MFNC - Mackinac Financial Corporation Reports 2021 Second Quarter Financial Results

MANISTIQUE, Mich., July 22, 2021 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq: MFNC) (“we”, or the “Corporation”) the bank holding company for mBank (“the Bank”) today announced 2021 second quarter net income of $2.94 million, or $.28 per share, compared to 2020 second quarter net income of $3.45 million, or $.33 per share. The 2021 second quarter results included expenses related to the pending merger with Nicolet Bankshares, Inc. (Green Bay, WI) (“Nicolet”), which had an estimated after-tax impact of $391 thousand on earnings. Adjusted net income (net of transaction related expenses) for the second quarter of 2021 was $3.34 million, or $.32 per share. Weighted average shares outstanding for the second quarter of 2021 were 10,550,393 compared to 10,533,589 for the same period of 2020.

Total assets of the Corporation at June 30, 2021 were $1.52 billion, compared to $1.52 billion at June 30, 2020. Shareholders’ equity at June 30, 2021 totaled $171.92 million, compared to $164.16 million at June 30, 2020. Book value per share outstanding equated to $16.30 at the end of the second quarter 2021, compared to $15.58 per share outstanding a year ago. Tangible book value at quarter-end was $148.31 million, or $14.06 per share outstanding, compared to $139.88 million, or $13.28 per share outstanding at the end of the second quarter 2020.

Additional notes:

• mBank, the Corporation’s primary asset, recorded net income of $3.82 million for the second quarter of 2021, compared to $3.88 million for the second quarter of 2020. Transaction expenses were minimal at the bank level for the period and did not meaningfully impact mBank net income.
  
  
• Non-interest income remained solid for the quarter, including secondary market mortgage fees and gains on sale of $982 thousand and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $869 thousand.
  
  
• Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments and Paycheck Protection Program (“PPP”) fees, was 4.16%.
  
  
• On April 12, 2021 the Board of Directors of MFNC announced the signing of a definitive agreement for Nicolet to acquire the Corporation. On July 15, 2021 the shareholders of MFNC voted (either in-person or via proxy) to approve the transaction at a Special Shareholder meeting of the Corporation. The transaction is still 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 second quarter 2021 was $16.61 million, compared to $18.81 million for the second quarter of 2020. The majority of the variance is due to the higher levels of FASB (GAAP) recognition of PPP loan fee income in the 2020 period. Total interest income for the second quarter 2021 was $14.19 million, compared to $16.44 million for the same period in 2020. The year-over-year variance in interest income, once again, was related to the aforementioned timing of PPP recognition in 2020. The 2021 second quarter interest income also included accretive yield of $642 thousand from combined credit mark accretion associated with acquisitions, compared to $320 thousand in the same period of 2020.

PPP fee income for the second quarter of 2021 was $1.43 million, compared to $2.13 million for the second quarter of 2020. As of June 30, 2021, the Corporation has $2.166 million of PPP fee income that has been received but not recognized. Recognition of the remaining PPP fees will occur in accordance with FASB guidance based on normal amortization or acceleration upon the forgiveness of the PPP loan by the SBA. Current monthly amortization / recognition is approximately $163 thousand.

Loan Production and Portfolio Mix

Total balance sheet loans at June 30, 2021 were $978 million, compared to June 30, 2020 balances of $1.15 billion. Total loans under management reside at $1.215 billion, which includes $236.88 million of service retained loans. Overall loan production for the first six months of 2021 was $218.90 million, which included $57.67 million of PPP loans. The remaining $161.22 million was inclusive of, but not limited to, $67.99 million of secondary market loans, $63.3 million of commercial loans and $16.97 million of conventional balance sheet mortgage loans.

Credit Quality

Nonperforming loans totaled $4.93 million, or .50% of total loans (.53% when excluding PPP loans) at June 30, 2021, compared to $6.12 million, or .53% of total loans at June 30, 2020. Total loan delinquencies greater than 30 days resided at .46% (.49% when excluding PPP loans), compared to .54% in 2020.  The nonperforming assets to total assets ratio resided at .41% (.41% when excluding PPP loans) for the second quarter of 2021, compared to .55% for the second quarter of 2020. The Corporation currently has no commercial loans in principal deferral and a nominal $2.08 million that remain in the interest only portion of their COVID-19 loan modification period. There are no consumer loans that remain in full payment deferral. Total loans in some type of COVID-19 payment modification are a minimal .21% of total loans. There remains no sign of any adverse systemic issues or deterioration in the loan portfolio.

Margin Analysis, Funding and Liquidity

Net interest income for second quarter 2021 was $13.22 million, resulting in a Net Interest Margin (NIM) of 4.56%, compared to $14.36 million in the second quarter 2020 and a NIM of 4.51%. Net interest income was impacted by the aforementioned PPP recognition for the 2020 period. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments as well as PPP impact, was 4.16% for the second quarter of 2021, compared to 3.75% for the same period of 2020.

Total bank deposits were $1.29 billion at June 30, 2021, compared to $1.14 billion at first quarter-end 2020, an increase of approximately $150 million. Total brokered deposits have decreased significantly and were $13.35 million at June 30, 2021, compared to $90.48 million at June 30, 2020, a decrease of $77 million. FHLB (Federal Home Loan Bank) borrowings have also decreased from $63.31 million at June 30, 2020 to $28.11 million at June 30, 2021.   Overall access to short-term functional liquidity remains very strong through multiple sources, if needed.

Noninterest Income / Expense

Second quarter 2021 Noninterest Income was $2.42 million, compared to $2.37 million for the same period of 2020. Noninterest Expense for the second quarter of 2021 was $11.91 million, compared to $12.35 million for the same period of 2020. When giving effect to the $495 thousand of pre-tax transaction expenses ($391 thousand after-tax), noninterest expense was $11.42 million for the second quarter of 2021.

Capital

Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 15.64% and 15.76% and tier 1 capital to total tier 1 average assets at the Corporation of 9.68% and at the Bank of 9.38%. 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, “With the recent MFNC shareholder approval of the Nicolet transaction, we have moved one step closer to the consummation of the merger. As we approach the closing of the 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 thank all of our shareholders, clients and employees for being a part of Mackinac Financial.”

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: 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.

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS