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Mackinac Financial Corporation Reports Third Quarter 2018 Results

MANISTIQUE, Mich., Oct. 31, 2018 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (MFNC) (the “Corporation”), the bank holding company for mBank, today announced third quarter 2018 income of $3.07 million, or $.29 per share, compared to net income of $2.09 million, or $.33 per share, for the third quarter of 2017.  As expected, the 2018 third quarter results were impacted by expenses related to the acquisition of First Federal of Northern Michigan (FFNM) and pre-closing activity for the Lincoln Community Bank (Lincoln) transaction that closed on October 1, 2018. 

The Corporation had third quarter GAAP pre-tax transaction related expenses totaling $350 thousand.  These transaction related costs reduced the reported net income for the quarter by $276 thousand, on an after-tax basis.  The adjusted net income for the third quarter of 2018 (exclusive of the transaction related expenses) would equate to $3.35 million, or $.31 per weighted average share.  Weighted average shares outstanding for the third quarter 2018 were 10,712,745 compared to 6,294,930 for the same period of 2017 and 7,769,720 shares for the second quarter of 2018.  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 that was completed in June 2018. 

Total assets of the Corporation at September 30, 2018 were $1.25 billion compared to $1.02 billion at September 30, 2017.  Shareholders’ equity at September 30, 2018 totaled $149.37 million, compared to $82.65 million on September 30, 2017. The tangible book value per share equated to $11.63 on September 30, 2018 compared to $11.91 per share a year ago.  The proceeds from the stock offering were used to pay down approximately $19.45 million in senior holding company debt, resulting in no long-term debt residing on the balance sheet at quarter end. 

mBank, the Corporation’s primary asset, recorded net income of $3.47 million in the third quarter of 2018, compared to $2.43 million in the third quarter of 2017. Acquisition-related expenses totaled $265 thousand at the bank level, with an after-tax impact of $210 thousand. Adjusted core net income (exclusive of the transaction expenses) for the third quarter of 2018 was $3.68 million, an increase of $1.25M from the third quarter 2017. 

Highlights and additional notes:

  • The Corporation completed the acquisition of Lincoln Community Bank (“Lincoln”) (Merrill, WI) on October 1, 2018 acquiring approximately $39 million in loans and $53 million of core deposits. As part of this transaction, the Corporation also plans to close the acquired Gleason, WI location at the end of the year. With the data processing conversion taking place in early November, all cost efficiencies will be phased in for 2019 and are expected to provide accretion to earnings. 
     
  • The Corporation plans to also consolidate mBank’s in-store Ishpeming, MI branch into another nearby mBank location at year end 2018.  Minimal client attrition is expected from the consolidation while realizing additional efficiencies.
     
  • Since the third quarter of 2017, higher rate wholesale funding sources have decreased $69 million ($57 million in Brokered CDs and $12 million in FHLB borrowings) through both repositioning of the balance sheet internally with growth in core deposits and through utilization of the FFNM liquidity following the transaction.
     
  • The Corporation’s non-GAAP core net interest margin (exclusive of purchase accounting mark accretion) continues to perform well, residing at 4.13% year-to-date.  Inclusive of the accretion from the recent FFNM acquisition combined with two other legacy transactions, total reportable margin equated to 4.37%. Additional interest rate increases are expected to have a positive impact on the margin moving into 2019.
     
  • New loan production from the newly acquired FFNM markets has totaled $31 million in the short time since the close of the transaction in May 2018. 

Revenue

Total revenue of the Corporation for the three months ended September 30, 2018 equated to $16.63 million compared to $12.68 million for the same period of 2017.  Total interest income was $15.29 million for the third quarter of 2018 compared to $11.52 million for the same period in 2017. The 2018 third quarter interest income included accretive yield of $1.01 million from combined accretion associated with acquisitions compared to 2017 same period of $554 thousand.  The non-interest income portion of total revenue increased slightly year-over-year from $1.15 million in the third quarter of 2017 to $1.34 million for the same period of 2018, partially due to the positive impact of FFNM. 

