UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

 

Date of Report (Date of earliest event reported): October 31, 2019

 

MACKINAC FINANCIAL CORPORATION

(previous filings under the name NORTH COUNTRY FINANCIAL CORPORATION)

(Exact name of registrant as specified in its charter)

 

 

 

Registrant’s telephone number, including area code: (888) 343-8147

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).  o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act o

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

 

 

Item 2.02                                           Results of Operations and Financial Condition.

 

On October 31, 2019, Registrant issued a press release announcing its results of operations for the three and nine months months ended Septembr 30, 2019 and Statement of Financial Condition as of September 30, 2019.  The press release is attached as Exhibit No. 99 and incorporated herein by reference.

 

ITEM 9.01.                                 FINANCIAL STATEMENTS AND EXHIBITS.

 

(d)      Exhibits

 

The following exhibits are furnished herewith:

 

EXHIBIT
NUMBER		EXHIBIT DESCRIPTION
99		Press Release of Mackinac Financial Corporation dated October 31, 2019

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	MACKINAC FINANCIAL CORPORATION
Date: October 31, 2019
	By:	/s/ Jesse A. Deering
		Jesse A. Deering
		EVP/CFO

 

2

Exhibit 99

 

 

PRESS RELEASE

 

For Release:	October 31, 2019
Nasdaq:	MFNC
Contact:	Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /jdeering@bankmbank.com
Website:	www.bankmbank.com

 

MACKINAC FINANCIAL CORPORATION

REPORTS 2019 THIRD QUARTER RESULTS

 

Manistique, Michigan — Mackinac Financial Corporation (Nasdaq: MFNC) (the “Corporation”), the bank holding company for mBank, today announced 2019 third quarter net income of $3.72 million, or $.35 per share, compared to 2018 third quarter net income of $3.07 million, or $.29 per share.  The 2018 third quarter results included expenses related to the acquisitions of First Federal of Northern Michigan (“FFNM”) and Lincoln Community Bank (“Lincoln”), which had an after-tax impact of $276 thousand on earnings.  Adjusted net income (net of transaction related expenses) for the third quarter of 2018 was $3.35 million or $.31 per share.  Third quarter 2019 net income, compared to 2018 third quarter adjusted net income, increased by $373 thousand, or 11%.

 

Net income for the first three quarters of 2019 was $10.56 million, or $.98 per share, compared to $5.00 million, or $.60 per share for the same period of 2018.  When giving effect to after-tax transaction related expenses of $2.08 million for the first three quarters, adjusted nine-month net income for 2018 was $7.08 million, or $.85 per share.  The year-over-year increase in  net income for the first three quarters was $3.47 million, or 49% when giving effect to the transaction expenses in 2018.

 

Total assets of the Corporation at September 30, 2019 were $1.36 billion, compared to $1.25 billion at September 30, 2018.  Weighted average shares outstanding for the third quarter of 2019 were 10,740,712, compared to 10,712,745 for the same period of 2018. Shareholders’ equity at September 30, 2019 totaled $160.17 million, compared to $149.37 million at September 30, 2018.  Book value per share equated to $14.91 at the end of the third quarter 2019, compared to $13.94 per share a year ago.  Tangible book value at quarter-end was $135.38 million, or $12.60 per share, compared to $124.61 million, or $11.63 per share, at the end of the third quarter 2018.

 

Additional notes:

 

·                  mBank, the Corporation’s primary asset, recorded year-to-date net income of $11.33 million for the first nine months of 2019, compared to $6.73 million for the same period of 2018. The 2018 nine-month results included expenses related to the acquisition of FFNM and Lincoln, which had an after-tax impact of $1.47 million on earnings.  Adjusted bank net income (net of transaction related expenses) for the first three quarters of 2018 was $8.20 million, equating to a year-over-year increase of $3.13 million, or 38%.  The increase in net income equated to an improvement in Return on Average Assets at the bank from .80% (.97% as adjusted) for the first nine months of 2018 to 1.14% for the same period of 2019.

