MANISTIQUE, Mich., July 22, 2021 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (NASDAQ:MFNC) ("we", or the "Corporation") the bank holding company for mBank ("the Bank") today announced 2021 second quarter net income of $2.94 million, or $.28 per share, compared to 2020 second quarter net income of $3.45 million, or $.33 per share. The 2021 second quarter results included expenses related to the pending merger with Nicolet Bankshares, Inc. (Green Bay, WI) ("Nicolet"), which had an estimated after-tax impact of $391 thousand on earnings. Adjusted net income (net of transaction related expenses) for the second quarter of 2021 was $3.34 million, or $.32 per share. Weighted average shares outstanding for the second quarter of 2021 were 10,550,393 compared to 10,533,589 for the same period of 2020.

Total assets of the Corporation at June 30, 2021 were $1.52 billion, compared to $1.52 billion at June 30, 2020. Shareholders' equity at June 30, 2021 totaled $171.92 million, compared to $164.16 million at June 30, 2020. Book value per share outstanding equated to $16.30 at the end of the second quarter 2021, compared to $15.58 per share outstanding a year ago. Tangible book value at quarter-end was $148.31 million, or $14.06 per share outstanding, compared to $139.88 million, or $13.28 per share outstanding at the end of the second quarter 2020.

Additional notes:

mBank, the Corporation's primary asset, recorded net income of $3.82 million for the second quarter of 2021, compared to $3.88 million for the second quarter of 2020. Transaction expenses were minimal at the bank level for the period and did not meaningfully impact mBank net income.
Non-interest income remained solid for the quarter, including secondary market mortgage fees and gains on sale of $982 thousand and premiums on the sale of Small Business Administration (SBA) guaranteed loans of $869 thousand.
Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments and Paycheck Protection Program ("PPP") fees, was 4.16%.
On April 12, 2021 the Board of Directors of MFNC announced the signing of a definitive agreement for Nicolet to acquire the Corporation. On July 15, 2021 the shareholders of MFNC voted (either in-person or via proxy) to approve the transaction at a Special Shareholder meeting of the Corporation. The transaction is still expected to close in the third quarter of 2021. Specific information regarding the transaction can be found at www.bankmbank.com.

Revenue & PPP Recognition

Total revenue of the Corporation for second quarter 2021 was $16.61 million, compared to $18.81 million for the second quarter of 2020. The majority of the variance is due to the higher levels of FASB (GAAP) recognition of PPP loan fee income in the 2020 period. Total interest income for the second quarter 2021 was $14.19 million, compared to $16.44 million for the same period in 2020. The year-over-year variance in interest income, once again, was related to the aforementioned timing of PPP recognition in 2020. The 2021 second quarter interest income also included accretive yield of $642 thousand from combined credit mark accretion associated with acquisitions, compared to $320 thousand in the same period of 2020.

PPP fee income for the second quarter of 2021 was $1.43 million, compared to $2.13 million for the second quarter of 2020. As of June 30, 2021, the Corporation has $2.166 million of PPP fee income that has been received but not recognized. Recognition of the remaining PPP fees will occur in accordance with FASB guidance based on normal amortization or acceleration upon the forgiveness of the PPP loan by the SBA. Current monthly amortization / recognition is approximately $163 thousand.

Loan Production and Portfolio Mix

Total balance sheet loans at June 30, 2021 were $978 million, compared to June 30, 2020 balances of $1.15 billion. Total loans under management reside at $1.215 billion, which includes $236.88 million of service retained loans. Overall loan production for the first six months of 2021 was $218.90 million, which included $57.67 million of PPP loans. The remaining $161.22 million was inclusive of, but not limited to, $67.99 million of secondary market loans, $63.3 million of commercial loans and $16.97 million of conventional balance sheet mortgage loans.

