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Mackinac Financial Corporation Reports 2018 Fourth Quarter and Annual Results

MANISTIQUE, Mich., Jan. 31, 2019 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (MFNC) (the “Corporation”), the bank holding company for mBank, today announced 2018 net income of $8.37 million, or $.94 per share, compared to 2017 net income of $5.48 million, or $.87 per share. 

The 2018 results included expenses related to the acquisitions of First Federal of Northern Michigan (“FFNM”), and Lincoln Community Bank (“Lincoln”), which had a collective after-tax impact of $2.46 million on earnings. The 2017 results include the effects of a $2.02 million non-cash tax expense related to the revaluation of the company’s Deferred Tax Asset (“DTA”) as a result of the corporate tax code change in December 2017 and a small amount of transaction expenses related to FFNM.  Adjusted core income (net of transaction related expenses) for 2018 was $10.83 million or $1.22 per share compared to 2017 adjusted core income (net of the DTA expense) of $7.54 million, or $1.20 per share. 

Weighted average shares outstanding for 2018 were 8,891,967 compared to 6,288,791 for 2017. Weighted average shares outstanding for the fourth quarter 2018 were 10,712,745 compared to 6,294,930 for the same period of 2017.  The Corporation issued 2,146,378 new shares for the FFNM purchase in May 2018 and issued an additional 2,225,807 shares related to the common stock offering completed in June 2018. 

The Corporation had fourth quarter 2018 net income of $3.36 million or $.31 per share compared to a $20 thousand loss ($0.00 per share) for the same period of 2017 due to the impact of the DTA revaluation.  The 2018 fourth quarter results were impacted by acquisition related expenses of $386 thousand on an after-tax basis. 2018 fourth quarter income, excluding tax-affected transaction related expenses, was $3.75 million or $.35 per share compared to 2017 income, net of the DTA expense, of $2.07 million or $0.33 per share.

Total assets of the Corporation at December 31, 2018 were $1.32 billion, compared to $985.37 million at December 31, 2017.  Shareholders’ equity at December 31, 2018 totaled $152.07 million, compared to $81.40 million at December 31, 2017.  Book value per share outstanding equated to $14.20 at year-end 2018 compared to $12.93 per share outstanding a year ago.  Tangible book value at year-end 2018 was $124.33 million or $11.61 per share outstanding compared to $73.78 million or $11.72 per share at year-end 2017. 

Additional notes:

  • mBank, the Corporation’s primary asset, recorded net income of $9.04 million in 2018, compared to $8.98 million in 2017.  In December 2018, mBank had an internal tax allocation expense between it and the Corporation (MFNC) of $1.34 million.  This adjustment resulted from the internal DTA allocation from 2017 and did not have an impact on the consolidated MFNC reported income or balance sheet for 2018.  It was, however, reflected in the mBank 2018 year-end Call Report.  Adjusted core net income for 2018 (including total adjustments for the tax reallocation and transaction related expenses of $3.16 million on an after-tax basis) was $12.20 million compared to 2017 core net income of the aforementioned $8.98 million. Adjusted bank core net income grew approximately 36%.
     
  • As expected, FFNM and Lincoln have been fully integrated into the Corporation and mBank as of year-end 2018.  No further significant transaction related expenses are expected from these acquisitions in 2019 and beyond.
     
  • Adjusted income before taxes of the Corporation (net of pre-tax transaction related expenses) was $13.71 million in 2018 compared to $11.12 million in 2017, which eliminates the effect of the non-cash DTA expense year-over-year.  Adjusted fourth quarter income before taxes was $4.75 million in 2018 compared to $2.94 million in 2017, an increase of 61%. 
     
  • Reliance on higher cost brokered deposits decreased significantly from $175.30 million or 21.43% of total deposits at year-end 2017 to $136.76 million or 12.46% of total deposits at year-end 2018.
     
  • 2018 net interest margin (NIM) remains strong at 4.44%.  Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments, was 4.21%.

