• Mackinac Financial Corporation Surpasses $1 Billion in Total Assets, Announces Six-Month and Second Quarter 2017 Results

    Source: Nasdaq GlobeNewswire / 27 Jul 2017 12:52:17   America/New_York

    MANISTIQUE, Mich., July 27, 2017 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq:MFNC) (the “Corporation”), the bank holding company for mBank, today announced second quarter 2017 income of $1.680 million, or $.27 per share, compared to a loss of $.125 million or ($.02) per share for the second quarter of 2016.  Net income for the first six months of 2017 totaled $3.406 million, or $.54 per share, compared to $1.007 million, or $.16 per share, for the same period in 2016.  Total assets of the Corporation at June 30, 2017 totaled $1.027 billion, compared to $892.328 million at June 30, 2016.  Weighted average shares for 2017 totaled 6,282,551, compared to 6,220,906 shares in the same period of 2016.

    The period-to-period comparison above includes the effect of the Corporation’s April 2016 acquisition of First National Bank of Eagle River (“Eagle River”).  In connection with this acquisition, the Corporation had GAAP pre-tax transaction related expenses totaling $2.516 million recorded in the second quarter of 2016. These costs, largely associated with the early termination of the Eagle River data processing system, reduced the reported net income for the 2016 second quarter by $1.712 million, or $.27 per share, on an after-tax basis.  The adjusted net income for the second quarter of 2016 (exclusive of the transaction related expenses) would equate to $1.588 million, or $.25 per share.  Adjusted net income for the first six months of 2016 for the Corporation was $2.770 million, or $.45 per share. 

    Highlights for the first six months of 2017 include:

    • mBank, the Corporation’s subsidiary bank, recorded six-month net income of $4.113 million compared to $1.807 million in 2016.  Excluding $2.216 million of transaction related expenses at the bank ($1.462 million after tax), net income was $3.270 million for the first six months of 2016, equating to a 26% increase, as adjusted, compared to the same period in 2017.    
       
    • The Corporation and mBank surpassed the billion-dollar asset threshold during the quarter and ended the period at $1.027 billion and $1.023 billion of total assets, respectively.
       
    • Total interest income of $21.462 million through June 2017 compared to $17.403 million for the same period in 2016.
       
    • Net interest margin remains solid, at 4.21%. Net interest income increased from $15.284 million in 2016 to $18.485 million in 2017, a 21% increase.
       
    • Credit quality remains strong with a Texas Ratio of 9.91%
       
    • Continued momentum in the asset based lending division, Mackinac Commercial Credit (“MCC”), with loan production of $16.1 million, an increase of 200% from the same period of 2016.

    Loans and Nonperforming Assets

    Total loans at June 30, 2017 were $790.753 million an increase from $725.635 million at June 30, 2016, of which approximately $28.0 million is attributable to the August 2016 Niagara Bancorporation (“Niagara”) acquisition. In addition to the balance sheet totals, the Corporation services $210.160 million of sold mortgage loans and $40.097 million of sold SBA and USDA loans. Total loans under management as of second quarter end were $1.041 billion. 

    New loan production totaled $131.0 million, with the Upper Peninsula contributing $59.8 million, the Northern Lower Peninsula $26.2 million, Southeast Michigan $17.5 million, Wisconsin $11.4 million and MCC, $16.1 million.  Commercial loan production accounted for $63.7 million of the total, with consumer loans, primarily 1-4 family mortgages, totaling $51.2 million, inclusive of $30.0 million of secondary market origination. Commenting on new loan production and overall lending activities, Kelly W. George, President and CEO of mBank stated, “We are pleased to have had consistent loan production thus far in 2017 compared to 2016 in a changing origination environment from years past.  We have accomplished good loan activity in light of increased interest rates that challenge both sides of our balance sheet in terms of garnering acceptable margins for fixed rate loans to support growth. The seasonality of our business and markets has kicked in with significant new loan fundings in July and we anticipate the remaining third quarter and early fourth quarter will remain an active period for lending originations throughout all lines of business.  Proactive officer calling efforts and business development initiatives continue to be a primary focus within all our markets and business segments given the changing lending landscape and the outlook for potential future upward rate moves from the Fed.”   
      
    Nonperforming assets totaled $7.798 million, or .76% of total assets at June 30, 2017 compared to $6.813 million, or .76% of total assets at June 30, 2016.  Total loan delinquencies greater than 30 days resided at a nominal .59%, or $4.693 million. George, commenting on credit quality stated, “Our loan portfolio remains sound with no material weaknesses showing in any of the different loan segments during the first half of this year and continued strong payment performance with very nominal levels of problem assets and delinquent obligations. We remain diligent in both the micro aspects of underwriting credits, as well as identifying and avoiding the macro risks associated with concentrations of different types of commercial loans we are cautious to put on our balance sheet. Certain types of commercial real-estate loans we may have looked to adjudicate in prior years have been passed on this year given acceptable returns could not be garnered for the structure or industry type risk of such credits. Maintaining a diverse client base and prudently mixed loan portfolio of business and retail loans remains highly important as we continue to grow, should another economic or real estate downturn occur as we seek to avoid overreliance on any one type of loan or segment.”        

    Margin/Deposit Analysis

    Net interest income for the first six months of 2017 increased to $18.485 million, a 4.21% net interest margin compared to $15.284 million, or 4.25%, in 2016.  Total deposits of $848.245 million June 30, 2017 included approximately $54 million in deposits acquired with the Niagara acquisition. The growth of total deposits was approximately $110 million year-over-year.  George, commenting on core deposits and overall liquidity, stated “The Corporation maintains a strong short-term liquidity position made up of various components of core and wholesale funding sources, as well as unpledged investments to support loan growth and operations. We review the mix of funding sources through various internal committees to ensure it is appropriate as we seek to maximize margin dollars while remaining competitive in terms of pricing to procure in-market core deposits and grow our client base. Focus on deposits has become especially important with changing client banking habits and demographics, as well as customer desire for more electronic and mobile based banking products and services. In June, we secured some longer-term bulk funding with a 4-year $25 million FHLB borrowing to help support new fixed rate commercial lending originations and lock in margin given the outlook for continued rising interest rates. It is becoming more and more difficult to sell variable rate loans in the upward rate environment and maintaining the longer term structural integrity of our balance sheet is critically important to ensure consistent earnings growth year over year, rather than stretch for short term gains in the current year.”

    Noninterest Income/Expense

    Noninterest income, at $1.571 million, was a $.048 million increase over the June 30, 2016 level of $1.523 million. Noninterest expense was $14.694 million for the first half of 2017 compared to $15.091 million for the same period of 2016.  The 2016 total included $2.516 million of transaction-related expenses. Excluding these charges, noninterest expense totaled $12.575 million.  The largest increase from 2016 was in salaries and benefits and other areas directly impacted by increased operating scale primarily related to the acquisitions of Eagle River and Niagara. The Corporation was able to achieve the expected level of cost efficiencies contemplated with the 2016 acquisitions.

    Assets and Capital

    Total assets of the Corporation at June 30, 2017 were $1.027 billion, up $135.122 million from the $892.328 million of total assets at June 30, 2016.  Total common shareholders’ equity at June 30, 2017 was $81.313 million, or $12.92 per share, compared to $77.081 million, or $12.38 per share at June 30, 2016.  Capital levels remain consistent with past periods as Tier 1 Common Equity resided at 6.93% of average assets at the Corporation and 9.14% at mBank. 

    In closure, Chairman and CEO of the Corporation Paul D. Tobias stated, “We are very pleased with the consistency of our earnings for the first half of 2017 as well as their improvement over the same period of 2016.  The scale that we have achieved through both organic growth and acquisitions is beginning to materialize since direct costs of the transactions were all recognized last year.  We believe reaching $1 billion in assets is an important milestone for the Corporation.  With our growth, we will certainly be subject to change in various areas of our company, however, what will not change is our focus on serving our valued clients and investing in the communities, both legacy and acquired, where we conduct business.  We are very excited about the direction of the Corporation and increased opportunities to increase shareholder value through acquisitions and organic growth.” 

    Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1 billion and whose common stock is traded on the NASDAQ stock market as “MFNC.”   The principal subsidiary of the Corporation is mBank.  Headquartered in Manistique, Michigan, mBank has 24 branch locations; twelve in the Upper Peninsula, four in the Northern Lower Peninsula, one in Oakland County, Michigan and seven in Northern Wisconsin.  The Company’s banking services include commercial lending and treasury management products and services geared toward small to mid-sized businesses, as well as a full array of personal and business deposit products and consumer loans.

    Forward-Looking Statements

    This release contains certain forward-looking statements.  Words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “should,” “will,” “view,” and variations of such words and similar expressions are intended to identify forward-looking statements: as defined by the Private Securities Litigation Reform Act of 1995.  These statements reflect management’s current beliefs as to expected outcomes of future events and are not guarantees of future performance.  These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence.  Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.  Factors that could cause a difference include among others: changes in the national and local economies or market conditions; changes in interest rates and banking regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhancements from mergers and acquisitions, bank consolidations, branch closings and other sources may not be fully realized at all or within specified time frames as well as other risks and uncertainties including but not limited to those detailed from time to time in filings of the Company with the Securities and Exchange Commission.  These and other factors may cause decisions and actual results to differ materially from current expectations.  Mackinac Financial Corporation undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

      
    MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES  
    SELECTED FINANCIAL HIGHLIGHTS 
                
          As of and For the As of and For the As of and For the 
          Period Ending Year Ending Period Ending 
          June 30, December 31, June 30, 
    (Dollars in thousands, except per share data)   2017  2016  2016  
          (Unaudited)   (Unaudited) 
    Selected Financial Condition Data (at end of period):       
    Assets     $1,027,450 $983,520 $892,328  
    Loans      790,753  781,857  725,635  
    Investment securities     82,212  86,273  71,114  
    Deposits      848,245  823,512  738,363  
    Borrowings     92,024  67,579  70,604  
    Shareholders' equity     81,313  78,609  77,081  
                
                
    Selected Statements of Income Data (six months and year ended):      
    Net interest income    $18,485 $33,098 $15,284  
    Income before taxes     5,162  6,766  1,566  
    Net income     3,406  4,483  1,007  
    Income per common share - Basic   .54 .72  .16  
    Income per common share - Diluted  .54 .72  .16  
    Weighted average shares outstanding   6,282,551  6,236,067  6,220,906  
    Weighted average shares outstanding- Diluted   6,298,515  6,268,703  6,241,367  
                
    Three Months Ended:          
    Net interest income    $9,319 $9,118 $7,996  
    Income before taxes     2,547  2,500  (151) 
    Net income     1,680  1,698  (125) 
    Income per common share - Basic   .27 .27  (.02) 
    Income per common share - Diluted  .27 .27  (.02) 
    Weighted average shares outstanding   6,294,930  6,263,371  6,227,730  
    Weighted average shares outstanding- Diluted   6,307,883  6,316,452  6,256,386  
                
    Selected Financial Ratios and Other Data:        
    Performance Ratios:           
    Net interest margin     4.21% 4.19% 4.25% 
    Efficiency ratio     71.61  79.69  89.10  
    Return on average assets   .70 .52  .26  
    Return on average equity    8.57  5.73  2.58  
                
    Average total assets    $982,374 $865,573 $785,881  
    Average total shareholders' equity    80,158  78,300  78,383  
    Average loans to average deposits ratio   95.38% 98.14% 101.68% 
                
                
    Common Share Data at end of period:        
    Market price per common share   $13.99 $13.47 $11.01  
    Book value per common share    12.92  12.55  12.38  
    Tangible book value per share    11.69  11.29  11.23  
    Dividends paid per share, annualized  .480 .400  .400  
    Common shares outstanding    6,294,930  6,263,371  6,226,246  
                
