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Mackinac Financial Corporation: Mackinac Financial Corporation Reports Second Quarter and Six Months 2009 Results

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  Published in Business and Finance on Thursday, July 30th 2009 at 13:22 GMT, Last Modified on 2009-07-30 13:23:12 by Market Wire
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MANISTIQUE, MI--(Marketwire - July 30, 2009) - Mackinac Financial Corporation (NASDAQ: [ MFNC ]), the bank holding company for mBank (the "Bank") today announced second quarter 2009 income of $.461 million or $.13 per share compared to net income of $1.769 million, or $.52 per share for the second quarter of 2008. Net income for the first six months of 2009 totaled $.551 million, or $.16 per share, compared to $1.908 million, or $.56 per share, for the same period in 2008.

The quarter and six month results for 2009 includes the FDIC special assessment which was charged to all banking organizations based upon asset size, and amounted to $.215 million for mBank. The quarter and six month results for 2008 include the positive effect, $3.475 million, of a lawsuit settlement and the negative effects, $.425 million, of a severance agreement. Operating results for the six month period in 2009 include the $.700 million provision compared to $.750 million in the same period in 2008. Excluding the FDIC special assessment for 2009 and the lawsuit settlement and severance payment in 2008, our adjusted six month net income in 2009 would be $.691 million, or $.20 income per share compared to a loss of $.213 million, or a loss of $.06 per share in the 2008 six month period.

Weighted average shares totaled 3,419,736 year to date and for the second quarter in 2009 compared to 3,424,314 for the six month period and 3,419,935 at the second quarter of 2008.

Net interest margin in the second quarter of 2009 increased to $4.051 million, or 3.58% compared to $3.118 million, or 3.19% in the second quarter of 2008. For the six month period the net interest margin totaled $7.546 million, or 3.47% compared to $6.163 million or 3.16% for the same period in 2008. This increased margin was due to a combination of a significant reduction in funding costs partially offset by decreased rates on earning assets. Paul Tobias, Chairman and Chief Executive officer, commented, "We are pleased with the continued improvement in our net interest margin, which reflects pricing discipline on new and renewed loans in addition to the lower rates on wholesale deposits. We expect this trend to continue."

Noninterest income totaled $.439 million in the second quarter of 2009, compared to $3.747 million the first quarter 2008. Included in noninterest income for the second quarter and six months ended periods of 2008 was the $3.475 million lawsuit settlement. Excluding this settlement, 2009 six month noninterest income exceeded 2008 by $.258 million, or 44.33%. Noninterest expense in the second quarter and for the six month period of 2009 was relatively unchanged from 2008 levels when excluding the increase in FDIC insurance premiums of $.331 million in 2009 and the severance payment of $.425 million incurred in 2008.

Total assets of the Corporation at June 30, 2009 were $506.304 million, up $68.977 million, or 15.77% from the $437.327 million in total assets reported at June 30, 2008 and up $54.873 million, or 12.16%, from total assets of $451.431 million at year-end 2008. Asset totals at June 30, 2009 reflect increased balances of investment securities of approximately $48 million.

Loans at June 30, 2009 totaled $372.004 million, a 2.73% increase from the $362.122 million at June 30, 2008, and a slight increase from year-end loans of $370.280 million. Kelly George, President and Chief Executive Officer of mBank, stated, "Loan growth in the first half was retarded by large paydowns amounting to $9.2 million, along with normal loan principal reductions of $15.3 million. Given the current economic environment, and tough requirements for loan pricing and credit quality, we are pleased with current year to date production which totaled $34.2 million with approximately 67% originating in the Upper Peninsula. In general, the Upper Peninsula has not experienced the economic downturn and collateral deterioration that has occurred elsewhere in Michigan. We continue to see loan opportunities, not only in the Upper Peninsula, but also in lower Michigan, as competitive banks withdraw from Michigan opportunities. Our current pipeline is extremely promising with more than $50 million of what we believe are good bankable loans, some already approved and others in the review process. A part of our success in loan production is attributed to our expertise with the SBA 504 and 7A programs. These programs benefit us with new loan opportunities along with a secondary source of balance sheet liquidity and the potential for significant fee income when the guaranteed portion is sold."

Total deposits of $413.152 million at June 30, 2009 were up 15.74% from deposits of $356.976 million on June 30, 2008. Deposits were up $42.055 million, or 11.33% from year-end 2008 deposits of $371.097 million. Total 2009 deposit growth reflects increases in noncore funding of $33.917 million and increases in core deposits of $8.138 million, or 3.67%. The increased brokered deposits were utilized to fund increased investment balances.

