2012-08-09 / Community

mBank reports finances, gives update on Manistique Papers

Bank shows positive outlook, some growth

MANISTIQUE – Mackinac Financial Corporation, the bank holding company for mBank (the “Bank”), recently announced second quarter 2012 income of $4.141 million or $1.21 per share compared to net income of $.603 million, or $.18 per share for the second quarter of 2011. The 2012 YTD and second quarter results include a $3 million valuation adjustment to deferred tax assets, which equates to $.88 per share.

Operating results excluding the deferred tax asset for the first six months of 2012 totaled $1.639 million or $.48 per share compared to $.859 million or $.25 per share for the same period in 2011. The Corporation’s subsidiary, mBank, recorded net income of $2.248 million, excluding the valuation adjustment to deferred taxes, for the first six months of this year compared to $1.439 million for the same period in 2011.

Some highlights for the first six months of 2012 results include:

• Improved credit quality with a Texas Ratio of 13.59 percent compared to 23.38 percent one year ago, with nonperforming loans of $5.375 million, a $4.066 million reduction from a year earlier

• Reduced credit related charges in 2012 at $.403 million compared to $.748 million in the 2011 six month period

• Improved net interest margin at 4.23 percent compared to 3.85 percent for the first six months of 2011

• Six month Secondary mortgage loan income of $.524 million, compared to $.199 million in the same period of 2011

• Continued success in SBA/ USDA lending initiatives, with $.620 million in sold guarantees to the secondary market. The Corporation continues to be a state leader in supporting small businesses with these programs ranking 9th in the state in total dollars for all banks for newly originated SBA 7(a) loans for the third quarter 2012 Michigan SBA results. The Corporation, under this program, originated 21 loans totaling $9.6 million.

• Growth in core deposits of $9.2 million

Total loans at June 30, 2012, were $419.453 million, a 6.24 percent increase from the $394.812 million at June 30, 2011 and up $18.207 million from year-end 2011 total loans of $401.246 million. The Corporation had total loan production for all loan types of $101 million in the first six months of this year. Comprising the total production were $54 million in commercial loans, and $47 million in retail, $44 million of which were mortgages.

The Upper Peninsula continues to drive a large majority of the new originations, totaling $66 million, with Southeast Michigan production of $18 million, and the Northern Lower Peninsula with $17 million.

Commenting on loan growth, Kelly W. George, president and CEO of mBank stated, “We are very pleased with the level of loan activity we are seeing in all our markets. The activity is all encompassing, including new home purchases and refinances, as well as small business expansion for various needs. Actual loan outstandings would have been greater, but the Corporation experienced unexpected large loan pay downs as a result of excess cash flow from strong commercial credits, and has also begun to experience tougher competition in the marketplace with respect to rate conditions. This has led to several relationships exiting because of pricing reasons. However, given our balance sheet and funding structure, we felt it was prudent to not try to retain these loans.”

Nonperforming loans totaled $5.375 million, 1.28 percent of total loans at June 30, 2012 compared to $9.441 million, or 2.39 percent of total loans at June 30, 2011 and down $2.618 million from Dec. 31, 2011.

Nonperforming assets were reduced by $5.354 million from a year ago and stood at 1.70 percent of total assets. Total loan delinquencies resided at .82 percent or $3.448 million, almost solely made up of non-accrual commercial loans.

“We are pleased with our continued reduction in the level of nonperforming assets and the overall payment performance on our total loan portfolio which has been good for several years now since coming out of the severe economic conditions from the 2008 downturn,” said George, commenting on credit quality. “Our current level of nonperforming assets is manageable and our associated costs are now more in line with a normal business climate with the reductions we have seen this year. We will remain diligent and timely in our recognition and disposal methods for our remaining nonperforming assets in terms of any future deterioration and in the event any new issues arise in subsequent quarters.”

As noted in their 2011 annual report, mBank was very close to consummating the sale of Manistique Papers Inc. out of a Chapter 11 bankruptcy process where it had played the lead role in facilitating since August of 2011 when mBank stepped in as the senior lender through a variety of transactions to purchase legacy debt of the corporation and provide new working capital funding to prevent the liquidation and closure of this 91 year old paper mill and the loss of approximately 150 jobs. They are very pleased to announce that in May of this year, through the collective efforts of various parties, they were able to close a sale to The Watermill Group, a private equity firm located in Boston, Mass., to become the new owner of the local mill and ensure its continued vital operations for the local community in Manistique.

“We could not be happier for the outcome of this endeavor we chose to take on 10 months ago to support our second largest employer and icon of the local business community Manistique Papers and all the good people who have worked there for years,” said George. “Manistique Papers will benefit greatly from The Watermill Group’s financial stability, operational expertise and experience in environmental paper and we appreciate the Watermill team’s creative strategies for revitalizing the mill and the commitment they’ve shown to the company and local community. We’re pleased to be working with them going forward and look forward to a mutually rewarding banking relationship as we move into a new rewarding chapter of the paper mills legacy.”


Total deposits of $425.381 million at June 30, 2012, increased 6.43 percent from deposits of $399.667 million on June 30, 2011. Total deposits on June 30, 2012, deposits were up $20.592 million from year-end 2011 deposits of $404.789 million. The overall increase in deposits for the six months of 2012 is comprised of an increase in noncore deposits of $11.383 million and increased core deposits of $9.209 million.

“In 2012, we have continued to experience a good growth rate on core deposits though lower than in previous years which is partially due to our reduced rates on transactional accounts to manage our net interest margin where we have seen a small exit from primarily rate only driven clients,” explained George. “We have supplemented our deposit growth with noncore deposits to manage interest rate risk in this prolonged low interest rate cycle, along with the need to align our funding costs with rates and maturities on loans as noted previously.”

Total assets of the Corporation at June 30, 2012 were $524.366 million, up 6.50 percent from the $492.373 million reported at June 30, 2011 and up 5.23 percent from the $498.311 million of total assets at year-end 2011.

Total shareholders’ equity at June 30, 2012, totaled $60.352 million, compared to $54.784 million on June 30, 2011, an increase of $5.568 million, or 10.16 percent. Book value of common shareholders’ equity was $14.43 per share at June 30, 2012, compared to $12.86 per share at June 30, 2011 and compared to $46.148 million, or $12.97 per share on Dec. 31, 2011. The Corporation and the bank are both “well-capitalized” with Tier 1 Capital at the Corporation of 10.16 percent and 9.52 percent at the bank.

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