×

Mackinac Financial Corporation Reports First Quarter 2017 Results

MANISTIQUE, Mich., April 26, 2017 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq:MFNC) (the “Corporation”), the bank holding company for mBank, today announced first quarter 2017 income of $1.726 million, or $.28 per share, compared to net income of $1.132 million, or $.18 per share, for the first quarter of 2016. As expected, the 2017 first quarter results were positively impacted by the operating scale garnered by the two 2016 acquisitions, as well as continued organic growth. All transaction-related expenses from the acquisitions occurred in 2016 and no legacy costs are expected this year. Total assets of the Corporation at March 31, 2017 were $976.635 million compared to $732.932 million at March 31, 2016.

Shareholders’ equity at March 31, 2017 totaled $80.009 million, compared to $77.395 million on March 31, 2016. The tangible book value per share equated to $11.47 on March 31, 2017 compared to $11.64 per share a year ago. Weighted average shares outstanding totaled 6,270,034 shares in the 2017 first quarter compared to 6,214,083 for the same period in 2016.

mBank, the Corporation’s primary asset, recorded net income of $2.061 million in the first quarter of 2017, compared to $1.486 million for the first quarter of 2016, equating to a 39% increase.

Some highlights for the first quarter include:

  • Quarterly dividend on common stock of $.12 per share compared to $.10 per share one year ago.
  • Total interest income of $10.596 million for 2017 compared to $8.310 million for the same period in 2016.
  • Net interest margin has remained strong at 4.19%.
  • Active secondary mortgage market activity with non-interest income stemming from that business line increasing from $.267 million to $.298 million year over year for the period.
  • Total loan production of $52.600 million in the first quarter of 2017.

Loans and Non-performing Assets

Total balance sheet loans at March 31, 2017 were $786.546 million, an increase from March 31, 2016 balances of $618.625 million. Total loans under management now reside at $1.058 billion which includes $271.179 million of service retained loans. New loan production was solid in the 2017 first quarter at $52.6 million, with the Upper Peninsula generating $26.7 million of this total and increasing contributions from the acquired Wisconsin markets and our ABL business line Mackinac Commercial Credit. Commercial originations accounted for $29.1 million, with retail, predominantly mortgage, equating to $23.5 million. Commenting on new loan production and overall lending activities, Kelly W. George, President and CEO of mBank stated, “We are pleased with our continued momentum and consistent loan production for the quarter, especially given some recent interest rate movement and the competitive lending landscape it fosters for good quality loans. We expect the strong production trend to continue as we move into our more seasonal lending origination months, particularly with our fully integrated and branded Wisconsin markets gaining continued traction. The performance of our asset based lending division through the first three months of the year has been strong, augmenting our well-rounded loan product mix. Our loan product mix should serve us well in this rising rate environment.”

Nonperforming loans totaled $3.730 million, .47% of total loans at March 31, 2017 compared to $1.717 million, or .28%, of total loans at March 31, 2016 and down from the $4.124 million from December 31, 2016. Total loan delinquencies greater than 30 days resided at a nominal .79%, or $6.193 million, at the end of the period. Mr. George, commenting on credit quality, stated, “Our credit quality risk metrics and overall loan portfolio payment performance remains strong with no significant loan issues within the portfolio for the quarter. We remain comfortable with our diligence on the acquired loan portfolios and corresponding purchase accounting marks and would expect our metrics to continue to improve in the normal course of business in 2017.”

Margin Analysis

Net interest income in the first quarter of 2017 resided at $9.166 million, or 4.19%, compared to $7.288 million, or 4.33%, in the first quarter of 2016. Mr. George stated, “We have been successful in maintaining our strong net interest margin through the historically low interest rate cycle. Interest rates have now begun to slowly increase, which will lead to increased net interest dollars given the asset structure of our balance sheet. We will continue to use targeted funding strategies and disciplined loan pricing in efforts to mitigate longer term interest rate risk while seeking opportunities that utilize the shape of the yield curve as we replace shorter term liabilities. We remain committed to our core banking philosophy, which emphasizes loan growth as the best asset to invest in to benefit and help grow the economic bases in our local communities, which in turn also provides the best overall returns to our shareholders.”