Nonperforming assets at the end of the second quarter of 2009 totaled $14.825 million, 2.93% of total assets, an increase of $7.749 million from 2008 year end balances, and down from first quarter 2009 balances of $15.252 million. Mr. George commented, "Our current level of nonperforming assets is not indicative of overall portfolio deterioration and while these balances are higher than we'd like, they are manageable considering the risk profile of our bank and Michigan's economic environment. The majority of our nonperforming assets stem from several larger credit relationships in Southeastern Michigan which we believe were impacted by the market and the regional economy. We are also on top of our overall loan delinquencies (loans past due greater than 30 days), which stands at 1.80% of total loans. While we feel comfortable with overall credit quality, the rapid deterioration in borrower collateral values that we witnessed in the credits mentioned above has caused us to take a very cautious stance in the Southeast Michigan market place and to increase our monitoring efforts. We intend to manage our nonperforming assets in order to limit carrying costs and further collateral deterioration by aggressive disposition."

Total shareholders' equity at June 30, 2009 totaled $53.939 million, compared to $40.975 million on June 30, 2008. The increase of $12.964 million includes $11 million of preferred stock which was issued in April 2009. Book value of common shareholders' equity was $12.55 per share at June 30, 2009, an increase of $2.80 per share since the recapitalization, priced at $9.75 in December 2004.

Mr. George, commenting on upcoming events, added, "Earlier this year we announced the sale of two of our Upper Peninsula branch offices, these sales will be completed in August and will result in an approximate 4% deposit premium. The sale of these branch offices will tighten up the footprint of our franchise, further reduce operating costs, and allow us to deploy capital to higher growth markets."

