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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
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Contact: Investor Relations (888) 343-8147 Website: www.bankmbank.com
SOURCE: Mackinac Financial Corporation
http://www.bankmbank.com
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