Mackinac Financial Corporation reports third quarter results
MANISTIQUE – Mackinac Financial Corporation, the bank holding company for mBank (the “Bank”), recently announced third quarter 2013 income of $.846 million or $.15 per share compared to net income available to common shareholders of $.897 million, or $.21 per share for the third quarter of 2012. Operating results for the first nine months of 2013 totaled $2.719 million or $.49 per share compared to $2.536 million or $.60 per share, excluding the $3.0 million deferred tax valuation adjustment, for the same period in 2012.
The Corporation’s subsidiary, mBank, recorded net income of $3.820 million for the first nine months of this year compared to $3.577 million, excluding the deferred tax valuation adjustment, for the same period in 2012.
Total assets of the Corporation at Sept. 30, 2013, were $567.917 million, up 3.05 percent from the $551.117 million reported at Sept. 30, 2012 and up 4.02 percent from the $545.980 million of total assets at year-end 2012. The Corporation and the Bank are both “well-capitalized” with Tier 1 Capital at the Corporation of 10.90 percent and 10.20 percent at the Bank.
Key highlights for the first nine months of 2013 results include:
• Continued strong credit quality with a Texas Ratio of 9.56 percent with nominal nonperforming loans of $4.313 million, a $.977 million reduction from a year earlier.
• Loan growth of $23.318 million, or 5.19 percent in the first nine months of 2013.
• Stability and above peer average net interest margin at 4.15 percent.
• Nine month secondary mortgage loan income of $.781 million.
• Continued success in SBA/ USDA lending with gains on the sale of these loans of $.798 million in the first nine months of 2013. The corporation continues to be a state leader within these various loan programs ranking ninth in terms of the number of SBA 7A loans originated, 30, and 13 based on total dollars equating to $9.553 million for the most recent SBA fiscal year end of Sept. 30, 2013.
Total loans at Sept. 30, 2013, were $472.495 million, an 8.88 percent increase from the $433.958 million at Sept. 30, 2012 and up $23.318 million from year-end 2012 total loans of $449.177 million. In addition to the balance sheet totals, the company services $126 million of sold mortgage loans, up from $78 million at Sept. 30, 2012. They also serviced another $71 million of sold SBA and USDA loans. Total loans under management now $670 million. The Corporation had total new loan production of $139 million in the first nine months of this year. Comprising the total production were $60 million in commercial loans, and $79 million in retail, $72 million of which were mortgages.
The Upper Peninsula continues to drive a large majority of the new originations, totaling $97 million, with Northern Lower production of $34 million and Southeast Michigan with $8 million.
Commenting on new loan production, Kelly W. George, President and Chief Executive Officer of mBank stated, “We are seeing good loan opportunities in all of our markets but Southeast Michigan from a commercial lending growth standpoint has been stymied due to increased competition as more larger and non-traditional lenders turned to offense with rates and terms we were not comfortable entertaining for our balance sheet structure. We also remain cautiously optimistic with our mortgage lending activity as it continues to perform well given the recent volatility of rates we have experienced, with a good mix of home purchases and refinances. We are closely monitoring the mortgage markets as we look toward the future. Our commercial pipeline remains good throughout all our regions heading into the end of the year for both traditional and SBA/USDA guaranteed loans we expect to close.”
Nonperforming loans totaled $4.313 million, .91 percent of total loans at Sept. 30, 2013, compared to $5.290 million, or 1.22 percent of total loans at Sept. 30, 2012 and down $.374 million from Dec, 31, 2012. Nonperforming assets were reduced by $1.920 million from a year ago and stood at 1.21 percent of total assets. Total loan delinquencies resided at .36 percent or $4.313 million, almost solely made up of non-accrual commercial loans. George, commenting on overall credit quality, “We remain pleased with the overall credit performance metrics of our loan portfolio from both a micro perspective as noted above, as well as from a macro perspective with all industry segments performing satisfactory with a good diversification of loan types being originated. Our performance metrics have improved and our current level of nonperforming assets has resulted in lower costs, which we believe will continue. We will remain diligent in our timely monitoring on any problem loans that arise and will stay true to our core underwriting principles and will not stretch credit quality even with more banks lending and competition fierce for new loans to augment balance sheet growth.”
Net interest income in the first nine months of 2013 increased to $15.773 million, or 4.15 percent, compared to $14.712 million, or 4.19 percent, in the same period in 2012. The increase in net interest income was due primarily to increased levels of earning assets.
Total deposits of $461.688 million at Sept. 30, 2013, increased 5.08 percent from deposits of $439.363 million on Sept. 30, 2012. Total deposits on Sept. 30, 2013, were up $27.131 million from year-end 2012 deposits of $434.557 million.
Noninterest income, at $2.747 million in the first nine months of 2013, decreased $.313 million from the same period in 2012 of $3.060 million. Levels of income from secondary market mortgage activities and gains from SBA/USDA loan sales were lower in 2013. Income from secondary mortgage activities totaled $.781 million in 2013 compared to $.844 million in 2012. SBA/USDA loan sale gains were behind 2012 with 2013 year to date gains of $.798 million compared to 2012 gains of $1.126 million.
Noninterest expense, at $13.193 million in the first nine months of 2013, increased $.785 million, or 6.33 percent from the same period in 2012. A significant portion of this increase in expense, approximately $.300 million was due to the initial start-up and operational costs of their newly formed asset based lending subsidiary. They are also experiencing added costs given the growth of the company’s operating platform and the need to keep pace both from a personnel, and infrastructure standpoint, with the changing internal risk profile of the company and external banking regulatory environment. Their overall non-interest expense base remains at, or below peer levels and they remain diligent in overseeing that the expense base is well controlled.
Total shareholders’ equity at Sept. 30, 2013, was $67.045 million, compared to $72.945 million on Sept. 30, 2012, a decrease of $5.900 million, or 8.09 percent. Common shareholders’ equity was $63.045 million, or $11.30 per share at Sept. 30, 2013, compared to $61.945 million or $11.14 per share at Sept. 30, 2012 and $61.448 million, or $11.05 per share on Dec. 31, 2012.
Paul D. Tobias, Chairman and Chief Executive Officer, concluded, “Our operating results reflect strong loan production and balance sheet growth, improved credit quality and a sustainable above average interest margin. We recognize the challenges to improving our operating results, but are confident that current momentum, the strength of our balance sheet and access to capital will help us improve our returns on equity.
Looking forward, we believe that as the economy continues to improve, opportunities for franchise expansion will present themselves. We retired $7 million of our preferred stock and intend to retire the remaining $4.0 million balance prior to 2013 year-end. After the preferred redemption our capital will still exceed regulatory “wellcapitalized” ratios. With our strong capital base and improving core earnings generation, coupled with our stable and experienced management team, we stand ready to create shareholder value through either organic growth or acquisition.”