SOURCE: Mackinac Financial Corporation

Mackinac Financial Corporation

May 04, 2011 14:00 ET

Mackinac Financial Corporation Reports First Quarter 2011 Results

MANISTIQUE, MI--(Marketwire - May 4, 2011) - Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the "Bank") today announced first quarter 2011 income of $.256 million or $.07 per share compared to net income of $3.526 million, or $1.03 per share for the first quarter of 2010. Operating results for the first quarter of 2010 included the recognition of a $3.500 million deferred tax benefit related to NOL carry-forwards. The Corporation's primary asset, mBank, recorded net income of $.529 million.

Some highlights for the quarter included:

  • Nonperforming assets at the end of the first quarter of 2011 totaled $15.045 million, a reduction of $1.080 million from 2010 year end balances.


  • In the first quarter of 2011, the corporation did not record a provision for loan losses as compared to the $.900 million provision recorded in the first quarter of 2010.


  • ORE write-downs/gains and losses of $.467 million.

  • Core deposit growth of $25.024 million primarily in transactional accounts, accounting for $17.743 million of this growth.


  • A stable and improving net interest margin of 3.92% for the quarter.


  • SBA/USDA loan sale premium income of $.236 million with a solid pipeline of new loans for sale entering into the second quarter which should enable the company to exceed first quarter totals. We still see premium pricing in the 108% to 110% range on these transactions.

Margin Analysis

Net interest margin in the first quarter of 2011 increased to $4.141 million, 3.92%, compared to $4.022 million, or 3.51%, in the first quarter of 2010. The interest margin increase was largely due to decreased funding costs. Kelly W. George, President and Chief Executive Officer of mBank, stated, "In the first quarter of 2011, we experienced continued margin improvement from decreased rates on deposit funding, increases in low cost transactional accounts, and also our disciplined loan pricing, which can include floor rates with regard to variable rate loans. We expect our margin to improve as we progress through the year with increased funding of new loans and further repayment of maturing brokered deposits."

Loans and Non-performing Assets

Total loans at March 31, 2011 were $374.609 million, a .72% decrease from the $377.311 million at March 31, 2010 and down $8.477 million from year-end 2010 total loans of $383.086 million. George stated, "Loan growth in the first quarter was impacted by normal principal reduction and pay-downs. The $8.477 million in reductions included $2.384 million in SBA loan sales, and the move of $.800 million of nonperforming loans to OREO, along with a reduction of $1.4 million on another nonperforming loan relationship that was sold. Our first quarter new loan production was satisfactory given the seasonality of our business where the first quarter routinely is the slowest. In the first quarter, we had $16.8 million of production occurring in all regions, including $4.9 million in secondary market mortgage production. Our strongest region was the Upper Peninsula with $11.4 million total production.

The decrease in nonperforming assets in the first quarter is the result of aggressive remediation of nonperforming assets, problem borrowers and related workout programs. George, commenting on credit quality, stated: "We continue to aggressively market our OREO properties and believe our aggressive write-downs reflect current market values, and will result in sales later this year. We remain highly focused on overall asset quality metrics given the still challenging overall Michigan economy but believe that things have begun to stabilize. We are encouraged by our Texas Ratio of 24.96% for the quarter, which is among the lowest of the 15 largest public banks headquartered in Michigan."

Deposits

Total deposits of $400.783 million at March 31, 2011 were down 1.09% from deposits of $405.212 million on March 31, 2010 due to decreased levels of brokered deposits, which declined from $138.812 million on March 31, 2010, to $63.342 million on March 31, 2011. First quarter 2011 deposits were up $14.004 million from year-end 2010 deposits of $386.779 million. The overall increase in deposits for the first quarter of 2011 is comprised of a decrease in noncore deposits of $11.020 million which was offset with increased core deposits of $25.024 million. George, commenting on the increased core deposits, stated, "In the first quarter of 2011, we continued to grow core deposits at a steady rate. We will remain focused on this as a primary strategic objective to reduce our overall dependency on wholesale funding sources for future margin improvements and decreased regulatory costs."

Noninterest Income/Expense

Noninterest income, at $.577 million in the first quarter of 2011, decreased $.230 million from the first quarter 2010 level of $.807 million. Noninterest income in the first quarter of 2010 includes $.215 million of security gains which the Corporation does not consider recurring or core earnings provider. The other most significant decrease for the 2011 first quarter was fees on deposit accounts, due mostly to lower overdraft fees in 2011, a trend that appears to be industry wide given heightened regulatory scrutiny, pending regulations and customers being more aware and diligent in managing their accounts.