Revenue

Total revenue of the Corporation for 2018 was $59.64 million compared to $48.42 million in 2017.  Total revenue for the three months ended December 31, 2018 equated to $17.54 million compared to $12.71 million for the same period of 2017.  Total interest income for 2018 was $55.38 million compared to $44.38 million for the same period in 2017.  Fourth quarter interest income equated to $16.09 million compared to $11.39 million in the fourth quarter of 2017.  The 2018 fourth quarter interest income included accretive yield of $946 thousand from combined credit mark accretion associated with acquisitions compared to $503 thousand in the same period of 2017. 

Loan Production

Total balance sheet loans at December 31, 2018 were $1.04 billion compared to December 31, 2017 balances of $811.08 million.  Total loans under management now reside at $1.38 billion, which includes $338.17 million of service retained loans.  New loan production for 2018 was $287 million, with origination activity increasing through the second half of the year, as expected.  Commercial originations accounted for $169 million, retail (predominantly mortgage), equated to $46 million, secondary market mortgage production was $57 million and Asset Based Lending (ABL) $15 million. The tables below illustrate year-to-date new loan production totals by region as well as bank-wide new loan production by quarter for 2018 highlighting the effect of seasonality on operations due to the Corporation’s geographic footprint.

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Commenting on new loan production and overall lending activities, President of the Corporation and President and CEO of mBank, Kelly W. George, stated, “Commercial loan production outpaced last year’s totals by $27 million with a continued competitive environment for high-quality credits.  We believe the acquired FFNM markets and Wisconsin markets will continue to have a positive impact on all types of originations and we are very pleased with their contributions since the acquisitions and their full integration into our lending culture. Secondary market activity has improved in the third and fourth quarters but remained $9 million less than 2017 after a slower start to the year, predominately driven by the expected slowdown in refinance activity. Commercial payoff activity was somewhat elevated this year, totaling $56 million as we saw continued fixed-rate pricing pressure and terms that led us to pass on renewing some larger client relationships that we felt were not prudent to retain for the long-term stability of our margin and macro portfolio mix. We also saw several clients divest of various types of large real estate development projects for liquidity and redeployment of their capital throughout the latter part of the year. Overall, we remain pleased with our lending activities in 2018 and the outlook for 2019 absent any significant adverse market conditions. Key lending personnel should also be able to focus greater time on organic growth initiatives given the multiple acquisition and capital raise activities throughout 2018.”

Credit Quality

Nonperforming loans totaled $5.08 million, or .49% of total loans at December 31, 2018 compared to $2.57 million, or .32% of total loans at December 31, 2017.  The increase in non-performing loans is mainly the result of credits acquired in the FFNM transaction, which were marked to fair value as part of the credit due diligence process.  Total loan delinquencies greater than 30 days resided at a nominal .96%, compared to .66% in 2017.  Provision for loan loss expense for the fourth quarter 2018 was $300 thousand.

Commenting on overall credit risk, Mr. George stated, “As expected, we saw a slight increase in our non-performing and problem loan credit ratios following the FFNM and Lincoln acquisitions. We have seen no signs of any adverse systemic issues in terms of increased payment period times for legacy clients or material deterioration in commercial client financial statements in any of our core industries in which we lend. Similar to previous transactions, we anticipate this slight increase to nonperforming loans and delinquencies will normalize over the coming quarters as we continue to work quickly in resolving these acquired problem credits, either through exit from the bank, or when possible, rehabilitation to an acceptable loan structure and performance.  Also, purchase accounting marks from the previously acquired banks have continued to prove accurate, attaining expected accretion levels.” 

Margin Analysis and Funding

Net interest income for 2018 was $47.13 million, leading to a Net Interest Margin (NIM) of 4.44% compared to $37.94 million in 2017 and a NIM of 4.20%.  Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments, was 4.21% for 2018.  Net interest income for the fourth quarter of 2018 resided at $13.79 million, and a NIM of 4.64%, compared to $9.66 million and a NIM of 4.18% in the fourth quarter of 2017.  2018 total interest expense was $8.25 million versus $6.44 million for 2017 due mainly to a larger deposit base following the FFNM transaction and partially to an increase in rates on brokered deposits.