 

·                  On August 28, 2019 the Corporation announced a common stock repurchase program authorizing the buyback of up to 5% of outstanding MFNC shares.  There is no guarantee as to the exact number of shares, if any, that will be repurchased by the Corporation, and the Corporation may discontinue purchases at any time that management determines additional purchases are not warranted. The Board’s approval of this program reflects its confidence in the Corporation’s intrinsic value. Repurchasing stock is one means of underscoring the Corporation’s commitment to enhancing shareholder value and it is a tool for proactive capital management.

 

 

·                  On September 17, 2019 the Corporation’s board of directors declared a cash dividend of $.14 per common share for the third quarter of 2019. The dividend was an increase of $.02 per share from the prior quarter’s dividend and represents a 17% increase in the annualized dividend from $.48 per share to $.56 per share.

 

·                  Total core bank deposits have increased $74.30 million (or 7.7%) in the first nine months of 2019 through more proactive sales activity in the treasury management line of business and increased marketing efforts in key retail markets where the Corporation has achieved some success in obtaining high value clients.

 

·                  Reliance on higher-cost brokered deposits continues to decrease significantly from $136.76 million, or 12.46% of total deposits at year-end 2018, to a second quarter 2019 balance of $114.10 million, or 10.23% of total deposits, to $78.50 million, or 6.57% of total deposits as of the end of the third quarter of 2019.

 

·                  Third quarter 2019 net interest margin remained solid at 4.39%.  Core operating margin for the third quarter, which is net of accretive yield from purchase accounting treatment on acquired loans (“accretion”), was 4.26%.

 

Revenue

 

Total revenue of the Corporation for third quarter 2019 was $17.91 million, compared to $16.63 million for the third quarter of 2018.  Total interest income for the quarter ended September 30, 2019 was $16.03 million, compared to $15.29 million for the same period in 2018. The 2019 third quarter interest income included $404 thousand from accretion associated with acquisitions.  Accretion was $1.01 million for the same period of 2018.  The year-over-year change in accretive yield was mainly associated with the normal level-yield accounting treatment for acquired loan portfolios.

 

Loan Production and Portfolio Mix

 

Total balance sheet loans at September 30, 2019 were $1.06 billion, compared to September 30, 2018 balances of $993.81 million.  Total loans under management reside at $1.36 billion, which includes $303.78 million of service retained loans.  Loan production for the third quarter of 2019 was $104.58 million, compared to $99.99 million for the third quarter of 2018.  Overall loan production for the first nine months of 2019 was $289.15 million, compared to $203.97 million for the same period of 2018, an increase of $85.18 million, or 42%.  Increased production was evident in all lines of business and across the entire market footprint, but driven primarily through commercial lending activities, which were up $74 million year-over-year. New production efforts have resulted in year-to-date 2019 organic balance sheet loan growth of $21.08 million, or annualized growth of approximately 3%.

 

 

 

2019 New Loan Production

$ in thousands (000)

 

		Q1			Q2			Q3			YTD
Upper Peninsula		$	24,631		$	38,069		$	35,430		$	98,130
Northern Lower Peninsula		33,895			33,654			30,169			97,718
Southeast Michigan		10,256			11,755			25,125			47,136
Wisconsin		6,486			18,883			13,942			39,311
Asset-Based Lending		6,100			750			—			6,850
Total		$	81,368		$	103,111		$	104,666		$	289,145

 

Payoff activity, outside of normal amortization, continued to constrain portfolio growth with approximately $99 million of total principal reduction ahead of original terms through the third quarter of 2019. Of this amount, $65.7 million came from the commercial portfolio with $21.8 million of the total being related to borrowers divesting of the collateral and $23.3 million being refinanced out at pricing or terms that the Corporation was not able or willing to compete with.  As noted in the charts below, the loan portfolio remains well balanced and diversified in terms of geography and loan type.

