Business & Finance
Business and Finance
Business and Finance
Thu, February 5, 2009
Wed, February 4, 2009 Mackinac Financial Corporation: Mackinac Financial Corporation Announces 2008 Results of Operations
MANISTIQUE, MI--(Marketwire - February 4, 2009) - Mackinac Financial Corporation (
The 2008 results included the positive effect, $3.475 million, of a lawsuit settlement and the negative effect, $.425 million, of a severance agreement. The results for 2007 included the recognition of a $7.500 million deferred tax benefit for NOL and tax credit carryforward and $.470 million of proceeds from the settlement of a lawsuit against the Corporation's former accountants.
In 2008, we experienced one of the most difficult and trying times in modern banking history. Our results for 2008 were significantly impacted by the current economic environment. The Prime Rate, currently at 3.25%, and the overnight investment rates at near zero, provide evidence of the seriousness in which the Federal Reserve Bank views this recession. This historically low interest rate environment made it extremely difficult to maintain adequate interest margins which stymied our ability to generate earnings growth. We are not satisfied with our operating results. In 2008, we focused our efforts on watchful diligence of our current loan portfolio by shoring up potential problem credits, repricing loans to align our returns with both credit and interest rate risks and by pursuing early resolution of nonperforming assets.
At 2008 year-end, the Corporation's loans stood at $370.280 million, an increase of $15.201 million, or 4.3%, from 2007 year-end balances of $355.079 million. Total loan originations in 2008 amounted to $61.6 million. Loan amortization and principal payoffs totaled $51.2 million. A good portion of these payoffs pertained to loan relationships that no longer met our pricing or credit standards. Loan growth was primarily from the Upper Peninsula markets where the economy is more stable.
Total assets of the Corporation at December 31, 2008 were $451.431 million, an increase of $42.551 million, or 10.4% from total assets of $408.880 million reported at December 31, 2007.
Asset quality remains relatively strong when compared to our peers, particularly considering the state of the Michigan economy. Nonperforming loans totaled $4.887 million, or 1.32% of total loans at December 31, 2008. Nonperforming assets at December 31, 2008, were $7.076 million, 1.57% of total assets, compared to $5.234 million or 1.28% of total assets at December 31, 2007. However, we are not immune to the current economic crisis and we are seeing rapid change in Southeast Michigan as the auto industry and manufacturing businesses struggle to survive. This economic risk has caused us to take an extremely hard and cautious look at our entire portfolio of loans in this market and we have been aggressive in our early identification of problem credits. We increased our fourth quarter loan loss provision to provide a specific reserve for one large loan in Southeast Michigan.
Total deposits grew from $320.827 million at December 31, 2007, to $371.097 million at December 31, 2008, an increase of $50.270 million, or 15.7%. This increase is composed of an increase in wholesale brokered deposits of $52.225 million and a decline in bank deposits of $1.955 million. During 2008, we significantly increased our balance sheet liquidity which was funded primarily by issuance of brokered deposits since rates on these deposits were priced lower than in-market bank deposits. We continue to focus our efforts on growing transactional accounts. We have had success in this area as demand, money market and NOW accounts grew from $119.2 million at 2007 year-end to $121.4 million at 2008 year-end. However, overall deposit totals have fallen as we have refused to compete for CDs that are overpriced.
Net interest income for the year ended December 31, 2008 was $12.864 million compared to $13.417 million for the year ended December 31, 2007, a decrease of $.553 million. The margin percentage for 2008 was 3.23% compared to 3.60% in 2007 and 3.51% in 2006. We believe that our margin has seen its low point in December when it fell to 3.01%. During 2008, the prime rate decreased from 7.25% to 3.25%, which created significant margin pressure since a majority of the commercial loan portfolio re-priced downward with each prime rate change, which the majority of the bank's funding sources had significant lag time in re-pricing. We experienced additional margin pressure due to our brokered deposits, which did not re-price in line with prime rate reductions, due to the overall market liquidity crisis.
We recognize the importance of cost control, especially in times of economic slowdown. Excluding extraordinary items, noninterest expense totaled $12.1 million in 2008 compared to $12.1 million in 2007 and $11.6 million in 2006. Salaries and benefits were reduced from $6.8 million in 2007 to $6.5 million in 2008. Assets per employee totaled $4.6 million
Shareholders' equity totaled $41.552 million at December 31, 2008, compared to $39.321 million at the end of 2007, an increase of $2.231 million. This increase reflects consolidated net income of $1.872 million, the capital contribution impact of stock options and also the increase in equity due to the increase in the market value of held-for-sale investments, which amounted to $.385 million and the purchase of odd lot shares for $.110 million. The book value per share at December 31, 2008, amounted to $12.15 compared to $11.47 at the end of 2007.
Late in 2008, the corporation elected to apply for $11 million in equity participation under the Troubled Asset Relief Program (TARP). We have received preliminary approval from the US Treasury Department and are now evaluating the merits of the program. Participation in this program would provide additional capital for future growth during a time when other sources for additional capital are scarce and expensive.
Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $450 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 12 branch locations; eight 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 For The Years Ended December 31, (Dollars in thousands, except per share data) 2008 2007 --------- --------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 451,431 $ 408,880 Loans 370,280 355,079 Investment securities 47,490 21,597 Deposits 371,097 320,827 Borrowings 36,210 45,949 Shareholders' equity 41,552 39,321 Selected Statements of Income Data: Net interest income $ 12,864 $ 13,417 Income before taxes 2,659 2,923 Net income 1,872 10,163 Income per common share - Basic .55 2.96 Income per common share - Diluted .55 2.96 Weighted average shares outstanding 3,422,012 3,428,695 Selected Financial Ratios and Other Data: Performance Ratios: Net interest margin 3.23% 3.60% Efficiency ratio 85.51 79.46 Return on average assets .44 2.59 Return on average equity 4.61 31.05 Average total assets $ 425,343 $ 392,313 Average total shareholders' equity 40,630 32,731 Average loans to average deposits ratio 105.61% 104.94% Common Share Data at end of period: Market price per common share $ 4.40 $ 8.98 Book value per common share $ 12.15 $ 11.47 Common shares outstanding 3,419,736 3,428,695 Other Data at end of period: Allowance for loan losses $ 4,277 $ 4,146 Non-performing assets $ 7,076 $ 5,234 Allowance for loan losses to total loans 1.16% 1.17% Non-performing assets to total assets 1.57% 1.28% Number of: Branch locations 12 12 FTE Employees 100 100 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December December 31, 31, (Dollars in thousands) 2008 2007 --------- --------- (unaudited) (audited) ASSETS Cash and due from banks $ 10,112 $ 6,196 Federal funds sold - 166 --------- --------- Cash and cash equivalents 10,112 6,362 Interest-bearing deposits in other financial institutions 582 1,810 Securities available for sale 47,490 21,597 Federal Home Loan Bank stock 3,794 3,794 Loans: Commercial 296,088 288,839 Mortgage 70,447 62,703 Installment 3,745 3,537 --------- --------- Total Loans 370,280 355,079 Allowance for loan losses (4,277) (4,146) --------- --------- Net loans 366,003 350,933 Premises and equipment 11,189 11,609 Other real estate held for sale 2,189 1,226 Other assets 10,072 11,549 --------- --------- TOTAL ASSETS $ 451,431 $ 408,880 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest-bearing deposits $ 30,099 $ 25,557 Interest-bearing deposits: NOW, Money Market, Checking 70,584 81,160 Savings 20,730 12,485 CDs < $100,000 73,752 80,607 CDs > $100,000 25,044 22,355 Brokered 150,888 98,663 --------- --------- Total deposits 371,097 320,827 Borrowings: Federal funds purchased - 7,710 Short-term - 1,959 Long-term 36,210 36,280 --------- --------- Total borrowings 36,210 45,949 Other liabilities 2,572 2,783 --------- --------- Total liabilities 409,879 369,559 Shareholders' equity: Preferred stock - No par value: Authorized 500,000 shares, no shares outstanding Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 3,419,736 and 3,428,695, respectively 42,815 42,843 Accumulated deficit (1,708) (3,582) Accumulated other comprehensive income (loss) 445 60 --------- --------- Total shareholders' equity 41,552 39,321 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 451,431 $ 408,880 ========= ========= MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands, except per share For The Years Ended December 31, data) 2008 2007 2006 --------- -------- -------- INTEREST INCOME: (unaudited)(audited) (audited) Interest and fees on loans: Taxable $ 22,555 $ 26,340 $ 21,239 Tax-exempt 404 533 753 Interest on securities: Taxable 1,293 1,100 1,186 Tax-exempt 5 - 87 Other interest income 305 722 787 --------- -------- -------- Total interest income 24,562 28,695 24,052 --------- -------- -------- INTEREST EXPENSE: Deposits 10,115 13,224 10,575 Borrowings 1,583 2,054 1,884 --------- -------- -------- Total interest expense 11,698 15,278 12,459 --------- -------- -------- Net interest income 12,864 13,417 11,593 Provision for loan losses 2,300 400 (861) --------- -------- -------- Net interest income after provision for loan losses 10,564 13,017 12,454 --------- -------- -------- OTHER INCOME: Service fees 838 688 547 Net security gains 64 - - Net gains on sale of secondary market loans 120 498 197 Proceeds from settlement of lawsuit 3,475 470 - Other 156 350 239 --------- -------- -------- Total other income 4,653 2,006 983 --------- -------- -------- OTHER EXPENSES: Salaries and employee benefits 6,886 6,757 6,132 Occupancy 1,374 1,272 1,264 Furniture and equipment 771 678 631 Data processing 844 785 691 Professional service fees 508 532 1,425 Loan and deposit 569 285 392 Telephone 170 228 210 Advertising 305 370 346 Other 1,131 1,193 1,130 --------- -------- -------- Total other expenses 12,558 12,100 12,221 --------- -------- -------- Income (loss) before provision for income taxes 2,659 2,923 1,216 Provision for (benefit of) income taxes 787 (7,240) (500) --------- -------- -------- NET INCOME (LOSS) $ 1,872 $ 10,163 $ 1,716 --------- -------- -------- INCOME (LOSS) PER COMMON SHARE Basic $ .55 $ 2.96 $ .50 ========= ======== ======== Diluted $ .55 $ 2.96 $ .50 ========= ======== ======== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES LOAN PORTFOLIO AND CREDIT QUALITY (Dollars in thousands) Loan Portfolio Balances (at end of period): December 31, December 31, 2008 2007 ------------ ------------ (unaudited) (audited) Commercial Loans: Real estate - operators of nonresidential buildings $ 41,299 $ 41,597 Hospitality and tourism 35,086 37,604 Real estate agents and managers 29,292 29,571 Operators of nonresidential buildings 13,467 10,569 Other 145,831 130,546 ------------ ------------ Total Commercial Loans 264,975 249,887 1-4 family residential real estate 65,595 57,613 Consumer 3,745 3,537 Construction Commercial 31,113 38,952 Consumer 4,852 5,090 ------------ ------------ Total Loans $ 370,280 $ 355,079 ============ ============ Credit Quality (at end of period): December 31, December 31, 2008 2007 ----------- ----------- (unaudited) (audited) Nonperforming Assets : Nonaccrual loans $ 4,887 $ 3,298 Loans past due 90 days or more - 710 ----------- ----------- Total nonperforming loans 4,887 4,008 Other real estate owned 2,189 1,226 ----------- ----------- Total nonperforming assets $ 7,076 $ 5,234 =========== =========== Nonperforming loans as a % of loans 1.32% 1.13% ----------- ----------- Nonperforming assets as a % of assets 1.57% 1.28% ----------- ----------- Reserve for Loan Losses: At period end $ 4,277 $ 4,146 ----------- ----------- As a % of average loans 1.18% 1.24% ----------- ----------- As a % of nonperforming loans 87.52% 103.44% ----------- ----------- As a % of nonaccrual loans 87.52% 125.71% =========== =========== Charge-off Information (year to date): Average loans 361,324 333,415 ----------- ----------- Net charge-offs 2,168 1,260 ----------- ----------- Charge-offs as a % of average loans .60% .38% ----------- ----------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED (Unaudited) December September December 31, 30, June 30, March 31, 31, 2008 2008 2008 2008 2007 --------- ---------- ---------- ---------- ---------- BALANCE SHEET (Dollars in thousands) Total loans $ 370,280 $ 361,521 $ 362,122 $ 360,056 $ 355,079 Allowance for loan losses (4,277) (3,385) (3,585) (3,924) (4,146) --------- ---------- ---------- ---------- ---------- Total loans, net 366,003 358,136 358,537 356,132 350,933 Intangible assets 46 65 85 104 124 Total assets 451,431 440,953 437,327 417,175 408,880 Core deposits 195,165 208,940 200,293 203,445 199,809 Noncore deposits (1) 175,932 151,754 156,683 122,602 121,018 --------- ---------- ---------- ---------- ---------- Total deposits 371,097 360,694 356,976 326,047 320,827 Total borrowings 36,210 36,210 36,280 48,849 45,949 Total shareholders' equity 41,552 41,427 40,975 39,633 39,321 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,428,695 3,428,695 AVERAGE BALANCES (Dollars in thousands) Assets $ 441,583 $ 423,702 $ 418,246 $ 417,682 $ 406,308 Loans 366,077 358,844 362,574 357,778 350,050 Deposits 358,213 341,377 332,725 336,016 324,194 Equity 41,516 41,097 40,399 39,491 38,973 INCOME STATEMENT (Dollars in thousands) Net interest income $ 3,330 $ 3,371 $ 3,118 $ 3,045 $ 3,410 Provision for loan losses 1,100 450 750 - - --------- ---------- ---------- ---------- ---------- Net interest income after provision 2,230 2,921 2,368 3,045 3,410 Total noninterest income 308 288 3,747 310 355 Total noninterest expense 2,961 2,935 3,471 3,191 2,978 --------- ---------- ---------- ---------- ---------- Income before taxes (423) 274 2,644 164 787 Provision for income taxes (171) 58 875 25 260 --------- ---------- ---------- ---------- ---------- Net income $ (252) $ 216 $ 1,769 $ 139 $ 527 ========= ========== ========== ========== ========== PER SHARE DATA Earnings - basic $ (.07) $ .06 $ .52 $ .04 $ .15 Earnings - diluted (.07) .06 .52 .04 .15 Book value 12.15 12.11 11.98 11.56 11.47 Market value, closing price 4.40 5.26 7.00 8.50 8.98 ASSET QUALITY RATIOS Nonperforming loans/total loans 1.32% 1.29% 1.27% .94% 1.13% Nonperforming assets/total assets 1.57 1.45 1.83 1.08 1.28 Allowance for loan losses/ total loans 1.16 .94 .99 1.09 1.17 Allowance for loan losses/ nonperforming loans 87.52 72.81 77.22 116.06 103.42 PROFITABILITY RATIOS Return on average assets (.23)% .20% 1.70% .13% .51% Return on average equity (2.42) 2.08 17.62 1.42 5.36 Net interest margin 3.20 3.39 3.19 3.13 3.55 Efficiency ratio 80.30 79.12 88.45 95.34 78.02 Average loans/ average deposits 102.20 105.12 108.97 106.48 107.98 CAPITAL ADEQUACY RATIOS Leverage ratio 8.01% 8.31% 8.56% 7.85% 8.05% Tier 1 capital ratio 9.25 9.40 9.48 8.84 8.97 Total capital ratio 10.38 10.31 10.45 9.92 10.13 Average equity/average assets 9.40 9.70 9.66 9.45 9.59 Tangible equity/tangible assets 9.20 9.38 9.35 9.48 9.59 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000
