MFNC
$9.06
Mackinac Financial
$.03
.33%
Earnings Details
2nd Quarter June 2020
Thursday, July 30, 2020 4:05:00 PM
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Summary

Mackinac Financial (MFNC) Recent Earnings

Mackinac Financial (MFNC) reported 2nd Quarter June 2020 earnings of $0.33 per share on revenue of $18.8 million. The consensus earnings estimate was $0.28 per share on revenue of $16.8 million. Revenue grew 5.2% on a year-over-year basis.

Results
Reported Earnings
$0.33
Earnings Whisper
-
Consensus Estimate
$0.28
Reported Revenue
$18.8 Mil
Revenue Estimate
$16.8 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

Mackinac Financial Corporation Reports 2020 Second Quarter Results and COVID-19 Progress

MANISTIQUE, Mich., July 30, 2020 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq: MFNC) (“we”, or the “Corporation”) the bank holding company for mBank (“the Bank”) today announced 2020 second quarter net income of $3.45 million, or $.33 per share, compared to 2019 second quarter net income of $3.67 million, or $.34 per share.  Net income for the first two quarters of 2020 was $6.50 million, or $.61 per share, compared to $6.84 million, or $.64 per share for the same period of 2019.

Overall Quarterly Loan Production
Overall Quarterly Loan Production


New Loan Production (less PPP loans)
New Loan Production (less PPP loans)


MFNC Composition of Loans June 30, 2020
MFNC Composition of Loans June 30, 2020


COVID-19 Loan Modifications Still in Deferral
COVID-19 Loan Modifications Still in Deferral


Breakdown of the $15.3M of CML COVID-19 Mods
Breakdown of the $15.3M of CML COVID-19 Mods


Margin Analysis Per Quarter
Margin Analysis Per Quarter


Total assets of the Corporation at June 30, 2020 were $1.52 billion, compared to $1.33 billion at June 30, 2019.  Shareholders’ equity at June 30, 2020 totaled $164.16 million, compared to $157.84 million at June 30, 2019.  Book value per share outstanding equated to $15.58 at the end of the second quarter 2020, compared to $14.70 per share outstanding a year ago.  Tangible book value at quarter-end was $139.88 million, or $13.28 per share outstanding, compared to $133.24 million, or $12.40 per share outstanding at the end of the second quarter 2019. 

Additional notes:

  • mBank, the Corporation’s primary asset, recorded net income of $3.88 million for the second quarter of 2020 and $7.28 million for the first six months of 2020.
     
  • As reflected in the size of the balance sheet, the Corporation funded approximately $150 million of Payroll Protection Program (“PPP”) loans in the second quarter with origination fees totaling approximately $5.1 million.  These loans are supporting over one thousand small businesses throughout our footprint with the majority of recipients residing in the Upper Peninsula and Northern Michigan.   
     
  • Only $15.3 million of commercial loan payment deferrals remain from peak levels of approximately $201 million, equating to a reduction of 92%.
     
  • Non-interest income was very solid for the second quarter including strong secondary market mortgage fees of $1.51 million and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $274 thousand. Year-to-date secondary market mortgage fees were $2.05 million and SBA premiums $984 thousand.  The residential mortgage pipeline resides at very robust levels and we expect sustained output from this line of business as we look to upcoming quarters.
     
  • Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments and PPP loan origination fees, was 3.75%.  However, we also estimate, on a non-GAAP basis, that PPP loan yields (not inclusive of fee income) are roughly a 26 basis point strain.  Estimated core operating margin is approximately 4.01%.

COVID-19 Operating Update

Upon the onset of the COVID-19 pandemic, management took proactive measures and moved quickly to implement protocols and adjust operations to continue to serve all constituencies.  These protocols have been refined throughout the second quarter as the pandemic operating environment evolved within the Corporation’s respective regions.  Speaking to these ongoing operational activities, President of the Corporation and President and CEO of mBank, Kelly W. George, stated, “When the Coronavirus crisis started to heighten around mid-March, we began to swiftly activate our pandemic response plan in each critical risk area of the bank. We subsequently closed our lobby access in the middle of March and began serving clients who needed in-person transactions almost exclusively via drive-thru windows. Most of our branch lobbies are now open to the public and all are operating under enhanced safety and cleaning protocol.  Overall, the majority of our bank footprint, outside of Southeast Michigan, resides in markets where active COVID-19 cases are very nominal compared to other areas of the country.  This is a trend we hope continues so that we do not need to take steps back to a more restrictive pandemic operating environment. The much lower COVID-19 case totals in most of our Northern Michigan and Wisconsin regions led to a sustained uptick in commerce activity, starting around Memorial Day, for both our tourism and retail industries. Specifically, hotel occupancies have come back to more normalized levels for this time of year. We remain cautiously optimistic that these positive health and commerce conditions can be maintained throughout our more traditionally busier seasonal months as we continue into the latter part of summer and early fall.”

