Mackinac Financial Corporation Reports First Quarter 2013 Results

Marketwired

MANISTIQUE, MI--(Marketwired - Apr 30, 2013) - Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the "Bank"), today announced first quarter 2013 income of $.676 million or $.12 per share compared to net income of $.498 million, or $.12 per share for the first quarter of 2012. The Corporation's primary asset, mBank, recorded net income of $1.006 million for the first quarter of 2013 compared to $.800 million in 2012. The first quarter 2013 results include a provision for loan losses of $.375 million compared to $.495 million for the same period in 2012. Total assets of the Corporation at March 31, 2013 were $541.896 million, up 6.99 % from the $506.496 million reported at March 31, 2012.

Shareholders' equity at March 31, 2013 totaled $73.039 million, compared to $56.095 million on March 31, 2012, an increase of $16.944 million. Book value of common shareholders' equity was $11.16 per share at March 31, 2013 compared to $13.19 per share at March 31, 2012. The increase in equity, between periods, includes the issuance of 2.138 million shares of common stock in August 2012 for net proceeds of $11.6 million. Weighted average shares outstanding totaled 5,559,859 shares in 2013 first quarter compared to 3,419,736 for the same period in 2012.

Some highlights for the first quarter include:

  • New loan production of $39.8 million which encompassed $15.6 million of new commercial originations and $24.2 million of consumer loans predominantly mortgage related. The Upper Peninsula region accounted for $27.4 million of the new production with the Northern Lower Peninsula equating to $10.4 million and Southeast Michigan $2.0 million.

  • Secondary mortgage loan income of $.299 million, compared to $.298 million in the first quarter of 2012.

  • Stable net interest margin holding up well at 4.18% compared to 4.17% for the first quarter of 2012.

  • Improved credit quality with a Texas Ratio of 9.90% compared to 16.84% one year ago.

Loans and Non-performing Assets

Total loans at March 31, 2013 were $454.051 million, a 9.57% increase from the $414.402 million at March 31, 2012 and up $4.874 million from year-end 2012 total loans of $449.177 million. Commenting on new loan production and overall loan growth, Kelly W. George, President and CEO of mBank stated, "We are still seeing good loan opportunities in all of our markets but have lost some transactions given interest rates and credit structures that did not work for our balance sheet and credit parameters. These were primarily in Southeast Michigan this quarter but all markets are experiencing highly competitive fixed rate commercial loan pricing. In addition, and consistent with previous years given the seasonality of our business primarily in the North, the extended winter and cold has delayed some economic progress for construction projects and just general borrowers overall ability to purchase and/or develop various commercial real estate transactions. We remain encouraged in the North with the 1-4 family mortgage lending activity continuing during this traditional slow period which should bode well for increased lending activities as we enter our peak mortgage lending periods within the late second and third quarters. Our pipeline remains strong too with already funded and waiting to be adjudicated SBA transactions which will lead to increased balance sheet growth and non-interest income generation in the next several quarters."

Nonperforming loans totaled $3.833 million, .84% of total loans at March 31, 2013 compared to $6.857 million, or 1.65% of total loans at March 31, 2012 and down $.854 million from December 31, 2012. Nonperforming assets were reduced by $2.693 million from a year ago and stood at 1.41% of total assets and equated to $7.7 million. Total loan delinquencies greater than 30 days resided at .50 % or $2.266 million. George, commenting on credit quality, stated, "Our overall loan portfolio and corresponding risk tolerance metrics continue to perform well with no material adverse items to note for this quarter. We remain diligent on overall new origination structures to not stretch our comfort zone for new loans, and we continue to timely identify any problems so they can be evaluated and actions plans put in place to either rehabilitate the credit or exit it from the bank. All remaining ORE properties continue to be assessed prudently for collateral valuations and we are confident in their current carrying levels."

Margin Analysis

Net interest margin in the first quarter of 2013 increased to $5.156 million, 4.18%, compared to $4.763 million, or 4.17%, in the first quarter of 2012. The interest margin increase was largely due to decreased overall funding costs. George stated, "We expect some margin pressure as we progress through the year due to increased competition on pricing for new loans and renewals which as noted above stunted our new loan growth this quarter. This resulted in our decision also to operate a little thinner on the liquidity side until the loan pipeline fully picked up given the seasonality of our business. We also remain timely in monitoring the liability side of the balance sheet by making any adjustments to our deposits rates based on market conditions to ensure we are maximizing our ability to maintain our interest spread."

