(Manistique, Michigan) – Mackinac Financial Corporation (Nasdaq: MFNC) (the “Corporation”), the bank holding company for mBank, today announced third quarter 2018 income of $3.07 million, or $.29 per share, compared to net income of $2.09 million, or $.33 per share, for the third quarter of 2017. As expected, the 2018 third quarter results were impacted by expenses related to the acquisition of First Federal of Northern Michigan (FFNM) and pre-closing activity for the Lincoln Community Bank (Lincoln) transaction that closed on October 1, 2018.
The Corporation had third quarter GAAP pre-tax transaction related expenses totaling $350 thousand. These transaction related costs reduced the reported net income for the quarter by $276 thousand, on an after-tax basis. The adjusted net income for the third quarter of 2018 (exclusive of the transaction related expenses) would equate to $3.35 million, or $.31 per weighted average share. Weighted average shares outstanding for the third quarter 2018 were 10,712,745 compared to 6,294,930 for the same period of 2017 and 7,769,720 shares for the second quarter of 2018. The Corporation issued 2,146,378 new shares for the FFNM purchase in May 2018 and issued an additional 2,225,807 shares related to the common stock offering that was completed in June 2018.
Total assets of the Corporation at September 30, 2018 were $1.25 billion compared to $1.02 billion at September 30, 2017. Shareholders’ equity at September 30, 2018 totaled $149.37 million, compared to $82.65 million on September 30, 2017. The tangible book value per share equated to $11.63 on September 30, 2018 compared to $11.91 per share a year ago. The proceeds from the stock offering were used to pay down approximately $19.45 million in senior holding company debt, resulting in no long-term debt residing on the balance sheet at quarter end.
mBank, the Corporation’s primary asset, recorded net income of $3.47 million in the third quarter of 2018, compared to $2.43 million in the third quarter of 2017. Acquisition-related expenses totaled $265 thousand at the bank level, with an after-tax impact of $210 thousand. Adjusted core net income (exclusive of the transaction expenses) for the third quarter of 2018 was $3.68 million, an increase of $1.25M from the third quarter 2017.
Highlights and additional notes:
The Corporation completed the acquisition of Lincoln Community Bank (“Lincoln”) (Merrill, WI) on October 1, 2018 acquiring approximately $39 million in loans and $53 million of core deposits. As part of this transaction, the Corporation also plans to close the acquired Gleason, WI location at the end of the year. With the data processing conversion taking place in early November, all cost efficiencies will be phased in for 2019 and are expected to provide accretion to earnings.
The Corporation plans to also consolidate mBank’s in-store Ishpeming, MI branch into another nearby mBank location at year end 2018. Minimal client attrition is expected from the consolidation while realizing additional efficiencies.
Since the third quarter of 2017, higher rate wholesale funding sources have decreased $69 million ($57 million in Brokered CDs and $12 million in FHLB borrowings) through both repositioning of the balance sheet internally with growth in core deposits and through utilization of the FFNM liquidity following the transaction.
The Corporation’s non-GAAP core net interest margin (exclusive of purchase accounting mark accretion) continues to perform well, residing at 4.13% year-to-date. Inclusive of the accretion from the recent FFNM acquisition combined with two other legacy transactions, total reportable margin equated to 4.37%. Additional interest rate increases are expected to have a positive impact on the margin moving into 2019.
New loan production from the newly acquired FFNM markets has totaled $31 million in the short time since the close of the transaction in May 2018.
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