Revenue & PPP Recognition

Total revenue of the Corporation for second quarter 2020 was $18.81 million, compared to $17.87 million for the second quarter of 2019.  Total interest income for the second quarter was $16.44 million, compared to $16.76 million for the same period in 2019. The 2020 second quarter interest income included accretive yield of $320 thousand from combined credit mark accretion associated with acquisitions, compared to $741 thousand in the same period of 2019.

The second quarter 2020 interest income was also positively impacted by the recognition of a portion of the PPP loan origination fees that were earned during the quarter:

  • The bank originated approximately $150 million of PPP loans in the second quarter.
  • The origination efforts resulted in fees earned of $5.09 million, which are deferred and will be recognized over the life of the PPP loans, which is 24 months.
  • Fee income of $2.13 million was recognized in the current quarter, offsetting $1.7 million of direct origination costs and the $425 thousand of accretion of the deferred fees.
  • The remaining deferred fees of $2.97 million will be accreted over the remaining 21 months, or accelerated upon early payoff of the PPP loans.

Loan Production and Portfolio Mix

Total balance sheet loans at June 30, 2020 were $1.15 billion, which is inclusive of $149.82 million of PPP loans, compared to June 30, 2019 balances of $1.06 billion.  Total loans under management reside at $1.44 billion, which includes $281.27 million of service retained loans.  Driven by strong mortgage refinance activity, overall traditional loan production (non-PPP) for the first six months of 2020 was $174.81 million, compared to $184.6 million for the same period of 2019.  When including PPP loans, total production was $324.63 million. Of the total production, traditional commercial loans equated to $64 million, consumer $111 million and the aforementioned $150 million of PPP.  Within the consumer totals was $86 million of secondary market mortgage production.  In total, 77% of PPP funds went to existing mBank clients. There were also 295 new customers that received PPP loans and 44 included a new deposit relationship.

Overall Quarterly Loan Production: https://www.globenewswire.com/NewsRoom/AttachmentNg/1b182b32-f73d-4874-84ed-4fa4f1e95cc7

New Loan Production (less PPP loans): https://www.globenewswire.com/NewsRoom/AttachmentNg/b01df5cc-99c1-40eb-9e92-3aec0898e83f

Commenting on new loan production and overall lending activities, Mr. George stated, “As can be seen from our production totals, we had a very busy second quarter, which was dominated by record mortgage production and PPP activity. The overall make up of the portfolio remains well diversified. We also continue to partake in some other specific pandemic-based relief programs that are being sponsored at the state and federal levels to help support the working capital needs of our local small businesses in terms of reopening. The relatively low number of virus cases in the majority of our footprint provide a safer environment for tourists to travel via automobile driving the strong local commerce uptick we have seen over the last several months. Our northern markets are also seeing heightened real estate activity from families and businesses looking to avoid a possible second wave of the virus and relocate for an overall healthier quality of life where working remote may become more of the norm for some time. These attributes, coupled with lack of large concentrations of inventory, have driven up prices and shortened marketing times for everything from second homes to vacant land.”

MFNC Composition of Loans June 30, 2020https://www.globenewswire.com/NewsRoom/AttachmentNg/4c6e26ae-7e8a-4bea-a511-ca5b84062de4

Credit Quality and COVID-19 Loan Activity

Nonperforming loans totaled $6.124 million, or .53% (.61% excluding PPP balances) of total loans at June 30, 2020, compared to $6.416 million, or .61% of total loans at March 31, 2020 and $4.673 million, or .44% of total loans at June 30, 2019. Total loan delinquencies greater than 30 days resided at .54% (.61% excluding PPP balances), compared to 1.23% a quarter ago, and 1.05% in 2019.  The nonperforming assets to total assets ratio resided at .55% (.61% excluding PPP balances) for the second quarter of 2020, compared to .51% for the second quarter of 2019.   

