MANISTIQUE, MI--(Marketwire - January 25, 2008) - Mackinac Financial Corporation (
NASDAQ:
MFNC), the holding company for mBank, has reported net income of $10.163
million, or $2.96 per share, for the year ended December 31, 2007, compared
to a net income of $1.716 million, or $.50 per share, for 2006. Weighted
average shares outstanding amounted to 3,428,695 in both years.
The results for 2007 include the recognition of a $7.500 million deferred
tax benefit for NOL and tax credit carryforwards and $.470 million of
proceeds from the settlement of a lawsuit against the Corporation's former
accountants.
The 2006 operations include a $600,000 negative provision recorded in the
first quarter in recognition of improved credit quality, a $261,000
negative provision recorded in the fourth quarter to recognize a specific
reserve reduction on a loan payoff, and a $500,000 deferred tax benefit
recorded in the third quarter in recognition of a portion of NOL and tax
credit carryforwards. The 2006 results also include $550,000 of expenses
incurred to pursue legal action against the Corporation's former
accountants.
Excluding these items in both years would have resulted in net profit of
$2.193 million, or $.64 per share, in 2007 versus $.907 million, or $.27
per share, in 2006.
Paul Tobias, Chairman and Chief Executive Officer, commented, "In 2007, the
Corporation continued to make progress generating core earnings in an
increasingly difficult banking environment. While we are pleased with our
loan growth and credit quality, we are not yet satisfied with our level of
earnings, and we intend to improve our performance in 2008, even with the
headwind from a difficult credit market and margin pressure from Federal
Reserve rate reductions. We are proud of the fact that we have
demonstrated a sufficient level of core earnings to provide the basis for
recognition of the deferred tax benefit related to NOL and tax credit
carryforwards. The loan and core deposit growth in 2007 provides the
foundation in which to increase our profitability in future periods. In
2008, our plan will be to emphasize core deposit growth and our deposit
mix. We have asked our team to focus on deposit and relationship growth
first and foremost. While our Upper Peninsula market remains stable, our
Traverse City and Southeastern Michigan markets are experiencing very
difficult times in the real estate and manufacturing sectors. While the
geographic diversity of our banking markets gives us the flexibility to
avoid troubled sectors, aggressive loan growth goals would not be prudent."
Total assets of the Corporation at December 31, 2007 were $408.880 million,
an increase of $26.089 million, or 6.8% from total assets of $382.791
million reported at December 31, 2006.
During 2007 the Corporation's loans stood at $355.079 million, an increase
of $32.498 million, or 10.1%, from 2006 year-end balances of $322.581
million. Total loan originations in 2007 amounted to $114 million, while
we experienced significant reductions from loan amortization and principal
payoffs of $79.3 million. A good portion of these payoffs pertained to
loan relationships that no longer met our pricing or credit standards.
Tobias stated, "During the year, we continued to be successful in
originating high quality loan relationships. Loan growth in 2007 builds on
prior growth during 2006 of $82.810 million and $35.939 million in 2005."
Asset quality remains relatively strong. Nonperforming loans totaled
$4.008 million, or 1.13% of total loans, at December 31, 2007.
Nonperforming assets at December 31, 2007 were $5.234 million, 1.28% of
total assets, compared to $2.965 million or .77% of total assets at
December 31, 2006. Tobias added, "During our loan portfolio expansion, we
have been diligent in our credit administration and have continued to focus
on credit quality. The recent economic issues of Michigan and the U.S.
economy concerns in total have reinforced our thinking relative to the
level of risk we will accept for new loans. We also believe in early
recognition of problem credits to minimize loss, especially during times of
economic uncertainty. Our level of nonperforming assets is well below most
of our peers, and we are proud of our credit quality, yet we remain
concerned with the ongoing costs associated with any level of nonperforming
assets." Included in the total nonperforming loans are
pre-recapitalization loans amounting to $2.036 million, with specific
reserves totaling $.741 million and an SBA guaranty amounting to $.688
million. A schedule depicting our nonperforming assets and associated
reserve levels is included in the appended information.
