Mackinac Financial Corporation Announces Solid 2013 Results of Operations

Mackinac Financial Corporation Announces Solid 2013 Results of Operations 
MANISTIQUE, MI -- (Marketwired) -- 01/30/14 --  Mackinac Financial
Corporation (NASDAQ: MFNC), the holding Corporation for mBank, today
announced net income of $5.629 million or $1.01 per share, for the
year ended December 31, 2013, compared to net income of $6.458
million, or $1.51 per share, for 2012. The 2013 and 2012 consolidated
and bank results include a deferred tax valuation adjustment of
$2.250 million, or $.40 per share and $3.000 million, $.70 per share,
respectively. The Corporation's primary asset, mBank, recorded net
income of $7.189 million for the fiscal year 2013 compared to $7.884
million for 2012. Excluding the aforementioned deferred tax asset,
the Bank subsidiary's core operations improved year over year from
2012 earnings of $4.884 million to $4.939 million in 2013.  
Total assets of the Corporation at 2013 year-end totaled $572.800
million, an increase of 4.91% from the $545.980 million at 2012
year-end. The Corporation and the Bank are both "well-capitalized"
with Tier 1 Capital at the Corporation of 10.30% and 10.00% at the
Bank. 
Some highlights from 2013 include: 


 
--  New loan production of $190.9 million, with balance sheet growth of
    $34.7 million, an increase of 7.7%, in loans outstanding from 2012
    year end.
    
    
--  Secondary mortgage loan income of $1.028 million.
    
    
--  Continued success with the sale of SBA and USDA loan guarantees with
    sales generating $.951 million for the year and a good pipeline of
    pending transactions at 2013 year-end.
    
    
--  Stable and above peer average net interest margin at 4.17% for the
    year.
    
    
--  Asset quality improved with further reductions in nonperforming assets
    from $7.899 at 2012 year end to $3.908 million at year-end 2013 with
    our Texas Ratio now residing at 5.59%.
    
    
--  Consolidation of our owner occupied branch and mortgage offices in
    Marquette, to a new leased facility in December of 2013.
    
    
--  Redemption of $11.000 million of preferred stock.
    
    
--  Increased common stock cash dividend from $.04 per share quarterly to
    $.05 per share quarterly.
    
    
--  Successful launching of our asset based lending subsidiary, Mackinac
    Commercial Credit, LLC late in 2013 located in Birmingham, MI.

