2012-11-22 / Community

mBank details third quarter

Bank ‘proud’ of growth in stagnant economy

MANISTIQUE – Mackinac Financial Corporation, the bank holding company for mBank, recently announced third quarter 2012 income of $.897 million or $.19 per share compared to net income of $.707 million, or $.21 per share for the third quarter of 2011. Nine month 2012 operating results totaled $5.536 million, or $1.44 per shares, which included a $3.0 million valuation adjustment to the deferred tax asset. Operating results excluding the deferred tax asset for the first nine months of 2012 totaled $2.536 million or $.66 per share compared to $1.566 million or $.46 per share for the same period in 2011. The corporation’s subsidiary mBank recorded net income of $1.329 million for the quarter and $3.577 million, excluding the valuation adjustment to deferred taxes, for the first nine months of this year compared to $2.439 million for the same period in 2011.

Total assets of the corporation at Sept. 30, 2012, were $551.117 million, up 10.53 percent from the $498.598 million reported at Sept. 30, 2011 and up 10.60 percent from the $498.311 million of total assets at year-end 2011.

Loan Production

Total loans at Sept. 30, 2012, were $433.958 million, a 10.73 percent increase from the $391.903 million at Sept. 30, 2011 and up $32.712 million from yearend 2011 total loans of $401.246 million. The corporation had total loan production for all loan types of $145 million in the first nine months of this year. Comprising the total production were $73 million in commercial loans, and $72 million in consumer, $67 million of which were mortgages. The Upper Peninsula continues to drive a large majority of the new originations, totaling $93 million, with Southeast Michigan production of $27 million, and the Northern Lower Peninsula with $25 million.

Commenting on new loan opportunities, Kelly W. George, president and chief executive officer of mBank, stated, “We are extremely pleased with our success in loan production thus far in 2012. Our loan production has been all encompassing, including new home purchases and refinances, small business expansion and working capital advances, and also a fair amount of loan relationships we have been able to procure from some of our competition. Our balance sheet growth would have been greater considering our production, but we are still experiencing unexpected large loan pay downs as a result of excess cash flow from some of our stronger commercial credits and we have also had some loans that exited the bank due to competitive pricing or loan structures that we felt did not adhere to our policy standards and credit culture. In addition to the $434 million in balance sheet loans, we also have $60 million of SBA/ USDA loans and $78 million of secondary market mortgage loans that we have sold but retain servicing on that respectively adds to our totals loans under management of $572 million. The servicing of these loans also provides another source of sustained noninterest income.”

Nonperforming Loans / Assets

Nonperforming loans totaled $5.290 million, 1.23 percent of total loans at Sep. 30, 2012, compared to $9.673 million, or 2.47 percent of total loans at Sept. 30, 2011 and down $2.703 million from Dec. 31, 2011. Nonperforming assets were reduced by $6.084 million from a year ago and stood at 1.60 percent of total assets equating to $8.801 million.


Total deposits of $439.363 million at Sept. 30, 2012, increased 8.47 percent from deposits of $405.058 million on Sept. 30, 2011. Total deposits on Sept. 30, 2012, were up $34.574 million from year-end 2011 deposits of $404.789 million. The overall increase in deposits for the nine months of 2012 is comprised of an increase in noncore deposits of $10.798 million and increased core deposits of $23.776 million.

“In 2012 we have continued to experience a good core deposit growth, though lower than in previous years, partially due to proactive rate reductions on deposit products that led to some balance reductions from price driven deposit customers,” George said, commenting on core deposits. “Our balance sheet liquidity is strong, and we have been able to fund the majority of our balance sheet growth with core deposits.”

Noninterest Income/Expense

Noninterest income, at $3.060 million in the first nine months of 2012, increased $.129 million from the same period in 2011 which totaled $2.931 million. The largest driver of noninterest income in 2012 was secondary market mortgage activities and gains from SBA/USDA loan sales. Income from secondary mortgage activities totaled $1.136 million in 2012 compared to $.694 million in 2011. SBA/USDA loan sale gains were behind 2011 with year to date gains of $1.126 million compared to 2011 gains of $1.469 million.

Noninterest expense, at $12.408 million in the first nine months of 2012, increased $.659 million, or 5.61 percent from the same period in 2011. Increased expenses were noted in data processing, professional services associated with the divesture auction of our TARP securities and nominal employment costs. The FDIC premiums were reduced by 53.11 percent in the first nine months of 2012 to $.354 million down from $.755 million in the same period in 2011.

“We are diligent in our efforts to manage our operating expenses that has been increasingly challenging due to increased overall costs associated with the banking climate, along with an ever changing need for upgrading our technology to stay ahead and thwart cyber/internet fraud while maintaining operational efficiencies,” George, explained.


In August, the Corporation consummated the common stock rights offering and the capital investment by Steinhardt Capital Investors, LLLP with the issuance of 2,140,178 shares of common stock for $11.500 million. Total shareholders’ equity at Sept. 30, 2012, totaled $72.945 million, compared to $55.479 million on Sept. 30, 2011, an increase of $17.466 million, or 31.48 percent. Book value of common shareholders’ equity was $11.14 per share at Sept. 30, 2012, compared to $13.05 per share at Sept. 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 11.93 percent and 9.26 percent at the bank.

“We are proud of our operating results thus far in 2012. We have continued our great success in the generation of new loans and have been able to grow our balances during extremely challenging times,” concluded Paul D. Tobias, chairman and chief executive officer. “We expect to close the year strong since our pipeline is robust with both balance sheet and secondary market loans. Looking forward, we are positioned well for expansion with our recent capital raise of $11.5 million from our rights offering and the investment from the Steinhardt family. This new capitalization and the access to the capital and the funding that accompany an association with the Steinhardts will be significant catalysts in the execution of our long-term strategic plan for franchise growth and increasing shareholder value.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $550 million and whose common stock is traded on the NASDAQ stock market as “MFNC.” The principal subsidiary of the Corporation is mBank. Headquartered in Manistique,

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