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Mackinac Financial Corporation Reports 2021 Second Quarter Financial Results


7/22/2021 4:16:32 PM

(MENAFN- GlobeNewsWire - Nasdaq) 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 .

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 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 Data Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /
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