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Mackinac Financial Corporation Reports 2021 Second Quarter Financial Results

MANISTIQUE, Mich., July 22, 2021 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq: MFNC) (“we”, or the “Corporation”) the bank holding company for mBank (“the Bank”) today announced 2021 second quarter net income of $2.94 million, or $.28 per share, compared to 2020 second quarter net income of $3.45 million, or $.33 per share. The 2021 second quarter results included expenses related to the pending merger with Nicolet Bankshares, Inc. (Green Bay, WI) (“Nicolet”), which had an estimated after-tax impact of $391 thousand on earnings. Adjusted net income (net of transaction related expenses) for the second quarter of 2021 was $3.34 million, or $.32 per share. Weighted average shares outstanding for the second quarter of 2021 were 10,550,393 compared to 10,533,589 for the same period of 2020.

Total assets of the Corporation at June 30, 2021 were $1.52 billion, compared to $1.52 billion at June 30, 2020. Shareholders’ equity at June 30, 2021 totaled $171.92 million, compared to $164.16 million at June 30, 2020. Book value per share outstanding equated to $16.30 at the end of the second quarter 2021, compared to $15.58 per share outstanding a year ago. Tangible book value at quarter-end was $148.31 million, or $14.06 per share outstanding, compared to $139.88 million, or $13.28 per share outstanding at the end of the second quarter 2020.

Additional notes:

  • mBank, the Corporation’s primary asset, recorded net income of $3.82 million for the second quarter of 2021, compared to $3.88 million for the second quarter of 2020. Transaction expenses were minimal at the bank level for the period and did not meaningfully impact mBank net income.

  • Non-interest income remained solid for the quarter, including secondary market mortgage fees and gains on sale of $982 thousand and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $869 thousand.

  • Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments and Paycheck Protection Program (“PPP”) fees, was 4.16%.

  • On April 12, 2021 the Board of Directors of MFNC announced the signing of a definitive agreement for Nicolet to acquire the Corporation. On July 15, 2021 the shareholders of MFNC voted (either in-person or via proxy) to approve the transaction at a Special Shareholder meeting of the Corporation. The transaction is still expected to close in the third quarter of 2021. Specific information regarding the transaction can be found at www.bankmbank.com.

Revenue & PPP Recognition

Total revenue of the Corporation for second quarter 2021 was $16.61 million, compared to $18.81 million for the second quarter of 2020. The majority of the variance is due to the higher levels of FASB (GAAP) recognition of PPP loan fee income in the 2020 period. Total interest income for the second quarter 2021 was $14.19 million, compared to $16.44 million for the same period in 2020. The year-over-year variance in interest income, once again, was related to the aforementioned timing of PPP recognition in 2020. The 2021 second quarter interest income also included accretive yield of $642 thousand from combined credit mark accretion associated with acquisitions, compared to $320 thousand in the same period of 2020.  

PPP fee income for the second quarter of 2021 was $1.43 million, compared to $2.13 million for the second quarter of 2020. As of June 30, 2021, the Corporation has $2.166 million of PPP fee income that has been received but not recognized. Recognition of the remaining PPP fees will occur in accordance with FASB guidance based on normal amortization or acceleration upon the forgiveness of the PPP loan by the SBA. Current monthly amortization / recognition is approximately $163 thousand.

Loan Production and Portfolio Mix

Total balance sheet loans at June 30, 2021 were $978 million, compared to June 30, 2020 balances of $1.15 billion. Total loans under management reside at $1.215 billion, which includes $236.88 million of service retained loans. Overall loan production for the first six months of 2021 was $218.90 million, which included $57.67 million of PPP loans. The remaining $161.22 million was inclusive of, but not limited to, $67.99 million of secondary market loans, $63.3 million of commercial loans and $16.97 million of conventional balance sheet mortgage loans.  

