com­mon share­hold­ers of $6,476,000 in­creased 193%, and earn­ings per share of $0.82 also in­creased 193% over the $0.28 per share earned in the first nine months of 2011.

Both book value per share and tan­gi­ble book value per share in­creased in the third quar­ter of 2012 as earn­ings and earn­ings re­ten­tion more than off­set the im­pact on these mea­sures of re­pur­chas­ing war­rants from Trea­sury, which was the fi­nal part of the suc­cess­ful exit from TARP/CPP and was com­pleted early in the third quar­ter. Book value per share in­creased to $16.24 at Septem­ber 30, 2012, from $16.14 at June 30, 2012, and tan­gi­ble book value per share in­creased to $11.64 at Septem­ber 30, 2012, from $11.52 at June 30, 2012. Dur­ing the third quar­ter we com­mis­sioned the an­nual up­date of the third-party-ex­pert val­u­a­tion study of good­will on our bal­ance sheet. That val­u­a­tion study, which as­sures the proper ap­pli­ca­tion of ac­count­ing rules and prin­ci­ples, in­di­cates that the amount of good­will on our books is not con­sid­ered im­paired and re­quires no re­duc­tion and no charge to earn­ings. As a re­sult, our book value per share of $16.24 at Septem­ber 30, 2012, is sub­stan­tially above tan­gi­ble book value per share of $11.64.

The pro­vi­sion for loan losses, at $1,364,000 in the third quar­ter of 2012, was 45% less than the amount re­quired in the sec­ond quar­ter of 2012 and was 61% less than the amount in the year-ago third quar­ter. The pro­vi­sion ex­pense of $1,364,000 was less than third quar­ter net char­ge­offs of $1,554,000, but the to­tal pro­vi­sion in the first nine months of 2012 of $6,352,000 ex­ceeded net charge-offs for this year-to-date pe­riod of $6,039,000. The level of pro­vi­sion ex­pense and other ex­penses re­lated to man­age­ment and col­lec­tion of the loan port­fo­lio continue to be the ma­jor im­ped­i­ments to higher lev­els of prof­itabil­ity.

Net in­ter­est in­come, at $13,542,000 in the third quar­ter of 2012 de­creased 1.7% com­pared to the third quar­ter of 2011. Net in­ter­est in­come de­creased as a re­sult of a 4 ba­sis point de­cline in net in­ter­est mar­gin com­pared to the year-ago third quar­ter.

Firstbank's net in­ter­est mar­gin was 3.99% in the third quar­ter of 2012, de­creas­ing from 4.05% in the sec­ond quar­ter of 2012 and 4.03% in the third quar­ter of 2011. Loan de­mand re­mains weak, re­sult­ing in more earn­ing as­sets be­ing al­lo­cated to the in­vest­ment port­fo­lio, ver­sus the higher-yield­ing loan port­fo­lio, and com­pet­i­tive pric­ing pres­sure is forc­ing yields lower on some loan re­newals.

The cost of funds to av­er­age earn­ing as­sets de­clined by 4 ba­sis points, to 0.59% in the third quar­ter of 2012 from 0.63% in the sec­ond quar­ter of 2012, while the yield on av­er­age earn­ing as­sets de­clined by a greater 10 ba­sis points, to 4.57% in the third quar­ter of 2012 from 4.67% in the sec­ond quar­ter of 2012.

To­tal non-in­ter­est in­come, at $3,016,000 in the third quar­ter of 2012, was 16.3% higher than in the third quar­ter of 2011. Mort­gage re­fi­nance ac­tiv­ity re­mains at a very strong level. Gain on sale of mort­gages, at $1,661,000 in the third quar­ter of 2012, in­creased 13.8% com­pared to the sec­ond quar­ter of 2012 and was 59.7% above the year­ago level. The cat­e­gory of "other" non-in­ter­est in­come, at $405,000 in the third quar­ter of 2012, was 12.3% less than the amount in the sec­ond quar­ter of 2012 and 0.2% more than in the third quar­ter of 2011.

The other in­come cat­e­gory in the sec­ond quar­ter of 2012 in­cluded $178,000 in­sur­ance pro­ceeds re­lated to a di­rec­tor ben­e­fit plan of an af­fil­i­ate bank, which did not re­cur in the third quar­ter.

In­cluded in this cat­e­gory of in­come was a $64,000 net gain on sale of other real es­tate owned in the third quar­ter of 2012, com­pared to a loss of $13,000 in the sec­ond quar­ter of 2012 and a gain of $98,000 in the third quar­ter of 2011.

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