Tobias concluded, "We are excited about our opportunities in these troubled economic times. We have the current asset base to support profitability with a strong capital position for future growth. We will explore opportunities for FDIC assisted deposit and loan transactions to expand our markets, while staying the course with solid organic growth opportunities within our current markets. As always, our initiatives will be governed by the ultimate strategy of preserving and increasing value for our shareholders."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $500 million and whose common stock is traded on the NASDAQ stock market as "MFNC." The principal subsidiary of the Corporation is mBank. Headquartered in Manistique, Michigan, mBank has 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 (Dollars in thousands, except per share data) For The Period Ended ----------------------------------------------- June 30, December 31, June 30, 2009 2008 2008 ------------- ------------ ------------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 506,304 $ 451,431 $ 437,327 Loans 372,004 370,280 362,122 Investment securities 95,620 47,490 23,230 Deposits 413,152 371,097 356,976 Borrowings 36,210 36,210 36,280 Shareholders' Equity 53,939 41,552 40,975 Selected Statements of Income Data (six months and year ended): Net interest income $ 7,546 $ 12,864 $ 6,163 Income before taxes and preferred dividend 967 2,659 2,808 Net income 551 1,872 1,908 Income per common share - Basic .16 .55 .56 Income per common share - Diluted .16 .55 .56 Three Months Ended: Net interest income $ 4,051 $ 3,330 $ 3,118 Income before taxes and preferred dividend 870 (423) 2,644 Net income 461 (252) 1,769 Income per common share - Basic .13 (.07) .52 Income per common share - Diluted .13 (.07) .52 Selected Financial Ratios and Other Data (six months and year ended): Performance Ratios: Net interest margin 3.47 % 3.23 % 3.16 % Efficiency ratio 79.25 85.51 91.85 Return on average assets .23 .44 .92 Return on average common equity 2.42 4.61 9.61 Average total assets $ 473,074 $ 425,343 $ 417,964 Average total common shareholders' equity $ 45,856 $ 40,630 $ 39,945 Average loans to average deposits ratio 95.90 % 105.61 % 107.72 % Common Share Data (at end of period): Market price per common share $ 4.50 $ 4.40 $ 7.00 Book value per common share $ 12.55 $ 12.15 $ 11.98 Common shares outstanding 3,419,736 3,419,736 3,419,736 Weighted average shares outstanding 3,419,736 3,422,012 3,424,314 Other Data (at end of period): Allowance for loan losses $ 4,119 $ 4,277 $ 3,585 Non-performing assets $ 14,825 $ 7,076 $ 8,008 Allowance for loan losses to total loans 1.11 % 1.16 % .99 % Non-performing assets to total assets 2.93 % 1.57 % 1.83 % Number of: Branch locations 11 12 12 FTE Employees 102 100 96 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, June 30, (Dollars in thousands) 2008 2008 2008 ------------ ------------ ------------ (unaudited) (unaudited) ASSETS Cash and due from banks $ 12,189 $ 10,112 $ 7,115 Federal funds sold - - 19,274 ------------ ------------ ------------ Cash and cash equivalents 12,189 10,112 26,389 Interest-bearing deposits in other financial institutions 618 582 387 Securities available for sale 95,620 47,490 23,230 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 296,392 296,088 292,645 Mortgage 71,777 70,447 65,869 Installment 3,835 3,745 3,608 ------------ ------------ ------------ Total Loans 372,004 370,280 362,122 Allowance for loan losses (4,119) (4,277) (3,585) ------------ ------------ ------------ Net loans 367,885 366,003 358,537 Premises and equipment 11,064 11,189 11,377 Other real estate held for sale 4,950 2,189 3,395 Other assets 10,184 10,072 10,218 ------------ ------------ ------------ TOTAL ASSETS $ 506,304 $ 451,431 $ 437,327 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Noninterest bearing deposits $ 33,368 $ 30,099 $ 27,741 NOW, money market, checking 75,974 70,584 78,703 Savings 21,411 20,730 15,171 CDs < $100,000 72,139 73,752 78,678 CDs > $100,000 25,455 25,044 28,252 Brokered 184,805 150,888 128,431 ------------ ------------ ------------ Total deposits 413,152 371,097 356,976 Borrowings: Federal funds purchased - - - Short-term - - - Long-term 36,210 36,210 36,280 ------------ ------------ ------------ Total borrowings 36,210 36,210 36,280 Other liabilities 3,003 2,572 3,096 ------------ ------------ ------------ Total liabilities 452,365 409,879 396,352 TOTAL SHAREHOLDERS' EQUITY 53,939 41,552 40,975 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 506,304 $ 451,431 $ 437,327 ============ ============ ============ MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2009 2008 2009 2008 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,104 $ 5,604 $ 10,106 $ 11,704 Tax-exempt 84 102 174 210 Interest on securities: Taxable 673 271 1,132 537 Tax-exempt 3 2 4 3 Other interest income 14 81 16 170 ----------- ----------- ----------- ----------- Total interest income 5,878 6,060 11,432 12,624 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Deposits 1,566 2,551 3,344 5,616 Borrowings 261 391 542 845 ----------- ----------- ----------- ----------- Total interest expense 1,827 2,942 3,886 6,461 ----------- ----------- ----------- ----------- Net interest income 4,051 3,118 7,546 6,163 Provision for loan losses 150 750 700 750 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 3,901 2,368 6,846 5,413 ----------- ----------- ----------- ----------- OTHER INCOME: Service fees 271 194 514 368 Net security gains - - - 65 Net gains on sale of secondary market loans 84 49 142 97 Proceeds from lawsuit settlements - 3,475 - 3,475 Other 84 29 174 52 ----------- ----------- ----------- ----------- Total other income 439 3,747 830 4,057 ----------- ----------- ----------- ----------- OTHER EXPENSES: Salaries and employee benefits 1,561 2,075 3,158 3,882 Occupancy 355 348 733 703 Furniture and equipment 222 190 411 368 Data processing 224 216 444 437 Professional service fees 144 