Credit Quality

Nonperforming loans totaled $4.93 million, or .50% of total loans (.53% when excluding PPP loans) at June 30, 2021, compared to $6.12 million, or .53% of total loans at June 30, 2020. Total loan delinquencies greater than 30 days resided at .46% (.49% when excluding PPP loans), compared to .54% in 2020.  The nonperforming assets to total assets ratio resided at .41% (.41% when excluding PPP loans) for the second quarter of 2021, compared to .55% for the second quarter of 2020. The Corporation currently has no commercial loans in principal deferral and a nominal $2.08 million that remain in the interest only portion of their COVID-19 loan modification period. There are no consumer loans that remain in full payment deferral. Total loans in some type of COVID-19 payment modification are a minimal .21% of total loans. There remains no sign of any adverse systemic issues or deterioration in the loan portfolio.  

Margin Analysis, Funding and Liquidity

Net interest income for second quarter 2021 was $13.22 million, resulting in a Net Interest Margin (NIM) of 4.56%, compared to $14.36 million in the second quarter 2020 and a NIM of 4.51%. Net interest income was impacted by the aforementioned PPP recognition for the 2020 period. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments as well as PPP impact, was 4.16% for the second quarter of 2021, compared to 3.75% for the same period of 2020.

Total bank deposits were $1.29 billion at June 30, 2021, compared to $1.14 billion at first quarter-end 2020, an increase of approximately $150 million. Total brokered deposits have decreased significantly and were $13.35 million at June 30, 2021, compared to $90.48 million at June 30, 2020, a decrease of $77 million. FHLB (Federal Home Loan Bank) borrowings have also decreased from $63.31 million at June 30, 2020 to $28.11 million at June 30, 2021.   Overall access to short-term functional liquidity remains very strong through multiple sources, if needed.

Noninterest Income / Expense

Second quarter 2021 Noninterest Income was $2.42 million, compared to $2.37 million for the same period of 2020. Noninterest Expense for the second quarter of 2021 was $11.91 million, compared to $12.35 million for the same period of 2020. When giving effect to the $495 thousand of pre-tax transaction expenses ($391 thousand after-tax), noninterest expense was $11.42 million for the second quarter of 2021.

Capital

Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 15.64% and 15.76% and tier 1 capital to total tier 1 average assets at the Corporation of 9.68% and at the Bank of 9.38%. The leverage ratio is calculated inclusive of PPP loan balances.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “With the recent MFNC shareholder approval of the Nicolet transaction, we have moved one step closer to the consummation of the merger. As we approach the closing of the transaction, the company continues to work on behalf of all constituencies to make the transition as smooth as possible, while maintaining best-in-class service to our valued clients. We thank all of our shareholders, clients and employees for being a part of Mackinac Financial.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.5 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 28 branch locations; ten in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and seven in Northern Wisconsin. The Corporation’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,” 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, 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)  2021  2020  2020 
      (Unaudited)   (Unaudited) 
Selected Financial Condition Data (at end of period):      
Assets     $ 1,518,952 $1,501,730 $1,518,473 
Loans      978,055  1,077,592  1,153,790 
Investment securities    101,955  111,836  108,703 
Deposits      1,307,154  1,258,776  1,227,552 
Borrowings     28,441  63,479  114,466 
Shareholders' equity    171,919  167,864  164,157 
            
Selected Statements of Income Data (six months and year ended)     
Net interest income    $ 27,044 $54,806 $27,855 
Income before taxes    8,006  17,056  8,235 
Net income     6,825  13,473  6,505 
Income per common share - Basic   .65  1.27  .61 
Income per common share - Diluted   .64  1.27  .61 
Weighted average shares outstanding - Basic  10,536,722  10,580,044  10,625,778 
Weighted average shares outstanding- Diluted  10,582,597  10,580,044  10,552,581 
            
Three Months Ended:         
Net interest income    $ 13,266 $13,899 $14,458 
Income before taxes    3,728  4,614  4,373 
Net income     2,945  3,644  3,454 
Income per common share - Basic   .28  .35  .33 
Income per common share - Diluted   .28  .35  .33 
Weighted average shares outstanding - Basic  10,550,393  10,536,023  10,533,589 
Weighted average shares outstanding- Diluted  10,617,422  10,536,023  10,460,802 
            