    Other Data at end of period:         
    Allowance for loan losses   $5,133 $5,020 $4,733  
    Non-performing assets    $7,798 $8,906 $6,813  
    Allowance for loan losses to total loans  .65%.64% .65% 
    Non-performing assets to total assets  .76%.91% .76% 
    Texas ratio      9.91% 11.76% 9.13% 
                
    Number of:           
    Branch locations     24  23  20  
    FTE Employees     235  222  209  
                


    MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES 
    CONSOLIDATED BALANCE SHEETS
     
     June 30, December 31, June 30,
      2017   2016   2016 
     (Unaudited)   (Unaudited)
    ASSETS     
          
    Cash and due from banks$78,972  $44,620  $40,226 
    Federal funds sold 10,006   2,135   9 
    Cash and cash equivalents 88,978   46,755   40,235 
          
    Interest-bearing deposits in other financial institutions 14,312   14,047   7,184 
    Securities available for sale 82,212   86,273   71,114 
    Federal Home Loan Bank stock 3,250   2,911   2,639 
          
    Loans:     
    Commercial 559,388   543,573   503,508 
    Mortgage 212,306   218,171   206,007 
    Consumer 19,059   20,113   16,120 
    Total Loans 790,753   781,857   725,635 
    Allowance for loan losses (5,133)  (5,020)  (4,733)
    Net loans 785,620   776,837   720,902 
          
    Premises and equipment 16,654   15,891   14,699 
    Other real estate held for sale 4,050   4,782   3,492 
    Deferred tax asset 6,639   8,760   10,147 
    Deposit based intangibles 2,047   2,172   1,992 
    Goodwill 5,694   5,694   5,173 
    Other assets 17,994   19,398   14,751 
          
    TOTAL ASSETS$1,027,450  $983,520  $892,328 
          
    LIABILITIES AND SHAREHOLDERS' EQUITY     
          
    LIABILITIES:     
    Deposits:     
    Noninterest bearing deposits$156,970  $164,179  $149,435 
    NOW, money market, interest checking 259,423   286,622   251,140 
    Savings 61,741   58,315   48,978 
    CDs<$250,000 143,169   141,629   130,053 
    CDs>$250,000 10,077   8,489   5,417 
    Brokered 216,865   164,278   153,340 
    Total deposits 848,245   823,512   738,363 
          
    Federal funds purchased -   6,000   - 
    Borrowings 92,024   67,579   70,604 
    Other liabilities 5,868   7,820   6,280 
    Total liabilities 946,137   904,911   815,247 
          
    SHAREHOLDERS' EQUITY:     
    Common stock and additional paid in capital - No par value     
    Authorized - 18,000,000 shares     
    Issued and outstanding - 6,294,930; 6,263,371; and 6,231,246 shares respectively 61,782   61,583   61,283 
    Retained earnings 19,101   17,206   14,982 
    Accumulated other comprehensive income     
    Unrealized gains (losses) on available for sale securities 508   (102)  865 
    Minimum pension liability (78)  (78)  (49)
          
    Total shareholders' equity 81,313   78,609   77,081 
          
    TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$1,027,450  $983,520  $892,328 
          


    MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES 
    CONSOLIDATED STATEMENTS OF OPERATIONS
     
      Three Months Ended Six Months Ended
      June 30, June 30,
       2017   2016   2017   2016 
                     
      (Unaudited) (Unaudited)
    INTEREST INCOME:        
    Interest and fees on loans:        
    Taxable $10,260  $8,684  $20,217  $16,644 
    Tax-exempt  19   13   52   15 
    Interest on securities:        
    Taxable  396   304   795   566 
    Tax-exempt  75   26   154   57 
    Other interest income  116   66   244   121 
    Total interest income  10,866   9,093   21,462   17,403 
             
    INTEREST EXPENSE:        
    Deposits  1,054   771   2,013   1,540 
    Borrowings  493   326   964   579 
    Total interest expense  1,547   1,097   2,977   2,119 
             
    Net interest income  9,319   7,996   18,485   15,284 
    Provision for loan losses  50   150   200   150 
    Net interest income after provision for loan losses  9,269   7,846   18,285   15,134 
             