 

 

Commenting on new loan production and overall lending activities, President of the Corporation and President and CEO of mBank, Kelly W. George, stated, “We are pleased with our nine-month 2019 lending trends in the wake of some continued payoff activity and the rate cuts that occurred in the third quarter, which applied increased pricing pressure for fixed rate commercial loans, a trend we expect to continue going forward.  We continue to see good loan opportunities in all our markets, both on the commercial and retail side, with a solid pipeline moving through the end of the year and into 2020. Given the downward rate environment shift, management has pivoted to ensure that our margin is well maintained and that growth is in the form of ongoing profitable loans that will ensure the long-term integrity of the company’s well-matched balance sheet. We will continue to proactively monitor and try to reduce payoff activity on the commercial side, given the continued competitive pressure for good loans from all types of lending conduits.  However, we will not stretch to retain credits within the portfolio that could apply undue stress and negatively impact our balance sheet in the long-term from either a macro composition or a micro individual credit level perspective if adverse changes in overall economic conditions in our regions were to occur.”

 

Credit Quality

 

Nonperforming loans totaled $4.86 million, or .46% of total loans at September 30, 2019, compared to $4.53 million, or .46% of total loans at September 30, 2018. Total loan delinquencies greater than 30 days resided at a nominal .84%, compared to .97% at September 30, 2018.  The nonperforming assets to total assets ratio resided at .55% for third quarter of 2019, compared to .53% for the third quarter of 2018.

 

 

Commenting on overall credit risk, Mr. George stated, “We have seen no material signs of any credit issues on a systematic or individual credit basis within our loan book.  There has been no indication of softening credit quality through increased payment period times for legacy clients or material deterioration in commercial client financial statements in any of our core industries in which we lend.  Purchase accounting marks from the previously acquired banks have continued to prove accurate, attaining expected accretion levels, which should continue into future periods on the normal accretion schedule.”

 

Margin Analysis and Funding

 

Net interest income for the third quarter of 2019 was $13.32 million, with $404 thousand of accretion, resulting in a Net Interest Margin (“NIM”) of 4.39%, compared to $13.21 million in the third quarter of 2018, with $1.01 million of accretion and a NIM of 4.60%.  Core operating margin, which is net of accretion from acquired loans, was 4.26% for the third quarter 2019 and 4.24% for the same period of 2018.  Comparatively, net interest income for the second quarter of 2019 resided at $14.00 million ($741 thousand of accretion), a NIM of 4.76% and core NIM of 4.43%.  As illustrated in the chart below, core NIM remains comparatively strong but was impacted, as were the margins of most banks, by the Federal Reserve Bank (the “Fed”) rate moves in the third quarter and the effect of these moves on the Corporation’s variable based loan portfolio.

 

 

Total bank deposits (excluding brokered deposits) have increased by $132.33 million year-over-year from $902.74 million at September 30, 2018 to $1.04 billion at third quarter-end 2019 as a result of the Lincoln acquisition (approximately $53.00 million) and organic efforts (approximately $79.33 million).  Total brokered deposits have decreased significantly and were $78.50 million at September 30, 2019, compared to $125.32 million at September 30, 2018, a decrease of 43%.  FHLB (Federal Home Loan Bank) and other borrowings were slightly increased from $70.08 million at the end of the third quarter 2019 from $58.22 million at the end of the third quarter 2018.  This slight increase was due to the Corporation opportunistically extending duration of roughly $25 million of liability funding taking advantage of the inverted yield curve, given the overall duration of wholesale funding remains very short.

 

 

 

Mr. George stated, “The Corporation’s margin remains strong despite the two recent Fed rate cuts with continued focus on pricing of both the loan and deposit portfolio.  We expect some core margin compression from the Fed activity as we continue to proactively review traditional bank product offerings to maintain a competitive position with local peers, as well as regional and national banks.  We were able to adjust some liability pricing in concert with the rate moves and some term liabilities, i.e. brokered deposits, are being paid off or rolled over at lesser rates as they mature.   With our bank deposits up roughly $74 million since year-end 2018, our strong liquidity position has allowed for continued reduction in higher cost brokered deposits over the course of the first three quarters of 2019.  We have significantly lessened our reliance on wholesale funding while maintaining a shorter duration to allow for continued repricing of most brokered CD’s in a timely manner given the rate forecast. Our focus on new core deposit procurement remains a key initiative for 2019 and into 2020, which has provided some nice procurement of new high value clients.  We will look to continue to wind down our wholesale funding exposure through aggressive marketing and business development initiatives in our commerce hubs and within our Treasury Management line of business throughout our entire footprint.”