Deposits

Total deposits of $821.820 million at March 31, 2017 increased by $228.842 million from deposits of $592.978 million on March 31, 2016 and were slightly down from year end deposits of $823.512 million. Mr. George, commenting on core deposits and overall liquidity, stated, “The Corporation maintains a strong liquidity position to fund operations and loan growth. We proactively review our short and long term funding needs and our pricing levels within the different segments of our deposit products to best manage our net interest margin and increase profitability. We also continue to actively work to grow our core deposit base but we commonly experience some seasonality of deposit levels this time of year within our core client base given their locations and industry mix. This seasonality is factored into our funding plans.”

Noninterest Income/Expense

Noninterest income, at $.776 million in the first quarter of 2017, increased $.149 million from the first quarter 2016 level of $.627 million. Year over year non-interest income levels improved partially due to an increase in SBA\USDA sales which totaled $.060 million in the 2017 first quarter. Secondary market fees increased $.031 million in the first quarter of 2017 compared to first quarter of 2016. Noninterest expense, at $7.177 million in the first quarter of 2017, increased $.979 million from the first quarter of 2016. The expense increase from the first quarter of 2016 was largely attributable to the increased employee base from the two recent acquisitions and customary operating expenses necessary to ensure our platform infrastructure keeps pace with our growing asset base and the associated regulatory and risk management needs.

Assets and Capital

Total assets of the Corporation at March 31, 2017 were $976.635 million, up $243.703 million from the $732.932 million reported at March 31, 2016. Common shareholders’ equity at March 31, 2017 totaled $80.009 million, or $12.74 per share, compared to $77.395 million, or $12.42 per share on March 31, 2016. The Corporation is “adequately-capitalized” and the Bank is “well-capitalized” with Tier 1 Capital of 6.76% and 9.14%, respectively.

Paul D. Tobias, Chairman and Chief Executive Officer of Mackinac concluded, “We remain very pleased with the positive impact from our 2016 acquisitions as well as the prospect of rate increases for 2017. We will continue to seek and evaluate potential acquisition partners opportunistically while organically growing assets and earnings. We are well positioned for continued value creation for our shareholders while maintaining our safe and sound risk profile.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $975 million 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 23 branch locations; twelve in the Upper Peninsula, three 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
Quarter Ending Year Ending Quarter Ending
March 31, December 31, March 31,
(Dollars in thousands, except per share data) 2017 2016 2016
(Unaudited) (Unaudited) (Unaudited)
Selected Financial Condition Data (at end of period):
Assets $976,635 $983,520 $732,932
Loans 786,546 781,857 618,625
Investment securities 83,882 86,273 54,021
Deposits 821,820 823,512 592,978
Borrowings 66,279 67,579 46,454
Shareholders' equity 80,009 78,609 77,395
Selected Statements of Income Data:
Net interest income $9,166 $33,098 $7,288
Income before taxes 2,615 6,766 1,717
Net income 1,726 4,483 1,132
Income per common share - Basic .28 .72 .18
Income per common share - Diluted .28 .72 .18
Weighted average shares outstanding 6,270,034 6,236,067 6,214,083
Weighted average shares outstanding- Diluted 6,271,904 6,268,703 6,214,083
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 4.19% 7.19% 4.33%
Return on average assets .71 .52 .62
Return on average equity 8.83 5.73 5.89
Average total assets $980,491 $865,573 $737,088
Average total shareholders' equity 79,293 78,300 77,284
Average loans to average deposits ratio 94.81% 98.14% 101.87%
Common Share Data at end of period:
Market price per common share $13.72 $13.47 $10.25
Book value per common share 12.71 12.55 12.42
Tangible book value per share 11.47 11.29 11.64
Dividends paid per share, annualized .480 .400 .400
Common shares outstanding 6,294,930 6,263,371 6,231,246
Other Data at end of period:
Allowance for loan losses $5,146 $5,020 $4,824
Non-performing assets $8,196 $8,906 $4,401
Allowance for loan losses to total loans .66%.64%.78%
Non-performing assets to total assets .84%.91%.60%
Texas ratio 10.60% 11.76% 5.61%
Number of:
Branch locations 23 23 17
FTE Employees 221 222 178