  
Loan Production 
Total loans at 2013 year-end, totaled $483.832 million, an increase
of 7.7%, from the $449.177 million at 2012 year-end. The Corporation
had total loan production for all loan types of $191 million in 2013.
Production included $88 million in commercial loans, and $103 million
in consumer loans, $95 million of which were mortgages. The Upper
Peninsula continues to drive a large majority of the new
originations, with $125 million, followed by our Northern Lower
Region with $48 million and Southeast Michigan Region at $18 million.
Commenting on new loan opportunities, Kelly W. George, President and
Chief Executive Officer of mBank, stated, "We were extremely pleased
with our success in loan production for 2013 and the growth of good
quality assets to our balance sheet as we were able to achieve this
in a still very challenging interest rate environment and state
economy where the procurement of new loans for all banks has led to a
highly competitive lending environment. As was the case with most
banks, our mortgage pipeline decreased in the latter half of the year
with the increasing mortgage rates which slowed refinance business
but we are still seeing a good deal of new home purchases and are
optimistic that mortgage lending will rebound some in the new year.
The government shutdown in the early part of the fourth quarter also
stymied our momentum of SBA loan transactions being adjudicated for
the end of the year, which results in a strong pipeline to start
2014. In addition to the $484 million in balance sheet loans, $59
million of SBA/USDA loans and $133 million of secondary market
mortgage loans were sold with retained servicing. This increases our
loans under management to $676 million." 
Secondary Market Mortgage Lending  
The Corporation's production totaled $56.0 million in secondary
market mortgage loans in 2013 compared to $74.1 million in 2012.
Gains and fees from secondary mortgage activity totaled $1.028
million in 2013 compared to $1.390 million in 2012. In addition, the
Corporation also received $.299 million in fees on its secondary
market servicing portfolio which totaled $133 million at 2013 year
end. 
SBA/USDA Program Lending 
The Corporation continues to have success in this line of business as
in years past with 2013 gains from sales of SBA/USDA guaranteed loan
balances amounting to $.951 million compared to $1.176 million in
2012. The guaranteed SBA/USDA loan balances sold totaled $8.393
million for 2013, compared to $11.962 million in 2012. The Bank also
services approximately $59 million of SBA/USDA loans which generated
an additional $.402 million in fees during 2013. The Corporation
remains a state leader in the origination of these government lending
programs which the bank recognizes are critical for many small
businesses to obtain the capital they need to grow or improve their
operations throughout the state.  
Nonperforming Loans /Assets 
Nonperforming loans totaled $2.024 million, .42% of total loans at
December 31, 2013 compared to $4.687 million, or 1.04% of total loans
at December 31, 2012. Nonperforming assets were reduced by $3.991
million from a year ago and stood at $3.908 million, or .68% of total
assets. Mr. George, commenting on credit quality, stated, "We have
been diligent and aggressive in resolving our problem credit
relationships and in our overall new loan approval process which is
illustrated with the strong underlying credit metrics of our current
portfolio encompassing low manageable levels of nonperforming assets
and loan delinquencies residing at a nominal .38% of total loans."  
It should be noted the Corporation recorded a provision for loan
losses of $1.675 million in 2013 compared to $.945 million in 2012.
The increase in provision this year is not indicative of the current
underwriting or loan performance standards. The reason for the
increased provision in 2013 is solely due to the divesture of a
distressed legacy hotel loan, with no personal recourse, in the
Northern Lower Peninsula. This loan was originated in 2002 prior to
the recapitalization and has been long identified as a problem asset.
The company elected to divest of this loan after all other attempts
to minimize exposure and loss related to this property were
exhausted. The final charge-off in the fourth quarter of 2013 totaled
$.698 million which had been previously reserved for, with cumulative
losses of $1.680 million. At this time the loan loss reserve, at .96%
of loans outstanding is deemed more than adequate based on the
companies methodology, and the allowance as a percent of
nonperforming loans stands at 230.29%, well above peer comparisons.
Mr. George, commenting on this loan divesture, stated, "We were
approached by the owners of this property at the end of the year,
informing us that they had finally procured a buyer for the hotel.
After our internal analysis, which included assessments of the net
operating income of the property and external market reports, the
sale price appeared reasonable. We determined it was in the best
interest of the bank to remove this ongoing costly asset we had been
managing for years in the event marke
t prices declined further and
additional reserves would be necessary. The removal of this loan has
also improved the overall make-up of our balance sheet from both a
micro and macro aspect."  
Deposits/Funding 
Total deposits of $466.299 million at 2013 year-end increased 7.30%
from deposits of $434.557 million at 2012 year-end. The overall
increase in deposits for 2013 is comprised of an increase in core
deposits of $3.097 million and increased noncore deposits of $28.645
million. Mr. George, commenting on core deposits, stated, "In 2013,
we were proactive with rate reductions on deposit products to