Deposits

Total deposits of $425.236 million at March 31, 2013 increased by 3.19% from deposits of $412.088 million on March 31, 2012, however total deposits on March 31, 2013 were down $9.321 million from year-end 2012 deposits of $434.557 million. The overall decrease in deposits for the first three months of 2013 from year end is comprised of a decrease in core deposits, mostly in transactional accounts due to seasonal and some onetime cash needs of some of our larger commercial client relationships. George, commenting on core deposits, stated, "We have seen very good core deposit growth over the past several years and expect to see continued growth as we expand our customer relationships and also when our tourism season comes into full swing in later May. This continued low interest rate environment has impacted client decisions to remain in shorter term certificates or more liquid accounts as they wait out this period for increases in longer term fixed rate deposits."

Noninterest Income/Expense

Noninterest income, at $.758 million in the first quarter of 2013, increased $.152 million from the first quarter 2012 level of $.606 million with the largest drivers of this income coming from the secondary market mortgage area, which totaled $.299 million in the first quarter. Noninterest expense, at $4.311 million in the first quarter of 2013, increased $.477 million, or 12.44% from the first quarter of 2012. The largest increase from the first quarter of 2012 was in salaries and benefits which reflect several needed staff additions to augment lending/operational controls and sales throughout that 12 month period, and our customary salary and benefit annual awards for overall staff retention and incentive culture. The Corporation continues to look for ways to control costs and remains below peer levels in terms of salary and benefits as a percentage of total assets residing at 1.58%.

Assets and Capital

Total assets of the Corporation at March 31, 2013 were $541.896 million, up 6.99% from the $506.496 million reported at March 31, 2012 and down $4.084 million from the $545.980 million of total assets at year-end 2012. The decrease in assets was primarily due to a decrease in liquidity, as we experienced some seasonal deposit outflows and funded loan growth from cash on hand. Common shareholders' equity at March 31, 2012 totaled $62.039 million, or $11.16 per share, compared to $45.119 million, or $13.19 per share on March 31, 2012. This decrease in book value between periods reflects the impact of our 2012 capital raise when we issued 2.138 million shares of common stock for net proceeds of $11.6 million. The Corporation and the Bank are both "well-capitalized" with Tier 1 Capital at the Corporation of 12.23% and 9.95% at the Bank.

Paul D. Tobias, Chairman and Chief Executive Officer, concluded, "We are pleased with our first quarter operating results. Looking forward, we expect to complete our recently announced plan to redeem $7 million of our $11 million outstanding preferred stock early in the second quarter. This redemption was contemplated when we issued stock in August 2012, and we will redeem the balance of our preferred prior to the contractual increase in rate from the current 5% to 9% which would otherwise occur in April 2014."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $500 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 11 branch locations; seven in the Upper Peninsula, three in the Northern Lower Peninsula and one in Oakland County, Michigan. 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," 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
                   

(Dollars in thousands, except per share data)
  March 31,
2013
    December 31,
2012
    March 31,
2012
 
    (Unaudited)           (Unaudited)  
Selected Financial Condition Data (at end of period):                        
Assets   $ 541,896     $ 545,980     $ 506,496  
Loans     454,051       449,177       414,402  
Investment securities     48,556       43,799       36,788  
Deposits     425,236       434,557       412,088  
Borrowings     40,925       35,925       35,997  
Common Shareholders' Equity     62,039       61,448       45,119  
Shareholders' equity     73,039       72,448       56,095  
                         
                         
Selected Statements of Income Data:                        
Net interest income   $ 5,156     $ 19,824     $ 4,763  
Income before taxes and preferred dividend     1,228       6,165       1,040  
Net income     676       6,458       498  
Income per common share - Basic     .12       1.51       .12  
Income per common share - Diluted     .12       1.51       .11  
Weighted average shares outstanding     5,559,859       4,285,043       3,419,736  
Weighted average shares outstanding - Diluted     5,559,859       4,285,043       3,524,953  
                         