Credit Quality

Nonperforming loans totaled $4.93 million, or .50% of total loans (.53% when excluding PPP loans) at June 30, 2021, compared to $6.12 million, or .53% of total loans at June 30, 2020. Total loan delinquencies greater than 30 days resided at .46% (.49% when excluding PPP loans), compared to .54% in 2020. The nonperforming assets to total assets ratio resided at .41% (.41% when excluding PPP loans) for the second quarter of 2021, compared to .55% for the second quarter of 2020. The Corporation currently has no commercial loans in principal deferral and a nominal $2.08 million that remain in the interest only portion of their COVID-19 loan modification period. There are no consumer loans that remain in full payment deferral. Total loans in some type of COVID-19 payment modification are a minimal .21% of total loans. There remains no sign of any adverse systemic issues or deterioration in the loan portfolio.

Margin Analysis, Funding and Liquidity

Net interest income for second quarter 2021 was $13.22 million, resulting in a Net Interest Margin (NIM) of 4.56%, compared to $14.36 million in the second quarter 2020 and a NIM of 4.51%. Net interest income was impacted by the aforementioned PPP recognition for the 2020 period. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments as well as PPP impact, was 4.16% for the second quarter of 2021, compared to 3.75% for the same period of 2020.

Total bank deposits were $1.29 billion at June 30, 2021, compared to $1.14 billion at first quarter-end 2020, an increase of approximately $150 million. Total brokered deposits have decreased significantly and were $13.35 million at June 30, 2021, compared to $90.48 million at June 30, 2020, a decrease of $77 million. FHLB (Federal Home Loan Bank) borrowings have also decreased from $63.31 million at June 30, 2020 to $28.11 million at June 30, 2021. Overall access to short-term functional liquidity remains very strong through multiple sources, if needed.

Noninterest Income / Expense

Second quarter 2021 Noninterest Income was $2.42 million, compared to $2.37 million for the same period of 2020. Noninterest Expense for the second quarter of 2021 was $11.91 million, compared to $12.35 million for the same period of 2020. When giving effect to the $495 thousand of pre-tax transaction expenses ($391 thousand after-tax), noninterest expense was $11.42 million for the second quarter of 2021.

Capital

Both the Corporation and the Bank are "well-capitalized" with total risk-based capital to risk-weighted assets of 15.64% and 15.76% and tier 1 capital to total tier 1 average assets at the Corporation of 9.68% and at the Bank of 9.38%. The leverage ratio is calculated inclusive of PPP loan balances.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation and Chairman of mBank concluded, "With the recent MFNC shareholder approval of the Nicolet transaction, we have moved one step closer to the consummation of the merger. As we approach the closing of the transaction, the company continues to work on behalf of all constituencies to make the transition as smooth as possible, while maintaining best-in-class service to our valued clients. We thank all of our shareholders, clients and employees for being a part of Mackinac Financial."

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 28 branch locations; ten 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: 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 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


	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)		2021			2020			2020
	(Unaudited)						(Unaudited)
Selected Financial Condition Data (at end of period):
Assets	$	1,518,952		$	1,501,730		$	1,518,473
Loans		978,055			1,077,592			1,153,790
Investment securities		101,955			111,836			108,703
Deposits		1,307,154			1,258,776			1,227,552
Borrowings		28,441			63,479			114,466
Shareholders' equity		171,919			167,864			164,157

Selected Statements of Income Data (six months and year ended)
Net interest income	$	27,044		$	54,806		$	27,855
Income before taxes		8,006			17,056			8,235
Net income		6,825			13,473			6,505
Income per common share - Basic		.65			1.27			.61
Income per common share - Diluted		.64			1.27			.61
Weighted average shares outstanding - Basic		10,536,722			10,580,044			10,625,778
Weighted average shares outstanding- Diluted		10,582,597			10,580,044			10,552,581

Three Months Ended:
Net interest income	$	13,266		$	13,899		$	14,458
Income before taxes		3,728			4,614			4,373
Net income		2,945			3,644			3,454
Income per common share - Basic		.28			.35			.33
Income per common share - Diluted		.28			.35			.33
Weighted average shares outstanding - Basic		10,550,393			10,536,023			10,533,589
Weighted average shares outstanding- Diluted		10,617,422			10,536,023			10,460,802

Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		4.54	%		4.37	%		4.55	%
Efficiency ratio		74.09			71.84			73.23
Return on average assets		.91			.92			.93
Return on average equity		8.09			8.19			8.05

Average total assets	$	1,517,185		$	1,464,674		$	1,411,081
Average total shareholders' equity		170,217			164,505			162,556
Average loans to average deposits ratio		81.71	%		93.34	%		95.91	%

Common Share Data at end of period:
Market price per common share	$	19.76		$	12.76		$	10.37
Book value per common share		16.30			15.99			15.58
Tangible book value per share		14.06			13.71			13.28
Dividends paid per share, annualized		.56			.56			.56
Common shares outstanding		10,550,393			10,500,758			10,533,589

Other Data at end of period:
Allowance for loan losses	$	5,651		$	5,816		$	5,355
Non-performing assets		6,276			7,210			8,350
Allowance for loan losses to total loans		.58	%		.54	%		.46	%
Non-performing assets to total assets		.41	%		.48	%		.55	%
Texas ratio		4.08	%		4.82	%		4.22	%

Number of:
Branch locations		28			28			29
FTE Employees		291			315			315

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,			June 30,
	2021			2020			2020
	(Unaudited)						(Unaudited)
ASSETS

Cash and due from banks	$	341,436		$	218,901		$	126,398
Federal funds sold		10,041			76			28,110
Cash and cash equivalents		351,477			218,977			154,508

Interest-bearing deposits in other financial institutions		2,427			2,917			7,831
Securities available for sale		101,955			111,836			108,703
Federal Home Loan Bank stock		4,473			4,924			4,924

Loans:
Commercial		738,429			819,907			878,521
Mortgage		221,388			238,705			255,524
Consumer		18,238			18,980			19,745
Total Loans		978,055			1,077,592			1,153,790
Allowance for loan losses		(5,651	)		(5,816	)		(5,355	)
Net loans		972,404			1,071,776			1,148,435

Premises and equipment		24,533			25,518			25,448
Other real estate held for sale		1,343			1,752			2,226
Deferred tax asset		2,496			3,303			1,727
Deposit based intangibles		4,031			4,368			4,706
Goodwill		19,574			19,574			19,574
Other assets		34,239			36,785			40,391

TOTAL ASSETS	$	1,518,952		$	1,501,730		$	1,518,473

LIABILITIES AND SHAREHOLDERS EQUITY

LIABILITIES:
Deposits:
Noninterest bearing deposits	$	459,716		$	414,804		$	385,811
NOW, money market, interest checking		501,251			450,556			386,029
Savings		141,729			130,755			123,771
CDs<$250,000		178,723			202,266			226,971
CDs>$250,000		12,384			15,224			14,488
Brokered		13,351			45,171			90,482
Total deposits		1,307,154			1,258,776			1,227,552

Federal funds purchased
Borrowings		28,441			63,479			114,466
Other liabilities		11,438			11,611			12,298
Total liabilities		1,347,033			1,333,866			1,354,316

SHAREHOLDERS EQUITY:
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,550,393; 10,500,758 and 10,533,589 respectively		127,624			127,164			127,213
Retained earnings		43,189			39,318			35,295
Accumulated other comprehensive income (loss)
Unrealized (losses) gains on available for sale securities		1,689			1,965			2,059
Minimum pension liability		(583	)		(583	)		(410	)
Total shareholders equity		171,919			167,864			164,157

TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	$	1,518,952		$	1,501,730		$	1,518,473

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended				For the Six Months Ended
	June 30,				June 30,
		2021		2020		2021		2020

	(Unaudited)				(Unaudited)
INTEREST INCOME:
Interest and fees on loans:
Taxable	$	13,414	$	15,549	$	27,535	$	30,162
Tax-exempt		20		55		40		129
Interest on securities:
Taxable		503		560		1,028		1,180
Tax-exempt		132		152		274		240
Other interest income		120		125		204		395
Total interest income		14,189		16,441		29,081		32,106

