Business & Finance
Business and FinanceBusiness and Finance 
Fri, November 6, 2009
Thu, November 5, 2009
Wed, November 4, 2009
Mackinac Financial Corporation Reports Third Quarter and Nine Months 2009 Results
MANISTIQUE, MI--(Marketwire - November 4, 2009) - Mackinac Financial Corporation (
The quarter and nine month results for 2009 includes a $1.208 million gain on the sale of two branch banking offices, $.644 million in security gains and the FDIC special assessment which was charged to all banking organizations based upon asset size, and amounted to $.215 million for mBank. The nine 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. Excluding the branch sales, security gains and the charge for the FDIC special assessment for 2009 and the lawsuit settlement and severance payment in 2008, our adjusted nine month net income in 2009 would be $1.023 million, or $.30 income per share compared to adjusted income of $.142 million, $.04 per share in the 2008 nine month period.
A provision for loan losses of $1.400 million was recorded in the nine month period and $.700 million in the third quarter of 2009 compared to $1.200 million and $.450 million for the same periods in 2008. The 2009 provision restores the allowance for loan losses to an adequate level based upon the current level of loans, historical loss rates and specific reserves required for problem loans.
Weighted average shares totaled 3,419,736 year to date and for the third quarter in 2009 compared to 3,422,777 for the nine month period and 3,419,736 at the third quarter of 2008.
Net interest margin in the third quarter of 2009 increased to $4.310 million, or 3.66% compared to $3.371 million, or 3.39% in the third quarter of 2008. For the nine month period the net interest margin totaled $11.856 million, or 3.54% compared to $9.534 million or 3.24% 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, "Our improved interest margin reflects pricing discipline on new and renewed loans in addition to the lower rates on wholesale deposits, and the benefit of increased low cost transactional deposits. We expect this trend to continue."
Noninterest income, totaled $2.418 million in the third quarter of 2009, compared to $.288 million the third quarter of 2008. In the third quarter and for the nine months ended in 2009, noninterest income included a $1.208 million gain from the sale of two branch offices and net security gains of $.644 million. Included in noninterest income for the third quarter and nine months ended periods of 2008 was the $3.475 million lawsuit settlement. Excluding these extraordinary items for both periods, the normalized 2009 nine month noninterest income exceeded 2008 by $.526 million, or 60.46%. Noninterest expense in the third quarter and for the nine month periods of 2009 was $10.152 million compared to $9.597 million in 2008. This increase was largely attributed to FDIC insurance premiums, which increased by $.668 million in 2009.
Total assets of the Corporation at September 30, 2009 were $513.180 million, up $72.227 million, or 16.38% from the $440.953 million in total assets reported at September 30, 2008 and up $61.749 million, or 13.68%, from total assets of $451.431 million at year-end 2008. Asset totals at September 30, 2009 reflect increased balances of investment securities of approximately $33 million, which the Corporation added to leverage the $11 million proceeds of TARP funding.
Loans at September 30, 2009 totaled $384.100 million, a 6.25% increase from the $361.521 million at September 30, 2008, from year-end loans of $370.280 million. Kelly George, President and Chief Executive Officer of mBank stated, "We continue to see good loan growth opportunities. Loan growth in the first nine months was strong despite large paydowns amounting to $11.4 million, along with normal loan principal reductions of $30.6 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 $72.8 million, 97% of which occurred in the Upper Peninsula and Northern Lower Michigan markets. 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, however; we expect some slowing of loan growth through the end of 2009. We expect continued success in loan production attributed to our expertise with the SBA 504 and 7A programs. mBank ranks third in the entire state of Michigan in dollar volume of SBA loans at $13.2 million. 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 $418.581 million at September 30, 2009 were up 16.05% from deposits of $360.694 million on September 30, 2008. Deposits were up $47.484 million, or 12.80% from year-end 2008 deposits of $371.097 million. Total 2009 deposit growth reflects increases in noncore funding of $42.108 million and net increases in core deposits of $5.376 million, along with growth of $30 million to replace deposits of two branch offices sold in the third quarter at 2009. In the third quarter of 2009, we sold two branch offices in the northwestern part of the Upper Peninsula, which had total core deposits of approximately $30 million. We were able to replace the $30 million of deposits sold with new transactional account balances, while increased brokered deposits were utilized to fund increased investment balances to leverage TARP funding. Deposit growth occurred in all three of our regional markets, but we are especially pleased with our success in Southeast Michigan with $12.0 million of growth, almost all transactional account deposits.