 

Noninterest Income / Expense

 

Third quarter 2019 noninterest income was $1.88 million, compared to $1.34 million for the same period of 2018.  The year-over-year improvement is a combination of the scale provided by the two 2018 acquisitions, as well as continued focus on drivers of noninterest income, including secondary market mortgage and SBA sales. Noninterest expense for the third quarter of 2019 was $10.44 million, compared to $10.62 million for the same period of 2018.  The expense variance from 2018 was impacted by the transaction related expenses from FFNM, which equated to $350 thousand on a pre-tax basis.  For comparison purposes, noninterest expense remains consistent quarter-over-quarter with the second quarter of 2019 equating to $10.26 million.

 

Assets and Capital

 

Total assets of the Corporation at September 30, 2019 were $1.36 billion, compared to $1.25 billion at September 30, 2018.  Shareholders’ equity at September 30, 2019 totaled $160.17 million, compared to $149.37 million at September 30, 2018.  Book value per share equated to $14.91 at the end of the third quarter 2019, compared to $13.94 per share a year ago.  Tangible book value at quarter-end was $135.38 million, or $12.60 per share, compared to $124.61 million, or $11.63 per share at the end of the third quarter of 2018.  Both the 2018 common stock offering and the 2018 acquisitions had positive impacts on the Corporation’s overall capitalization and regulatory capital ratios. Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 12.90% and 12.81% and tier 1 capital to total tier 1 average assets at the Corporation of 9.81% and at the bank of 9.74%.

 

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “We believe that the first three quarters of 2019 reflect the positive trends in operating metrics and earnings quality as we fully absorbed the two 2018 acquisitions. We continue to improve efficiency and our core funding with our larger operating platform while we work to protect our margin in this changing rate environment.  We will continue to be receptive to acquisitions with sound

 

 

economics as we focus on operating efficiencies, credit trends and growth within the constructs of our credit and pricing philosophies.”

 

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.3 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 29 branch locations; eleven 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 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)		2019			2018			2018
		(Unaudited)			(Unaudited)			(Unaudited)
Selected Financial Condition Data (at end of period):
Assets		$	1,355,383		$	1,318,040		$	1,254,335
Loans		1,059,942			1,038,864			993,808
Investment securities		107,091			116,748			112,265
Deposits		1,113,579			1,097,537			1,028,058
Borrowings		70,079			60,441			58,216
Shareholders’ equity		160,165			152,069			149,367
Selected Statements of Income Data (nine months and year ended)
Net interest income		$	40,557		$	47,130		$	33,336
Income before taxes		13,361			10,593			6,333
Net income		10,555			8,367			5,002
Income per common share - Basic		.98			.94			.60
Income per common share - Diluted		.98			.94			.60
Weighted average shares outstanding - Basic		10,733,926			8,891,967			8,278,371
Weighted average shares outstanding- Diluted		10,744,119			8,921,658			8,304,689
Three Months Ended:
Net interest income		$	13,324		$	13,495		$	13,214
Income before taxes		4,708			4,260			3,889
Net income		3,719			3,365			3,069
Income per common share - Basic		.35			.31			.29
Income per common share - Diluted		.35			.31			.29
Weighted average shares outstanding - Basic		10,740,712			10,712,745			10,712,745
Weighted average shares outstanding- Diluted		10,752,178			10,712,745			10,734,465
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		4.61		%	4.44		%	4.37		%
Efficiency ratio		68.81			77.70			81.29
Return on average assets		1.06			.71			.59
Return on average equity		9.01			6.94			6.04
Average total assets		$	1,333,734		$	1,177,455		$	1,129,082
Average total shareholders’ equity		156,565			120,478			110,785
Average loans to average deposits ratio		93.91		%	97.75		%	98.46		%
Common Share Data at end of period:
Market price per common share		$	15.46		$	13.65		$	16.20
Book value per common share		14.91			14.20			13.94
Tangible book value per share		12.60			11.61			11.63
Dividends paid per share, annualized		.520			.480			.480
Common shares outstanding		10,740,712			10,712,745			10,712,745
Other Data at end of period:
Allowance for loan losses		$	5,308		$	5,183		$	5,186
Non-performing assets		$	7,473		$	8,196		$	6,675
Allowance for loan losses to total loans		.50		%	.50		%	.52		%
Non-performing assets to total assets		.55		%	.62		%	.53		%
Texas ratio		5.31		%	6.33		%	5.14		%
Number of:
Branch locations		29			29			30
FTE Employees		301			288			288