INTEREST EXPENSE:
Deposits		723		1,707		1,612		3,634
Borrowings		200		276		425		617
Total interest expense		923		1,983		2,037		4,251

Net interest income		13,266		14,458		27,044		27,855
Provision for loan losses		50		100		100		200
Net interest income after provision for loan losses		13,216		14,358		26,944		27,655

OTHER INCOME:
Deposit service fees		265		236		522		640
Income from loans sold on the secondary market		982		1,511		2,284		2,049
SBA/USDA loan sale gains		869		274		1,302		984
Mortgage servicing amortization		154		204		395		393
Net security gains		0		0		36		0
Other		154		142		283		238
Total other income		2,424		2,367		4,822		4,304

OTHER EXPENSE:
Salaries and employee benefits		6,306		7,009		13,130		13,060
Occupancy		1,092		1,008		2,275		2,132
Furniture and equipment		818		804		1,660		1,606
Data processing		707		852		1,477		1,677
Advertising		176		312		289		524
Professional service fees		515		574		1,013		1,072
Loan origination expenses and deposit and card related fees		419		406		869		787
Writedowns and losses on other real estate held for sale		84		30		32		34
FDIC insurance assessment		150		165		290		315
Communications expense		259		224		500		437
Transaction related expenses		495		-		495		-
Other		891		968		1,730		2,080
Total other expenses		11,912		12,352		23,760		23,724

Income before provision for income taxes		3,728		4,373		8,006		8,235
Provision for income taxes		783		919		1,181		1,730

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	2,945	$	3,454	$	6,825	$	6,505

INCOME PER COMMON SHARE:
Basic	$	.28	$	.33	$	.65	$	.61
Diluted	$	.28	$	.33	$	.64	$	.61

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,
		2021		2020		2020
	(Unaudited)		(Audited)		(Unaudited)
Commercial Loans:
Real estate - operators of nonresidential buildings	$	130,222	$	138,992	$	136,299
Hospitality and tourism		100,162		100,237		98,981
Lessors of residential buildings		53,016		52,035		48,852
Gasoline stations and convenience stores		26,583		29,046		28,463
Logging		17,408		18,651		22,283
Commercial construction		48,205		47,698		38,712
Other		362,833		433,248		504,931
Total Commercial Loans		738,429		819,907		878,521

1-4 family residential real estate		210,364		227,044		235,467
Consumer		18,238		18,980		19,745
Consumer construction		11,024		11,661		20,057

Total Loans	$	978,055	$	1,077,592	$	1,153,790

Credit Quality (at end of period):

	June 30,			December 31,			June 30,
		2021			2020			2020
	(Unaudited)			(Audited)			(Unaudited)
Nonperforming Assets :
Nonaccrual loans	$	4,927		$	5,458		$	6,124
Loans past due 90 days or more		6			-			-
Restructured loans		-			-			-
Total nonperforming loans		4,933			5,458			6,124
Other real estate owned		1,343			1,752			2,226
Total nonperforming assets	$	6,276		$	7,210		$	8,350
Nonperforming loans as a % of loans		.50	%		.51	%		.53	%
Nonperforming assets as a % of assets		.41	%		.48	%		.55	%
Reserve for Loan Losses:
At period end	$	5,651		$	5,816		$	5,355
As a % of outstanding loans		.58	%		.54	%		.46	%
As a % of nonperforming loans		114.56	%		106.56	%		87.44	%
As a % of nonaccrual loans		114.69	%		106.56	%		87.44	%
Texas Ratio		4.08	%		4.82	%		4.22	%

Charge-off Information (year to date):
Average loans	$	1,051,518		$	1,117,132		$	1,097,382
Net charge-offs (recoveries)	$	264		$	492		$	153
Charge-offs as a % of average
loans, annualized		.05	%		.04	%		.03	%

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS


	QUARTER ENDED
	(Unaudited)
	June 30,				March 31,				December 31,				September 30,				June 30,
		2021				2021				2020				2020				2020
BALANCE SHEET (Dollars in thousands)