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31, March 31,
2017 2015 2015
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks$41,166 $44,620 $18,013
Federal funds sold 3 2,135 3
Cash and cash equivalents 41,169 46,755 18,016
Interest-bearing deposits in other financial institutions 13,448 14,047 4,989
Securities available for sale 83,882 86,273 54,021
Federal Home Loan Bank stock 2,719 2,911 2,169
Loans:
Commercial 552,483 543,573 455,575
Mortgage 215,042 218,171 147,600
Consumer 19,021 20,113 15,450
Total Loans 786,546 781,857 618,625
Allowance for loan losses (5,146) (5,020) (4,824)
Net loans 781,400 776,837 613,801
Premises and equipment 15,970 15,891 12,491
Other real estate held for sale 4,466 4,782 2,684
Deferred tax asset 7,651 8,760 8,523
Deposit based intangibles 2,110 2,172 1,046
Goodwill 5,694 5,694 3,805
Other assets 18,126 19,398 11,387
TOTAL ASSETS$976,635 $983,520 $732,932
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest bearing deposits$147,106 $164,179 $117,704
NOW, money market, interest checking 283,314 286,622 207,068
Savings 61,171 58,315 31,994
CDs<$250,000 141,569 141,629 116,995
CDs>$250,000 8,802 8,489 7,910
Brokered 179,858 164,278 111,307
Total deposits 821,820 823,512 592,978
Federal funds purchased 3,000 6,000 10,000
Borrowings 66,279 67,579 46,454
Other liabilities 5,527 7,820 6,105
Total liabilities 896,626 904,911 655,537
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 61,683 61,583 61,184
Retained earnings 18,176 17,206 15,746
Accumulated other comprehensive income
Unrealized gains (losses) on available for sale securities 228 (102) 514
Minimum pension liability (78) (78) (49)
Total shareholders' equity 80,009 78,609 77,395
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY$976,635 $983,520 $732,932


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
2017 2016
(Unaudited)
INTEREST INCOME:
Interest and fees on loans:
Taxable $9,957 $7,960
Tax-exempt 33 2
Interest on securities:
Taxable 399 262
Tax-exempt 79 31
Other interest income 128 55
Total interest income 10,596 8,310
INTEREST EXPENSE:
Deposits 959 769
Borrowings 471 253
Total interest expense 1,430 1,022
Net interest income 9,166 7,288
Provision for loan losses 150 -
Net interest income after provision for loan losses 9,016 7,288
OTHER INCOME:
Deposit service fees 272 216
Income from loans sold on the secondary market 298 267
SBA/USDA loan sale gains 60 -
Mortgage servicing (amortization) income (8) (54)
Net security gains - 97
Other 154 101
Total other income 776 627
OTHER EXPENSE:
Salaries and employee benefits 3,797 3,387
Occupancy 785 640
Furniture and equipment 481 383
Data processing 461 345
Advertising 123 156
Professional service fees 321 241
Loan origination expenses and deposit and card related fees 179 127
Writedowns and losses on other real estate held for sale 12 16
FDIC insurance assessment 157 108
Telephone 157 112
Transaction related expenses - 106
Other 704 577
Total other expenses 7,177 6,198
Income before provision for income taxes 2,615 1,717
Provision for income taxes 889 585
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $1,726 $1,132
INCOME PER COMMON SHARE:
Basic $.28 $.18
Diluted $.28 $.18


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY
(Dollars in thousands)
Loan Portfolio Balances (at end of period):
March 31, December 31, March 31,
2017 2016 2016
(Unaudited) (Unaudited) (Unaudited)
Commercial Loans:
Real estate - operators of nonresidential buildings$114,650 $121,861 $102,427
Hospitality and tourism 69,568 68,025 46,555
Lessors of residential buildings 30,118 27,590 29,194
Gasoline stations and convenience stores 20,187 20,509 21,614
Logging 16,096 19,903 17,306
Commercial construction 10,618 11,505 14,489
Other 291,246 274,180 223,990
Total Commercial Loans 552,483 543,573 455,575
1-4 family residential real estate 202,654 205,945 135,641
Consumer 19,021 20,113 15,450
Consumer construction 12,388 12,226 11,959
Total Loans$786,546 $781,857 $618,625


