þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
MICHIGAN (State or other jurisdiction of incorporation or organization) |
38-2062816 (I.R.S. Employer Identification No.) |
130 SOUTH CEDAR STREET, MANISTIQUE, MI (Address of principal executive offices) |
49854 (Zip Code) |
Large Accelerated Filer o | Accelerated Filer o | Non-accelerated Filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
(Unaudited) | (Unaudited) | |||||||||||
ASSETS |
||||||||||||
Cash and due from banks |
$ | 41,715 | $ | 22,719 | $ | 19,359 | ||||||
Federal funds sold |
12,000 | 12,000 | 36,000 | |||||||||
Cash and cash equivalents |
53,715 | 34,719 | 55,359 | |||||||||
Interest-bearing deposits in other financial institutions |
734 | 713 | 700 | |||||||||
Securities available for sale |
37,543 | 33,860 | 36,841 | |||||||||
Federal Home Loan Bank stock |
3,423 | 3,423 | 3,794 | |||||||||
Loans: |
||||||||||||
Commercial |
287,760 | 297,047 | 296,271 | |||||||||
Mortgage |
81,404 | 80,756 | 76,996 | |||||||||
Consumer |
5,445 | 5,283 | 4,044 | |||||||||
Total Loans |
374,609 | 383,086 | 377,311 | |||||||||
Allowance for loan losses |
(6,184 | ) | (6,613 | ) | (4,737 | ) | ||||||
Net loans |
368,425 | 376,473 | 372,574 | |||||||||
Premises and equipment |
9,715 | 9,660 | 10,060 | |||||||||
Other real estate held for sale |
5,081 | 5,562 | 7,723 | |||||||||
Other assets |
14,154 | 14,286 | 15,376 | |||||||||
TOTAL ASSETS |
$ | 492,790 | $ | 478,696 | $ | 502,427 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY |
||||||||||||
LIABILITIES: |
||||||||||||
Deposits: |
||||||||||||
Noninterest bearing deposits |
$ | 39,269 | $ | 41,264 | $ | 30,356 | ||||||
NOW, money market, interest checking |
154,420 | 134,703 | 109,374 | |||||||||
Savings |
17,691 | 17,670 | 20,675 | |||||||||
CDs<$100,000 |
104,258 | 96,977 | 75,822 | |||||||||
CDs>$100,000 |
21,803 | 22,698 | 30,173 | |||||||||
Brokered |
63,342 | 73,467 | 138,812 | |||||||||
Total deposits |
400,783 | 386,779 | 405,212 | |||||||||
Borrowings: |
||||||||||||
Federal Home Loan Bank |
35,000 | 35,000 | 35,000 | |||||||||
Other |
1,069 | 1,069 | 1,140 | |||||||||
Total borrowings |
36,069 | 36,069 | 36,140 | |||||||||
Other liabilities |
1,841 | 1,966 | 2,353 | |||||||||
Total liabilities |
438,693 | 424,814 | 443,705 | |||||||||
SHAREHOLDERS EQUITY: |
||||||||||||
Preferred stock No par value: |
||||||||||||
Authorized 500,000 shares, 11,000 shares issued and
outstanding |
10,757 | 10,706 | 10,562 | |||||||||
Common stock and additional paid in capital No par value
Authorized 18,000,000 shares |
||||||||||||
Issued and outstanding 3,419,736 shares |
43,525 | 43,525 | 43,502 | |||||||||
Retained earnings |
(705 | ) | (961 | ) | 3,724 | |||||||
Accumulated other comprehensive income |
520 | 612 | 934 | |||||||||
Total shareholders equity |
54,097 | 53,882 | 58,722 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
$ | 492,790 | $ | 478,696 | $ | 502,427 | ||||||
1.