Nonperforming assets at the end of the third quarter of 2009 totaled $17.349 million, 3.38% of total assets, an increase of $10.273 million from 2008 year end balances. Mr. George commented, "The extended economy slowdown continues to put added stress on marginal loan relationships. We do not have a systematic problem with asset quality, and in fact, more than 50% of our nonperforming assets stems from six relationships. We increased nonperforming loans by approximately $1.7 million during the third quarter, $1.5 million from one secured commercial loan relationship in the Northern Lower Peninsula which stemmed from the continued economic distress in Michigan markets. We have reevaluated the supporting collateral in this relationship and we feel exposure is low. We recognize the importance of early identification of problematic credits and monitor all of our delinquencies to determine risk of loss. We intend to manage our nonperforming assets in order to limit carrying costs and further collateral deterioration by aggressive disposition."
Total shareholders' equity at September 30, 2009 totaled $55.766 million, compared to $41.427 million on September 30, 2008. The increase of $14.339 million includes $11 million of preferred stock which was issued in April 2009. Book value of common shareholders' equity was $13.25 per share at September 30, 2009, an increase of $3.50 per share since the recapitalization, priced at $9.75 in December 2004.
George, commenting on recent events added, "In the third quarter we completed the sale of two of our Upper Peninsula branch offices, which resulted in an above market deposit premium, and a net gain of $1.208 million. The sale of these branch offices tightened up the footprint of our franchise, reduced operating costs, and will allow us to deploy capital to higher growth markets. We also, as planned, reduced liquidity by selling approximately $16 million of investment securities which resulted in a gain of $.644 million. This action was a part of our TARP participation strategy to leverage our balance sheet to offset TARP costs." George concluded, "We are somewhat satisfied with our performance thus far in 2009, and we will continue to evaluate our banking franchise to build on our 2009 successes by further expanding noninterest income and improving net interest income to increase franchise value. We recently added several key income producing employees to expand our efforts in generating noninterest income along with loan and deposit growth. One primary emphasis for the futures is a broadening of our consumer lending. We made a significant commitment to this strategy with the recent executive staff addition which will provide leadership from our new mortgage and consumer lending office in Marquette."
Tobias concluded, "We are satisfied that we have positioned ourselves well in a difficult economy. We have stumbled a bit in Southeastern Michigan, but have our problems identified and are reducing exposures and dealing with the significant non-performing loans. Our capital strength, low cost structure and core earnings momentum make us optimistic about the future prospects of our organization. We will continue to explore opportunities for FDIC assisted deposit and loan transactions to expand our core deposit mix, 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 10 branch locations; six 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 --------------------------------- September December September 30, 31, 30, 2009 2008 2008 ---------- --------- ---------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 513,180 $ 451,431 $ 440,953 Loans 384,100 370,280 361,521 Investment securities 80,203 47,490 42,781 Deposits 418,581 371,097 360,694 Borrowings 36,140 36,210 