COVID-19 related loan deferral activity has slowed significantly in the second quarter reducing by 90% from peak levels and equating to a nominal 2.3% of total loans. Of the original $219.60 million of payment deferred loans, $196.70 have already returned to contractual obligations of either principal and interest or interest only, for a short period, as they come off of full payment deferral to build up cash flow.

COVOD-19 Loan Modifications Still in Deferral: https://www.globenewswire.com/NewsRoom/AttachmentNg/62488d0a-feed-4513-9ee8-c5211faae69c

Of the $15.3 million of commercial loans still in payment deferral, there are no significant concentrations, with the largest single borrower categories being rental properties ($4.60 million) and Hotels ($4.00 million). Hotel specific loan deferrals have reduced significantly from $65.60 million, or a 94% reduction.    

Breakdown of the $15.3M of CML COVID-19 Mods: https://www.globenewswire.com/NewsRoom/AttachmentNg/fc5fdbe6-0dab-4358-9d8d-49b9d7c22320

The second quarter provision for loan losses was $100 thousand.  This amount was consistent with past quarters.  As a result of COVID-19, the qualitative factors for economic conditions were adjusted within the Allowance for Loan Losses (ALLL) calculation and methodology at the end of the first quarter of 2020. These adjustments did not lead to a larger provision.  Management will actively refine the provision and loan reserves as client impact and broader economic data both regionally and nationally from the pandemic becomes more clear. Coupled with the health data specific to our region and footprint that could also negatively impact the current uptick in business activity.  The Corporation is not currently required to utilize CECL.

Commenting on overall credit risk, Mr. George stated, “The credit book has seen no signs of any systemic adverse trends, and the vast majority of our COVID-19 loan deferments are now expired with very few requests for extensions. While certainly not clear of all headwinds, we remain cautiously optimistic on the second half of 2020 in terms of overall credit performance given further national stimulus actions are probable and expect more clarity to evolve as to the virus spread and containment measures. Both factors helping to reduce the possibility of returning to business closures and/or a resetting of improving consumer confidence within our local markets provided a larger second wave does not materialize. Also, we remain ever vigilant in terms of monitoring deterioration in any isolated specific situations that could arise for a client or two where provisions could be needed in light of ongoing pandemic conditions within a particular industry that we all know can still change quickly.”   

Margin Analysis, Funding and Liquidity

Net interest income for second quarter 2020 was $14.46 million, resulting in a Net Interest Margin (NIM) of 4.51%, compared to $14.0 million in the second quarter 2019 and a NIM of 4.76%.  Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments and recognized PPP fee income, was 3.75% for the second quarter of 2020, compared to 4.43% for the same period of 2019.  Items impacting margin, outside of the overall current low interest rate environment, include higher than normal cash balances as well as negative impact from the yields associated with PPP loans.  On a non-GAAP basis, management currently estimates the direct negative impact of the PPP loan balances for the second quarter to be .26%.  Estimated adjusted core margin for the second quarter is 4.01%.

Margin Analysis Per Quarterhttps://www.globenewswire.com/NewsRoom/AttachmentNg/06b3df92-9ce7-4c7e-bb34-b3453efed0ef

Total bank deposits (excluding brokered deposits) have increased by $136.31 million year-over-year from $1.00 billion at June 30, 2019 to $1.137 billion at second quarter-end 2020.  Total brokered deposits have also decreased and were $90.48 million at June 30, 2020, compared to $114.10 million at June 30, 2019, a decrease of 21%.  However, brokered deposits have increased by roughly $32 million since year-end 2019.  This increase is the direct result of the bank taking precautionary measures to augment its cash position at the onset of the COVID-19 pandemic and some funding of PPP loans.  FHLB (Federal Home Loan Bank) borrowings were also mostly flat at $65 million since the end of 2019.  The Corporation utilized the Payroll Protection Program Liquidity Facility (PPPLF) to fund a portion of the PPP loan originations.  The current balance of the PPPLF is approximately $51 million.  Overall access to short term functional liquidity remains very strong through multiple sources. 

Mr. George stated, “We are pleased with our organic efforts in terms of core deposit growth this year within the more challenging pandemic environment. Core deposit growth just in July equates to approximately $25M supporting the commerce buildup we have seen since reopening in later May throughout our various business segments. We continue to carry large levels of liquidity in light of PPP and we also put some conservative measures in place at the onset of the pandemic to ensure funds availability given the large unknowns. These liquidity levels should continue to normalize through the rest of the year as PPP winds down and some wholesale funding sources mature. The large drop in rates in late quarter one has led to unavoidable margin compression, but we have been proactive in continuing to review and market price our deposit offerings to best offset the dollars lost.”