    OTHER INCOME:        
    Deposit service fees  268   248   540   464 
    Income from loans sold on the secondary market  316   339   614   606 
    SBA/USDA loan sale gains  89   166   149   166 
    Mortgage servicing income  (9)  (8)  (17)  (62)
    Net security gains  -   12   -   109 
    Other  131   139   285   240 
    Total other income  795   896   1,571   1,523 
             
    OTHER EXPENSE:        
    Salaries and employee benefits  3,658   3,519   7,455   6,906 
    Occupancy  776   640   1,561   1,280 
    Furniture and equipment  544   425   1,025   808 
    Data processing  489   333   950   678 
    Advertising  174   181   297   337 
    Professional service fees  405   257   726   498 
    Loan and deposit  155   155   334   282 
    Writedowns and losses on other real estate held for sale  243   (14)  255   2 
    FDIC insurance assessment  189   117   346   225 
    Telephone  134   122   291   234 
    Transaction related expenses  -   2,449   -   2,516 
    Other  750   709   1,454   1,325 
    Total other expenses  7,517   8,893   14,694   15,091 
             
    Income before provision for income taxes  2,547   (151)  5,162   1,566 
    Provision for income taxes  867   (26)  1,756   559 
             
    NET INCOME AVAILABLE TO COMMON SHAREHOLDERS  1,680   (125)  3,406   1,007 
             
             
    INCOME PER COMMON SHARE:        
    Basic $.27  $(.02) $.54  $.16 
    Diluted $.27  $(.02) $.54  $.16 
             


    MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES 
    LOAN PORTFOLIO AND CREDIT QUALITY
     
    (Dollars in thousands)
     
    Loan Portfolio Balances (at end of period):
     
     June 30, December 31, June 30,
      2017  2016  2016
     (Unaudited) (Unaudited) (Unaudited)
    Commercial Loans:     
    Real estate - operators of nonresidential buildings$114,129 $121,861 $111,523
    Hospitality and tourism 73,109  68,025  48,295
    Lessors of residential buildings 30,719  27,590  26,662
    Gasoline stations and convenience stores 19,903  20,509  20,582
    Logging 18,143  19,903  19,203
    Commercial construction 10,145  11,505  18,576
    Other 293,240  274,180  258,667
    Total Commercial Loans 559,388  543,573  503,508
          
    1-4 family residential real estate 200,771  205,945  194,167
    Consumer 19,059  20,113  16,120
    Consumer construction 11,535  12,226  11,840
          
    Total Loans$790,753 $781,857 $725,635
          


    Credit Quality (at end of period): 
      
     June 30, December 31, June 30, 
      2017  2016  2016 
     (Unaudited) (Unaudited) (Unaudited) 
    Nonperforming Assets :      
    Nonaccrual loans$3,644 $3,959 $3,177 
    Loans past due 90 days or more -  -  - 
    Restructured loans 104  165  144 
    Total nonperforming loans 3,748  4,124  3,321 
    Other real estate owned 4,050  4,782  3,492 
    Total nonperforming assets$7,798 $8,906 $6,813 
    Nonperforming loans as a % of loans.47%.53%.46%
    Nonperforming assets as a % of assets.76%.91%.76%
    Reserve for Loan Losses:      
    At period end$5,133 $5,020 $4,733 
    As a % of average loans.65%.64%.73%
    As a % of nonperforming loans 136.95% 121.73% 142.52%
    As a % of nonaccrual loans 140.86% 126.80% 148.98%
    Texas Ratio 9.91% 11.76% 9.13%
           
    Charge-off Information (year to date):      
    Average loans$784,823 $703,047 $652,573 
    Net charge-offs (recoveries)$88 $584 $421 
    Charge-offs as a % of average      
    loans, annualized.02%.08%.13%
           


    MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES 
    QUARTERLY FINANCIAL HIGHLIGHTS 
               
     QUARTER ENDED 
     (Unaudited) 
     June 30 March 31 December 31 September 30 June 30, 
      2017   2017   2016   2016   2016  
    BALANCE SHEET (Dollars in thousands)          
               
