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MFNC Reports First Quarter 2013 Results

2013 Press Releases Expand

(Manistique, Michigan) – Mackinac Financial Corporation (Nasdaq: MFNC), the bank holding company for mBank (the “Bank”), today announced first quarter 2013 income of $.676 million or $.12 per share compared to net income of $.498 million, or $.12 per share for the first quarter of 2012.  The Corporation’s primary asset, mBank, recorded net income of $1.006 million for the first quarter of 2013 compared to $.800 million in 2012.  The first quarter 2013 results include a provision for loan losses of $.375 million compared to $.495 million for the same period in 2012.  Total assets of the Corporation at March 31, 2013 were $541.896 million, up 6.99 % from the $506.496 million reported at March 31, 2012.

Shareholders’ equity at March 31, 2013 totaled $73.039 million, compared to $56.095 million on March 31, 2012, an increase of $16.944 million.  Book value of common shareholders’ equity was $11.16 per share at March 31, 2013 compared to $13.19 per share at March 31, 2012. The increase in equity, between periods, includes the issuance of 2.138 million shares of common stock in August 2012 for net proceeds of $11.6 million. Weighted average shares outstanding totaled 5,559,859 shares in 2013 first quarter compared to 3,419,736 for the same period in 2012. 

Some highlights for the first quarter include:
  • New loan production of $39.8 million which encompassed $15.6 million of new commercial originations and $24.2 million of consumer loans predominantly mortgage related. The Upper Peninsula region accounted for $27.4 million of the new production with the Northern Lower Peninsula equating to $10.4 million and Southeast Michigan $2.0 million.
  • Secondary mortgage loan income of $.299 million, compared to $.298 million in the first quarter of 2012.
  • Stable net interest margin holding up well at 4.18% compared to 4.17% for the first quarter of 2012. 
  • Improved credit quality with a Texas Ratio of 9.90% compared to 16.84% one year ago.
Loans and Non-performing Assets

Total loans at March 31, 2013 were $454.051 million, a 9.57% increase from the $414.402 million at March 31, 2012 and up $4.874 million from year-end 2012 total loans of $449.177 million.  Commenting on new loan production and overall loan growth, Kelly W. George, President and CEO of mBank stated, “We are still seeing good loan opportunities in all of our markets but have lost some transactions given interest rates and credit structures that did not work for our balance sheet and credit parameters. These were primarily in Southeast Michigan this quarter but all markets are experiencing highly competitive fixed rate commercial loan pricing. In addition, and consistent with previous years given the seasonality of our business primarily in the North, the extended winter and cold has delayed some economic progress for construction projects and just general borrowers overall ability to purchase and/or develop various commercial real estate transactions. We remain encouraged in the North with the 1-4 family mortgage lending activity continuing during this traditional slow period which should bode well for increased lending activities as we enter our peak mortgage lending periods within the late second and third quarters. Our pipeline remains strong too with already funded and waiting to be adjudicated SBA transactions which will lead to increased balance sheet growth and non-interest income generation in the next several quarters.”

Nonperforming loans totaled $3.833 million, .84% of total loans at March 31, 2013 compared to $6.857 million, or 1.65% of total loans at March 31, 2012 and down $.854 million from December 31, 2012.  Nonperforming assets were reduced by $2.693 million from a year ago and stood at 1.41% of total assets and equated to $7.7 million.  Total loan delinquencies greater than 30 days resided at .50 % or $2.266 million.  George, commenting on credit quality, stated, “Our overall loan portfolio and corresponding risk tolerance metrics continue to perform well with no material adverse items to note for this quarter. We remain diligent on overall new origination structures to not stretch our comfort zone for new loans, and we continue to timely identify any problems so they can be evaluated and actions plans put in place to either rehabilitate the credit or exit it from the bank. All remaining ORE properties continue to be assessed prudently for collateral valuations and we are confident in their current carrying levels.”   

Margin Analysis

Net interest margin in the first quarter of 2013 increased to $5.156 million, 4.18%, compared to $4.763 million, or 4.17%, in the first quarter of 2012.  The interest margin increase was largely due to decreased overall funding costs.  George stated, “We expect some margin pressure as we progress through the year due to increased competition on pricing for new loans and renewals which as noted above stunted our new loan growth this quarter. This resulted in our decision also to operate a little thinner on the liquidity side until the loan pipeline fully picked up given the seasonality of our business. We also remain timely in monitoring the liability side of the balance sheet by making any adjustments to our deposits rates based on market conditions to ensure we are maximizing our ability to maintain our interest spread.”


Total deposits of $425.236 million at March 31, 2013 increased by 3.19% from deposits of $412.088 million on March 31, 2012, however total deposits on March 31, 2013 were down $9.321 million from year-end 2012 deposits of $434.557 million.  The overall decrease in deposits for the first three months of 2013 from year end is comprised of a decrease in core deposits, mostly in transactional accounts due to seasonal and some onetime cash needs of some of our larger commercial client relationships. George, commenting on core deposits, stated, “We have seen very good core deposit growth over the past several years and expect to see continued growth as we expand our customer relationships and also when our tourism season comes into full swing in later May. This continued low interest rate environment has impacted client decisions to remain in shorter term certificates or more liquid accounts as they wait out this period for increases in longer term fixed rate deposits.”

Noninterest Income/Expense

Noninterest income, at $.758 million in the first quarter of 2013, increased $.152 million from the first quarter 2012 level of $.606 million with the largest drivers of this income coming from the secondary market mortgage area, which totaled $.299 million in the first quarter.  Noninterest expense, at $4.311 million in the first quarter of 2013, increased $.477 million, or 12.44% from the first quarter of 2012. The largest increase from the first quarter of 2012 was in salaries and benefits which reflect several needed staff additions to augment lending/operational controls and sales throughout that 12 month period, and our customary salary and benefit annual awards for overall staff retention and incentive culture. The Corporation continues to look for ways to control costs and remains below peer levels in terms of salary and benefits as a percentage of total assets residing at 1.58%. 

Assets and Capital

Total assets of the Corporation at March 31, 2013 were $541.896 million, up 6.99% from the $506.496 million reported at March 31, 2012 and down $4.084 million from the $545.980 million of total assets at year-end 2012. The decrease in assets was primarily due to a decrease in liquidity, as we experienced some seasonal deposit outflows and funded loan growth from cash on hand.  Common shareholders’ equity at March 31, 2012 totaled $62.039 million, or $11.16 per share, compared to $45.119 million, or $13.19 per share on March 31, 2012. This decrease in book value between periods reflects the impact of our 2012 capital raise when we issued 2.138 million shares of common stock for net proceeds of $11.6 million. The Corporation and the Bank are both “well-capitalized” with Tier 1 Capital at the Corporation of 12.23% and 9.95% at the Bank.

Paul D. Tobias, Chairman and Chief Executive Officer, concluded, “We are pleased with our first quarter operating results.   Looking forward, we expect to complete our recently announced plan to redeem $7 million of our $11 million outstanding preferred stock early in the second quarter. This redemption was contemplated when we issued stock in August 2012, and we will redeem the balance of our preferred prior to the contractual increase in rate from the current 5% to 9% which would otherwise occur in  April 2014." 

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 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.

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