Noninterest Income / Expense

Second quarter 2020 noninterest income was $2.37 million, compared to $1.11 million for the same period of 2019.  The significant year-over-year improvement is mainly a combination of the secondary market mortgage and SBA sales.  The SBA 7A sales were not inclusive of any PPP loan fees, all of which are recognized through interest income.  Noninterest Expense for the second quarter of 2020 was $12.35 million, compared to $10.26 million for the same period of 2019.  For comparison purposes, noninterest expense for the first quarter of 2020 equated to $11.37 million.  The quarter-over-quarter change was heavily impacted by the direct PPP expenses that were offset by corresponding PPP fee recognition as well as some pandemic related operating items.  Specific non-recurring items associated with COVID-19 and PPP equated to $949 thousand and included $125 thousand of COVID-related compensation for retail centric employees, and $824 thousand of direct PPP related origination costs. Management expects expenses to normalize in the coming quarters in light of the one-time nature of these items.

Assets and Capital

Total assets of the Corporation at June 30, 2020 were $1.52 billion, compared to $1.33 billion at June 30, 2019.  Shareholders’ equity at June 30, 2020 totaled $164.16 million, compared to $157.84 million at June 30, 2019.  Book value per share outstanding equated to $15.58 at the end of the second quarter 2020, compared to $14.70 per share outstanding a year ago.  Tangible book value at quarter end was $139.88 million, or $13.28 per share outstanding, compared to $133.24 million, or $12.40 per share outstanding at the end of the second quarter 2019. 

Both the Corporation and the Bank are “well-capitalized” with total risk-based capital to risk-weighted assets of 13.79% at the Corporation and 13.30% at the Bank and tier 1 capital to total tier 1 average assets (the “leverage ratio”) at the Corporation of 9.45% and at the Bank of 8.93%.  The leverage ratio is calculated inclusive of PPP loan balances.  The Corporation is monitoring the impact of the recent pandemic-associated market volatility on its Goodwill asset.  The Corporation continues to conduct Goodwill impairment analysis to confirm the value of this intangible asset as market events unfold.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, “We have weathered this economic storm thus far in a manner that has allowed us to protect our shareholders’ investment by growing our capital base and controlling our credit risk.  While management acknowledges that, more likely than not, there will be challenges ahead for all banks, we can only get through the whole pandemic if we first get through the initial 120 days.  We are the same bank currently as we were going into this and continue to be well-capitalized, appropriately conservative and have plenty of liquidity.  Our commitment is to continue with our steadfast efforts to help our employees, customers and communities through this crisis while managing the bank for continued success.  It is at times like this where the value of a community bank is demonstrated in the marketplace through the customers that we have helped.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.5 billion 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 29 branch locations; eleven in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and seven in Northern Wisconsin.  The Corporation’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: the effects of the COVID-19 pandemic, particularly potentially negative effects on our customers, borrowers, third party service providers and our liquidity; 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, 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 Corporation 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.

Contact: Jesse A. Deering, EVP & Chief Financial Officer (248) 290-5906 / jdeering@bankmbank.com 
Website: www.bankmbank.com

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS

       
 As of and For the As of and For the As of and For the 
 Period Ending Year Ending Period Ending 
 June 30, December 31, June 30, 
(Dollars in thousands, except per share data)2020 2019 2019 
 (Unaudited)   (Unaudited) 
Selected Financial Condition Data (at end of period):      
Assets$  1,518,473  $  1,320,069 $  1,330,723 
Loans   1,153,790     1,058,776    1,060,703 
Investment securities    108,703     107,972    110,348 
Deposits   1,227,552     1,075,677    1,114,853 
Borrowings   114,466     64,551    46,232 
Shareholders' equity   164,157     161,919    157,840 
       
Selected Statements of Income Data (six months and year ended)      
Net interest income$  27,855  $  53,907 $  27,233 
Income before taxes   8,235     17,710    8,653 
Net income   6,505     13,850    6,836 
Income per common share - Basic  .61     1.29   .64 
Income per common share - Diluted  .61     1.29   .64 
Weighted average shares outstanding - Basic   10,625,778     10,737,653    10,730,477 
Weighted average shares outstanding- Diluted   10,552,581     10,757,507    10,739,471 
       