"In 2008, we will begin to provide for loan losses for new loan growth and
to replenish the reserve for charge-off activity. While further
deterioration in the economy will impact our portfolio and the required
level of our loan loss reserve, we intend to stay ahead of our potential
problems and do not anticipate significant deviance from our plan," Tobias
concluded.
Total deposits grew from $312.421 million at December 31, 2006 to $320.827
million at December 31, 2007, an increase of 2.7%. In the fourth quarter
of 2007, we consummated the sale of our Ripley branch office with $9.3
million in deposits. This branch office sale was in line with the overall
strategic plan of the Corporation to focus on markets with higher growth
potential. Excluding the Ripley branch deposits sold, deposits grew by
$17.706 million, of which $9.5 million consisted of brokered deposits.
Core deposit growth for 2007 peaked in August at $26 million, before
shrinking in the fourth quarter. We believe a significant portion of the
fourth quarter runoff was seasonal and due to customers using more of their
cash to support their operations and we anticipate subsequent deposit
inflows on a seasonal basis from these established accounts. Another
portion of the deposit runoff was due to our unwillingness to pay "higher
than wholesale" CD deposit rates in our local markets.
Since the recapitalization, we have been successful in growing core
deposits, as evidenced by the increase in customer deposit balances of $68
million in that time period.
Net interest income for the year ended December 31, 2007 was $13.417
million compared to $11.593 million for the year ended December 31, 2006,
an increase of $1.824 million. The margin percentage for 2007 was 3.60%
compared to 3.51% in 2006 and 3.64% in 2005. During the later months of
2007, the prime rate decreased from 8.25% to 7.25%, which created margin
pressure since a majority of the commercial loan portfolio repriced
downwards with each prime rate change. We experienced additional margin
pressure from higher relative rates on brokered deposits, which did not
reprice in line with prime rate reductions, due to the overall market
liquidity crisis. Tobias commented, "We will continue to focus our efforts
on growing transactional accounts. We will be implementing appropriate
incentives in 2008 to help reward the individuals that grow low cost
deposits."
"Operating expenses continue to be a focus of management and our challenge
is to balance the skills and talents of our management team with our asset
base. While our efficiency ratio has improved, we understand that we need
to continue to drive it lower. We continue to take cost out of our
operation as we work on growing our net interest margin," according to
Tobias. Excluding extraordinary items, noninterest expense totaled $12.1
million in 2007 compared to $11.6 million in 2006 and $13.9 million in
2005.
Shareholders' equity totaled $39.321 million at December 31, 2007 compared
to $28.790 million at the end of 2006, an increase of $10.531 million.
This increase reflects consolidated net income of $10.163 million, the
capital contribution impact of stock options and also the increase in
equity due to the increase in the market value of held-for-sale
investments, which amounted to $.247 million. The book value per share at
December 31, 2007 amounted to $11.47 compared to $8.40 at the end of 2006.
Tobias stated, "The 2007 year-end equity now reflects the Corporation's
value of the deferred tax benefit pertaining to the Corporation's NOL and
tax credit carryforwards which were recognized through income."
Tobias concluded, "We will continue to work hard in 2008 to build core
earnings and shareholder value. We are proud of the progress to date but
are impatient for our progress to create a higher level of earnings and
shareholder value. Mindful of the risks in our markets, we will remain
focused on the fundamentals of community banking, and at the same time,
attempt to broaden our stock ownership by explaining our unique story to a
large audience. Management team members and our Board members are
committed to increasing their individual ownership position by acquiring
additional shares."
Mackinac Financial Corporation is a registered bank holding company formed
under the Bank Holding Company Act of 1956 with assets in excess of $400
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, Michigan, mBank has 12 branch locations; eight
in the Upper Peninsula, three in the Northern Lower Peninsula and one in
Oakland County, Michigan. The Company'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, branch closings 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.
