Manistique, Michigan – Mackinac Financial Corporation (Nasdaq: MFNC) (the “Corporation”), the bank holding company for mBank, today announced 2018 net income of $8.37 million, or $.94 per share, compared to 2017 net income of $5.48 million, or $.87 per share.
The 2018 results included expenses related to the acquisitions of First Federal of Northern Michigan (“FFNM”), and Lincoln Community Bank (“Lincoln”), which had a collective after-tax impact of $2.46 million on earnings. The 2017 results include the effects of a $2.02 million non-cash tax expense related to the revaluation of the company’s Deferred Tax Asset (“DTA”) as a result of the corporate tax code change in December 2017 and a small amount of transaction expenses related to FFNM. Adjusted core income (net of transaction related expenses) for 2018 was $10.83 million or $1.22 per share compared to 2017 adjusted core income (net of the DTA expense) of $7.54 million, or $1.20 per share.
Weighted average shares outstanding for 2018 were 8,891,967 compared to 6,288,791 for 2017. Weighted average shares outstanding for the fourth quarter 2018 were 10,712,745 compared to 6,294,930 for the same period of 2017. The Corporation issued 2,146,378 new shares for the FFNM purchase in May 2018 and issued an additional 2,225,807 shares related to the common stock offering completed in June 2018.
The Corporation had fourth quarter 2018 net income of $3.36 million or $.31 per share compared to a $20 thousand loss ($0.00 per share) for the same period of 2017 due to the impact of the DTA revaluation. The 2018 fourth quarter results were impacted by acquisition related expenses of $386 thousand on an after-tax basis. 2018 fourth quarter income, excluding tax-affected transaction related expenses, was $3.75 million or $.35 per share compared to 2017 income, net of the DTA expense, of $2.07 million or $0.33 per share.
Total assets of the Corporation at December 31, 2018 were $1.32 billion, compared to $985.37 million at December 31, 2017. Shareholders’ equity at December 31, 2018 totaled $152.07 million, compared to $81.40 million at December 31, 2017. Book value per share outstanding equated to $14.20 at year-end 2018 compared to $12.93 per share outstanding a year ago. Tangible book value at year-end 2018 was $124.33 million or $11.61 per share outstanding compared to $73.78 million or $11.72 per share at year-end 2017.
mBank, the Corporation’s primary asset, recorded net income of $9.04 million in 2018, compared to $8.98 million in 2017. In December 2018, mBank had an internal tax allocation expense between it and the Corporation (MFNC) of $1.34 million. This adjustment resulted from the internal DTA allocation from 2017 and did not have an impact on the consolidated MFNC reported income or balance sheet for 2018. It was, however, reflected in the mBank 2018 year-end Call Report. Adjusted core net income for 2018 (including total adjustments for the tax reallocation and transaction related expenses of $3.16 million on an after-tax basis) was $12.20 million compared to 2017 core net income of the aforementioned $8.98 million. Adjusted bank core net income grew approximately 36%.
As expected, FFNM and Lincoln have been fully integrated into the Corporation and mBank as of year-end 2018. No further significant transaction related expenses are expected from these acquisitions in 2019 and beyond.
Adjusted income before taxes of the Corporation (net of pre-tax transaction related expenses) was $13.71 million in 2018 compared to $11.12 million in 2017, which eliminates the effect of the non-cash DTA expense year-over-year. Adjusted fourth quarter income before taxes was $4.75 million in 2018 compared to $2.94 million in 2017, an increase of 61%.
Reliance on higher cost brokered deposits decreased significantly from $175.30 million or 21.43% of total deposits at year-end 2017 to $136.76 million or 12.46% of total deposits at year-end 2018.
2018 net interest margin (NIM) remains strong at 4.44%. Core operating margin, which is net of accretion from acquired loans that were subject to purchase accounting adjustments, was 4.21%.
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