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Mackinac Financial Corporation Reports 2017 Fourth Quarter and Annual Results

Manistique, Michigan – Mackinac Financial Corporation (Nasdaq: MFNC) (the “Corporation”), the bank holding company for mBank, today announced 2017 net income of $5.48 million, or $.87 per share, compared to net income $4.48 million, or $.72 per share, in 2016. The 2017 results include the effects of the $2.02 million non-cash tax expense related to the revaluation of the company’s Deferred Tax Asset (“DTA”) as a result of the corporate tax code change in December 2017 and a small amount of transaction related expenses related to the recently announced definitive agreement to acquire First Federal of Northern Michigan Bancorp, Inc. (“FFNM”). The 2016 results included expenses related to the acquisitions of Niagara Bancorporation, Inc. (“Niagara”) and First National Bank of Eagle River (“Eagle River”) that had an after-tax impact of $2.05 million on earnings. Adjusted core net income for 2017 was $7.57 million (net of the DTA adjustment and FFNM expenses) or $1.20 per share while 2016 (exclusive of all Niagara and Eagle transaction-related expenses) was $6.53 million, or $1.05 per share. On a per share basis, actual earnings growth was 20% while adjusted earnings growth was 14% year-over-year.

The DTA adjustment negated earnings for the quarter ended December 31, 2017 resulting in a nominal $20 thousand loss for the period ($0.00 per share), compared to earnings of $1.70 million, or $0.27 per share, in the prior year period. Exclusive of the DTA adjustment and transaction related expenses, the adjusted core net income for the fourth quarter of 2017 was $2.07 million, or $0.33 per share.

Total assets of the Corporation at December 31, 2017 were $985.37 million, compared to $983.52 million at December 31, 2016. Shareholders’ equity at December 31, 2017 totaled $81.40 million, compared to $78.61 million at December 31, 2016. Book value per share equated to $12.95 compared to $12.55 per share a year ago. Tangible book value at yearend 2017 was $73.78 million or $11.72 per share compared to $70.74 million or $11.29 per share for 2016. Market price on the last trading day of the year was $15.90 in 2017 and $13.47 in 2016. Weighted average shares outstanding totaled 6,288,791 for year-end 2017 compared to 6,236,067 for the same period in 2016.

Key highlights:

  • mBank, the Corporation’s primary asset, recorded net income of $6.92 million in 2017, compared to $6.05 million, in 2016. The DTA revaluation resulted in a non-cash tax expense totaling $2.02 million. Adjusted core net income for 2017 was $8.95 million compared to 2016 (exclusive of $1.754 million in transaction related expenses) of $7.80 million. Adjusted bank net income grew approximately 15%.
  • In early 2018 the Corporation announced the execution of a definitive agreement to acquire First Federal of Northern Michigan through an all-stock merger of FFNM with and into a subsidiary of the Corporation. The aggregate value of the transaction is estimated at approximately $41.8 million, subject to MFNC’s closing price on the day the deal closes. The transaction remains subject to various approvals with an expected closing date late in the second quarter 2018.
  • Total interest income of $44.38 million for 2017 compared to $37.98 million for the same period in 2016.
  • Net Interest Margin remains strong at 4.20%, consistent with the 2016 margin of 4.19%.
  • Credit quality at the bank remains solid with a Texas Ratio of 7.77% compared to 11.76% one year ago, and nonperforming assets of $6.13 million, or .62% of total assets, compared to $8.91 million, or .91% of total assets for the same period in 2016.

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