79 297 232 Loan and deposit 512 144 773 254 Telephone 46 39 89 84 Advertising 80 60 158 120 Other 326 320 646 582 ----------- ----------- ----------- ----------- Total other expenses 3,470 3,471 6,709 6,662 ----------- ----------- ----------- ----------- Income before provision for income taxes 870 2,644 967 2,808 Provision for (benefit of) income taxes 271 875 278 900 ----------- ----------- ----------- ----------- NET INCOME 599 1,769 689 1,908 ----------- ----------- ----------- ----------- Preferred dividend expense 138 - 138 - ----------- ----------- ----------- ----------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 461 $ 1,769 $ 551 $ 1,908 =========== =========== =========== =========== INCOME PER COMMON SHARE: Basic $ .13 $ .52 $ .16 $ .56 =========== =========== =========== =========== Diluted $ .13 $ .52 $ .16 $ .56 =========== =========== =========== =========== 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, 2009 2008 2008 ------------- ------------- ------------- Commercial Loans Real estate - operators of nonresidential buildings $ 44,087 $ 41,299 $ 41,778 Hospitality and tourism 35,033 35,086 35,053 Real estate agents and managers 24,614 29,292 27,495 Operators of nonresidential buildings 13,525 13,467 15,238 Other 153,008 145,831 144,017 ------------- ------------- ------------- Total Commercial Loans 270,267 264,975 263,581 1-4 family residential real estate 65,564 65,595 60,882 Consumer 3,835 3,745 3,608 Construction Commercial 26,125 31,113 29,064 Consumer 6,213 4,852 4,987 ------------- ------------- ------------- Total Loans $ 372,004 $ 370,280 $ 362,122 ============= ============= ============= Credit Quality (at end of period): June 30, December 31, June 30, 2009 2008 2008 ------------- ------------- ------------- Nonperforming Assets: Nonaccrual loans $ 9,283 $ 4,887 $ 4,613 Loans past due 90 days or more - - - Restructured loans 592 - - ------------- ------------- ------------- Total nonperforming loans 9,875 4,887 4,613 Other real estate owned 4,950 2,189 3,395 ------------- ------------- ------------- Total nonperforming assets $ 14,825 $ 7,076 $ 8,008 ============= ============= ============= Nonperforming loans as a % of loans 2.65 % 1.32 % 1.27 % ------------- ------------- ------------- Nonperforming assets as a % of assets 2.93 % 1.57 % 1.83 % ------------- ------------- ------------- Reserve for Loan Losses: At period end $ 4,119 $ 4,277 $ 3,585 ------------- ------------- ------------- As a % of average loans 1.11 % 1.16 % 1.00 % ------------- ------------- ------------- As a % of nonperforming loans 41.71 % 87.52 % 77.72 % ------------- ------------- ------------- As a % of nonaccrual loans 44.37 % 87.52 % 77.72 % ============= ============= ============= Charge-off Information (year to date): Average loans 371,278 361,324 360,176 ------------- ------------- ------------- Net charge-offs 858 2,169 1,310 ------------- ------------- ------------- Charge-offs as a % of average loans .23 % .60 % .36 % ------------- ------------- ------------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS December September June 30, March 31, 31, 30, June 30, 2009 2009 2008 2008 2008 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 372,004 $ 370,776 $ 370,280 $ 361,521 $ 362,122 Allowance for loan losses (4,119) (4,793) (4,277) (3,385) (3,585) --------- --------- --------- --------- --------- Total loans, net 367,885 365,983 366,003 358,136 358,537 Intangible assets 6 26 46 65 85 Total assets 506,304 466,375 451,431 440,953 437,327 Core deposits 202,892 196,860 195,165 208,940 200,293 Noncore deposits (1) 210,260 188,897 175,932 151,754 156,683 --------- --------- --------- --------- --------- Total deposits 413,152 385,757 371,097 360,694 356,976 Total borrowings 36,210 36,210 36,210 36,210 36,280 Total shareholders' equity 53,939 41,864 41,552 41,427 40,975 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,419,736 AVERAGE BALANCES (Dollars in thousands) Assets $ 491,205 $ 454,741 $ 441,583 $ 423,702 $ 418,246 Loans 371,609 370,943 366,077 358,844 362,574 Deposits 401,510 372,670 358,213 341,377 332,725 Equity 49,855 41,813 41,516 41,097 40,399 INCOME STATEMENT (Dollars in thousands) Net interest income $ 4,051 $ 3,495 $ 3,330 $ 3,371 $ 3,118 Provision for loan losses 150 550 1,100 450 750 --------- --------- --------- --------- --------- Net interest income after provision 3,901 2,945 2,230 2,921 2,368 Total noninterest income 439 391 308 288 3,747 Total noninterest expense 3,470 3,239 2,961 2,935 3,471 --------- --------- --------- --------- --------- Income before taxes 870 97 (423) 274 2,644 Provision for income taxes 271 7 (171) 58 875 Preferred dividend expense 138 - - - - --------- --------- --------- --------- --------- Net income $ 461 $ 90 $ (252) $ 216 $ 1,769 ========= ========= ========= ========= ========= PER SHARE DATA Earnings - basic $ .13 $ .03 $ (.07) $ .06 $ .52 Earnings - diluted .13 .03 (.07) .06 .52 Book value per common share 12.55 12.24 12.15 12.11 11.98 Market value, closing price 4.50 4.00 4.40 5.26 7.00 ASSET QUALITY RATIOS Nonperforming loans/total loans 2.65% 3.52% 1.32% 1.29% 1.27% Nonperforming assets/total assets 2.93 3.27 1.57 1.45 1.83 Allowance for loan losses/total loans 1.11 1.29 1.16 .94 .99 Allowance for loan losses/nonperformi- ng loans 41.71 36.72 87.52 72.81 77.22 PROFITABILITY RATIOS Return on average assets .38% .08% (.23)% .20% 1.70% Return on average equity 3.71 .87 (2.42) 2.08 17.62 Net interest margin 3.58 3.35 3.20 3.39 3.19 Efficiency ratio 76.55 82.36 80.30 79.12 88.45 Average loans/average deposits 92.55 99.54 102.20 105.12 108.97 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 9.65% 7.86% 8.01% 8.31% 8.56% Tier 1 capital to risk weighted assets 11.94 9.31 9.25 9.40 9.48 Total capital to risk weighted assets 13.00 10.56 10.38 10.31 10.45 Average equity/average assets 10.15 9.20 9.40 9.70 9.66 Tangible equity/tangible assets 10.65 8.97 9.20 9.38 9.35 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000