Loan Production

Total balance sheet loans at September 30, 2018 were $993.81 million compared to September 30, 2017 balances of $808.15 million.  Total loans under management now reside at $1.32, billion which includes $328.54 million of service retained loans.  Total loan production through three quarters of 2018 is $8 million ahead of 2017 at $204 million with origination activity increasing in the second and third quarters, as expected. Commercial originations accounted for $131 million, while retail, predominantly mortgage, equated to $73 million. Regional new production year-to-date is noted in the below chart:

 
2018 Year-to-Date Loan Production
$ in thousands (000)
Upper Peninsula $   81,000
Northern Lower Peninsula     70,000
Southeast Michigan     23,000
Wisconsin     17,000
Asset-Based Lending     13,000
Total $   204,000
   
   

Commenting on new loan production and overall lending activities, Kelly W. George, President of the Corporation and President and CEO of mBank stated, “Commercial loan production is slightly ahead of last year despite a continued competitive environment for the high-quality loans we adjudicate.  Based on steady deal flow since the FFNM acquisition date, we expect that the addition of the FFNM markets and the recently acquired Lincoln markets will continue to have a positive impact on all types of originations as we assimilate the acquired banks into our lending culture. As we alluded to in our previous quarter communications, we have seen the change in interest rates impact our secondary market originations on the refinance side, which has been an industry-wide challenge. While secondary market mortgage activity has improved in the third quarter, bringing the total to $40 million year to date, it is still $9 million less than 2017. Overall, we like the outlook of our loan activity and it will continue to be a focus in all of our markets going into 2019.”  

Credit Risk

Nonperforming loans totaled $4.53 million, or .46% of total loans at September 30, 2018 compared to $3.07 million, or .38%, of total loans at September 30, 2017. Total loan delinquencies greater than 30 days resided at a nominal .97%, compared to .51% in the third quarter of 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 transaction due diligence. Commenting on overall credit risk, Mr. George stated, “As expected, we saw a slight increase in our non-performing credit ratios following the FFNM acquisition.  Similar to previous transactions, we anticipate this will normalize over the coming quarters as we work to quickly resolve or shore up some of these acquired problem loans.  Overall, loan portfolio performance, both legacy mBank and acquired FFNM, remains strong with no material credit issues within any of the business segments. Purchase accounting marks from the previously acquired banks have continued to prove accurate, attaining expected accretion to the margin. We expect the same accretive mark performance behavior for the recently acquired FFNM and Lincoln portfolios.”

Margin Analysis / Funding

Net interest income in the third quarter of 2018 resided at $13.21 million, or 4.60%, compared to $9.79 million, or 4.23%, in the third quarter of 2017. Third quarter 2018 total interest expense was $2.08 million versus $1.73 million for the same period of 2017 due mainly to a larger deposit base acquired in the FFNM transaction. Total deposits at the end of the quarter equated to $1.03 billion. Brokered deposits were $125 million at the end of September 2018, reduced from $182 million at September 30, 2017.  The Corporation continues to opportunistically reduce brokered deposits when they mature as liquidity needs allow given the seasonality in our core funding sources.  Mr. George stated, “We are pleased to have been successful in maintaining our strong core net interest margin of 4.13% in the rising rate environment, where we have seen nominal pressure to significantly move up rates on transaction related accounts. We did adjust some transactional depository rates in late September for the first time in the rising interest rate cycle. We also began to offer some special term CD rates, both in an effort to alleviate seasonality runoff as we go into our slower business cycle months and primarily to take a more aggressive and offensive posture to procure new in-market deposits heading into 2019. The impact of this rate increase will be more than offset by the positive impact from the increase in our variable rate loan portfolio from the recent and any subsequent rate increases. Through our balance sheet repositioning over the past quarter, from both liquidity generated from investment sales following the FFNM close of $46 million and the acquired FFNM core deposit base, our funding structure has improved greatly from a cost and risk standpoint as we remain in a market environment that is expecting future rate increases for 2019.    The acquired deposits in the Lincoln transaction will also help our funding structure.”  

