Manistique, Michigan – Mackinac Financial Corporation (Nasdaq: MFNC)(the “Corporation”), the bank holding company for mBank, today announced a net loss, after certain acquisition transaction expenses described below, for the second quarter 2016 of $.125 million or ($.02) per share compared to net income of $1.614 million, or $.26 per share, for the second quarter of 2015 and $1.132 million, or $.18 per share, in the 2016 first quarter. Net income for the first six months of 2016 totaled $1.007 million, or $.16 per share, after acquisition transaction expenses, compared to $2.985 million, or $.48 per share, for the same period in 2015. Total assets of the Corporation at June 30, 2016 totaled $892.238 million, compared to $735.338 million at June 30, 2015. Weighted average shares for 2016 totaled 6,231,246, compared to 6,245,553 shares in the same period of 2015.
On April 29, 2016, the company completed the acquisition of First National Bank of Eagle River (“Eagle River”). In connection with this acquisition, the Corporation had GAAP pre-tax transaction related expenses totaling $2.516 million. These one-time costs, largely associated with the early termination of the Eagle River data processing system, reduced the reported net income for the quarter by $1.712 million, or $.27 per share, on an after tax basis. While the data processing termination fee was incurred by Eagle River and factored into the purchase price paid for the assets, GAAP business combination guidance requires the Corporation to expense the entire $1.585 million in the second quarter of 2016. The Corporation did realize the entire tax benefit from the expense in the second quarter. The accounting treatment of the termination fee does not adversely affect the overall economics of the purchase. All expenses were a component of management’s price and impact analysis of the transaction. The adjusted net income for the second quarter of 2016 (exclusive of the transaction related expenses) would equate to $1.588 million, or $.25 per share. Adjusted net income for the first six months of 2016 for the Corporation is $2.770 million, or $.45 per share.
Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation, commenting on performance, stated “We are very pleased with our recent acquisition of Eagle River and the continued organic growth of our company through the first six months of the year. We anticipated the nonrecurring expenses that were booked along with various purchase accounting items in the second quarter in our pre-transaction due diligence. While GAAP treatment of these expenses reduced our second quarter and six month reported results, the economics of the transaction have not been negatively impacted and we expect to achieve the accretion targets we discussed in our transaction announcement in the second half of the year.”
Key highlights for the first six months of 2016 results include:
- mBank, the Corporation’s subsidiary bank, recorded six-month adjusted net income of $3.270 million compared to $3.230 million in 2015. Inclusive of $2.216 million of transaction related expenses noted above ($1.462 million after tax), net income was $1.807 million for the first six months of 2016.
- The April 29, 2016 acquisition of First National Bank of Eagle River, a $127 million asset bank headquartered in the Northern Wisconsin with two banking locations in Vilas County and one in Oneida County. With this transaction, total assets of the Corporation were $892 million at period end.
- The May 24, 2016 announcement of the execution of a definitive agreement to acquire Niagara Bancorporation (“Niagara”), the holding company for First National Bank of Niagara (Wisconsin). At the time of the announcement, Niagara had total assets of approximately $70 million, loans of $35 million and deposits of $60 million. Niagara operates four full-service banking centers. The transaction is expected to close late in the third quarter of 2016.
- Total interest income of $17.4 million through June 2016 compared to $16.7 million for the same period in 2015.
- Margin remains solid, at 4.25% with disciplined pricing of loan and deposit products. Net interest income increased from $14.520 million in 2015 to $15.284 million in 2016, a 5% increase.
- Credit quality remains strong with a Texas Ratio of 9.13% compared to 15.76% one year ago, and nonperforming assets of $6.813 million, or .76% of total assets, compared with $12.044 million, or 1.64% of total assets, for the same period 2015.
- Healthy new loan production of $125 million through June 2016 compared to $115 million through June 2015.