maximize margin dollars which led to some balance reductions from
strictly price driven time deposit customers. The bank saw increased
levels of transactional deposits as we pushed to increase deposit
share with our high value relationship clients. We also experienced
some larger withdrawals from commercial clients that used their
excess liquidity to fund business expansion or pay down debt. We
augmented our funding sources this year as well with some nominal and
manageable levels of brokered and internet deposits, primarily to
extend the maturities of some of our liabilities to support fixed
rate lending structures to better mitigate any long term interest
rate risk."  
Margin Analysis 
Net interest income in 2013 increased to $21.399 million, compared to
$ 19.824 million in 2012. The net interest margin was 4.17% for both
years. Mr. George, commenting on the margin, stated, "We expect
continued margin pressure from a national economic policy that
fosters a low interest rate environment but remain positive of our
ability to prudently manage the balance sheet to mitigate the
downward pressure and maintain an above peer and strong net interest
margin. In addition, this low interest rate environment has severely
limited many investment options which in turns puts more pressure on
our loan portfolio yields and the maintaining of good loan pricing
and interest rate floors where applicable. We remain highly cognizant
as we continue growing our loan portfolio to structure lending
relationship as much as possible to mitigate long-term interest rate
risk when an upward interest rate movement eventually begins to
occur."  
Noninterest Income/Expense 
Noninterest income, at $3.938 million was slightly lower than the
$4.043 million recorded in 2012. The largest driver of noninterest
income in 2013 was secondary market mortgage activities and gains
from SBA/USDA loan sales. Income from secondary mortgage activities
totaled $1.028 million in 2013 compared to $1.390 million in 2012.
This reduction was due in part to a slowdown in refinancing activity
as mortgage rates increased in the latter half of 2013. SBA/USDA loan
sale gains were $.951 million in 2013 compared to 2012 gains of
$1.176 million. As discussed previously, this activity was hampered
in late 2013 due to the Government shutdown when a bottleneck
occurred for processing of these loans once the government agencies
reopened.  
Noninterest expense, at $18.128 million in 2013, increased $1.371
million, or 8.18%, from 2012 levels. This increase was higher than
normal due to several initiatives undertaken during the year
including start-up costs for our asset based lending subsidiary of
approximately $.671 million, the write down of the old mortgage loan
office, of $.270 million, in our Marquette market as we moved to the
new leased facility, and other costs incurred in the exploration of a
possible acquisition which totaled approximately $.162 million. Mr.
George, commenting on the areas of increased expenses, stated, "We
remain diligent in our efforts to manage our operating expenses in
the ongoing evaluation of our personnel infrastructure and banking
lines of business to improve future efficiencies, keep pace with
ongoing regulatory requirements, and in providing avenues for
increased business growth we ascertain will enhance overall franchise
value in the long run."  
Capital 
At 2013 year-end the Corporation completed the redemption of its
outstanding preferred stock. The preferred shares were originally
issued to the US Treasury under the TARP Capital Purchase Program and
were subsequently sold to private investors. Total shareholders'
equity at December 31, 2013 totaled $65.429 million, compared to
$72.448 million at 2012 year-end. Book value of common shareholders'
equity was $11.77 per share at December 31, 2013 compared to $11.05
per share at December 31, 2012.  
Paul D. Tobias, Chairman and Chief Executive Officer, concluded, "We
delivered a solid performance in 2013 in what is proving to be an
extremely challenging environment for community banking. Looking
forward, we believe that there will be some consolidation in the
banking industry as companies, like MFNC, look for growth in order to
achieve enhanced shareholder value with increased economies of scale. 
"Our capital strength and our earnings momentum provided the impetus
for both the redemption of our preferred stock and the increase in
our cash dividend from $.16 per share to $.20 per share, annually. We
were also able to recognize deferred tax benefits given the current
level of sustained profitability of our company. 
"In 2014 we will explore more opportunities for creating added
shareholder value including expansion within our current markets,
acquisitions that complement our current footprint and through the
growth of our new asset based lending and factoring subsidiary
Mackinac Commercial Credit. We have a management team and
infrastructure that we can leverage for increased returns to our
shareholders. We will be patient in evaluating and executing our
growth strategy while continuing with the day to day execution of
organic growth and increased operational efficiencies." 
Mackinac Financial Corporation is a registered bank holding company
formed under the Bank Holding Company Act of 1956 with assets of $573
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 11 branch locations;
seven in the Upper Peninsula, three in the Northern Lower Peninsula
and one in Oakland County, Michigan. 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 econom
ies 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                        
                                                                            