    Total loans$790,753  $786,546  $781,857  $756,804  $725,635  
    Allowance for loan losses (5,133)  (5,146)  (5,020)  (4,862)  (4,733) 
    Total loans, net 785,620   781,400   776,837   751,942   720,902  
    Total assets 1,027,450   976,635   983,520   959,121   892,328  
    Core deposits 621,303   633,160   650,745   660,867   579,606  
    Noncore deposits 226,942   188,660   172,767   146,313   158,757  
    Total deposits 848,245   821,820   823,512   807,180   738,363  
    Total borrowings 92,024   66,279   67,579   67,730   70,604  
    Total shareholders' equity 81,313   80,009   78,609   78,285   77,081  
    Total tangible equity 73,572   72,205   70,743   70,356   69,916  
    Total shares outstanding 6,294,930   6,294,930   6,263,371   6,263,371   6,226,246  
    Weighted average shares outstanding 6,294,930   6,270,034   6,263,371   6,238,756   6,227,730  
               
    AVERAGE BALANCES (Dollars in thousands)          
               
    Assets$984,236  $980,491  $958,781  $930,353  $834,674  
    Loans 787,143   782,477   771,279   734,702   689,462  
    Deposits 820,375   825,309   800,508   780,265   679,183  
    Equity 81,013   79,293   78,406   78,027   79,481  
               
    INCOME STATEMENT (Dollars in thousands)          
               
    Net interest income$9,319  $9,166  $9,118  $8,696  $7,996  
    Provision for loan losses 50   150   250   200   150  
    Net interest income after provision 9,269   9,016   8,868   8,496   7,846  
    Total noninterest income 795   776   1,141   1,489   896  
    Total noninterest expense 7,517   7,177   7,509   7,285   8,893  
    Income before taxes 2,547   2,615   2,500   2,700   (151) 
    Provision for income taxes 867   889   802   922   (26) 
    Net income available to common shareholders$1,680  $1,726  $1,698  $1,778  $(125) 
    Income pre-tax, pre-provision$2,597  $2,765  $2,750  $2,900  $(1) 
               
    PER SHARE DATA          
               
    Earnings$.27  $.28  $.27  $.29  $(.02) 
    Book value  per common share 12.92   12.71   12.55   12.50   12.38  
    Tangible book value per share 11.69   11.47   11.29   11.23   11.23  
    Market value, closing price 13.99   13.72   13.47   11.49   11.01  
    Dividends per share .120   .120   .100   .100   .100  
                         
    ASSET QUALITY RATIOS                    
                         
    Nonperforming loans/total loans .47 % .47 % .53 % .62 % .46 %
    Nonperforming assets/total assets .76   .84   .91   .83   .76  
    Allowance for loan losses/total loans .65   .65   .64   .64   .65  
    Allowance for loan losses/nonperforming loans 136.95   137.96   121.73   104.13   142.52  
    Texas ratio 9.91   10.60   11.76   10.55   9.13  
               
    PROFITABILITY RATIOS          
               
    Return on average assets .68 % .71 % .70 % .76 % (.06)%
    Return on average equity 8.32   8.83   8.62   9.06   (.63) 
    Net interest margin 4.24   4.19   4.14   4.18   4.19  
    Average loans/average deposits 95.95   94.81   96.35   94.16   101.51  
               
    CAPITAL ADEQUACY RATIOS          
               
    Tier 1 leverage ratio 7.02 % 6.77 % 7.18 % 7.29 % 7.68 %
    Tier 1 capital to risk weighted assets 8.57   8.49   8.80   8.22   8.76  
    Total capital to risk weighted assets 9.21   9.15   9.45   8.81   9.39  
    Average equity/average assets (for the quarter) 8.23   8.09   8.18   8.39   9.52  
    Tangible equity/tangible assets (at quarter end) 7.22   7.45   7.25   7.40   7.90  


    Contact:
    Paul D. Tobias, (248) 290-5901 / ptobias@bankmbank.com
    Jesse A. Deering, (248) 290-5906 /jdeering@bankmbank.com
    Website: www.bankmbank.com

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