MFC announces improved profitability in 2012 report
MANISTIQUE – Mackinac Financial Corporation the holding Corporation for mBank, recently announced net income of $6.459 million or $1.51 per share, for the year ended Dec. 31, 2012, compared to net income of $1.452 million, or $.42 per share, for 2011. The Corporation’s primary asset, mBank, recorded net income of $7.884 million for the fiscal year 2012 compared to $2.656 million for 2011. The 2012 consolidated and bank results include a $3.0 million deferred tax valuation adjustment.
Total assets of the Corporation at 2012 year-end were $545.980 million, up 9.57 percent from the $498.311 million at 2011 year-end. The Corporation and the Bank are both “well-capitalized” with Tier 1 Capital at the Corporation of 11.98 percent and 9.63 percent at the Bank.
Some highlights for 2012 include:
- Consummation of a common stock rights offering and the investment by Steinhardt Capital Investors, LLLP with the issuance of 2.140 million shares for net proceeds of $11.500 million.
- In December, the Corporation announced its first quarterly dividend since the recapitalization at $.04 per share.
- New loan production of $214.1 million. Balance sheet growth equated to $47.9 million for 2012, an 11.9 percent increase in loans outstanding from 2011 year end.
- 2012 secondary mortgage loan income of $1.390 million, compared to $.700 million in 2011.
- Continued success with the sale of SBA and USDA loan guarantees with sales generating $1.126 million in 2012.
- 2012 core deposit growth of $24 million from 2011 year end, an increase of 6.8 percent.
- Improved net interest margin at 4.17 percent compared to 4.06 percent in 2011.
- Improved credit quality with a Texas Ratio of 10.30 percent compared to 18.43 percent one year ago, with nonperforming assets of $8.001 million at 2012 year end compared to $11.155 million a year ago.
- Opening of our new standalone Escanaba branch banking center relocated from an in-store Menards location in August, and the opening of their new loan production office in Traverse City. Both locations are considered core commerce center hubs in their respective markets.
Total loans at 2012 year-end were $449.177 million, an 11.95 percent increase from the $401.246 million at 2011 year-end. The Corporation had total loan production for all loan types of $214 million in 2012. Comprising the total production were $103 million in commercial loans, and $111 million in consumer loans, $101 million of which were mortgages. The Upper Peninsula continues to drive a large majority of the new originations, totaling $134 million, with Southeast Michigan production of $42 million, and the Northern Lower Peninsula with $38 million.
Commenting on new loan opportunities, Kelly W. George, President and Chief Executive Officer of mBank, stated, “We were extremely pleased with our success in loan production in 2012. Our loan production was all encompassing, including new home purchases and refinances, small business expansion and working capital advances, and also included loan relationships we procured from our competition. We continue to see good loan opportunities, both commercial and retail in all our markets. Our focus on SBA/USDA lending programs has allowed small businesses in our markets to take advantage of these loan programs to garner the additional capital they have needed to grow their operations and provide more jobs and commerce to these areas. We continue to remain very diligent within our credit underwriting parameters to ensure the new growth is coming onto our balance sheet in a prudent and sound manner with discipline in both loan structuring and pricing. In addition to the $449 million in balance sheet loans, we also have $50 million of SBA/ USDA loans and $97 million of secondary market mortgage loans that we sold but retained servicing on. This increases our loans under management to $596 million.”
Nonperforming loans totaled $4.789 million, 1.07 percent of total loans at Dec. 31, 2012, compared to $7.993 million, or 1.99 percent of total loans at Dec. 31, 2011. Nonperforming assets were reduced by $3.154 million from a year ago and stood at $8.001 million, or 1.47 percent of total assets.
George, commenting on credit quality, stated, “We have continued to aggressively remedy or exit our remaining problem assets throughout the year and are pleased with our continued reduction in the level of nonperforming assets and our overall loan portfolio payment performance with delinquent loans greater than 30 days residing at a nominal .73 percent of total loans. Our current level of nonperforming assets and associated costs are now more in line with a normal business climate and we continue to validate the underlying collateral to ensure the security has not deteriorated and carrying values are accurate.”
Total deposits of $434.557 million at 2012 year-end increased 11.64 percent from deposits of $404.789 million at 2011 year-end. The overall increase in deposits for 2012 is comprised of an increase in core deposits of $23.772 million and increased noncore deposits of $5.996 million.
Noninterest income, at $4.043 million in 2012, increased $.387 million from 2011’s total of $3.656 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 $1.390 million in 2012 compared to $.700 million in 2011. SBA/USDA loan sale gains were $1.176 million compared to 2011 gains of $1.500 million.
Noninterest expense, at $16.757 million in 2012, increased $.788 million, or 4.93 percent from 2011. Increased expenses were noted in data processing, professional services associated with the divesture auction of their TARP securities and nominal employment costs. The FDIC premiums were reduced by $.390 million, or 45.94 percent in 2012 from $.849 million in 2011.
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 million shares of common stock for $11.500 million in net proceeds. Total shareholders’ equity at Dec. 31, 2012, totaled $72.448 million, compared to $55.263 million at 2011 year-end, an increase of $17.185 million, or 31.10 percent. Book value of common shareholders’ equity was $11.05 per share at Dec. 31, 2012, compared to $12.97 per share at Dec. 31, 2011.
“We are proud of our operating results for 2012. Looking forward, we are well positioned for expansion with strong credit quality and capital above the ‘well capitalized’ regulatory guidelines. The capital raised this year and our new relationship with the Steinhardt family are significant achievements and give us flexibility in an uncertain banking world. Regulatory costs and increasing capital requirements are creating an environment where capital is once again ‘King.’ To provide further flexibility, we are also in the process of setting up an $8.0 million line of credit with one of our correspondent banks,” commented Paul D. Tobias, Chairman and Chief Executive Officer.
“Our capital strength and our earnings momentum has led to the establishment of a dividend on our common stock, initially at $.04 per quarter. We are pleased to be able to reward our shareholders for their loyalty and faith. We will continue to focus on our organic growth but will also keep an eye out for external expansion opportunities that we can execute and where returns will exceed our cost of capital.
On the list of value creation options will be the partial or full redemption of our preferred stock securities, now held by friends and investors. The current dividend at 5 percent without tax shelter moves to 9 percent without tax shelter in early 2014. We will evaluate our redemption strategy and base our timing and level of redemption on these cost factors and the quality of probable returns of alternate uses. We believe prudent growth, strong earnings, proper use of capital and returning excess capital to shareholders will help create fair market valuation for the benefit of all shareholders.”