Selected Financial Ratios and Other Data:       
Performance Ratios:          
Net interest margin     4.54% 4.37% 4.55%
Efficiency ratio     74.09  71.84  73.23 
Return on average assets    .91  .92  .93 
Return on average equity    8.09  8.19  8.05 
            
Average total assets    $ 1,517,185 $1,464,674 $1,411,081 
Average total shareholders' equity   170,217  164,505  162,556 
Average loans to average deposits ratio   81.71% 93.34% 95.91%
            
Common Share Data at end of period:        
Market price per common share  $ 19.76 $12.76 $10.37 
Book value per common share   16.30  15.99  15.58 
Tangible book value per share   14.06  13.71  13.28 
Dividends paid per share, annualized   .56  .56  .56 
Common shares outstanding    10,550,393  10,500,758  10,533,589 
            
Other Data at end of period:         
Allowance for loan losses   $ 5,651 $5,816 $5,355 
Non-performing assets    6,276  7,210  8,350 
Allowance for loan losses to total loans   .58% .54% .46%
Non-performing assets to total assets   .41% .48% .55%
Texas ratio     4.08% 4.82% 4.22%
            
Number of:          
     Branch locations     28  28  29 
     FTE Employees     291  315  315 
            

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

  June 30, December 31, June 30, 
  2021  2020  2020  
  (Unaudited)    (Unaudited) 
ASSETS          
           
Cash and due from banks $341,436  $218,901  $126,398  
Federal funds sold  10,041   76   28,110  
Cash and cash equivalents  351,477   218,977   154,508  
           
Interest-bearing deposits in other financial institutions  2,427   2,917   7,831  
Securities available for sale  101,955   111,836   108,703  
Federal Home Loan Bank stock  4,473   4,924   4,924  
           
Loans:          
Commercial  738,429   819,907   878,521  
Mortgage  221,388   238,705   255,524  
Consumer  18,238   18,980   19,745  
Total Loans  978,055   1,077,592   1,153,790  
Allowance for loan losses  (5,651)  (5,816)  (5,355) 
Net loans  972,404   1,071,776   1,148,435  
           
Premises and equipment  24,533   25,518   25,448  
Other real estate held for sale  1,343   1,752   2,226  
Deferred tax asset  2,496   3,303   1,727  
Deposit based intangibles  4,031   4,368   4,706  
Goodwill  19,574   19,574   19,574  
Other assets  34,239   36,785   40,391  
           
TOTAL ASSETS $1,518,952  $1,501,730  $1,518,473  
           
LIABILITIES AND SHAREHOLDERS EQUITY          
           
LIABILITIES:          
Deposits:          
Noninterest bearing deposits $459,716  $414,804  $385,811  
NOW, money market, interest checking  501,251   450,556   386,029  
Savings  141,729   130,755   123,771  
CDs<$250,000  178,723   202,266   226,971  
CDs>$250,000  12,384   15,224   14,488  
Brokered  13,351   45,171   90,482  
Total deposits  1,307,154   1,258,776   1,227,552  
           
Federal funds purchased          
Borrowings  28,441   63,479   114,466  
Other liabilities  11,438   11,611   12,298  
Total liabilities  1,347,033   1,333,866   1,354,316  
           
SHAREHOLDERS EQUITY:          
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,550,393; 10,500,758 and 10,533,589 respectively  127,624   127,164   127,213  
Retained earnings  43,189   39,318   35,295  
Accumulated other comprehensive income (loss)          
Unrealized (losses) gains on available for sale securities  1,689   1,965   2,059  
Minimum pension liability  (583)  (583)  (410) 
Total shareholders equity  171,919   167,864   164,157  
           
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $1,518,952  $1,501,730  $1,518,473  
              

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

  For the Three Months Ended For the Six Months Ended
  June 30, June 30,
   2021  2020  2021  2020
     
  (Unaudited) (Unaudited)
INTEREST INCOME:        
     Interest and fees on loans:        
          Taxable $ 13,414 $15,549 $ 27,535 $30,162
          Tax-exempt  20  55  40  129
     Interest on securities:        
          Taxable  503  560  1,028  1,180
          Tax-exempt  132  152  274  240
     Other interest income  120  125  204  395
          Total interest income  14,189  16,441  29,081  32,106
         
INTEREST EXPENSE:        
     Deposits  723  1,707  1,612  3,634
     Borrowings  200  276  425  617
          Total interest expense  923  1,983  2,037  4,251
         
Net interest income  13,266  14,458  27,044  27,855
Provision for loan losses  50  100  100  200
Net interest income after provision for loan losses  13,216  14,358  26,944  27,655
         
OTHER INCOME:        
     Deposit service fees  265  236  522  640
     Income from loans sold on the secondary market  982  1,511  2,284  2,049
     SBA/USDA loan sale gains  869  274  1,302  984
     Mortgage servicing amortization  154  204  395  393
     Net security gains  0  0  36  0
     Other  154  142  283  238
          Total other income  2,424  2,367  4,822  4,304
         
OTHER EXPENSE:        
     Salaries and employee benefits  6,306  7,009  13,130  13,060
     Occupancy  1,092  1,008  2,275  2,132
     Furniture and equipment  818  804  1,660  1,606
     Data processing  707  852  1,477  1,677
     Advertising  176  312  289  524
     Professional service fees  515  574  1,013  1,072
     Loan origination expenses and deposit and card related fees  419  406  869  787
     Writedowns and losses on other real estate held for sale  84  30  32  34
     FDIC insurance assessment  150  165  290  315
     Communications expense  259  224  500  437
     Transaction related expenses  495  -  495  -
     Other  891  968  1,730  2,080
          Total other expenses  11,912  12,352  23,760  23,724
         
Income before provision for income taxes  3,728  4,373  8,006  8,235
Provision for income taxes  783  919  1,181  1,730
         
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 2,945 $3,454 $ 6,825 $6,505
         
INCOME PER COMMON SHARE:        
     Basic $.28 $.33 $.65 $.61
     Diluted $.28 $.33 $.64 $.61
         

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, 
  2021  2020  2020 
 (Unaudited) (Audited) (Unaudited) 
Commercial Loans:      
Real estate - operators of nonresidential buildings$ 130,222 $138,992 $136,299 
Hospitality and tourism 100,162  100,237  98,981 
Lessors of residential buildings 53,016  52,035  48,852 
Gasoline stations and convenience stores 26,583  29,046  28,463 
Logging 17,408  18,651  22,283 
Commercial construction 48,205  47,698  38,712 
Other 362,833  433,248  504,931 
   Total Commercial Loans 738,429  819,907  878,521 
       
1-4 family residential real estate 210,364  227,044  235,467 
Consumer 18,238  18,980  19,745 
Consumer construction 11,024  11,661  20,057 
       
   Total Loans$ 978,055 $1,077,592 $1,153,790 
       

Credit Quality (at end of period):

 June 30, December 31, June 30, 
  2021  2020  2020 
 (Unaudited) (Audited) (Unaudited) 
Nonperforming Assets :      
Nonaccrual loans$ 4,927 $5,458 $6,124 
Loans past due 90 days or more 6  -  - 
Restructured loans -  -  - 
   Total nonperforming loans 4,933  5,458  6,124 
Other real estate owned 1,343  1,752  2,226 
   Total nonperforming assets$ 6,276 $7,210 $8,350 
Nonperforming loans as a % of loans .50% .51% .53%
Nonperforming assets as a % of assets .41% .48% .55%
Reserve for Loan Losses:      
At period end$ 5,651 $5,816 $5,355 
As a % of outstanding loans .58% .54% .46%
As a % of nonperforming loans 114.56% 106.56% 87.44%
As a % of nonaccrual loans 114.69% 106.56% 87.44%
Texas Ratio 4.08% 4.82% 4.22%
       
Charge-off Information (year to date):     
   Average loans$ 1,051,518 $1,117,132 $1,097,382 
   Net charge-offs (recoveries)$ 264 $492 $153 
   Charge-offs as a % of average      
       loans, annualized .05% .04% .03%
          

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS

            
 QUARTER ENDED  
 (Unaudited)  
 June 30, March 31, December 31, September 30, June 30,  
  2021   2021   2020   2020   2020   
BALANCE SHEET (Dollars in thousands)           
            