Noninterest expense totaled $4.059 million in the first quarter of 2011, an increase of $.430 million, or 11.85% from the first quarter of 2010. Increased expenses in the first quarter continue to reflect the added cost of aggressive nonperforming asset remediation, along with an increase in FDIC insurance premiums of $.063 million. The expenses related to nonperforming assets were primarily write-downs and gains/losses on OREO of $.467 million. The Corporation continues to look for ways to control costs and remains below peer level in terms of salary and benefits and total operating expenses as a percentage of total assets.

Assets and Capital

Total assets of the Corporation at March 31, 2011 were $492.790 million, down 1.92% from the $502.427 million reported at March 31, 2010. First quarter 2011 total assets were up 2.94% from the $478.696 million of total assets at year-end 2010. Common Shareholders' equity at March 31, 2011 totaled $43.340 million, or $12.67 per share, compared to $48.160 million, or $14.08 per share on March 31, 2010. The Corporation and the Bank are both "well-capitalized" with Tier 1 Capital at the Corporation of 9.70% and 8.54% at the Bank.

Paul D. Tobias, Chairman and Chief Executive Officer, concluded, "We believe that 2011 will be the year where MFNC begins to demonstrate the earning capability of the franchise as the credit environment and our credit metrics improve. In the 2011 first quarter we experienced good growth in core deposits. We expect good loan growth for the remainder of 2011, which will translate into fee income from sales of SBA/USDA loans, along with good balance sheet growth to enhance our net interest margin. We have also begun to explore the merits of the Small Business Loan Fund as an inexpensive temporary source of capital and a source of repayment of our TARP funding."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $490 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 11 branch locations; seven 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
                                        ----------------------------------
                                                     December
                                        March 31,       31,     March 31,
                                           2011        2010        2010
                                        ----------  ----------  ----------
                                        (Unaudited)             (Unaudited)
Selected Financial Condition Data (at
 end of period):
Assets                                  $  492,790  $  478,696  $  502,427
Loans                                      374,609     383,086     377,311
Investment securities                       37,543      33,860      36,841
Deposits                                   400,783     386,779     405,212
Borrowings                                  36,069      36,069      36,140
Common shareholders' equity                 43,340      43,176      48,160
Total shareholders' equity                  54,097      53,882      58,722


Selected Statements of Income Data:
Net interest income                     $    4,141  $   16,385  $    4,022
Income (Loss) before taxes and
 preferred dividend                            659      (3,918)        300
Net income (Loss)                              256      (1,160)      3,526
Income (Loss) per common share - Basic         .07       (0.34)       1.03
Income (Loss) per common share -
 Diluted                                       .07       (0.34)       1.03
Weighted average shares outstanding      3,419,736   3,419,736   3,419,736


Selected Financial Ratios and Other
 Data:
Performance Ratios:
Net interest margin                           3.92%       3.66%       3.51%
Efficiency ratio                             75.73       72.57       78.12
Return on average assets                       .22       (0.23)       2.81
Return on average common equity               2.40       (2.54)      32.08
Return on average total equity                1.92       (2.06)      25.95

Average total assets                    $  478,861  $  502,993  $  508,495
Average common shareholders' equity         43,147      45,568      44,577
Average total shareholders' equity          53,870      56,171      55,109
Average loans to average deposits ratio      98.27%      94.36%      92.93%


Common Share Data (at end of period):
Market price per common share           $     6.02  $     4.58  $     4.72
Book value per common share             $    12.67  $    12.63  $    14.08
Common shares outstanding                3,419,736   3,419,736   3,419,736


Other Data (at end of period):
Allowance for loan losses               $    6,184  $    6,613  $    4,737
Non-performing assets                   $   15,045  $   16,125  $   17,619
Allowance for loan losses to total
 loans                                        1.65%       1.73%       1.26%
Non-performing assets to total assets         3.05%       3.37%       3.51%
Texas Ratio                                  24.96%      26.66%      27.75%

Number of:
  Branch locations                              11          11          10
  FTE Employees                                108         110         103





                MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS


                                    March 31,   December 31,    March 31,
(Dollars in thousands)                2011          2010          2010
                                  ------------  ------------  ------------
                                  (Unaudited)                 (Unaudited)
ASSETS

Cash and due from banks           $     41,715  $     22,719  $     19,359
Federal funds sold                      12,000        12,000        36,000
                                  ------------  ------------  ------------
  Cash and cash equivalents             53,715        34,719        55,359

Interest-bearing deposits in
 other financial institutions              734           713           700
Securities available for sale           37,543        33,860        36,841
Federal Home Loan Bank stock             3,423         3,423         3,794

Loans:
  Commercial                           287,760       297,047       296,271
  Mortgage                              81,404        80,756        76,996
  Installment                            5,445         5,283         4,044
                                  ------------  ------------  ------------
    Total Loans                        374,609       383,086       377,311
      Allowance for loan losses         (6,184)       (6,613)       (4,737)
                                  ------------  ------------  ------------
  Net loans                            368,425       376,473       372,574

Premises and equipment                   9,715         9,660        10,060
Other real estate held for sale          5,081         5,562         7,723
Other assets                            14,154        14,286        15,376
                                  ------------  ------------  ------------

TOTAL ASSETS                      $    492,790  $    478,696  $    502,427
                                  ============  ============  ============

LIABILITIES AND SHAREHOLDERS'
 EQUITY
LIABILITIES:
  Deposits:
      Noninterest bearing
       deposits                   $     39,269  $     41,264  $     30,356
      NOW, money market, checking      154,420       134,703       109,374
      Savings                           17,691        17,670        20,675
      CDs < $100,000                   104,258        96,977        75,822
      CDs > $100,000                    21,803        22,698        30,173
      Brokered                          63,342        73,467       138,812
                                  ------------  ------------  ------------
        Total deposits                 400,783       386,779       405,212

  Borrowings:
      Federal Home Loan Bank            35,000        35,000        35,000
      Other                              1,069         1,069         1,140
                                  ------------  ------------  ------------
        Total borrowings                36,069        36,069        36,140
      Other liabilities                  1,841         1,966         2,353
                                  ------------  ------------  ------------
        Total liabilities              438,693       424,814       443,705

Shareholders' equity:
  Preferred stock - No par value:
    Authorized 500,000 shares,
    11,000 shares issued and
    outstanding                         10,757        10,706        10,562
  Common stock and additional
   paid in capital - No par value
    Authorized - 18,000,000 shares
    Issued and outstanding -
     3,419,736 shares                   43,525        43,525        43,502
    Accumulated earnings (deficit)        (705)         (961)        3,724
    Accumulated other
     comprehensive income                  520           612           934
                                  ------------  ------------  ------------

        Total shareholders' equity      54,097        53,882        58,722
                                  ------------  ------------  ------------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY             $    492,790  $    478,696  $    502,427
                                  ============  ============  ============




             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS


                                                      Three Months Ended
                                                          March 31,
                                                    ----------------------
(Dollars in thousands except per share data)           2011        2010
                                                    ----------- ----------
                                                    (Unaudited) (Unaudited)

INTEREST INCOME:
     Interest and fees on loans:
          Taxable                                   $     5,136 $    5,191
          Tax-exempt                                         42         52
     Interest on securities:
          Taxable                                           282        397
          Tax-exempt                                          7          7
     Other interest income                                   33         40
                                                    ----------- ----------
          Total interest income                           5,500      5,687
                                                    ----------- ----------

INTEREST EXPENSE:
     Deposits                                             1,219      1,457
     Borrowings                                             140        208
                                                    ----------- ----------
          Total interest expense                          1,359      1,665
                                                    ----------- ----------

Net interest income                                       4,141      4,022
Provision for loan losses                                     -        900
                                                    ----------- ----------
Net interest income after provision for loan losses       4,141      3,122
                                                    ----------- ----------

OTHER INCOME:
     Service fees                                           217        223
     Net security gains                                       -        215
     Income from loans sold                                 314        316
     Other                                                   46         53
                                                    ----------- ----------
       Total other income                                   577        807
                                                    ----------- ----------

OTHER EXPENSE:
     Salaries and employee benefits                       1,824      1,720
     Occupancy                                              365        345
     Furniture and equipment                                194        194
     Data processing                                        176        189
     Professional service fees                              153        173
     Loan and deposit                                       179        268
     ORE writedowns and (gains) losses on sale              467        147
     FDIC insurance assessment                              285        222
     Telephone                                               51         47
     Advertising                                             88         72
     Other                                                  277        252
                                                    ----------- ----------
       Total other expense                                4,059      3,629
                                                    ----------- ----------

