MFNC - Mackinac Financial Corporation Reports 2021 First Quarter Financial Results

MANISTIQUE, Mich., April 29, 2021 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq: MFNC) (“we”, or the “Corporation”) the bank holding company for mBank (“the Bank”) today announced 2021 first quarter net income of $3.88 million, or $.37 per share, compared to 2020 first quarter net income of $3.05 million, or $.28 per share. Weighted average shares outstanding for the first quarter of 2021 were 10,522,899 compared to 10,717,967 for the same period of 2020.

Total assets of the Corporation at March 31, 2021 were $1.51 billion, compared to $1.36 billion at March 31, 2020. Shareholders’ equity at March 31, 2021 totaled $170.18 million, compared to $160.06 million at March 31, 2020. Book value per share outstanding equated to $16.13 at the end of the first quarter 2021, compared to $14.93 per share outstanding a year ago. Tangible book value at quarter-end was $146.40 million, or $13.88 per share outstanding, compared to $135.61 million, or $12.87 per share outstanding at the end of the first quarter 2020.

Additional notes:

• mBank, the Corporation’s primary asset, recorded net income of $4.26 million for the first quarter of 2021.
  
  
• The Bank funded approximately $53 million of Paycheck Protection Program (PPP) loans in the first quarter of 2021 with origination fees totaling approximately $2.78 million. These loans continue to support small businesses throughout our footprint with the majority of recipients residing in the Upper Peninsula and Northern Michigan.
  
  
• Non-interest income was very solid for the quarter including secondary market mortgage fees and gains on sale of $1.30 million and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $433 thousand.
  
  
• The residential mortgage pipeline resides at robust levels and we expect strong output from this line of business as we look to upcoming quarters.
  
  
• Core operating margin, which is net of accretion from acquired loans and PPP fees that were subject to purchase accounting adjustments, was 4.14%.
  
  
• On April 12, 2021 the Board of Directors of MFNC announced the signing of a definitive agreement for Nicolet Bankshares (Green Bay, WI) to acquire the Corporation. The transaction is expected to close in the third quarter of 2021. Specific information regarding the transaction can be found at www.bankmbank.com.
  

Revenue & PPP Recognition

Total revenue of the Corporation for first quarter 2021 was $17.29 million, compared to $17.60 million for the first quarter of 2020. Total interest income for the first three months of 2021 was $14.89 million, compared to $15.67 million for the same period in 2020. The 2021 first quarter interest income included accretive yield of $237 thousand from combined credit mark accretion associated with acquisitions, compared to $818 thousand in the same period of 2020.

The first quarter 2021 interest income was also positively impacted by recognition of a portion of the PPP loan origination fees that were earned during the quarter:

• The bank originated approximately $53 million of PPP loans in the first quarter.
• The origination efforts resulted in fees earned of $2.78 million, which are subject to FASB accounting guidance for recognition.
• In accordance with applicable accounting guidance, the bank recognized $826 thousand in pre-tax fee revenue that offset ASC 310-20 eligible origination costs.
• This recognition resulted in $1.95 million of fees remaining to be accreted over the expected life of the PPP loan pool, which will initially be 12-months unless acceleration occurs due to the loans being paid off or forgiven before maturity.
• The amount accreted during the second quarter was $296 thousand.
• The total amount of PPP fees that were recognized in the second quarter was $1.12 million, leaving $1.66 million to be accreted or accelerated upon payoff.

Loan Production and Portfolio Mix

Total balance sheet loans at March 31, 2021 were $1.06 billion, compared to March 31, 2020 balances of $1.04 billion. Total loans under management reside at $1.31 billion, which includes $244.14 million of service retained loans. Overall loan production for the first three months of 2021 was $133.56 million, which included $53.73 million of PPP loans. The remaining $79.8 million was inclusive of $35.1 million of secondary market loans, compared to total production of $66.9 million in the first quarter 2020, which was inclusive of $19.0 million of secondary market production.

Overall Quarterly Loan Production is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/4f450277-ef09-4a10-8450-2f908fce2b32

Credit Quality

Nonperforming loans totaled $5.02 million, or .47% of total loans (.53% when excluding PPP loans) at March 31, 2021, compared to $6.42 million, or .61% of total loans at March 31, 2020. Total loan delinquencies greater than 30 days resided at .43% (.48% when excluding PPP loans), compared to 1.23% in 2020. The nonperforming assets to total assets ratio resided at .45% (.48 when excluding PPP loans) for the first quarter of 2021, compared to .64% for the first quarter of 2020. The Corporation currently has no commercial loans in full payment deferral and a nominal $5.3 million that remain in the interest- only portion of their COVID-19 loan modification period. These loans are expected to return to normal principal and interest payments over the next quarter. There are $300 thousand of consumer loans that remain in full payment deferral. Total loans in some type of COVID-19 payment modification are a minimal .59% of total loans. There remains no sign of any adverse systemic issues or deterioration in the loan portfolio and we expect good payment performance as we look to our stronger commerce months ahead.

