Firstbank Corp. in Alma, Mich., said Friday that it expects to add $3.1 million to its loan-loss provision for the second quarter.
The $1.4 billion-asset Firstbank attributed the increase to deterioration in its loan portfolio as a result of declining real estate values and the weak Michigan economy. It had previously announced that it would record a $300,000 provision for the quarter.
Most of the problem loans were inherited in the July purchase of ICNB Financial Corp. of Ionia for $36.4 million, Firstbank said. ICNB was folded into Firstbank-West Michigan in the fourth quarter.
"In times of less credit stress, most of these problem credits could, and were able to, perform according to their terms, and that was our judgment at the time of acquisition," Thomas R. Sullivan, Firstbank Corp.'s president and chief executive, said in a press release. "Part of our culture is to openly recognize problems when they are identified, and the actions we are taking in the second quarter are in keeping with this principle."
The charge is expected to reduce Firstbank's second-quarter earnings by nearly $2 million, or 27 cents a share. In the second quarter of last year it earned $4.4 million, or 68 cents a share, and reported a loan-loss provision of $18,000.
Firstbank plans to release its second-quarter earnings July 24.