Income before provision for income taxes                    659        300
Provision for (benefit of) income taxes                     214     (3,411)
                                                    ----------- ----------
NET INCOME                                          $       445 $    3,711
                                                    ----------- ----------

Preferred dividend and accretion of discount                189        185

                                                    ----------- ----------
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS         $       256 $    3,526
                                                    =========== ==========

INCOME PER COMMON SHARE:
     Basic                                          $       .07 $     1.03
                                                    =========== ==========
     Diluted                                        $       .07 $     1.03
                                                    =========== ==========



             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                   LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

                                      March 31,   December 31,  March 31,
                                         2011         2010         2010
                                     ------------ ------------ ------------
Commercial Loans
Real estate - operators of
 nonresidential buildings            $     58,132 $     58,114 $     49,753
Hospitality and tourism                    35,016       37,737       44,820
Operators of nonresidential
 buildings                                 17,091       16,598       13,170
Real estate - operators of
 nonresidential buildings                  15,518       15,857       21,529
Other                                     138,565      135,411      138,964
                                     ------------ ------------ ------------
   Total Commercial Loans                 264,322      263,717      268,236

1-4 family residential real estate         75,663       75,074       70,087
Consumer                                    5,445        5,283        4,044
Construction
   Commercial                              23,438       33,330       28,035
   Consumer                                 5,741        5,682        6,909
                                     ------------ ------------ ------------

   Total Loans                       $    374,609 $    383,086 $    377,311
                                     ============ ============ ============


Credit Quality (at end of period):


                                      March 31,   December 31,   March 31,
                                        2011         2010         2010
                                     -----------  -----------  -----------
Nonperforming Assets :
Nonaccrual loans                     $     9,859  $     5,921  $     9,027
Loans past due 90 days or more                 -            -            -
Restructured loans                           105        4,642          869
                                     -----------  -----------  -----------
   Total nonperforming loans               9,964       10,563        9,896
Other real estate owned                    5,081        5,562        7,723
                                     -----------  -----------  -----------
   Total nonperforming assets        $    15,045  $    16,125  $    17,619
                                     ===========  ===========  ===========
Nonperforming loans as a % of loans         2.66%        2.76%        2.62%
                                     -----------  -----------  -----------
Nonperforming assets as a % of
 assets                                     3.05%        3.37%        3.51%
                                     -----------  -----------  -----------
Reserve for Loan Losses:
At period end                        $     6,184  $     6,613  $     4,737
                                     -----------  -----------  -----------
As a % of loans                             1.65%        1.73%        1.26%
                                     -----------  -----------  -----------
As a % of nonperforming loans              62.06%       62.61%       47.87%
                                     -----------  -----------  -----------
As a % of nonaccrual loans                 62.72%      111.69%       52.48%
                                     -----------  -----------  -----------
Texas ratio                                24.96%       26.66%       27.75%
                                     ===========  ===========  ===========

Charge-off Information (year to
 date):
   Average loans                     $   380,066  $   384,347  $   384,640
                                     -----------  -----------  -----------
   Net charge-offs                           429        5,112        1,389
                                     -----------  -----------  -----------
   Charge-offs as a % of average
    loans                                    .11%        1.33%         .36%
                                     -----------  -----------  -----------




                 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                         QUARTERLY FINANCIAL HIGHLIGHTS


                                      QUARTER ENDED
                ----------------------------------------------------------
                                        (Unaudited)
                ----------------------------------------------------------
                             December   September
                March 31,       31,         30,      June 30,   March 31,
                   2011        2010        2010        2010        2010
                ----------  ---------   ---------   ---------   ----------
BALANCE SHEET
 (Dollars in
 thousands)