Selected Financial Ratios and Other Data:                        
Performance Ratios:                        
Net interest margin     4.18 %     4.17 %     4.17 %
Efficiency ratio     72.65       67.95       71.01  
Return on average assets     .51       1.23       .40  
Return on average common equity     4.47       12.43       4.53  
Return on average equity     3.79       10.26       3.62  
                         
Average total assets   $ 541,279     $ 526,740     $ 503,412  
Average common shareholders' equity     61,238       51,978       44,229  
Average total shareholders' equity     72,238       62,939       55,418  
Average loans to average deposits ratio     104.63 %     99.45 %     98.73 %
                         
                         
Common Share Data at end of period:                        
Market price per common share   $ 9.21     $ 7.09     $ 7.00  
Book value per common share   $ 11.16     $ 11.05     $ 13.19  
Common shares outstanding     5,557,859       5,559,859       3,419,736  
                         
Other Data at end of period:                        
Allowance for loan losses   $ 5,037     $ 5,218     $ 5,382  
Non-performing assets   $ 7,658     $ 7,899     $ 10,351  
Allowance for loan losses to total loans     1.11 %     1.16 %     1.30 %
Non-performing assets to total assets     1.41 %     1.47 %     2.04 %
Texas ratio     9.90 %     10.25 %     16.96 %
                         
Number of:                        
  Branch locations     11       11       11  
  FTE Employees     126       121       114  
                           
                           
                           
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
   
    March 31,     December 31,     March 31,  
    2013     2012     2012  
    (Unaudited)           (Unaudited)  
ASSETS                        
                         
Cash and due from banks   $ 12,598     $ 26,958     $ 16,912  
Federal funds sold     3       3       14,000  
  Cash and cash equivalents     12,601       26,961       30,912  
                         
Interest-bearing deposits in other financial institutions     10       10       10  
Securities available for sale     48,556       43,799       36,788  
Federal Home Loan Bank stock     3,060       3,060       3,060  
                         
Loans:                        
  Commercial     345,032       342,841       318,810  
  Mortgage     97,216       95,413       81,953  
  Consumer     11,803       10,923       13,639  
  Total Loans     454,051       449,177       414,402  
    Allowance for loan losses     (5,037 )     (5,218 )     (5,382 )
  Net loans     449,014       443,959       409,020  
                         
Premises and equipment     10,587       10,633       9,774  
Other real estate held for sale     3,825       3,212       3,494  
Deferred tax asset     8,726       9,131       7,958  
Other assets     5,517       5,215       5,480  
                         
TOTAL ASSETS   $ 541,896     $ 545,980     $ 506,496  
                         
LIABILITIES AND SHAREHOLDERS' EQUITY                        
                         
LIABILITIES:                        
Deposits:                        
  Noninterest bearing deposits   $ 57,547     $ 67,652     $ 52,470  
  NOW, money market, interest checking     161,445       155,465       151,614  
  Savings     13,273       13,829       13,601  
  CDs     130,646       135,550       137,501  
  CDs > $100,000     24,619       24,355       24,066  
  Brokered     37,706       37,706       32,836  
    Total deposits     425,236       434,557       412,088  
                         
Borrowings:                        
  Fed funds purchased     5,000       -       -  
  FHLB and other     35,925       35,925       35,997  
    Total borrowings     40,925       35,925       35,997  
  Other liabilities     2,696       3,050       2,316  
    Total liabilities     468,857       473,532       450,401  
                         
SHAREHOLDERS' EQUITY:                        
  Preferred stock - No par value:                        
    Authorized 500,000 shares, Issued and outstanding - 11,000 shares     11,000       11,000       10,976  
  Common stock and additional paid in capital - No par value                        
    Authorized - 18,000,000 shares                        
    Issued and outstanding - 5,557,859; 5,559,859; and 3,419,736 shares respectively     53,888       53,797       43,525  
    Retained earnings     7,181       6,727       990  
    Accumulated other comprehensive income     970       924       604  
                           
      Total shareholders' equity     73,039       72,448       56,095  
                         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 541,896     $ 545,980     $ 506,496  
                         
                         
                         