Three Months Ended:      
Net interest income$  14,458  $  13,350 $  13,997 
Income before taxes   4,373     4,350    4,644 
Net income   3,454      3,296    3,669 
Income per common share - Basic  .33    .31   .34 
Income per common share - Diluted  .33     .31   .34 
Weighted average shares outstanding - Basic   10,533,589     10,748,712    10,740,712 
Weighted average shares outstanding- Diluted   10,460,802     10,768,841     10,752,070 
       
Selected Financial Ratios and Other Data:      
Performance Ratios:       
Net interest margin   4.55 %   4.57%   4.65%
Efficiency ratio    73.23     69.10    68.94 
Return on average assets  .93     1.04    1.04 
Return on average equity   8.05      8.78    8.89 
       
Average total assets$  1,411,081  $  1,332,882 $  1,323,321 
Average total shareholders' equity   162,556     157,831     155,098 
Average loans to average deposits ratio   95.91 %   95.03%   95.22%
       
Common Share Data at end of period:      
Market price per common share$   10.37  $  17.56 $  15.80 
Book value per common share   15.58     15.06    14.70 
Tangible book value per share   13.28     12.77    12.40 
Dividends paid per share, annualized  .560    .520   .480 
Common shares outstanding   10,533,589     10,748,712    10,740,712 
       
Other Data at end of period:      
Allowance for loan losses$  5,355  $  5,308 $  5,306 
Non-performing assets$  8,350  $  7,377 $   6,798 
Allowance for loan losses to total loans  .53 %  .49%  .50%
Non-performing assets to total assets  .55 %  .56%  .51%
Texas ratio   4.22 %   4.41%   4.91%
       
Number of:      
  Branch locations   29     29    29 
  FTE Employees   315     304    301 


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

      
 June 30, December 31,  June 30,
 2020  2019  2019 
 (Unaudited)    (Unaudited)
ASSETS        
         
Cash and due from banks$  126,398   $  49,794  $  60,680 
Federal funds sold   28,110      32     10 
Cash and cash equivalents   154,508      49,826     60,690 
         
Interest-bearing deposits in other financial institutions   7,831      10,295     12,465 
Securities available for sale   108,703      107,972     110,348 
Federal Home Loan Bank stock   4,924      4,924     4,924 
         
Loans:        
Commercial   878,521      765,524     755,176 
Mortgage   255,524      272,014     284,864 
Consumer   19,745      21,238     20,663 
Total Loans   1,153,790      1,058,776     1,060,703 
Allowance for loan losses   (5,355)    (5,308)    (5,306)
Net loans   1,148,435      1,053,468     1,055,397 
         
Premises and equipment   25,448      23,608      23,166 
Other real estate held for sale   2,226      2,194     2,125 
Deferred tax asset   1,727      3,732     4,609 
Deposit based intangibles   4,706      5,043     5,380 
Goodwill   19,574      19,574     19,574 
Other assets   40,391      39,433     32,045 
         
TOTAL ASSETS$  1,518,473   $  1,320,069  $  1,330,723 
         
LIABILITIES AND SHAREHOLDERS’ EQUITY        
         
LIABILITIES:        
Deposits:        
Noninterest bearing deposits$  385,811   $  287,611  $  276,776 
NOW, money market, interest checking   386,029      373,165     344,213 
Savings   123,771      109,548     111,438 
CDs<$250,000   226,971      233,956     256,689 
CDs>$250,000   14,488      12,775     11,640 
Brokered   90,482      58,622     114,097 
Total deposits   1,227,552      1,075,677     1,114,853 
         
Federal funds purchased    —      6,225     — 
Borrowings   114,466      64,551     46,232 
Other liabilities   12,298      11,697     11,798 
Total liabilities   1,354,316      1,158,150     1,172,883 
         
SHAREHOLDERS’ EQUITY:        
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,533,589; 10,748,712 and 10,740,712 respectively   127,213      129,564     129,262 
Retained earnings   35,295      31,740     27,734 
Accumulated other comprehensive income (loss)        
Unrealized (losses) gains on available for sale securities   2,059      1,025     1,062 
Minimum pension liability   (410)    (410)    (218)
Total shareholders’ equity   164,157      161,919      157,840 
         
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$  1,518,473   $  1,320,069  $  1,330,723 