Noninterest Expense

Noninterest expense, at $10.62 million in the third quarter of 2018, increased $2.90 million from the third quarter 2017 total of $7.72 million. The expense variance from the third quarter of 2017 was heavily impacted by the additional expense related to the larger bank platform following the FFNM closing including additional salary, benefits and occupancy costs as well as the Lincoln Bank acquisition transaction related expenses.  Efficiencies from both FFNM and Lincoln are expected to be fully phased in by yearend 2018 and achieve a stabilized run rate and improved efficiencies for 2019.   This should improve our current non-GAAP adjusted efficiency ratio (backing out transaction related expenses) of 74%.       

Assets and Capital

Total assets of the Corporation at September 30, 2018 were $1.25 billion compared to $1.02 billion at September 30, 2017.  Shareholders’ equity at September 30, 2018 totaled $149.37 million, compared to $82.65 million on September 30, 2017. The tangible book value per share equated to $11.63 on September 30, 2018 compared to $11.91 per share a year ago.  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 net proceeds from the June 2018 common stock offering, the Corporation utilized $19.45 million to retire senior holding company debt, and an additional $8.5 million to fund the Lincoln acquisition.  The Corporation is “well-capitalized” and the Bank is “well-capitalized” with total risk-based capital to risk weighted assets of 13.17% and 11.95%, respectively.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “We continue to execute our growth and acquisition strategy while maintaining focus on our core operations and governance.  Our balance sheet attributes are strong with the complementary deposit base of FFNM and the reduction of floating rate debt at the holding company with proceeds from the common stock offering.  We believe our timing was good in terms of the rate environment and the interest expense we were able to save on our borrowings and wholesale funding.  We will remain opportunistic as we are presented with possible acquisition partners and focus on gaining maximum efficiencies out of our current platform to drive shareholder value.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.25 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 30 full service branch locations; eleven in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and eight 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,” “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 Corporation 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  
            September 30,   December 31,   September 30,  
(Dollars in thousands, except per share data)      2018    2017     2017  
            (Unaudited)       (Unaudited)  
Selected Financial Condition Data (at end of period):              
Assets           $    1,254,335   $   985,367   $   1,015,070  
Loans               993,808       811,078       808,149  
Investment securities             112,265       75,897       85,009  
Deposits               1,028,058       817,998       835,203  
Borrowings             58,216       79,552       91,397  
Shareholders' equity             149,367       81,400       82,649  
                       
                       
Selected Statements of Income Data (nine months and year ended):          
Net interest income         $    33,336   $   37,938   $   28,274  
Income before taxes             6,333       11,018       8,180  
Net income             5,002       5,479       5,499  
Income per common share - Basic         .60     .87     .88  
Income per common share - Diluted       .60     .87     .87  
Weighted average shares outstanding         8,278,371       6,288,791       6,286,722  
Weighted average shares outstanding- Diluted         8,304,689       6,322,413       6,310,866  
                       
Three Months Ended:                    
Net interest income         $    13,214   $   9,664   $   9,789  
Income before taxes              3,889       2,838       3,018  
Net income             3,069       (20)       2,093  
Income per common share - Basic         .29       -      .33  
Income per common share - Diluted       .29       -      .33  
Weighted average shares outstanding         10,712,745       6,294,930       6,294,930  
Weighted average shares outstanding- Diluted         10,734,465       6,294,930       6,318,488  
                       
Selected Financial Ratios and Other Data (nine months and year ended):          
Performance Ratios:                     
Net interest margin             4.37 %     4.20 %     4.21 %
Efficiency ratio             81.29       71.39       71.09  
Return on average assets         .59     .55     .74  
Return on average equity           6.04       6.74       9.10  
                       
Average total assets         $    1,129,082   $   995,826   $   995,442  
Average total shareholders' equity           110,785       81,349       80,833  
Average loans to average deposits ratio         98.46 %     96.29 %     95.42 %
                       
                       
Common Share Data at end of period:                
Market price per common share       $    16.20   $   15.90   $   15.50  
Book value per common share           13.94       12.93       13.13  
Tangible book value per share           11.63       11.72       11.91  
Dividends paid per share, annualized       .480     .480     .480  
Common shares outstanding           10,712,745       6,294,930       6,294,930  
                       