Margin Analysis, Funding and Liquidity

Net interest income for first quarter 2021 was $13.78 million, resulting in a Net Interest Margin (NIM) of 4.52%, compared to $13.40 million in the first quarter 2020 and a NIM of 4.60%. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments (as well as PPP impact for the 2021 period), was 4.14% for the first quarter of 2021, compared to 4.32% for the same period of 2020.

Margin Analysis Per Quarter is available at https://www.globenewswire.com/NewsRoom/AttachmentNg/6792bddd-857d-40a7-affe-d09627009945

Total bank deposits (excluding brokered deposits) have increased by approximately $261 million year-over-year from $999.09 million at March 31, 2020 to $1.26 billion at first quarter-end 2021. Total brokered deposits have decreased significantly and were $13.35 million at March 31, 2021, compared to $96.29 million at March 31, 2020, a decrease of 86%. FHLB (Federal Home Loan Bank) borrowings have also decreased from $64.12 million at March 31, 2020 to $53.46 million at March 31, 2021. The company plans to retire an additional $25 million of FHLB borrowings in June 2021. Overall access to short-term functional liquidity remains very strong through multiple sources, if needed.

Noninterest Income / Expense

First quarter 2021 Noninterest Income was $2.40 million, compared to $1.94 million for the same period of 2020. The significant year-over-year improvement is mainly due to the increase of secondary market mortgage sales. Noninterest Expense for the first quarter of 2021 was $11.85 million, compared to $11.37 million for the same period of 2020. The expense variance was largely a result of PPP related expenses.

Assets and Capital

Total assets of the Corporation at March 31, 2021 were $1.51 billion, compared to $1.36 billion at March 31, 2020. Shareholders’ equity at March 31, 2021 totaled $170.18 million, compared to $160.06 million at March 31, 2020. Book value per share outstanding equated to $16.13 at the end of the first quarter 2021, compared to $14.93 per share outstanding a year ago. Tangible book value at quarter-end was $146.40 million, or $13.88 per share outstanding, compared to $135.61 million, or $12.87 per share outstanding at the end of the first quarter 2020.

Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 15.34% and 14.62% and tier 1 capital to total tier 1 average assets at the Corporation of 9.63% and at the bank of 9.16%. The leverage ratio is calculated inclusive of PPP loan balances.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “As we move toward closing of the Nicolet transaction, the company continues to work on behalf of all constituencies to make the transition as smooth as possible while maintaining best-in-class service to our valued clients. We know that with our experience on the buy-side and Nicolet being an active acquirer, we have two dedicated teams that will complete this process in the best manner possible.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.5 billion 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 28 branch locations: ten in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and seven in Northern Wisconsin. The Corporation’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: risks that the Company’s proposed merger with Nicolet Bankshares, Inc. (“Nicolet”) will not be consummated due to inability to obtain shareholder or regulatory approval or to satisfy certain closing conditions, or if consummated, the possibility that any of the anticipated benefits of the proposed merger will not be realized; 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, 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.

Important Information and Where to Find It

Certain communications in this release relate to the proposed merger transaction involving Nicolet and Mackinac. In connection with the proposed merger, Nicolet and Mackinac will file a joint proxy statement/?prospectus on Form S-4 and other relevant documents concerning the merger with the Securities and Exchange Commission (the “SEC”). BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/?PROSPECTUS AND ANY OTHER DOCUMENTS TO BE FILED WITH THE SEC IN CONNECTION WITH THE PROPOSED MERGER OR INCORPORATED BY REFERENCE IN THE JOINT PROXY STATEMENT/?PROSPECTUS BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NICOLET, MACKINAC AND THE PROPOSED MERGER. When available, the joint proxy statement/ ? prospectus will be delivered to shareholders of Nicolet and Mackinac. Investors may obtain copies of the joint proxy statement/prospectus and other relevant documents (as they become available) free of charge at the SEC’s website (www.sec.gov) . Copies of the documents filed with the SEC by Nicolet will be available free of charge on Nicolet’s website at www.nicoletbank.com . Copies of the documents filed with the SEC by Mackinac will be available free of charge on Mackinac’s website at www.bankmbank.com .

Nicolet, Mackinac and certain of their directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of Nicolet and the shareholders of Mackinac in connection with the proposed merger. Information about the directors and executive officers of Nicolet and Mackinac will be included in the joint proxy statement/ ? prospectus for the proposed transaction filed with the SEC. Information about the directors and executive officers of Nicolet is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on March 2, 2021. Information about the directors and executive officers of Mackinac is also included in the proxy statement for its 2021 annual meeting of shareholders, which was filed with the SEC on April 22, 2021. Additional information regarding the interests of such participants and other persons who may be deemed participants in the transaction will be included in the joint proxy statement/prospectus and the other relevant documents filed with the SEC when they become available.

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS

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CONSOLIDATED STATEMENTS OF OPERATIONS

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LOAN PORTFOLIO AND CREDIT QUALITY

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS

Contact:        Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 /jdeering@bankmbank.com
Website: www.bankmbank.com