                                                 December 31,  December 31, 
(Dollars in thousands, except per share data)        2013          2012     
                                                 ------------  ------------ 
                                                  (Unaudited)   (Unaudited) 
Selected Financial Condition Data (at end of                                
 period):                                                                   
Assets                                           $    572,800  $    545,980 
Loans                                                 483,832       449,177 
Investment securities                                  44,388        43,799 
Deposits                                              466,299       434,557 
Borrowings                                             37,852        35,925 
Common Shareholders' Equity                            65,249        61,448 
Shareholders' equity                                   65,249        72,448 
                                                                            
                                                                            
Selected Statements of Income Data:                                         
Net interest income                              $     21,399  $     19,824 
Income before taxes and preferred dividend              5,534         6,165 
Net income                                              5,629         6,458 
Income per common share - Basic                          1.01          1.51 
Income per common share - Diluted                        1.00          1.46 
Weighted average shares outstanding                 5,558,313     4,285,043 
Weighted average shares outstanding- Diluted        5,650,058     4,412,625 
                                                                            
Selected Financial Ratios and Other Data:                                   
Performance Ratios:                                                         
Net interest margin                                      4.17%         4.17%
Efficiency ratio                                        67.46         67.95 
Return on average assets                                 1.01          1.23 
Return on average common equity                          9.07         12.43 
Return on average equity                                 8.26         10.26 
                                                                            
Average total assets                             $    555,152  $    526,740 
Average common shareholders' equity                    62,082        51,978 
Average total shareholders' equity                     68,172        62,939 
Average loans to average deposits ratio                103.46%        99.45%
                                                                            
                                                                            
Common Share Data at end of period:                                         
Market price per common share                    $       9.90  $       7.09 
Book value per common share                      $      11.77  $      11.05 
Common shares outstanding                           5,541,390     5,559,859 
                                                                            
Other Data at end of period:                                                
Allowance for loan losses                        $      4,661  $      5,218 
Non-performing assets                            $      3,908  $      7,899 
Allowance for loan losses to total loans                  .96%         1.16%
Non-performing assets to total assets                     .68%         1.45%
Texas ratio                                              5.59%        10.17%
                                                                            
Number of:                                                                  
  Branch locations                                         11            11 
  FTE Employees                                           133           121 
                                                                            
                                                                            
                                                                            
              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES               
                        CONSOLIDATED BALANCE SHEETS                         
                                                                            
                                                 December 31,  December 31, 
                                                     2013          2012     
                                                 ------------  ------------ 
                                                  (Unaudited)    (Audited)  
ASSETS                                                                      
                                                                            
Cash and due from banks                          $     18,216  $     26,958 
Federal funds sold                                          3             3 
                                                 ------------  ------------ 
  Cash and cash equivalents                            18,219        26,961 
                                                                            
Interest-bearing deposits in other financial                                
 institutions                                              10            10 
Securities available for sale                          44,388        43,799 
Federal Home Loan Bank stock                            3,060         3,060 
                                                                            
Loans:                                                                      
  Commercial                                          359,368       342,841 
  Mortgage                                            110,663        95,413 
  Consumer                                             13,801        10,923 
                                                 ------------  ------------ 
    Total Loans                                       483,832       449,177 
      Allowance for loan losses                        (4,661)       (5,218)
                                                 ------------  ------------ 
  Net loans                                           479,171       443,959 
                                                                            
Premises and equipment                                 10,210        10,633 
Other real estate held for sale                         1,884         3,212 
Deferred Tax Asset                                      9,933         9,131 
Other assets                                            5,925         5,215 
                                                 ------------  ------------ 
               
                                                             
TOTAL ASSETS                                     $    572,800  $    545,980 
                                                 ============  ============ 
                                                                            
LIABILITIES AND SHAREHOLDERS' EQUITY                                        
                                                                            
LIABILITIES:                                                                
Deposits:                                                                   
  Noninterest bearing deposits                   $     72,936  $     67,652 
  NOW, money market, interest checking                149,123       155,465 
  Savings                                              13,039        13,829 
  CDs less than $100,000                              140,495       135,550 
  CDs greater than $100,000                            23,159        24,355 
  Brokered                                             67,547        37,706 
                                                 ------------  ------------ 
      Total deposits                                  466,299       434,557 
                                                                            
  Borrowings                                           37,852        35,925 
  Other liabilities                                     3,400         3,050 
                                                 ------------  ------------ 
    Total liabilities                                 507,551       473,532 
                                                                            
SHAREHOLDERS' EQUITY:                                                       
  Preferred stock - No par value:                                           
    Authorized 500,000 shares, Issued and                                   
     outstanding - none and 11,000 shares                   -        11,000 
  Common stock and additional paid in capital -                             
   No par value                                                             
    Authorized - 18,000,000 shares                                          
    Issued and outstanding - 5,541,390 and                                  
     5,559,914, shares respectively                    53,621        53,797 
    Retained earnings                                  11,412         6,727 
    Accumulated other comprehensive income                216           924 
                                                 ------------  ------------ 
                                                                            
      Total shareholders' equity                       65,249        72,448 
                                                 ------------  ------------ 
                                                                            
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY       $    572,800  $    545,980 
                                                 ============  ============ 
                                                                            
                                                                            
                                                                            