Total loans$ 978,055  $1,063,756  $1,077,592  $1,144,325  $1,153,790   
Allowance for loan losses (5,651)  (5,842)  (5,816)  (5,832)  (5,355)  
Total loans, net 972,404   1,057,914   1,071,776   1,138,493   1,148,435   
Total assets 1,518,952   1,508,248   1,501,730   1,522,917   1,518,473   
Core deposits 1,281,419   1,249,591   1,198,381   1,195,062   1,122,582   
Noncore deposits 25,735   23,688   60,395   85,825   104,970   
Total deposits 1,307,154   1,273,279   1,258,776   1,280,887   1,227,552   
Total borrowings 28,441   53,459   63,479   63,505   114,466   
Total shareholders' equity 171,919   170,176   167,864   166,168   164,157   
Total tangible equity 148,314   146,402   143,922   142,057   139,877   
Total shares outstanding 10,550,393   10,550,393   10,500,758   10,533,589   10,533,589   
Weighted average shares outstanding 10,550,393   10,522,899   10,536,023   10,533,589   10,533,589   
            
AVERAGE BALANCES (Dollars in thousands)          
            
Assets$ 1,522,548  $1,512,496  $1,505,869  $1,536,128  $1,501,423   
Earning assets 1,168,006   1,235,235   1,252,038   1,303,102   1,290,012   
Loans 1,025,306   1,078,022   1,118,665   1,154,670   1,147,620   
Noninterest bearing deposits 452,881   426,890   422,081   422,134   346,180   
Deposits 1,295,982   1,279,362   1,255,669   1,269,658   1,211,694   
Equity 171,411   169,023   167,459   165,450   161,811   
            
INCOME STATEMENT (Dollars in thousands)          
            
Net interest income$ 13,266  $13,778  $13,898  $13,052  $14,458   
Provision for loan losses 50   50   400   400   100   
Net interest income after provision 13,216   13,728   13,498   12,652   14,358   
Total noninterest income 2,424   2,398   2,779   3,116   2,367   
Total noninterest expense 11,912   11,848   11,663   11,561   12,352   
Income before taxes 3,728   4,278   4,614   4,207   4,373   
Provision for income taxes 783   398   970   883   919   
Net income available to common shareholders$ 2,945  $3,880  $3,644  $3,324  $3,454   
Income pre-tax, pre-provision$ 3,778  $4,328  $5,014  $4,607  $4,473   
            
PER SHARE DATA           
            
Earnings per common share$.28  $.37  $.35  $.32  $.33   
Book value per common share 16.30   16.13   15.99   15.78   15.58   
Tangible book value per share 14.06   13.88   13.71   13.49   13.28   
Market value, closing price 19.76   14.02   12.76   9.65   10.37   
Dividends per share .14   .14   .14   .14   .14   
            
ASSET QUALITY RATIOS           
            
Nonperforming loans/total loans .50 % .47 % .51 % .47 % .53 % 
Nonperforming assets/total assets .41   .45   .48   .48   .55   
Allowance for loan losses/total loans .58   .55   .54   .51   .46   
Allowance for loan losses/nonperforming loans 114.56   116.28   106.56   107.72   87.44   
Texas ratio 4.08   4.41   4.82   4.91   4.22   
            
PROFITABILITY RATIOS           
            
Return on average assets .78 % 1.04 % .96 % .86 % .93 % 
Return on average equity 6.89   9.31   8.66   7.99   8.58   
Net interest margin 4.56   4.52   4.42   3.98   4.51   
Average loans/average deposits 79.11   84.26   89.09   90.94   94.71   
            
CAPITAL ADEQUACY RATIOS           
            
Tier 1 leverage ratio 9.68 % 9.63 % 9.63 % 9.20 % 9.45 % 
Tier 1 capital to risk weighted assets 15.64   14.74   14.48   13.91   13.27   
Total capital to risk weighted assets 16.25   15.34   15.07   14.49   13.79   
Average equity/average assets (for the quarter) 11.26   11.18   11.12   10.77   10.78   
            

Contact:        Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /[email protected]
Website:        www.bankmbank.com

 


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