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Total bank deposits (excluding brokered deposits) have increased by $318.08 million year-over-year from $642.70 million in 2017 to $960.78 million at year-end 2018.  Total brokered deposits were $136.76 million at the end of December 2018, down from $175.30 million at December 31, 2017.  FHLB and other borrowings were also down slightly from $60 million at year-end 2017 to $57 million at the end of 2018. 

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Mr. George stated, “With the lower cost core deposit base we acquired from FFNM and Lincoln, we were able to reposition the balance sheet and remove approximately $40 million of much higher cost wholesale funding sources in 2018. We also continue to maintain our pricing discipline with regard to fixed rate lending, primarily on the commercial side to ensure margin sustainability. The impact of any future Federal Reserve Bank rate moves on funding sources are expected to be more than offset by the positive impact from the increase in the variable rate portion of our well-balanced loan portfolio given the structure of our balance sheet. We have not seen any significant pricing pressure in our high value deposit markets and have had to make nominal increases in our deposit products to remain rate-competitive and offset any potential outflows. Our focus on new core deposit procurement remains a key initiative for 2019 as we look to continue to wind down our wholesale funding sources through aggressive marketing and business development initiatives within our retail branch and treasury management business lines in target markets where greater opportunities exist.”

Noninterest Income / Expense

2018 Noninterest Income was $4.26 million compared to $4.04 million for 2017.  While year-over-year improvement is negligible, 2017 included approximately $230 thousand in additional gains on sales of securities from the bank investment portfolio as well as $315 thousand more in gains on sale of secondary market mortgages and Small Business Administration (SBA) loans compared to 2018.  Overall, non-interest income generated from the larger bank platform is trending positively and we expect SBA income to normalize in 2019.  Noninterest Expense for 2018 was $40.30 million compared to $30.36 million in 2017.  The expense variance from 2017 was heavily impacted by the additional expense related to the larger bank platform following the FFNM and Lincoln transactions including additional salary, benefits and occupancy costs as well as the transaction related expenses. 

Assets and Capital

Total assets of the Corporation at December 31, 2018 were $1.32 billion, compared to $985.37 million at December 31, 2017.  Shareholders’ equity at December 31, 2018 totaled $152.07 million, compared to $81.40 million at December 31, 2017.  Both the common stock offering and the FFNM acquisition had positive impacts on the Corporation’s overall capitalization and regulatory capital ratios.  Of the $32.4 million in net proceeds from the June 2018 common stock offering, the Corporation utilized $19.45 million to retire senior holding company debt and $8.5 million for the purchase of Lincoln.  Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 12.47% and 12.22% and tier 1 capital to total tier 1 average assets at the corporation of 9.24% and at the bank of 9.02%.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “We believe that 2018 was an extremely productive and transformative year. We continue to execute our growth and acquisition strategy while maintaining focus on credit quality, scale efficiencies, community support and governance.  Our balance sheet attributes are strong due to a capital raise that provides us with a cushion that will help us maintain our ability to seek well-priced acquisitions.  The complementary core deposit base of FFNM and Lincoln allowed us to restructure our liabilities, reducing holding company debt and wholesale funding levels at an opportune time in the rate cycle. Our patience and discipline have served us well in all aspects of our business.  We remain optimistic that we will develop acquisition opportunities as we grow organically.  Our focus on efficiency and improved profitability always will be paramount.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.3 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 29 branch locations; eleven in the Upper Peninsula, ten 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,” 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  
            Year Ending   Year Ending  
            December 31,   December 31,  
(Dollars in thousands, except per share data)     2018   2017  
            (Unaudited)      
Selected Financial Condition Data (at end of period):          
Assets           $   1,318,040   $ 985,367  
Loans               1,038,864     811,078  
Investment securities             116,748     75,897  
Deposits               1,097,537     817,998  
Borrowings             60,441     79,552  
Shareholders' equity             152,069     81,400  
                   