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
 
    Three Months Ended
    March 31,
    2013   2012
    (Unaudited)
INTEREST INCOME:            
  Interest and fees on loans:            
    Taxable   $ 5,889   $ 5,580
    Tax-exempt     27     32
  Interest on securities:            
    Taxable     240     264
    Tax-exempt     7     7
  Other interest income     31     25
    Total interest income     6,194     5,908
             
INTEREST EXPENSE:            
  Deposits     877     983
  Borrowings     161     162
    Total interest expense     1,038     1,145
             
Net interest income     5,156     4,763
Provision for loan losses     375     495
Net interest income after provision for loan losses     4,781     4,268
             
OTHER INCOME:            
  Deposit service fees     162     194
  Income from secondary market loans sold     299     298
  SBA/USDA loan sale gains     109     -
  Mortgage servicing income     103     85
  Other     85     29
    Total other income     758     606
             
OTHER EXPENSE:            
  Salaries and employee benefits     2,306     1,975
  Occupancy     382     345
  Furniture and equipment     270     228
  Data processing     265     228
  Professional service fees     225     180
  Loan and deposit     73     141
  Writedowns and losses on other real estate held for sale     2     11
  FDIC insurance assessment     105     159
  Telephone     82     55
  Advertising     104     98
  Other     497     414
    Total other expenses     4,311     3,834
             
Income before provision for income taxes     1,228     1,040
Provision for income taxes     415     349
             
NET INCOME     813     691
             
Preferred dividend and accretion of discount     137     193
             
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS   $ 676   $ 498
             
INCOME PER COMMON SHARE:            
  Basic   $ .12   $ .12
  Diluted   $ .12   $ .11
               
               
               
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,
    2013   2012   2012
    (Unaudited)   (Unaudited)   (Unaudited)
Commercial Loans:                  
Real estate - operators of nonresidential buildings   $ 94,828   $ 95,151   $ 78,769
Hospitality and tourism     42,733     40,787     33,452
Lessors of residential buildings     13,162     12,672     15,460
Insurance agencies and brokerages     11,854     12,128     11,302
Gasoline stations and convenience stores     11,201     11,393     11,872
Other     154,959     153,481     145,839
  Total Commercial Loans     328,737     325,612     296,694
                   
1-4 family residential real estate     89,629     87,948     81,953
Consumer     11,803     10,923     8,524
Construction                  
  Commercial     16,295     17,229     22,116
  Consumer     7,587     7,465     5,115
                   
  Total Loans   $ 454,051   $ 449,177   $ 414,402
                     
                     
                     
Credit Quality (at end of period):
                   
    March 31,     December 31,     March 31,  
    2013     2012     2012  
    (Unaudited)     (Unaudited)     (Unaudited)  
Nonperforming Assets :                        
Nonaccrual loans   $ 3,833     $ 4,687     $ 4,457  
Loans past due 90 days or more     -       -       -  
Restructured loans     -       -       2,400  
  Total nonperforming loans     3,833       4,687       6,857  
Other real estate owned     3,825       3,212       3,494  
  Total nonperforming assets   $ 7,658     $ 7,899     $ 10,351  
Nonperforming loans as a % of loans     .84 %     1.04 %     1.65 %
Nonperforming assets as a % of assets     1.41 %     1.45 %     2.04 %
Reserve for Loan Losses:                        
At period end   $ 5,037     $ 5,218     $ 5,382  
As a % of average loans     1.12 %     1.24 %     1.30 %
As a % of nonperforming loans     131.41 %     111.33 %     78.49 %
As a % of nonaccrual loans     131.41 %     111.33 %     120.75 %
Texas Ratio     9.90 %     10.25 %     16.96 %
                         
Charge-off Information (year to date):                        
  Average loans   $ 449,065     $ 422,440     $ 380,066  
  Net charge-offs   $ 364     $ 978     $ 429  
  Charge-offs as a % of average loans, annualized     .32 %     .23 %     .45 %
                           
                           
                           
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
                     
  QUARTER ENDED  
  (Unaudited)  
  March 31,   December 31,   September 30,   June 30,   March 31,  
  2013   2012   2012   2012   2012  
BALANCE SHEET (Dollars in thousands)                              
                               