Other Data at end of period:                  
Allowance for loan losses       $    5,186   $   5,079   $   5,130  
Non-performing assets         $    6,675   $   6,126   $   7,478  
Allowance for loan losses to total loans       .52 %   .63 %   .63 %
Non-performing assets to total assets       .53 %   .62 %   .74 %
Texas ratio               5.14 %     7.77 %     9.34 %
                       
Number of:                      
  Branch locations             30       23       23  
  FTE Employees             288       233       233  
         
         

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

  September 30,   December 31,   September 30,
    2018       2017       2017  
  (Unaudited)       (Unaudited)
ASSETS          
           
Cash and due from banks $    60,619     $ 37,420     $ 52,676  
Federal funds sold     9       6       5,006  
Cash and cash equivalents     60,628       37,426       57,682  
           
Interest-bearing deposits in other financial institutions     9,149       13,374       13,374  
Securities available for sale     111,765       75,397       84,509  
Other securities     500       500       500  
Federal Home Loan Bank stock     4,860       3,112       3,250  
           
Loans:          
Commercial     680,451       572,936       572,799  
Mortgage     295,010       220,708       217,103  
Consumer     18,347       17,434       18,247  
Total Loans     993,808       811,078       808,149  
Allowance for loan losses     (5,186 )     (5,079 )     (5,130 )
Net loans     988,622       805,999       803,019  
           
Premises and equipment     21,831       16,290       16,619  
Other real estate held for sale     2,149       3,558       4,413  
Deferred tax asset     6,285       4,970       6,266  
Deposit based intangibles     4,373       1,922       1,985  
Goodwill     20,389       5,694       5,694  
Other assets     23,784       17,125       17,759  
           
TOTAL ASSETS $    1,254,335     $ 985,367     $ 1,015,070  
           
LIABILITIES AND SHAREHOLDERS' EQUITY          
           
LIABILITIES:          
Deposits:          
Noninterest bearing deposits $    240,940     $ 148,079     $ 162,142  
NOW, money market, interest checking     341,651       280,309       275,854  
Savings     104,382       61,097       61,832  
CDs<$250,000     199,015       142,159       144,031  
CDs>$250,000     16,755       11,055       9,126  
Brokered     125,315       175,299       182,218  
Total deposits     1,028,058       817,998       835,203  
           
Federal funds purchased     11,000       -       -  
Borrowings     58,216       79,552       91,397  
Other liabilities     7,694       6,417       5,821  
Total liabilities     1,104,968       903,967       932,421  
           
SHAREHOLDERS' EQUITY:          
Common stock and additional paid in capital - No par value          
Authorized - 18,000,000 shares          
Issued and outstanding - 10,712,745; 6,294,930; and 6,294,930 shares respectively     129,043       61,981       61,881  
Retained earnings     21,351       19,711       20,439  
Accumulated other comprehensive income          
Unrealized gains (losses) on available for sale securities     (806 )     (71 )     407  
Minimum pension liability     (221 )     (221 )     (78 )
           
Total shareholders' equity     149,367       81,400       82,649  
           
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $    1,254,335     $ 985,367     $ 1,015,070  
           
           

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

    Three Months Ended   Nine Months Ended
    September 30,   September 30,
      2018     2017       2018     2017  
    (Unaudited)   (Unaudited)
INTEREST INCOME:                
Interest and fees on loans:                
Taxable   $    14,097   $ 10,799     $    36,558   $ 31,016  
Tax-exempt       25     21         81     73  
Interest on securities:                
Taxable       723     401         1,655     1,195  
Tax-exempt       84     72         232     226  
Other interest income       362     230         758     475  
Total interest income       15,291     11,523         39,284     32,985  
                 
INTEREST EXPENSE:                
Deposits       1,698     1,157         4,536     3,170  
Borrowings       379     577         1,412     1,541  
Total interest expense       2,077     1,734         5,948     4,711  
                 
Net interest income       13,214     9,789         33,336     28,274  
Provision for loan losses       50     200         200     400  
Net interest income after provision for loan losses       13,164     9,589         33,136     27,874  
                 