                   
Selected Statements of Income Data:            
Net interest income         $   47,130   $ 37,938  
Income before taxes             10,593     11,018  
Net income             8,367     5,479  
Income per common share - Basic         .94   .87  
Income per common share - Diluted       .94   .87  
Weighted average shares outstanding         8,891,967     6,288,791  
Weighted average shares outstanding- Diluted         8,921,658     6,322,413  
                   
Selected Financial Ratios and Other Data:            
Performance Ratios:                
Net interest margin             4.44 %   4.20 %
Efficiency ratio             77.70     71.39  
Return on average assets         .71   .55  
Return on average equity           6.94     6.74  
                   
Average total assets         $   1,177,455   $ 995,826  
Average total shareholders' equity           120,478     81,349  
Average loans to average deposits ratio         97.75 %   96.29 %
                   
                   
Common Share Data at end of period:            
Market price per common share       $   13.65   $ 15.90  
Book value per common share           14.20     12.93  
Tangible book value per share           11.61     11.72  
Dividends paid per share, annualized       .480   .480  
Common shares outstanding           10,712,745     6,294,930  
                   
Other Data at end of period:              
Allowance for loan losses       $   5,183   $ 5,079  
Non-performing assets         $   8,196   $ 6,126  
Allowance for loan losses to total loans       .50 % .63 %
Non-performing assets to total assets       .62 % .62 %
Texas ratio               6.33 %   7.77 %
                   
Number of:                  
Branch locations             29     23  
FTE Employees             288     233  
                   
                   

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

         
  December 31,   December 31,  
  2018   2017  
  (Unaudited)      
ASSETS        
         
Cash and due from banks $   64,151     $ 37,420    
Federal funds sold     6       6    
Cash and cash equivalents     64,157       37,426    
         
Interest-bearing deposits in other financial institutions     13,452       13,374    
Securities available for sale     116,248       75,397    
Other securities     500       500    
Federal Home Loan Bank stock     4,924       3,112    
         
Loans:        
Commercial     717,032       572,936    
Mortgage     301,461       220,708    
Consumer     20,371       17,434    
Total Loans     1,038,864       811,078    
Allowance for loan losses     (5,183 )     (5,079 )  
Net loans     1,033,681       805,999    
         
Premises and equipment     22,783       16,290    
Other real estate held for sale     3,119       3,558    
Deferred tax asset     5,763       4,970    
Deposit based intangibles     5,720       1,922    
Goodwill     22,024       5,694    
Other assets     25,669       17,125    
         
TOTAL ASSETS $   1,318,040     $ 985,367    
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
         
LIABILITIES:        
Deposits:        
Noninterest bearing deposits $   241,556     $ 148,079    
NOW, money market, interest checking     368,890       280,309    
Savings     111,358       61,097    
CDs<$250,000     225,236       142,159    
CDs>$250,000     13,737       11,055    
Brokered     136,760       175,299    
Total deposits     1,097,537       817,998    
         
Federal funds purchased     2,905       -    
Borrowings     57,536       79,552    
Other liabilities     7,993       6,417    
Total liabilities     1,165,971       903,967    
         
SHAREHOLDERS' EQUITY:        
Common stock and additional paid in capital - No par value        
Authorized - 18,000,000 shares        
Issued and outstanding - 10,712,745 and 6,294,930, shares respectively     129,066       61,981    
Retained earnings     23,466       19,711    
Accumulated other comprehensive income        
Unrealized gains (losses) on available for sale securities     (245 )     (71 )  
Minimum pension liability     (218 )     (221 )  
         
Total shareholders' equity     152,069       81,400    
         
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $   1,318,040     $ 985,367    
         

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

     
    For the Years Ended
    December 31,
    2018   2017   2016
    (Unaudited)
  (Audited)   (Audited)
INTEREST INCOME:            
Interest and fees on loans:            
Taxable   $   51,407   $ 41,770     $ 36,078  
Tax-exempt       123     95       64  
Interest on securities:            
Taxable       2,408     1,606       1,322  
Tax-exempt       338     298       220  
Other interest income       1,101     607       299  
Total interest income       55,377     44,376       37,983  
             