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
For The Years Ended
December 31,
(Dollars in thousands,except per share data) 2007 2006
----------- -----------
(Unaudited) (Audited)
Selected Financial Condition Data (at end of
period):
Total assets $ 408,880 $ 382,791
Total loans 355,079 322,581
Total deposits 320,827 312,421
Borrowings and subordinated debentures 45,949 38,307
Total shareholders' equity 39,321 28,790
Selected Statements of Income Data:
Net interest income $ 13,417 $ 11,593
Income before taxes 2,923 1,216
Net income 10,163 1,716
Income per common share - Basic 2.96 .50
Income per common share - Diluted 2.96 .50
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin 3.60% 3.51%
Efficiency ratio 79.46 93.95
Return on average assets 2.59 .49
Return on average equity 31.05 6.19
Average total assets $ 392,313 $ 347,927
Average total shareholders' equity 32,731 27,744
Average loans to average deposits ratio 104.94% 99.77%
Common Share Data at end of period:
Market price per common share $ 8.98 $ 11.50
Book value per common share $ 11.47 $ 8.40
Common shares outstanding 3,428,695 3,428,695
Weighted average shares outstanding 3,428,695 3,428,695
Other Data at end of period:
Allowance for loan losses $ 4,146 $ 5,006
Non-performing assets $ 5,234 $ 2,965
Allowance for loan losses to total loans 1.17% 1.55%
Non-performing assets to total assets 1.28% .77%
Number of:
Branch locations 12 13
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data) December 31,
2007 2006
----------- -----------
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 6,196 $ 4,865
Federal funds sold 166 5,841
----------- -----------
Cash and cash equivalents 6,362 10,706
Interest-bearing deposits in other financial
institutions 1,810 856
Securities available for sale 21,597 32,769
Federal Home Loan Bank stock 3,794 3,794
Loans:
Commercial 288,839 255,780
Mortgage 62,703 63,960
Installment 3,537 2,841
----------- -----------
Total loans 355,079 322,581
Allowance for loan losses (4,146) (5,006)
----------- -----------
Net loans 350,933 317,575
Premises and equipment 11,609 12,453
Other real estate held for sale 1,226 26
Other assets 11,549 4,612
----------- -----------
TOTAL ASSETS $ 408,880 $ 382,791
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest-bearing deposits $ 25,557 $ 23,471
Interest-bearing deposits
NOW and Money Market 81,160 73,188
Savings 12,485 13,365
CDs < $100,000 80,607 89,585
CDs > $100,000 22,355 23,645
Brokered 98,663 89,167
----------- -----------
Total deposits 320,827 312,421
Borrowings
Short-term 7,710
Long-term 38,239 38,307
Other liabilities 2,783 3,273
----------- -----------
Total liabilities 369,559 354,001
Shareholders' equity:
Preferred stock - No par value:
Authorized 500,000 shares, no shares
outstanding - -
Common stock and additional paid in capital -
No par value
Authorized - 18,000,000 shares Issued and
outstanding - 3,428,695 shares 42,841 42,722
Retained earnings (3,580) (13,745)
Accumulated other comprehensive income (loss) 60 (187)
----------- -----------
Total shareholders' equity 39,321 28,790
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 408,880 $ 382,791
=========== ===========
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per
share data) For The Years Ended December 31,
2007 2006 2005
----------- ----------- -----------
Interest income: (Unaudited) (Audited) (Audited)
Interest and fees on loans:
Taxable $ 26,340 $ 21,239 $ 13,862
Tax-exempt 533 753 928
Interest on securities:
Taxable 1,100 1,186 1,455
Tax-exempt - 87 167
Other interest income 722 787 564