 

 

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

(Dollars in thousands)

 

		September 30,			December 31,			September 30,
		2019			2018			2018
		(Unaudited)						(Unaudited)
ASSETS
Cash and due from banks		$	66,722		$	64,151		$	60,619
Federal funds sold		16,202			6			9
Cash and cash equivalents		82,924			64,157			60,628
Interest-bearing deposits in other financial institutions		11,275			13,452			9,149
Securities available for sale		107,091			116,748			112,265
Federal Home Loan Bank stock		4,924			4,924			4,860
Loans:
Commercial		752,715			717,032			680,451
Mortgage		287,013			301,461			295,010
Consumer		20,214			20,371			18,347
Total Loans		1,059,942			1,038,864			993,808
Allowance for loan losses		(5,308		)	(5,183		)	(5,186		)
Net loans		1,054,634			1,033,681			988,622
Premises and equipment		23,709			22,783			21,831
Other real estate held for sale		2,618			3,119			2,149
Deferred tax asset		4,599			5,763			6,285
Deposit based intangibles		5,212			5,720			4,373
Goodwill		19,574			22,024			20,389
Other assets		38,823			25,669			23,784
TOTAL ASSETS		$	1,355,383		$	1,318,040		$	1,254,335
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES:
Deposits:
Noninterest bearing deposits		$	285,887		$	241,556		$	240,940
NOW, money market, interest checking		375,267			368,890			341,651
Savings		110,455			111,358			104,382
CDs<$250,000		250,506			225,236			199,015
CDs>$250,000		12,964			13,737			16,755
Brokered		78,500			136,760			125,315
Total deposits		1,113,579			1,097,537			1,028,058
Federal funds purchased		—			2,905			11,000
Borrowings		70,079			57,536			58,216
Other liabilities		11,560			7,993			7,694
Total liabilities		1,195,218			1,165,971			1,104,968
SHAREHOLDERS’ EQUITY:
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,740,712; 10,712,745 and 10,712,745 respectively		129,292			129,066			129,008
Retained earnings		29,949			23,466			21,386
Accumulated other comprehensive income (loss)
Unrealized (losses) gains on available for sale securities		1,142			(245		)	(806		)
Minimum pension liability		(218		)	(218		)	(221		)
Total shareholders’ equity		160,165			152,069			149,367
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,355,383		$	1,318,040		$	1,254,335

 

 