INTEREST EXPENSE:            
Deposits       6,492     4,361       3,322  
Borrowings       1,755     2,077       1,563  
Total interest expense       8,247     6,438       4,885  
             
Net interest income       47,130     37,938       33,098  
Provision for loan losses       500     625       600  
Net interest income after provision for loan losses       46,630     37,313       32,498  
             
OTHER INCOME:            
Deposit service fees       1,441     1,056       995  
Income from mortgage loans sold on the secondary market       1,289     1,373       1,575  
SBA/USDA loan sale gains       661     867       897  
Mortgage servicing income - net       197     (31 )     (40 )
Net security gains       -     231       150  
Other       675     545       576  
Total other income       4,263     4,041       4,153  
             
OTHER EXPENSE:            
Salaries and employee benefits       20,064     15,490       14,625  
Occupancy       3,640     3,104       2,680  
Furniture and equipment       2,548     2,209       1,749  
Data processing       2,503     2,037       1,620  
Advertising       905     711       620  
Professional service fees       1,575     1,534       1,169  
Loan and deposit       1,166     1,335       1,100  
Writedowns and losses on other real estate held for sale       182     388       202  
FDIC insurance assessment       700     731       488  
Telephone       726     604       528  
Transaction related expenses       2,951     50       3,101  
Other       3,340     2,143       2,003  
Total other expenses       40,300     30,336       29,885  
             
Income before provision for income taxes       10,593     11,018       6,766  
Provision for (benefit of)  income taxes       2,226     5,539       2,283  
             
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS   $   8,367   $ 5,479     $ 4,483  
             
INCOME PER COMMON SHARE:            
Basic    $ .94   $ .87     $ .72  
Diluted    $ .94   $ .87     $ .71  
               
             

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

         
   December 31,   December 31,  
   2018    2017  
  (Unaudited)   (Unaudited)  
Commercial Loans:        
Real estate - operators of nonresidential buildings $   150,251   $ 119,025  
Hospitality and tourism     77,598     75,228  
Lessors of residential buildings     50,204     33,032  
Gasoline stations and convenience stores     24,189     21,176  
Logging     20,860     17,554  
Commercial construction     12,752     9,243  
Other     381,178     297,678  
Total Commercial Loans     717,032     572,936  
         
1-4 family residential real estate     286,908     209,890  
Consumer     20,371     17,434  
Consumer construction     14,553     10,818  
         
Total Loans $   1,038,864   $ 811,078  
         

Credit Quality (at end of period):

         
   December 31,   December 31,  
  2018   2017  
  (Unaudited)   (Unaudited)  
Nonperforming Assets :        
Nonaccrual loans $   5,054   $ 2,388  
Loans past due 90 days or more     23     -  
Restructured loans     -     180  
Total nonperforming loans     5,077     2,568  
Other real estate owned     3,119     3,558  
Total nonperforming assets $   8,196   $ 6,126  
Nonperforming loans as a % of loans   .49 % .32 %
Nonperforming assets as a % of assets   .62 % .62 %
Reserve for Loan Losses:        
At period end $   5,183   $ 5,079  
As a % of average loans   .55 % .64 %
As a % of nonperforming loans     102.09 %   197.78 %
As a % of nonaccrual loans     102.55 %   212.69 %
Texas Ratio     6.33 %   7.77 %
         
Charge-off Information (year to date):        
Average loans $   941,221   $ 795,532  
Net charge-offs (recoveries) $   396   $ 566  
Charge-offs as a % of average        
loans, annualized   .04 % .07 %
         

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS

                       
  QUARTER ENDED    
  (Unaudited)    
  December 31   September 30,   June 30   March 31   December 31    
  2018   2018   2018   2018   2017    
BALANCE SHEET (Dollars in thousands)                      
                       