Credit Quality (at end of period):
March 31, December 31, March 31,
2017 2016 2016
(Unaudited) (Unaudited) (Unaudited)
Nonperforming Assets :
Nonaccrual loans$3,691 $3,959 $1,523
Loans past due 90 days or more - - 44
Restructured loans 39 165 150
Total nonperforming loans 3,730 4,124 1,717
Other real estate owned 4,466 4,782 2,684
Total nonperforming assets$8,196 $8,906 $4,401
Nonperforming loans as a % of loans.47%.53%.28%
Nonperforming assets as a % of assets.84%.91%.60%
Reserve for Loan Losses:
At period end$5,146 $5,020 $4,824
As a % of average loans.65%.64%.78%
As a % of nonperforming loans 137.96% 121.73% 280.96%
As a % of nonaccrual loans 139.42% 126.80% 316.74%
Texas Ratio 10.60% 11.76% 5.61%
Charge-off Information (year to date):
Average loans$782,477 $703,047 $615,684
Net charge-offs (recoveries)$24 $584 $180
Charge-offs as a % of average
loans, annualized.01%.08%.12%


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
QUARTER ENDED
(Unaudited)
March 31 December 31 September 30 June 30, March 31,
2017 2016 2016 2016 2016
BALANCE SHEET (Dollars in thousands)
Total loans$786,546 $781,857 $756,804 $725,635 $618,625
Allowance for loan losses (5,146) (5,020) (4,862) (4,733) (4,824)
Total loans, net 781,400 776,837 751,942 720,902 613,801
Total assets 976,635 983,520 959,121 892,328 732,932
Core deposits 633,160 650,745 660,867 579,606 473,761
Noncore deposits 188,660 172,767 146,313 158,757 119,217
Total deposits 821,820 823,512 807,180 738,363 592,978
Total borrowings 66,279 67,579 67,730 70,604 56,454
Total shareholders' equity 80,009 78,609 78,285 77,081 77,395
Total tangible equity 72,205 70,743 70,356 69,916 72,544
Total shares outstanding 6,294,930 6,263,371 6,263,371 6,226,246 6,231,246
Weighted average shares outstanding 6,270,034 6,263,371 6,238,756 6,227,730 6,214,083
AVERAGE BALANCES (Dollars in thousands)
Assets$980,491 $958,781 $930,353 $834,674 $737,088
Loans 782,477 771,279 734,702 689,462 615,684
Deposits 825,309 800,508 780,265 679,183 604,363
Equity 79,293 78,406 78,027 79,481 77,284
INCOME STATEMENT (Dollars in thousands)
Net interest income$9,166 $9,118 $8,696 $7,996 $7,288
Provision for loan losses 150 250 200 150 -
Net interest income after provision 9,016 8,868 8,496 7,846 7,288
Total noninterest income 776 1,141 1,489 896 627
Total noninterest expense 7,177 7,509 7,285 8,893 6,198
Income before taxes 2,615 2,500 2,700 (151) 1,717
Provision for income taxes 889 802 922 (26) 585
Net income available to common shareholders$1,726 $1,698 $1,778 $(125) $1,132
Income pre-tax, pre-provision$2,765 $2,750 $2,900 $(1) $1,717
PER SHARE DATA
Earnings$.28 $.27 $.29 $(.02) $.18
Book value per common share 12.71 12.55 12.50 12.38 12.42
Tangible book value per share 11.47 11.29 11.23 11.23 11.64
Market value, closing price 13.72 13.47 11.49 11.01 10.25
Dividends per share .120 .100 .100 .100 .100
ASSET QUALITY RATIOS
Nonperforming loans/total loans .47 % .53 % .62 % .46 % .28 %
Nonperforming assets/total assets .84 .91 .83 .76 .60
Allowance for loan losses/total loans .65 .64 .64 .65 .78
Allowance for loan losses/nonperforming loans 137.96 1.22 104.13 142.52 280.96
Texas ratio 10.60 11.76 10.55 9.13 5.61
PROFITABILITY RATIOS
Return on average assets .71 % .70 % .76 % (.06)% .62 %
Return on average equity 8.83 8.62 9.06 (.63) 5.89
Net interest margin 4.19 4.14 4.18 4.19 4.33
Average loans/average deposits 94.81 96.35 94.16 101.51 101.87
CAPITAL ADEQUACY RATIOS
Tier 1 leverage ratio 6.77 % 7.18 % 7.29 % 7.68 % 9.55 %
Tier 1 capital to risk weighted assets 8.49 8.80 8.22 8.76 10.82
Total capital to risk weighted assets 9.15 9.45 8.81 9.39 11.57
Average equity/average assets (for the quarter) 8.09 8.18 8.39 9.52 10.49
Tangible equity/tangible assets (at quarter end) 7.45 7.25 7.40 7.90 9.96



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

Source:Mackinac Financial Corporation