Total loans $ 454,051   $ 449,177   $ 433,958   $ 419,453   $ 414,402  
Allowance for loan losses   (5,037 )   (5,218 )   (5,186 )   (5,083 )   (5,382 )
  Total loans, net   449,014     443,959     428,772     414,370     409,020  
Total assets   541,896     545,980     551,117     524,366     506,496  
Core deposits   362,911     372,496     372,500     357,933     355,186  
Noncore deposits (1)   62,325     62,061     66,863     67,448     56,902  
  Total deposits   425,236     434,557     439,363     425,381     412,088  
Total borrowings   40,925     35,925     35,925     35,997     35,997  
Common shareholders' equity   62,039     61,448     61,945     49,352     45,119  
Total shareholders' equity   73,039     72,448     72,945     60,352     56,095  
Total shares outstanding   5,557,859     5,559,859     5,559,859     3,419,736     3,419,736  
Weighted average shares outstanding   5,559,859     5,559,859     4,722,029     3,419,736     3,419,736  
                               
AVERAGE BALANCES (Dollars in thousands)                              
                               
Assets $ 541,279   $ 545,661   $ 545,788   $ 511,681   $ 503,412  
Loans   449,065     438,168     424,461     422,887     404,048  
Deposits   429,174     433,573     439,327     452,655     409,250  
Common Equity   61,238     61,936     56,327     44,927     44,469  
Equity   72,238     72,936     67,327     55,915     55,418  
                               
INCOME STATEMENT (Dollars in thousands)                              
                               
Net interest income $ 5,156   $ 5,112   $ 4,930   $ 5,019   $ 4,763  
Provision for loan losses   375     150     150     150     495  
  Net interest income after provision   4,781     4,962     4,780     4,869     4,268  
Total noninterest income   758     983     1,149     1,305     606  
Total noninterest expense   4,311     4,349     4,367     4,207     3,834  
Income before taxes   1,228     1,596     1,562     1,967     1,040  
Provision for income taxes   415     536     528     (2,335 )   349  
  Net income   813     1,060     1,034     4,302     691  
Preferred dividend expense   137     138     137     161     193  
Net income (loss) available to common shareholders $ 676   $ 922   $ 897   $ 4,141   $ 498  
                               
PER SHARE DATA                              
                               
Earnings $ .12   $ .21   $ .21   $ .97   $ .12  
Book value per common share   11.16     11.05     11.14     14.43     13.19  
Market value, closing price   9.21     7.09     7.60     5.99     7.00  
                               
ASSET QUALITY RATIOS                              
                               
Nonperforming loans/total loans   .84 %   1.07 %   1.23 %   1.28 %   1.65 %
Nonperforming assets/total assets   1.41     1.47     1.61     1.70     2.04  
Allowance for loan losses/total loans   1.11     1.16     1.20     1.21     1.30  
Allowance for loan losses/nonperforming loans   131.41     108.96     96.99     94.57     78.49  
Texas ratio (2)   9.90     10.25     11.35     13.70     16.96  
                               
PROFITABILITY RATIOS                              
                               
Return on average assets   .51 %   .67 %   .65 %   3.21 %   .40 %
Return on average common equity   4.47     5.93     6.33     36.57     4.53  
Return on average equity   3.79     5.03     5.29     29.39     3.62  
Net interest margin   4.18     4.11     4.10     4.30     4.17  
Efficiency ratio   72.65     70.52     67.29     63.61     71.01  
Average loans/average deposits   104.63     99.45     96.62     101.50     98.73  
                               
CAPITAL ADEQUACY RATIOS                              
                               
Tier 1 leverage ratio   12.23 %   11.98 %   10.16 %   9.95 %   10.08 %
Tier 1 capital to risk weighted assets   13.98     13.81     12.87     11.55     11.62  
Total capital to risk weighted assets   15.06     14.93     14.12     12.80     12.87  
Average equity/average assets   13.16     13.37     10.93     11.01     11.33  
Tangible equity/tangible assets   13.36     13.17     13.15     11.42     11.00  
                               
(1)   Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000
(2)   Texas ratio equals nonperforming assets divided by shareholders' equity plus allowance for loan losses
     
     
     
Contact:

Ernie R. Krueger
(906)341-7158
Website: www.bankmbank.com
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