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

    
 For the Three Months Ended For the Six Months Ended
 June 30,   June 30,  
 2020 2019 2020 2019
 (Unaudited)   (Unaudited)  
INTEREST INCOME:       
  Interest and fees on loans:       
  Taxable$  15,549  $  15,586 $  30,162  $   30,181
  Tax-exempt   55     42    129     89
  Interest on securities:       
  Taxable   560     680    1,180      1,383
  Tax-exempt   152     85    240     183
  Other interest income   125     367    395     752
  Total interest income   16,441     16,760    32,106     32,588
        
INTEREST EXPENSE:       
  Deposits   1,707     2,515    3,634     4,869
  Borrowings    276     248    617     486
  Total interest expense   1,983     2,763    4,251     5,355
        
Net interest income   14,458      13,997    27,855     27,233
Provision for loan losses   100     200    200     300
Net interest income after provision for loan losses   14,358      13,797    27,655     26,933
        
OTHER INCOME:       
  Deposit service fees   236     408    640     814
  Income from loans sold on the secondary market    1,511     355    2,049     667
  SBA/USDA loan sale gains   274     29    984     154
  Mortgage servicing amortization   204     128    393     248
  Other   142     190    238     344
  Total other income   2,367     1,110     4,304     2,227
        
OTHER EXPENSE:       
  Salaries and employee benefits   7,009     5,511    13,060     10,946
  Occupancy   1,008     1,004    2,132     2,085
  Furniture and equipment   804     723    1,606     1,441
  Data processing   852     708    1,677     1,417
   Advertising   312     214    524     523
  Professional service fees   574     547    1,072     981
  Loan origination expenses and deposit and card related fees   406     184    787     363
  Writedowns and losses on other real estate held for sale    30     73    34      101
  FDIC insurance assessment   165     77    315     211
  Communications expense   224     232    437     460
  Other   968     990    2,080     1,979
  Total other expenses   12,352     10,263    23,724     20,507
        
Income before provision for income taxes   4,373     4,644    8,235     8,653
Provision for income taxes   919     975    1,730     1,817
        
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS$  3,454  $  3,669 $  6,505  $  6,836
        
INCOME PER COMMON SHARE:       
  Basic $  .33   $  .34  $  .61   $  .64
  Diluted $   .33   $  .34  $  .61   $  .64


MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY

      
(Dollars in thousands)     
      
Loan Portfolio Balances (at end of period):     
  June 30,   December 31,  June 30,
 2020  2019 2019
 (Unaudited) (Audited) (Unaudited)
Commercial Loans:     
Real estate - operators of nonresidential buildings$  136,299  $  141,965 $  143,897
Hospitality and tourism   98,981     97,721    92,809
Lessors of residential buildings   48,852     51,085    49,489
Gasoline stations and convenience stores   28,463     27,176    26,974
Logging   22,283     22,136    21,666
Commercial construction   38,712     40,107    36,803
Other   504,931     385,334    383,538
  Total Commercial Loans   878,521     765,524    755,176
      
1-4 family residential real estate   235,467     253,918    273,813
Consumer   19,745     21,238    20,663
Consumer construction   20,057     18,096    11,051
      
  Total Loans$  1,153,790  $  1,058,776 $  1,060,703

Credit Quality (at end of period):

 June 30,  December 31, June 30, 
 2020  2019 2019 
 (Unaudited) (Audited) (Unaudited) 
Nonperforming Assets :      
Nonaccrual loans$  6,124  $  5,172 $  4,673 
Loans past due 90 days or more   -     11     - 
Restructured loans   -     -    - 
  Total nonperforming loans   6,124     5,183    4,673 
Other real estate owned    2,226     2,194    2,125 
  Total nonperforming assets$  8,350  $  7,377 $  6,798 
Nonperforming loans as a % of loans  .53 %   .49%  .44%
Nonperforming assets as a % of assets  .55 %  .56%  .51%
Reserve for Loan Losses:      
At period end$  5,355  $  5,308 $  5,306 
As a % of outstanding loans  .46 %  .50%  .50%
As a % of nonperforming loans   87.44 %   102.41%   113.55%
As a % of nonaccrual loans   87.44 %   102.63%   113.55%
Texas Ratio   4.22 %   4.41%   4.91%
       
Charge-off Information (year to date):      
  Average loans$  1,097,382  $  1,047,439 $  1,049,383 
  Net charge-offs (recoveries)$  153  $  260 $  177 
  Charge-offs as a % of average      
  loans, annualized  .03 %  .02%  .03%



MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS

          
 QUARTER ENDED        
 (Unaudited)        
 June 30, March 31, December 31, September 30, June 30,
  2020   2020   2019   2019   2019 
BALANCE SHEET (Dollars in thousands)         
          
Total loans$  1,153,790   $  1,044,177  $  1,058,776  $  1,059,942  $  1,060,703 
Allowance for loan losses   (5,355)    (5,292)    (5,308)    (5,308)    (5,306)
  Total loans, net   1,148,435      1,038,885     1,053,468     1,054,634     1,055,397 
Total assets   1,518,473      1,356,381     1,320,069     1,355,383     1,330,723 
Core deposits   1,122,582       984,936     1,004,280     1,022,115     989,116 
Noncore deposits   104,970      110,445     71,397     91,464     125,737 
  Total deposits   1,227,552      1,095,381     1,075,677     1,113,579     1,114,853 
Total borrowings   114,466      67,120     64,551      70,079     46,232 
Total shareholders' equity   164,157      160,060     161,919     160,165     157,840 
Total tangible equity   139,877      135,612     137,302     135,379     133,236 
Total shares outstanding   10,533,589      10,533,589     10,748,712     10,740,712     10,740,712 
Weighted average shares outstanding   10,533,589      10,717,967     10,748,712     10,740,712     10,740,712 
          
AVERAGE BALANCES (Dollars in thousands)         
          
Assets$   1,501,423   $  1,321,134  $  1,347,916  $  1,354,220  $  1,326,827 
Earning assets   1,290,012      1,171,551     1,205,241     1,204,782     1,179,584 
Loans   1,147,620      1,047,144     1,081,294     1,065,337     1,051,998 
Noninterest bearing deposits   346,180      284,677     283,259     284,354     260,441 
Deposits   1,211,694      1,076,206     1,080,359     1,124,433     1,103,413 
Equity   161,811      162,661     161,588     159,453     156,491 
          
INCOME STATEMENT (Dollars in thousands)         
          
Net interest income$  14,458   $  13,397  $  13,350  $  13,324  $  13,997 
Provision for loan losses   100      100     35     50     200 
  Net interest income after provision   14,358      13,297     13,315     13,274     13,797 
Total noninterest income   2,367      1,937      1,848     1,878     1,110 
Total noninterest expense   12,352      11,372     10,813     10,444     10,263 
Income before taxes   4,373      3,862     4,350     4,708     4,644 
Provision for income taxes   919      811      1,054     989     975 
Net income available to common shareholders$  3,454   $   3,051  $  3,296  $  3,719  $  3,669 
Income pre-tax, pre-provision$  4,473   $  3,962  $  4,385  $  4,758  $  4,844 
          
PER SHARE DATA         
          
Earnings per common share $.33   $.28   $.31   $.35   $.34 
Book value  per common share   15.58      15.20     15.06     14.91     14.70 
Tangible book value per share   13.28      12.87     12.77     12.60     12.40 
Market value, closing price   10.37      10.45     17.56     15.46     15.80 
Dividends per share   .140    .140     .140   .140   .120 
          
ASSET QUALITY RATIOS         
          
Nonperforming loans/total loans .53%  .61%    .49%  .46%  .44%
Nonperforming assets/total assets .55   .64   .56   .55     .51 
Allowance for loan losses/total loans   .46   .51   .50   .50   .50 
Allowance for loan losses/nonperforming loans    87.44      82.48     102.41     109.33     113.55 
Texas ratio   4.22      6.13     4.41      5.31     4.91 
          
PROFITABILITY RATIOS         
          
Return on average assets .93%  .93%  .97%    1.09    1.11
Return on average equity   8.58      7.54     8.09     9.25     9.40 
Net interest margin    4.51      4.60     4.39     4.39      4.76 
Average loans/average deposits   94.71      97.30     100.09      94.74     95.34 
          
CAPITAL ADEQUACY RATIOS         
          
Tier 1 leverage ratio   9.45     10.20    10.09%    9.81    9.74
Tier 1 capital to risk weighted assets   13.27      12.89     12.71     12.39     12.20 
Total capital to risk weighted assets   13.79      13.41     13.22     12.90     12.72 
Average equity/average assets (for the quarter)   10.78      12.31     11.99     11.77     11.80 
                    

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Source: Mackinac Financial Corporation