----------- ----------- -----------
Total interest income 28,695 24,052 16,976
----------- ----------- -----------
Interest expense:
Deposits 13,224 10,575 5,259
Borrowings 2,054 1,884 1,937
----------- ----------- -----------
Total interest expense 15,278 12,459 7,196
----------- ----------- -----------
Net interest income 13,417 11,593 9,780
Provision for loan losses 400 (861) -
----------- ----------- -----------
Net interest income after provision
for loan losses 13,017 12,454 9,780
----------- ----------- -----------
Other income
Service fees 688 547 586
Net gains on sale of secondary
market loans 498 197 49
Proceeds from settlement of
lawsuit 470 - -
Other 350 239 476
----------- ----------- -----------
Total other income 2,006 983 1,111
----------- ----------- -----------
Other expenses:
Salaries and employee benefits 6,757 6,132 6,090
Occupancy 1,272 1,264 1,053
Furniture and equipment 678 631 560
Data processing 785 691 1,720
Accounting, legal and consulting
fees 532 1,425 886
Loan and deposit 285 392 852
Telephone 228 210 271
Advertising 370 346 814
Penalty on prepayment of FHLB
borrowings - - 4,320
Other 1,193 1,130 1,689
----------- ----------- -----------
Total other expenses 12,100 12,221 18,255
----------- ----------- -----------
Income (loss) before provision for
income taxes 2,923 1,216 (7,364)
Provision for (benefit of) income
taxes (7,240) (500) -
----------- ----------- -----------
Net income (loss) $ 10,163 $ 1,716 $ (7,364)
----------- ----------- -----------
Income (loss) per common share:
Basic $ 2.96 $ .50 $ (2.15)
=========== =========== ===========
Diluted $ 2.96 $ .50 $ (2.15)
=========== =========== ===========
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY
(Dollars in thousands)
Loan Portfolio Balances (at end of period):
December 31,
2007 2006
----------- -----------
Commercial Loans
Real estate - operators of nonresidential buildings $ 41,597 $ 44,308
Hospitality and tourism 37,604 30,826
Real estate agents and managers 29,571 25,071
New car dealers 10,569 10,086
Other 130,546 115,426
----------- -----------
Total Commercial Loans 249,887 225,717
1-4 family residential real estate 57,613 58,014
Consumer 3,537 2,841
Construction
Consumer 5,090 5,946
Commercial 38,952 30,063
----------- -----------
Total Loans $ 355,079 $ 322,581
=========== ===========
Credit Quality (at end of period):
December 31,
2007 2006
----------- ----------
Nonperforming Assets
Nonaccrual loans (1) $ 3,298 $ 2,899
Loans past due 90 days or more 710 40
---------- ----------
Total nonperforming loans 4,008 2,939
Other real estate owned (2) 1,226 26
---------- ----------
Total nonperforming assets $ 5,234 $ 2,965
========== ==========
Nonperforming loans as a % of loans 1.13% .91%
---------- ----------
Nonperforming assets as a % of assets 1.28% .77%
---------- ----------
Reserve for Loan Losses:
At period end $ 4,146 $ 5,006
---------- ----------
As a % of loans 1.17% 1.55%
---------- ----------
As a % of nonperforming loans 103.42% 170.33%
---------- ----------
As a % of nonaccrual loans 125.71% 172.68%
========== ==========
Charge-off Information:
Average loans $ 333,415 $ 278,953
---------- ----------
Net charge-offs $ 1,261 $ 241
---------- ----------
Charge-offs as a % of average loans .38% .09%
---------- ----------
(1) Nonaccrual loans at December 31, 2007 include loans totaling $2.036
million with specific reserves of $.741 million that were originated
before the recapitalization. Nonaccrual loans originated after the
recapitalization total $1.262 million and have specific reserves of
$.478 million.