Total loans     $  374,609  $ 383,086   $ 382,727   $ 384,839   $  377,311
Allowance for
 loan losses        (6,184)    (6,613)     (5,437)     (6,371)      (4,737)
                ----------  ---------   ---------   ---------   ----------
  Total loans,
   net             368,425    376,473     377,290     378,468      372,574
Intangible
 assets                  -          -           -           -            -
Total assets       492,790    478,696     499,006     500,774      502,427
Core deposits      315,638    290,614     287,055     271,026      236,227
Noncore
 deposits (1)       85,145     96,165     117,469     134,758      168,985
                ----------  ---------   ---------   ---------   ----------
  Total deposits   400,783    386,779     404,524     405,784      405,212
Total
 borrowings         36,069     36,069      36,069      36,140       36,140
Common
 shareholders'
 equity             43,340     43,176      45,329      45,621       48,160
Total
 shareholders'
 equity             54,097     53,882      55,987      56,231       58,722
Total shares
 outstanding     3,419,736  3,419,736   3,419,736   3,419,736    3,419,736

AVERAGE
 BALANCES
 (Dollars in
 thousands)

Assets          $  478,861  $ 488,320   $ 512,335   $ 502,942   $  508,495
Loans              380,066    385,296     385,268     382,169      384,640
Deposits           386,743    393,266     416,847     405,449      413,897
Common equity       43,147     44,339      46,041      47,542       44,577
Equity              53,870     55,015      56,668      57,889       55,109

INCOME
 STATEMENT
 (Dollars in
 thousands)

Net interest
 income         $    4,141  $   4,276   $   4,064   $   4,023   $    4,022
Provision for
 loan losses             -      1,800       1,000       2,800          900
                ----------  ---------   ---------   ---------   ----------
  Net interest
   income after
   provision         4,141      2,476       3,064       1,223        3,122
Total other
 income                577        747         648         593          807
Total other
 expense             4,059      4,037       3,601       5,330        3,629
                ----------  ---------   ---------   ---------   ----------
Income before
 taxes                 659       (814)        111      (3,514)         300
Provision for
 (benefit of)
 income taxes          214      1,093          30      (1,212)      (3,411)
                ----------  ---------   ---------   ---------   ----------
  Net income           445     (1,907)         81      (2,302)       3,711
                ----------  ---------   ---------   ---------   ----------
Preferred
 dividend
 expense               189        185         185         186          185
                ----------  ---------   ---------   ---------   ----------
Net income
 (loss)
 available to
 common
 shareholders   $      256  $  (2,092)  $    (104)  $  (2,488)  $    3,526
                ==========  =========   =========   =========   ==========

PER SHARE DATA

Earnings        $      .07  $    (.61)  $    (.03)  $    (.73)  $     1.03
Book value per
 common share        12.67      12.63       13.26       13.34        14.08
Market value,
 closing price        6.02       4.58        5.10        6.50         4.72

ASSET QUALITY
 RATIOS

Nonperforming
 loans/total
 loans                2.66%      2.76 %      2.94 %      2.87 %       2.62%
Nonperforming
 assets/total
 assets               3.05       3.37        3.41        3.34         3.51
Allowance for
 loan losses/
 total loans          1.65       1.73        1.42        1.66         1.26
Allowance for
 loan losses/
 nonperforming
 loans               62.06      62.61       48.34       57.69        47.87
Texas ratio (2)      24.96      26.66       27.68       26.71        27.76

PROFITABILITY
 RATIOS

Return on
 average assets        .22%     (1.70)%      (.08)%     (1.98)%       2.81%
Return on
 average common
 equity               2.40     (18.72)       (.90)     (20.99)       32.08
Return on
 average equity       1.92     (15.09)       (.73)     (17.24)       25.95
Net interest
 margin               3.92       3.88        3.69        3.56         3.51
Efficiency
 ratio               75.73      65.05       75.98       76.04        78.12
Average
 loans/average
 deposits            98.27      97.97       92.42       94.26        92.93

CAPITAL
 ADEQUACY
 RATIOS

Tier 1 leverage
 ratio                9.70%      9.25 %      9.22 %      9.38 %       9.85%
Tier 1 capital
 to risk
 weighted
 assets              11.61      11.36       11.73       11.65        12.48
Total capital
 to risk
 weighted
 assets              12.86      12.62       12.98       12.91        13.69
Average
 equity/average
 assets              11.25      11.27       11.06       11.51        10.84
Tangible
 equity/tangible
 assets              11.25      11.27       11.06       11.51        10.84

(1)  Noncore deposits includes Internet CDs, brokered deposits and CDs
     greater than $100,000
(2)  Texas ratio equals nonperforming assets divided by shareholders'
     equity plus allowance for loan losses

Contact Information