Total loans $   1,038,864     $ 993,808     $ 1,003,377     $ 812,441     $ 811,078      
Allowance for loan losses     (5,183 )     (5,186 )     (5,141 )     (5,101 )     (5,079 )    
Total loans, net     1,033,681       988,622       998,236       807,340       805,999      
Total assets     1,318,040       1,254,335       1,274,095       983,929       985,367      
Core deposits     947,040       885,988       844,894       602,601       631,644      
Noncore deposits     150,497       142,070       170,607       204,196       186,354      
Total deposits     1,097,537       1,028,058       1,015,501       806,797       817,998      
Total borrowings     60,441       69,216       91,747       80,002       79,552      
Total shareholders' equity     152,069       149,367       148,867       81,857       81,400      
Total tangible equity     124,325       124,605       123,974       74,303       73,784      
Total shares outstanding     10,712,745       10,712,745       10,712,745       6,332,560       6,294,930      
Weighted average shares outstanding     10,712,745       10,712,745       7,769,720       6,304,203       6,294,930      
                       
AVERAGE BALANCES (Dollars in thousands)                      
                       
Assets $   1,320,996     $ 1,284,068     $ 1,117,188     $ 982,679     $ 996,966      
Loans     1,043,409       1,001,763       905,802       810,688       808,306      
Deposits     1,087,174       1,042,004       913,220       805,092       817,338      
Equity     149,241       149,202       100,518       81,894       82,879      
                       
INCOME STATEMENT (Dollars in thousands)                      
                       
Net interest income $   13,795     $ 13,214     $ 10,813     $ 9,309     $ 9,664      
Provision for loan losses     300       50       100       50       225      
Net interest income after provision     13,495       13,164       10,713       9,259       9,439      
Total noninterest income     1,443       1,343       863       614       1,317      
Total noninterest expense     10,678       10,618       11,077       7,928       7,918      
Income before taxes     4,260       3,889       499       1,945       2,838      
Provision for income taxes   895       820       103       408       2,858      
Net income available to common shareholders $   3,365     $ 3,069     $ 396     $ 1,537     $ (20 )    
Income pre-tax, pre-provision $   4,560     $ 3,939     $ 599     $ 1,995     $ 3,062      
                       
PER SHARE DATA                      
                       
Earnings  $   .31      $   .29      $   .05      $  .24     $ -      
Book value  per common share     14.20       13.94       13.90       12.96       12.93      
Tangible book value per share     11.61       11.63       11.57       11.73       11.72      
Market value, closing price     13.65       16.20       16.58       16.25       15.90      
Dividends per share     .120       .120       .120       .120       .120      
                                           
ASSET QUALITY RATIOS                                          
                                           
Nonperforming loans/total loans     .49    %   .46   %   .50   %   .53   %   .32   %  
Nonperforming assets/total assets     .62       .53       .59       .70       .62      
Allowance for loan losses/total loans     .50       .52       .51       .63       .63      
Allowance for loan losses/nonperforming loans     102.09       114.58       102.31       117.48       197.78      
Texas ratio     6.33       5.14       5.80       6.87       7.77      
                       
PROFITABILITY RATIOS                      
                       
Return on average assets     1.01    %   .95   %   .14   %   .63   %   (.01)   %  
Return on average equity     8.95       8.16       1.58       7.61       (.10)      
Net interest margin     4.64       4.60       4.26       4.19       4.18      
Average loans/average deposits     95.97       96.14       99.19       100.70       98.89      
                                       
CAPITAL ADEQUACY RATIOS                                      
                                       
Tier 1 leverage ratio     9.24    %   9.51   %   9.39   %   7.25   %   7.06   %  
Tier 1 capital to risk weighted assets     11.95       12.62       11.87       8.79       8.66      
Total capital to risk weighted assets     12.47       13.17       12.39       9.43       9.29      
Average equity/average assets (for the quarter)     11.30       11.62       9.00       8.33       8.31      
Tangible equity/tangible assets (at quarter end)     9.64       10.13       9.92       7.62       7.55      
                       

Contact:                                Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /jdeering@bankmbank.com
Website:                                www.bankmbank.com