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,
		2019			2018			2019			2018
		(Unaudited)						(Unaudited)
INTEREST INCOME:
Interest and fees on loans:
Taxable		$	14,829		$	14,097		$	45,010		$	36,558
Tax-exempt		45			25			134			81
Interest on securities:
Taxable		675			723			2,058			1,655
Tax-exempt		78			84			261			232
Other interest income		403			362			1,155			758
Total interest income		16,030			15,291			48,618			39,284
INTEREST EXPENSE:
Deposits		2,464			1,698			7,333			4,536
Borrowings		242			379			728			1,412
Total interest expense		2,706			2,077			8,061			5,948
Net interest income		13,324			13,214			40,557			33,336
Provision for loan losses		50			50			350			200
Net interest income after provision for loan losses		13,274			13,164			40,207			33,136
OTHER INCOME:
Deposit service fees		383			414			1,197			1,006
Income from loans sold on the secondary market		586			423			1,253			877
SBA/USDA loan sale gains		496			184			650			318
Mortgage servicing amortization		238			110			486			123
Other		175			212			519			496
Total other income		1,878			1,343			4,105			2,820
OTHER EXPENSE:
Salaries and employee benefits		5,669			5,600			16,615			14,627
Occupancy		987			963			3,072			2,702
Furniture and equipment		768			681			2,209			1,856
Data processing		785			720			2,202			1,810
Advertising		203			258			726			645
Professional service fees		536			421			1,517			1,122
Loan origination expenses and deposit and card related fees		314			242			677			516
Writedowns and losses on other real estate held for sale		(24		)	36			77			102
FDIC insurance assessment		(141		)	201			70			544
Communications expense		221			171			681			478
Transaction related expenses		—			350			—			2,463
Other		1,126			975			3,105			2,758
Total other expenses		10,444			10,618			30,951			29,623
Income before provision for income taxes		4,708			3,889			13,361			6,333
Provision for income taxes		989			820			2,806			1,331
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS		$	3,719		$	3,069		$	10,555		$	5,002
INCOME PER COMMON SHARE:
Basic		$	.35		$	.29		$	.98		$	.60
Diluted		$	.35		$	.29		$	.98		$	.60

 

 

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

LOAN PORTFOLIO AND CREDIT QUALITY

 

(Dollars in thousands)

 

Loan Portfolio Balances (at end of period):

 

		September 30,			December 31,			September 30,
		2019			2018			2018
		(Unaudited)						(Unaudited)
Commercial Loans:
Real estate - operators of nonresidential buildings		$	142,176		$	150,251		$	144,079
Hospitality and tourism		94,143			77,598			81,033
Lessors of residential buildings		50,891			50,204			43,699
Gasoline stations and convenience stores		24,917			24,189			21,156
Logging		22,725			20,860			20,758
Commercial construction		34,511			29,765			12,750
Other		383,352			364,165			356,976
Total Commercial Loans		752,715			717,032			680,451
1-4 family residential real estate		268,333			286,908			277,508
Consumer		20,214			20,371			18,347
Consumer construction		18,680			14,553			17,502
Total Loans		$	1,059,942		$	1,038,864		$	993,808

 

Credit Quality (at end of period):

 

		September 30,			December 31,			September 30,
		2019			2018			2018
		(Unaudited)						(Unaudited)
Nonperforming Assets :
Nonaccrual loans		$	4,844		$	5,054		$	4,526
Loans past due 90 days or more		11			23			—
Restructured loans		—			—			—
Total nonperforming loans		4,855			5,077			4,526
Other real estate owned		2,618			3,119			2,149
Total nonperforming assets		$	7,473		$	8,196		$	6,675
Nonperforming loans as a % of loans		.46		%	.49		%	.46		%
Nonperforming assets as a % of assets		.55		%	.62		%	.53		%
Reserve for Loan Losses:
At period end		$	5,308		$	5,183		$	5,186
As a % of outstanding loans		.50		%	.50		%	.52		%
As a % of nonperforming loans		109.33		%	102.09		%	114.58		%
As a % of nonaccrual loans		109.58		%	102.55		%	114.58		%
Texas Ratio		5.31		%	6.33		%	5.14		%
Charge-off Information (year to date):
Average loans		$	1,041,991		$	941,221		$	906,784
Net charge-offs (recoveries)		$	225		$	396		$	93
Charge-offs as a % of average loans, annualized		.03		%	.04		%	.01		%

 

 

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

 