OTHER INCOME:                
Deposit service fees       414     262         1,006     803  
Income from loans sold on the secondary market       423     434         877     1,048  
SBA/USDA loan sale gains       184     278         318     426  
Mortgage servicing income       110     (6 )       123     (24 )
Net security gains       -     38         -     38  
Other       212     147         496     433  
Total other income       1,343     1,153         2,820     2,724  
                 
OTHER EXPENSE:                
Salaries and employee benefits       5,600     3,934         14,627     11,388  
Occupancy       963     761         2,702     2,322  
Furniture and equipment       681     616         1,856     1,640  
Data processing       720     533         1,810     1,482  
Advertising       258     227         645     524  
Professional service fees       421     323         1,122     1,049  
Loan and deposit       242     181         516     515  
Writedowns and losses on other real estate held for sale       36     43         102     298  
FDIC insurance assessment       201     210         544     556  
Telephone       171     154         478     445  
Transaction related expenses       350     -         2,463     -  
Other       975     742         2,758     2,199  
Total other expenses       10,618     7,724         29,623     22,418  
                 
Income before provision for income taxes       3,889     3,018         6,333     8,180  
Provision for income taxes       820     925         1,331     2,681  
                 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS       3,069     2,093         5,002     5,499  
                 
                 
INCOME PER COMMON SHARE:                
Basic    $  .29   $  .33    $  .60   $  .88
Diluted    $  .29   $  .33    $  .60   $  .87
                 
                 

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, 
   2005     2004     2004 
Nonperforming Assets:          
Nonaccrual loans $   2,272     $   4,307     $   18,297  
Loans past due 90 days or more     -         -         736  
Restructured loans     -         -         48  
  Total nonperforming loans     2,272         4,307         19,081  
Other real estate owned     1,515         1,730         3,861  
  Total nonperforming assets $   3,787     $   6,037     $   22,942  
Nonperforming loans as a % of loans   1.17 %     2.11 %     7.48 %
Nonperforming assets as a % of assets   1.38 %     1.78 %     5.73 %
Reserve for Loan Losses:          
At period end $   6,836     $   6,966     $   12,730  
As a % of loans   3.51 %     3.42 %     4.99 %
As a % of nonperforming loans   300.88 %     161.74 %     66.72 %
As a % of nonaccrual loans   300.88 %     161.74 %     69.57 %
           
           

Credit Quality (at end of period): 

             
  September 30,   December 31,   September 30,  
  2018   2017   2017  
  (Unaudited)   (Unaudited)   (Unaudited)  
Nonperforming Assets :            
Nonaccrual loans $    4,526   $ 2,388   $ 2,964  
Loans past due 90 days or more     -     -     -  
Restructured loans     -     180     101  
Total nonperforming loans     4,526     2,568     3,065  
Other real estate owned     2,149     3,558     4,413  
Total nonperforming assets $    6,675   $ 6,126   $ 7,478  
Nonperforming loans as a % of loans   .46 % .32 % .38 %
Nonperforming assets as a % of assets   .53 % .62 % .74 %
Reserve for Loan Losses:            
At period end $    5,186   $ 5,079   $ 5,130  
As a % of average loans   .57 % .64 % .63 %
As a % of nonperforming loans     114.58 %   197.78 %   167.37 %
As a % of nonaccrual loans     114.58 %   212.69 %   173.08 %
Texas Ratio     5.14 %   7.77 %   9.34 %
             
Charge-off Information (year to date):            
Average loans $    906,784   $ 795,532   $ 791,227  
Net charge-offs (recoveries) $    93   $ 566   $ 290  
Charge-offs as a % of average            
loans, annualized   .01 % .07 % .05 %
             
             

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

                   
  QUARTER ENDED
  (Unaudited)
  September 30   June 30,   March 31,   December 31   September 30,
   2018     2018     2018     2017     2017 
BALANCE SHEET (Dollars in thousands)                  
                   