              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES               
                   CONSOLIDATED STATEMENTS OF OPERATIONS                    
                                                                            
                                          For the Years Ended December 31,  
                                        ----------------------------------- 
                                            2013         2012        2011   
                                        -----------  -----------  --------- 
                                        (Unaudited)   (Audited)   (Audited) 
INTEREST INCOME:                                                            
  Interest and fees on loans:                                               
    Taxable                             $    24,295  $    23,197  $  21,627 
    Tax-exempt                                  105          116        147 
  Interest on securities:                                                   
    Taxable                                     961          948      1,162 
    Tax-exempt                                   34           27         28 
  Other interest income                         128          139        108 
                                        -----------  -----------  --------- 
    Total interest income                    25,523       24,427     23,072 
                                        -----------  -----------  --------- 
                                                                            
INTEREST EXPENSE:                                                           
  Deposits                                    3,468        3,946      4,530 
  Borrowings                                    656          657        613 
                                        -----------  -----------  --------- 
    Total interest expense                    4,124        4,603      5,143 
                                        -----------  -----------  --------- 
                                                                            
Net interest income                          21,399       19,824     17,929 
Provision for loan losses                     1,675          945      2,300 
                                        -----------  -----------  --------- 
Net interest income after provision for                                     
 loan losses                                 19,724       18,879     15,629 
                                        -----------  -----------  --------- 
                                                                            
OTHER INCOME:                                                               
  Deposit service fees                          667          699        832 
  Income from secondary market loans                                        
   sold                                       1,028        1,390        700 
  SBA/USDA loan sale gains                      951        1,176      1,500 
  Mortgage servicing income                     790          417        400 
  Net security gains                             73            -         (1)
  Other                                         429          361        225 
                                        -----------  -----------  --------- 
    Total other income                        3,938        4,043      3,656 
                                        -----------  -----------  --------- 
                                                                            
OTHER EXPENSE:                                                              
  Salaries and employee benefits              9,351        8,288      7,275 
  Occupancy                                   1,481        1,372      1,376 
  Furniture and equipment                     1,102          885        827 
  Data processing                             1,071          991        761 
  Professional service fees                   1,069        1,196        756 
  Loan and deposit                              617          877      1,137 
  Writedowns and losses on other real                                       
   estate held for sale                         265          489      1,137 
  FDIC insurance assessment                     385          459        849 
  Telephone                                     303          233        215 
  Advertising                                   436          376        351 
  Other                                       2,048        1,591      1,285 
                                        -----------  -----------  --------- 
    Total other expenses                     18,128       16,757     15,969 
                                        -----------  -----------  --------- 
                 
                                                           
Income before income taxes                    5,534        6,165      3,316 
Provision (benefit of) for income taxes        (403)        (922)     1,098 
                                        -----------  -----------  --------- 
                                                                            
NET INCOME                                    5,937        7,087      2,218 
                                        -----------  -----------  --------- 
                                                                            
Preferred dividend and accretion of                                         
 discount                                       308          629        766 
                                                                            
                                        -----------  -----------  --------- 
NET INCOME AVAILABLE TO COMMON                                              
 SHAREHOLDERS                           $     5,629  $     6,458  $   1,452 
                                        ===========  ===========  ========= 
                                                                            
INCOME PER COMMON SHARE:                                                    
  Basic                                 $      1.01  $      1.51  $     .42 
                                        ===========  ===========  ========= 
  Diluted                               $      1.00  $      1.51  $     .41 
                                        ===========  ===========  ========= 
                                                                            
                                                                            
                                                                            
               MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES              
                      LOAN PORTFOLIO AND CREDIT QUALITY                     
                                                                            
(Dollars in thousands)                                                      
                                                                            
Loan Portfolio Balances (at end of period):                                 
                                                                            
                                                  December 31,  December 31,
                                                      2013          2012    
                                                  ------------  ------------
                                                   (Unaudited)   (Unaudited)
Commercial Loans:                                                           
Real estate - operators of nonresidential                                   
 buildings                                        $    100,333  $     95,151
Hospitality and tourism                                 45,360        40,787
Lessors of residential buildings                        14,191        12,128
Gasoline stations and convenience stores                11,534        11,393
Real estate agents and managers                         10,922        10,597
Commercial construction                                 10,904        17,229
Other                                                  166,124       155,556
                                                  ------------  ------------
  Total Commercial Loans                               359,368       342,841
                                                                            