		QUARTER ENDED
		(Unaudited)
		September 30,			June 30,			March 31,			December 31			September 30,
		2019			2019			2019			2018			2018
BALANCE SHEET (Dollars in thousands)
Total loans		$	1,059,942		$	1,060,703		$	1,045,428		$	1,038,864		$	993,808
Allowance for loan losses		(5,308		)	(5,306		)	(5,154		)	(5,183		)	(5,186		)
Total loans, net		1,054,634			1,055,397			1,040,274			1,033,681			988,622
Total assets		1,355,383			1,330,723			1,316,996			1,318,040			1,254,335
Core deposits		1,022,115			989,116			965,359			947,040			885,988
Noncore deposits		91,464			125,737			131,889			150,497			142,070
Total deposits		1,113,579			1,114,853			1,097,248			1,097,537			1,028,058
Total borrowings		70,079			46,232			53,678			60,441			69,216
Total shareholders’ equity		160,165			157,840			154,746			152,069			149,367
Total tangible equity		135,379			133,236			129,973			124,325			124,605
Total shares outstanding		10,740,712			10,740,712			10,740,712			10,712,745			10,712,745
Weighted average shares outstanding		10,740,712			10,740,712			10,720,127			10,712,745			10,712,745
AVERAGE BALANCES (Dollars in thousands)
Assets		$	1,354,220		$	1,326,827		$	1,320,080		$	1,320,996		$	1,284,068
Loans		1,065,337			1,051,998			1,046,740			1,043,409			1,001,763
Deposits		1,124,433			1,103,413			1,099,644			1,087,174			1,042,004
Equity		159,453			156,491			153,689			149,241			149,202
INCOME STATEMENT (Dollars in thousands)
Net interest income		$	13,324		$	13,997		$	13,236		$	13,795		$	13,214
Provision for loan losses		50			200			100			300			50
Net interest income after provision		13,274			13,797			13,136			13,495			13,164
Total noninterest income		1,878			1,110			1,117			1,443			1,343
Total noninterest expense		10,444			10,263			10,244			10,678			10,618
Income before taxes		4,708			4,644			4,009			4,260			3,889
Provision for income taxes		989			975			842			895			820
Net income available to common shareholders		$	3,719		$	3,669		$	3,167		$	3,365		$	3,069
Income pre-tax, pre-provision		$	4,758		$	4,844		$	4,109		$	4,560		$	3,939
PER SHARE DATA
Earnings per common share		$	.35		$	.34		$	.30		$	.31		$	.29
Book value per common share		14.91			14.70			14.41			14.20			13.94
Tangible book value per share		12.60			12.40			12.10			11.61			11.63
Market value, closing price		15.46			15.80			15.74			13.65			16.20
Dividends per share		.140			.120			.120			.120			.120
ASSET QUALITY RATIOS
Nonperforming loans/total loans		.46		%	.44		%	.53		%	.49		%	.46		%
Nonperforming assets/total assets		.55			.51			.57			.62			.53
Allowance for loan losses/total loans		.50			.50			.49			.50			.52
Allowance for loan losses/nonperforming loans		109.33			113.55			92.23			102.09			114.58
Texas ratio		5.31			4.91			5.59			6.33			5.14
PROFITABILITY RATIOS
Return on average assets		1.09		%	1.11		%	.97		%	1.01		%	.95		%
Return on average equity		9.25			9.40			8.36			8.95			8.16
Net interest margin		4.39			4.76			4.55			4.64			4.60
Average loans/average deposits		94.74			95.34			95.10			95.97			96.14
CAPITAL ADEQUACY RATIOS
Tier 1 leverage ratio		9.81		%	9.74		%	9.54		%	9.24		%	9.51		%
Tier 1 capital to risk weighted assets		12.39			12.20			12.28			11.95			12.62
Total capital to risk weighted assets		12.90			12.72			12.79			12.47			13.17
Average equity/average assets (for the quarter)		11.77			11.80			11.64			11.30			11.62
Tangible equity/tangible assets (at quarter end)		10.17			10.20			10.06			9.64			10.13