Total loans $    993,808   $ 1,003,377   $ 812,441   $ 811,078   $ 808,149  
Allowance for loan losses     (5,186     (5,141     (5,101     (5,079     (5,130 )
Total loans, net     988,622     998,236     807,340     805,999     803,019  
Total assets     1,254,335     1,274,095     983,929     985,367     1,015,070  
Core deposits     885,988     844,894     602,601     631,644     643,859  
Noncore deposits     142,070     170,607     204,196     186,354     191,344  
Total deposits     1,028,058     1,015,501     806,797     817,998     835,203  
Total borrowings     69,216     91,747     80,002     79,552     91,397  
Total shareholders' equity     149,367     148,867     81,857     81,400     82,649  
Total tangible equity     124,605     123,974     74,303     73,784     74,970  
Total shares outstanding     10,712,745     10,712,745     6,332,560     6,294,930     6,294,930  
Weighted average shares outstanding     10,712,745     7,769,720     6,304,203     6,294,930     6,294,930  
                   
AVERAGE BALANCES (Dollars in thousands)                  
                   
Assets $    1,284,068   $ 1,117,188   $ 982,679   $ 996,966   $ 1,021,152  
Loans     1,001,763     905,802     810,688     808,306     803,825  
Deposits     1,042,004     913,220     805,092     817,338     841,699  
Equity     149,202     100,518     81,894     82,879     82,162  
                   
INCOME STATEMENT (Dollars in thousands)                  
                   
Net interest income $    13,214   $ 10,813   $ 9,309   $ 9,664   $ 9,789  
Provision for loan losses     50     100     50     225     200  
Net interest income after provision     13,164     10,713     9,259     9,439     9,589  
Total noninterest income     1,343     863     614     1,317     1,153  
Total noninterest expense     10,618     11,077     7,928     7,918     7,724  
Income before taxes     3,889     499     1,945     2,838     3,018  
Provision for income taxes     820     103     408     2,858     925  
Net income available to common shareholders $    3,069   $ 396   $ 1,537   $ (20   $ 2,093  
Income pre-tax, pre-provision $    3,939   $ 599   $ 1,995   $ 3,062   $ 3,218  
                   
PER SHARE DATA                  
                   
Earnings $ .29   $  .05   $ .24   $ (.01)   $ .33  
Book value  per common share     13.94     13.90     12.96     12.93     13.13  
Tangible book value per share     11.63     11.57     11.73     11.72     11.91  
Market value, closing price     16.20     16.58     16.25     15.90     15.50  
Dividends per share   .120   .120   .120   .120     .120  
                   
ASSET QUALITY RATIOS                  
                   
Nonperforming loans/total loans   .46 % .50 % .53 % .32 %   .38 %
Nonperforming assets/total assets   .53   .59   .70   .62     .74  
Allowance for loan losses/total loans   .52   .51   .63   .63     .63  
Allowance for loan losses/nonperforming loans     114.58     102.31     117.48     197.78     167.37  
Texas ratio     5.14     5.80     6.87     7.77     9.34  
                   
PROFITABILITY RATIOS                  
                   
Return on average assets   .95 % .14 % .63 % (.01) %   .81 %
Return on average equity     8.16     1.58     7.61   (.10)     10.11  
Net interest margin     4.60     4.26     4.19     4.18     4.23  
Average loans/average deposits     96.14     99.19     100.70     98.89     95.50  
                   
CAPITAL ADEQUACY RATIOS                  
                   
Tier 1 leverage ratio     9.51 %   9.39 %   7.25 %   7.06 %   6.82 %
Tier 1 capital to risk weighted assets     12.62     11.87     8.79     8.66     8.47  
Total capital to risk weighted assets     13.17     12.39     9.43     9.29     9.10  
Average equity/average assets (for the quarter)     11.62     9.00     8.33     8.31     8.05  
Tangible equity/tangible assets (at quarter end)     10.13     9.92     7.62     7.55     7.44  
                   


             
Contact:           Jesse A. Deering, (248) 290-5906 / jdeering@bankmbank.com
            Paul D. Tobias, (248) 290-5900 / ptobias@bankmbank.com
Website:            www.bankmbank.com