36,210 Shareholders' Equity 55,766 41,552 41,427 Selected Statements of Income Data (nine months and year ended): Net interest income $ 11,856 $ 12,864 $ 9,534 Income before taxes and preferred dividend 3,552 2,659 3,082 Net income 2,087 1,872 2,124 Income per common share - Basic .61 .55 .62 Income per common share - Diluted .61 .55 .62 Three Months Ended: Net interest income $ 4,310 $ 3,330 $ 3,371 Income before taxes and preferred dividend 2,585 (423) 274 Net income 1,536 (252) 216 Income per common share - Basic .45 (.07) .06 Income per common share - Diluted .45 (.07) .06 Selected Financial Ratios and Other Data (nine months and year ended): Performance Ratios: Net interest margin 3.54% 3.23% 3.24% Efficiency ratio 77.71 85.51 87.36 Return on average assets .57 .44 .68 Return on average common equity 5.72 4.61 7.03 Average total assets $ 486,447 $ 425,343 $ 419,891 Average total common shareholders' equity $ 44,312 $ 40,630 $ 40,332 Average loans to average deposits ratio 91.72% 105.61% 106.83% Common Share Data (at end of period): Market price per common share $ 4.10 $ 4.40 $ 5.26 Book value per common share $ 13.25 $ 12.15 $ 12.11 Common shares outstanding 3,419,736 3,419,736 3,419,736 Weighted average shares outstanding 3,419,736 3,422,012 3,422,777 Other Data (at end of period): Allowance for loan losses $ 4,081 $ 4,277 $ 3,585 Non-performing assets $ 17,439 $ 7,076 $ 6,400 Allowance for loan losses to total loans 1.06% 1.16% .94% Non-performing assets to total assets 3.38% 1.57% 1.45% Number of: Branch locations 10 12 12 FTE Employees 97 100 96 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September December September 30, 31, 30, (Dollars in thousands) 2009 2008 2008 ---------- --------- ---------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 23,249 $ 10,112 $ 8,217 Federal funds sold - - 4,422 ---------- --------- ---------- Cash and cash equivalents 23,249 10,112 12,639 Interest-bearing deposits in other financial institutions 662 582 382 Securities available for sale 80,203 47,490 42,781 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 306,590 296,088 290,406 Mortgage 73,116 70,447 67,576 Installment 4,394 3,745 3,539 ---------- --------- ---------- Total Loans 384,100 370,280 361,521 Allowance for loan losses (4,081) (4,277) (3,385) ---------- --------- ---------- Net loans 380,019 366,003 358,136 Premises and equipment 10,281 11,189 11,360 Other real estate held for sale 5,821 2,189 1,751 Other assets 9,151 10,072 10,110 ---------- --------- ---------- TOTAL ASSETS $ 513,180 $ 451,431 $ 440,953 ========== ========= ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Noninterest bearing deposits $ 33,254 $ 30,099 $ 34,858 NOW, money market, checking 88,843 70,584 80,185 Savings 18,807 20,730 18,957 CDs < $100,000 59,637 73,752 74,940 CDs > $100,000 25,409 25,044 30,220 Brokered 192,631 150,888 121,534 ---------- --------- ---------- Total deposits 418,581 371,097 360,694 Borrowings: Federal funds purchased - - - Short-term - - - Long-term 36,140 36,210 36,210 ---------- --------- ---------- Total borrowings 36,140 36,210 36,210 Other liabilities 2,693 2,572 2,622 ---------- --------- ---------- Total liabilities 457,414 409,879 399,526 SHAREHOLDERS' EQUITY: Preferred stock - No par value: Authorized 500,000 shares, no shares outstanding 10,466 - - Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 3,419,736 shares 43,485 42,815 42,794 Retained Earnings 378 (1,708) (1,456) Accumulated other comprehensive income 1,437 445 89 ---------- --------- ---------- Total shareholders' equity 55,766 41,552 41,427 ---------- --------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 513,180 $ 451,431 $ 440,953 ========== ========= ========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share data) Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2009 2008 2009 2008 -------- ------- -------- -------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,106 $ 5,537 $ 15,212 $ 17,241 Tax-exempt 63 100 237 310 Interest on securities: Taxable 888 303 2,020 840 Tax-exempt 7 1 11 4 Other interest income 28 87 44 257 -------- ------- -------- -------- Total interest income 6,092 6,028 17,524 18,652 -------- ------- -------- -------- INTEREST EXPENSE: Deposits 1,550 2,308 4,894 7,924 Borrowings 232 349 774 1,194 -------- ------- -------- -------- Total interest expense 1,782 2,657 5,668 9,118 -------- ------- -------- -------- Net interest income 4,310 3,371 11,856 9,534 Provision for loan losses 700 450 1,400 1,200 -------- ------- -------- -------- Net interest income after provision for loan losses 3,610 2,921 10,456 8,334 -------- ------- -------- -------- OTHER INCOME: Service fees 236 229 750 597 Net security gains 644 (1) 644 64 Net gains on sale of secondary market loans 247 16 179 113 Proceeds from lawsuit settlements - - - 3,475 Other 1,291 44 1,675 96 -------- ------- -------- -------- Total other income 2,418 288 3,248 4,345 -------- ------- -------- -------- OTHER EXPENSES: Salaries and employee benefits 1,603 1,534 4,761 5,416 Occupancy 336 336 1,069 1,039 Furniture and equipment 193 202 604 570 Data processing 221 212 665 649 Professional service fees 161 120 458 352 Loan and deposit 402 176 1,175 430 Telephone 50 41 139 125 Advertising 80 93 238 213 Other 397 221 1,043 803 -------- ------- -------- -------- Total other expenses 3,443 2,935 10,152 9,597 -------- ------- -------- -------- Income before provision for income taxes 2,585 274 3,552 3,082 Provision for (benefit of) income taxes 864 58 1,142 958 -------- ------- -------- -------- NET INCOME 1,721 216 2,410 2,124 -------- ------- -------- -------- Preferred dividend expense 185 - 323 - -------- ------- -------- -------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 1,536 $ 216 $ 2,087 $ 2,124 ======== ======= ======== ======== INCOME PER COMMON SHARE: Basic $ .45 $ .06 $ .61 $ .62 ======== ======= ======== ======== Diluted $ .45 $ .06 $ .61 $ .62 ======== ======= ======== ======== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES LOAN PORTFOLIO AND CREDIT QUALITY (Dollars in thousands) Loan Portfolio Balances (at end of period): September December September 30, 31, 30, 2009 2008 2008 ----------- ----------- ----------- Commercial Loans Real estate - operators of nonresidential buildings $ 47,007 $ 41,299 $ 41,486 Hospitality and tourism 45,867 35,086 35,287 Real estate agents and managers 23,996 29,292 29,277 Lessors of nonresidential buildings 13,782 13,467 13,352 Other 151,862 145,831 140,631 ----------- ----------- ----------- Total Commercial Loans 282,514 264,975 260,033 1-4 family residential real estate 66,700 65,595 62,895 Consumer 4,394 3,745 3,539 Construction Commercial 24,076 31,113 30,373 Consumer 6,416 4,852 4,681 ----------- ----------- ----------- Total Loans $ 384,100 $ 370,280 $ 361,521 =========== =========== =========== Credit Quality (at end of period): September December September 30, 31, 30, 2009 2008 2008 ---------- ---------- ---------- Nonperforming Assets: Nonaccrual loans $ 10,655 $ 4,887 $ 4,649 Loans past due 90 days or more - - - Restructured loans 873 - - ---------- ---------- ---------- Total nonperforming loans 11,528 4,887 4,649 Other real estate owned 5,821 2,189 1,751 ---------- ---------- ---------- Total nonperforming assets $ 17,349 $ 7,076 $ 6,400 ========== ========== ========== Nonperforming loans as a % of loans 3.00% 1.32% 1.29% ---------- ---------- ---------- Nonperforming assets as a % of assets 3.38% 1.57% 1.45% ---------- ---------- ---------- Reserve