(2) Most recently appraised at $1.533 million
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
QUARTER ENDED
-----------------------------------------------------
(Unaudited)
-----------------------------------------------------
December September June March December
31, 30, 30, 31, 31,
2007 2007 2007 2007 2006
--------- --------- --------- --------- ---------
BALANCE SHEET
(Dollars in
thousands)
Total loans $ 355,079 $ 344,149 $ 338,896 $ 318,421 $ 322,581
Allowance for loan
losses (4,146) (5,022) (4,920) (4,975) (5,006)
--------- --------- --------- --------- ---------
Total loans, net 350,933 339,127 333,976 313,446 317,575
Intangible assets 124 143 163 182 205
Total assets 408,880 401,213 393,319 375,644 382,791
Core deposits 199,809 218,638 211,773 201,529 199,609
Noncore deposits (1) 121,018 102,733 109,473 102,883 112,812
--------- --------- --------- --------- ---------
Total deposits 320,827 321,371 321,246 304,412 312,421
Total borrowings 45,949 38,239 38,307 38,307 38,307
Total shareholders'
equity 39,321 38,697 30,485 29,932 28,790
Total shares
outstanding 3,428,695 3,428,695 3,428,695 3,428,695 3,428,695
AVERAGE BALANCES
(Dollars in
thousands)
Assets $ 406,308 $ 400,105 $ 382,065 $ 380,403 $ 366,566
Loans 350,050 340,391 324,721 318,072 301,508
Deposits 324,194 327,293 309,469 309,619 294,755
Equity 38,973 32,184 30,412 29,254 28,646
INCOME STATEMENT
(Dollars in
thousands)
Net interest income $ 3,410 $ 3,560 $ 3,269 $ 3,178 $ 3,027
Provision for loan
losses - 400 - - (261)
--------- --------- --------- --------- ---------
Net interest
income after
provision 3,410 3,160 3,269 3,178 3,288
Total noninterest
income 355 396 342 913 276
Total noninterest
expense 2,978 3,001 3,065 3,056 3,226
--------- --------- --------- --------- ---------
Income before taxes 787 555 546 1,035 338
Provision for income
taxes 260 (7,500) - - -
--------- --------- --------- --------- ---------
Net income $ 527 $ 8,055 $ 546 $ 1,035 $ 338
========= ========= ========= ========= =========
PER SHARE DATA
Earnings - basic $ .15 $ 2.35 $ .16 $ .30 $ .10
Earnings - diluted .15 2.35 .16 .30 .10
Book value 11.47 11.29 8.89 8.73 8.40
Market value,
closing price 8.98 8.75 9.45 9.26 11.50
ASSET QUALITY RATIOS
Nonperforming
loans/total loans 1.13% .92% 1.49% 1.53% .91%
Nonperforming
assets/total assets 1.28 .90 1.30 1.33 .77
Allowance for loan
losses/total loans 1.17 1.46 1.45 1.56 1.55
Allowance for loan
losses/nonperformi-
ng loans 103.42 158.32 97.45 102.32 170.33
PROFITABILITY RATIOS
Return on average
assets .51% 7.99% .57% 1.10% .37%
Return on average
equity 5.36 99.30 7.20 14.35 4.68
Net interest margin 3.55 3.71 3.60 3.55 3.44
Efficiency ratio 78.02 74.71 83.18 82.39 94.60
Average
loans/average
deposits 107.98 104.00 104.93 102.73 102.29
CAPITAL ADEQUACY
RATIOS
Tier 1 leverage
ratio 8.05% 8.03% 7.97% 7.85% 7.85%
Tier 1 capital to
risk weighted
assets 8.97 9.03 8.85 9.16 8.77
Total capital to
risk weighted
assets 10.13 10.28 10.10 10.41 10.02
Average
equity/average
assets 9.59 8.04 7.96 7.69 7.81
Tangible
equity/tangible
assets, period end 9.59 9.61 7.71 7.92 7.47
(1) Noncore deposits includes Internet CDs, brokered deposits and CDs
greater than $100,000
Contact Information: Contact:
Investor Relations
(888) 343-8147
Website: www.bankmbank.com