Total loans	$	978,055			$	1,063,756			$	1,077,592			$	1,144,325			$	1,153,790
Allowance for loan losses		(5,651	)			(5,842	)			(5,816	)			(5,832	)			(5,355	)
Total loans, net		972,404				1,057,914				1,071,776				1,138,493				1,148,435
Total assets		1,518,952				1,508,248				1,501,730				1,522,917				1,518,473
Core deposits		1,281,419				1,249,591				1,198,381				1,195,062				1,122,582
Noncore deposits		25,735				23,688				60,395				85,825				104,970
Total deposits		1,307,154				1,273,279				1,258,776				1,280,887				1,227,552
Total borrowings		28,441				53,459				63,479				63,505				114,466
Total shareholders' equity		171,919				170,176				167,864				166,168				164,157
Total tangible equity		148,314				146,402				143,922				142,057				139,877
Total shares outstanding		10,550,393				10,550,393				10,500,758				10,533,589				10,533,589
Weighted average shares outstanding		10,550,393				10,522,899				10,536,023				10,533,589				10,533,589

AVERAGE BALANCES (Dollars in thousands)

Assets	$	1,522,548			$	1,512,496			$	1,505,869			$	1,536,128			$	1,501,423
Earning assets		1,168,006				1,235,235				1,252,038				1,303,102				1,290,012
Loans		1,025,306				1,078,022				1,118,665				1,154,670				1,147,620
Noninterest bearing deposits		452,881				426,890				422,081				422,134				346,180
Deposits		1,295,982				1,279,362				1,255,669				1,269,658				1,211,694
Equity		171,411				169,023				167,459				165,450				161,811

INCOME STATEMENT (Dollars in thousands)

Net interest income	$	13,266			$	13,778			$	13,898			$	13,052			$	14,458
Provision for loan losses		50				50				400				400				100
Net interest income after provision		13,216				13,728				13,498				12,652				14,358
Total noninterest income		2,424				2,398				2,779				3,116				2,367
Total noninterest expense		11,912				11,848				11,663				11,561				12,352
Income before taxes		3,728				4,278				4,614				4,207				4,373
Provision for income taxes		783				398				970				883				919
Net income available to common shareholders	$	2,945			$	3,880			$	3,644			$	3,324			$	3,454
Income pre-tax, pre-provision	$	3,778			$	4,328			$	5,014			$	4,607			$	4,473

PER SHARE DATA

Earnings per common share	$	.28			$	.37			$	.35			$	.32			$	.33
Book value per common share		16.30				16.13				15.99				15.78				15.58
Tangible book value per share		14.06				13.88				13.71				13.49				13.28
Market value, closing price		19.76				14.02				12.76				9.65				10.37
Dividends per share		.14				.14				.14				.14				.14

ASSET QUALITY RATIOS

Nonperforming loans/total loans		.50		%		.47		%		.51		%		.47		%		.53		%
Nonperforming assets/total assets		.41				.45				.48				.48				.55
Allowance for loan losses/total loans		.58				.55				.54				.51				.46
Allowance for loan losses/nonperforming loans		114.56				116.28				106.56				107.72				87.44
Texas ratio		4.08				4.41				4.82				4.91				4.22

PROFITABILITY RATIOS

Return on average assets		.78		%		1.04		%		.96		%		.86		%		.93		%
Return on average equity		6.89				9.31				8.66				7.99				8.58
Net interest margin		4.56				4.52				4.42				3.98				4.51
Average loans/average deposits		79.11				84.26				89.09				90.94				94.71

CAPITAL ADEQUACY RATIOS

Tier 1 leverage ratio		9.68		%		9.63		%		9.63		%		9.20		%		9.45		%
Tier 1 capital to risk weighted assets		15.64				14.74				14.48				13.91				13.27
Total capital to risk weighted assets		16.25				15.34				15.07				14.49				13.79
Average equity/average assets (for the quarter)		11.26				11.18				11.12				10.77				10.78

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

Website: www.bankmbank.com

Mackinac Financial Corporation Reports 2021 Second Quarter Financial Results