for Loan Losses: At period end $ 4,081 $ 4,277 $ 3,385 ---------- ---------- ---------- As a % of average loans 1.10% 1.16% 0.94% ---------- ---------- ---------- As a % of nonperforming loans 35.40% 87.52% 72.81% ---------- ---------- ---------- As a % of nonaccrual loans 38.30% 87.52% 72.81% ========== ========== ========== Charge-off Information (year to date): Average loans 370,952 361,324 359,729 ---------- ---------- ---------- Net charge-offs 1,596 2,169 1,961 ---------- ---------- ---------- Charge-offs as a % of average loans .43% .60% .55% ---------- ---------- ---------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED ------------------------------------------------------- (Unaudited) ------------------------------------------------------- September December September 30, June 30, March 31, 31, 30, 2009 2009 2009 2008 2008 --------- --------- --------- --------- ---------- BALANCE SHEET (Dollars in thousands) Total loans $ 384,100 $ 372,004 $ 370,776 $ 370,280 $ 361,521 Allowance for loan losses (4,081) (4,119) (4,793) (4,277) (3,385) --------- --------- --------- --------- ---------- Total loans, net 380,019 367,885 365,983 366,003 358,136 Intangible assets - 6 26 46 65 Total assets 513,180 506,304 466,375 451,431 440,953 Core deposits 200,541 202,892 196,860 195,165 208,940 Noncore deposits (1) 218,040 210,260 188,897 175,932 151,754 --------- --------- --------- --------- ---------- Total deposits 418,581 413,152 385,757 371,097 360,694 Total borrowings 36,140 36,210 36,210 36,210 36,210 Total shareholders' equity 55,766 53,939 41,864 41,552 41,427 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,419,736 AVERAGE BALANCES (Dollars in thousands) Assets $ 513,687 $ 491,205 $ 454,741 $ 441,583 $ 423,702 Loans 370,310 371,609 370,943 366,077 358,844 Deposits 419,102 401,510 372,670 358,213 341,377 Equity 54,594 49,855 41,813 41,516 41,097 INCOME STATEMENT (Dollars in thousands) Net interest income $ 4,310 $ 4,051 $ 3,495 $ 3,330 $ 3,371 Provision for loan losses 700 150 550 1,100 450 --------- --------- --------- --------- ---------- Net interest income after provision 3,610 3,901 2,945 2,230 2,921 Total noninterest income 2,418 439 391 308 288 Total noninterest expense 3,443 3,470 3,239 2,961 2,935 --------- --------- --------- --------- ---------- Income before taxes 2,585 870 97 (423) 274 Provision for income taxes 864 271 7 (171) 58 Preferred dividend expense 185 138 - - - --------- --------- --------- --------- ---------- Net income $ 1,536 $ 461 $ 90 $ (252) $ 216 ========= ========= ========= ========= ========== PER SHARE DATA Earnings - basic $ .45 $ .13 $ .03 $ (.07) $ .06 Earnings - diluted .45 .13 .03 (.07) .06 Book value per common share 13.25 12.55 12.24 12.15 12.11 Market value, closing price 4.10 4.50 4.00 4.40 5.26 ASSET QUALITY RATIOS Nonperforming loans/total loans 3.00% 2.66% 3.52% 1.32% 1.29% Nonperforming assets/total assets 3.38 2.93 3.27 1.57 1.45 Allowance for loan losses/total loans 1.06 1.11 1.29 1.16 .94 Allowance for loan losses/nonperfor- ming loans 35.40 41.71 36.72 87.52 72.81 PROFITABILITY RATIOS Return on average assets .77% .38% .08% (.23)% .20% Return on average equity 7.17 3.71 .87 (2.42) 2.08 Net interest margin 3.66 3.58 3.35 3.20 3.39 Efficiency ratio 70.09 76.55 82.36 80.30 79.12 Average loans/average deposits 88.36 92.55 99.54 102.20 105.12 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 10.30% 9.65% 7.86% 8.01% 8.31% Tier 1 capital to risk weighted assets 12.89 11.94 9.31 9.25 9.40 Total capital to risk weighted assets 13.90 13.00 10.56 10.38 10.31 Average equity/average assets 10.63 10.15 9.20 9.40 9.70 Tangible equity/tangible assets 10.87 10.65 8.97 9.20 9.38 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000