1-4 family residential real estate                     103,768        87,948
Consumer                                                13,801        10,923
Consumer construction                                    6,895         7,465
                                                  ------------  ------------
                                                                            
  Total Loans                                     $    483,832  $    449,177
                                                  ============  ============
                                                                            
                                                                            
                                                                            
Credit Quality (at end of period):                                          
                                                                            
                                                December 31,   December 31, 
                                                    2013           2012     
                                                ------------   ------------ 
                                                 (Unaudited)    (Unaudited) 
Nonperforming Assets :                                                      
Nonaccrual loans                                $      2,024   $      4,687 
Loans past due 90 days or more                             -              - 
Restructured loans                                         -              - 
                                                ------------   ------------ 
  Total nonperforming loans                            2,024          4,687 
Other real estate owned                                1,884          3,212 
                                                ------------   ------------ 
  Total nonperforming assets                    $      3,908   $      7,899 
                                                ============   ============ 
Nonperforming loans as a % of loans                      .42%          1.04%
                                                ------------   ------------ 
Nonperforming assets as a % of assets                    .68%          1.45%
                                                ------------   ------------ 
Reserve for Loan Losses:                                                    
At period end                                   $      4,661   $      5,218 
                                                ------------   ------------ 
As a % of average loans                                  .96%          1.24%
                                                ------------   ------------ 
As a % of nonperforming loans                         230.29%        111.33%
                                                ------------   ------------ 
As a % of nonaccrual loans                            230.29%        111.33%
                                                ------------   ------------ 
Texas Ratio                                             5.59%         10.17%
                                                ------------   ------------ 
                                                                            
Charge-off Information (year to date):                                      
  Average loans                                 $    462,500   $    422,440 
                                                ------------   ------------ 
  Net charge-offs                               $      2,232   $        978 
                                                ------------   ------------ 
  Charge-offs as a % of average loans,                                      
   annualized                                            .48%           .23%
                                                ------------   ------------ 
                                                                            
                                                                            
                                                                            

 
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES                             
LOAN PORTFOLIO AND CREDIT QUALITY                                           
                                                                            
                                                                            
                ------------------------------------------------------------
       
                                 QUARTER ENDED                       
                ------------------------------------------------------------
                                         (Unaudited)                        
                ------------------------------------------------------------
                  December    September   June 30,    March 31,   December  
                  31, 2013    30,  2013     2013        2013      31, 2012  
                ------------ ----------- ----------- ----------- -----------
BALANCE SHEET                                                               
 (Dollars in                                                                
 thousands)                                                                 
                                                                            
Total loans      $  483,832  $  472,495  $  455,555  $  454,051  $  449,177 
Allowance for                                                               
 loan losses         (4,661)     (4,959)     (5,177)     (5,037)     (5,218)
                 ----------  ----------  ----------  ----------  ---------- 
  Total loans,                                                              
   net              479,171     467,536     450,378     449,014     443,959 
Total assets        572,800     567,917     553,501     541,896     545,980 
Core deposits       375,593     375,166     357,935     362,911     372,496 
Noncore deposits     90,706      86,522      89,972      62,325      62,061 
                 ----------  ----------  ----------  ----------  ---------- 
  Total deposits    466,299     461,688     447,907     425,236     434,557 
Total borrowings     37,852      35,852      35,925      40,925      35,925 
Common                                                                      
 shareholders'                                                              
 equity              65,249      63,045      62,520      62,039      61,448 
Total                                                                       
 shareholders'                                                              
 equity              65,249      67,045      66,520      73,039      72,448 
Total shares                                                                
 outstanding      5,541,390   5,581,339   5,554,459   5,557,859   5,559,859 
Weighted average                                                            
 shares                                                                     
 outstanding      5,555,952   5,562,835   5,556,133   5,559,859   5,559,859 
                                                                            
AVERAGE BALANCES                                                            
 (Dollars in                                                                
 thousands)                                                                 
                                                                            
Assets           $  569,443  $  560,089  $  548,455  $  541,279  $  545,661 
Loans               479,321     464,324     456,937     449,065     438,168 
Deposits            461,630     456,191     439,780     429,174     433,573 
Common Equity        62,950      62,134      62,483      61,238      61,936 
Equity               66,906      66,134      67,483      72,238      72,936 
                                                                            
INCOME STATEMENT                                                            
 (Dollars in                                                                
 thousands)                                                                 
                                                                            
Net interest                                                                
 income          $    5,626  $    5,348  $    5,269  $    5,156  $    5,112 
Provision for                                                               
 loan losses            825         375         100         375         150 
                 ----------  ----------  ----------  ----------  ---------- 
  Net interest                                                              
   income after                                                             
   provision          4,801       4,973       5,169       4,781       4,962 
Total                                                                       
 noninterest                                                                
 income               1,191         738       1,251         758         983 
Total                                                                       
 noninterest                                                                
 expense              4,935       4,359       4,523       4,311       4,349 
                 ----------  ----------  ----------  ----------  ---------- 
Income before                                                               
 taxes                1,057       1,352       1,897       1,228       1,596 
Provision for                                                               
 income taxes        (1,911)        456         637         415         536 
                 ----------  ----------  ----------  ----------  ---------- 
  Net income          2,968         896       1,260         813       1,060 
                 ----------  ----------  ----------  ----------  ---------- 
Preferred                                                                   
 dividend                                                                   
 expense                 58          50          63         137         138 
                 ----------  ----------  ----------  ----------  ---------- 
Net income                                                                  
 available to                                                               
 common                                                                     
 shareholders    $    2,910  $      846  $    1,197  $      676  $      922 
                 ==========  ==========  ==========  ==========  ========== 
                                                                            
PER SHARE DATA                                                              
                                                                            
Earnings         $      .52  $      .15  $      .22  $      .12  $      .21 
Book value per                                                              
 common share         11.77       11.30       11.26       11.16       11.05 
Market value,                                                               
 closing price         9.90        9.10        8.88        9.21        7.09 
                                                                            
ASSET QUALITY                                                               
 RATIOS                                                                     
                                                                            
Nonperforming                                                               
 loans/total                                                                
 loans                  .42%        .91%        .87%        .84%       1.04%
Nonperforming                                                               
 assets/total                                                               
 assets                 .68        1.21        1.17        1.41        1.45 
Allowance for                                                               
 loan                                                                       
 losses/total                                                               
 loans                  .96        1.09        1.14        1.11        1.16 
Allowance for                                                               
 loan                                                                       
 losses/                                                            
 nonperforming 
 loans               230.29      114.98      129.98      131.41      111.33 
Texas ratio (1)        5.59        9.56        9.02        9.81       10.17 
                                                                            
PROFITABILITY                                                               
 RATIOS                                                                     
                                                                            
Return on                                                                   
 average assets        2.03%        .60%        .88%        .51%        .67%
Return on                                                                   
 average common                                                             
 equity               18.34        5.40        7.69        4.47        5.93 
Return on                                                                   
 average equity       17.26        5.08        7.12        3.79        5.03 
Net interest                                                                
 margin                4.24        4.12        4.16        4.18        4.11 
Efficiency ratio      66.94       70.64       68.02       72.65       70.52 
Average                                                                     
 loans/average                                                              
 deposits            103.83      101.78      103.90      104.63       99.45 
                                                                            
CAPITAL ADEQUACY                                                            
 RATIOS                                                                     
                                                                            
Tier 1 leverage                                                             
 ratio                10.31%      10.90%      11.01%      12.23%      11.98%
Tier 1 capital                                                              
 to risk                                                                    
 weighted assets      11.83       12.45       12.74       13.98       13.81 
Total capital to                                                            
 risk weighted                                                              
 assets               12.79       13.47       13.85       15.06       14.93 
Average                                                                     
 equity/average                                                             
 assets (for the                                                            
 quarter)             11.75       11.81       12.30       13.35       13.37 
Tangible                                                                    
 equity/tangible                                                            
 assets (at                                                                 
 quarter end)         11.75       11.81       12.30       13.35       13.37 
                                                                            
  (1) Texas ratio equals nonperforming assets divided by shareholders'      
equity plus allowance for loan losses                                       

  
Contact: 
Ernie Krueger
EVP/CFO
(906) 341-7158
Website: www.bankmbank.com 
 
 
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