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
(Unaudited) | ||||||||
INTEREST INCOME: |
||||||||
Interest and fees on loans: |
||||||||
Taxable |
$ | 5,136 | $ | 5,191 | ||||
Tax-exempt |
42 | 52 | ||||||
Interest on securities: |
||||||||
Taxable |
282 | 397 | ||||||
Tax-exempt |
7 | 7 | ||||||
Other interest income |
33 | 40 | ||||||
Total interest income |
5,500 | 5,687 | ||||||
INTEREST EXPENSE: |
||||||||
Deposits |
1,219 | 1,457 | ||||||
Borrowings |
140 | 208 | ||||||
Total interest expense |
1,359 | 1,665 | ||||||
Net interest income |
4,141 | 4,022 | ||||||
Provision for loan losses |
| 900 | ||||||
Net interest income after provision for loan losses |
4,141 | 3,122 | ||||||
OTHER INCOME: |
||||||||
Service fees |
217 | 223 | ||||||
Net security gains |
| 215 | ||||||
Income from loans sold |
314 | 316 | ||||||
Other |
46 | 53 | ||||||
Total other income |
577 | 807 | ||||||
OTHER EXPENSE: |
||||||||
Salaries and employee benefits |
1,824 | 1,720 | ||||||
Occupancy |
365 | 345 | ||||||
Furniture and equipment |
194 | 194 | ||||||
Data processing |
176 | 189 | ||||||
Professional service fees |
153 | 173 | ||||||
Loan and deposit |
179 | 268 | ||||||
ORE writedowns and (gains) losses on sale |
467 | 147 | ||||||
FDIC insurance assessment |
285 | 222 | ||||||
Telephone |
51 | 47 | ||||||
Advertising |
88 | 72 | ||||||
Other |
277 | 252 | ||||||
Total other expense |
4,059 | 3,629 | ||||||
Income before provision for (benefit of) income taxes |
659 | 300 | ||||||
Provision for (benefit of) income taxes |
214 | (3,411 | ) | |||||
NET INCOME |
445 | 3,711 | ||||||
Preferred dividend and accretion of discount |
189 | 185 | ||||||
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS |
$ | 256 | $ | 3,526 | ||||
INCOME PER COMMON SHARE: |
||||||||
Basic |
$ | .07 | $ | 1.03 | ||||
Diluted |
$ | .07 | $ | 1.03 | ||||
2.
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Balance, beginning of period |
$ | 53,882 | $ | 55,299 | ||||
Net income for period |
445 | 3,711 | ||||||
Net unrealized gain (loss) on securities available for sale |
(92 | ) | (159 | ) | ||||
Total comprehensive income |
353 | 3,552 | ||||||
Dividend on preferred stock |
(189 | ) | (185 | ) | ||||
Stock option compensation |
| 8 | ||||||
Accretion of preferred stock discount |
51 | 48 | ||||||
Balance, end of period |
$ | 54,097 | $ | 58,722 | ||||
3.
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash Flows from Operating Activities: |
||||||||
Net income |
$ | 445 | $ | 3,711 | ||||
Adjustments to reconcile net income to net cash
provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
347 | 348 | ||||||
Provision for loan losses |
| 900 | ||||||
Provision for (benefit of) income taxes |
214 | (3,411 | ) | |||||
(Gain) loss on sales/calls of securities available for sale |
| (215 | ) | |||||
(Gain) loss on sale of secondary market loans |
(42 | ) | (46 | ) | ||||
Origination of secondary market loans held for sale |
(4,926 | ) | (2,810 | ) | ||||
Proceeds from secondary market loans held for sale |
5,005 | 2,873 | ||||||
(Gain) loss on sale of premises, equipment, and other real estate |
15 | 20 | ||||||
Writedown of other real estate |
452 | 128 | ||||||
Stock option compensation |
| 8 | ||||||
Change in other assets |
(35 | ) | 12,021 | |||||
Change in other liabilities |
(125 | ) | (196 | ) | ||||
Net cash provided by operating activities |
1,350 | 13,331 | ||||||
Cash Flows from Investing Activities: |
||||||||
Net decrease in loans |
7,213 | 2,687 | ||||||
Net increase in interest-bearing deposits in other financial institutions |
(21 | ) | (22 | ) | ||||
Purchase of securities available for sale |
(8,088 | ) | | |||||
Proceeds from maturities, sales, calls or paydowns of securities
available for sale |
4,194 | 9,560 | ||||||
Capital expenditures |
(330 | ) | (156 | ) | ||||
Proceeds from sale of premises, equipment, and other real estate |
812 | 840 | ||||||
Net cash provided by investing activities |
3,780 | 12,909 | ||||||
Cash Flows from Financing Activities: |
||||||||
Net increase (decrease) in deposits |
14,004 | (16,177 | ) | |||||
Dividend on preferred stock |
(138 | ) | (137 | ) | ||||
Net cash provided by (used in) financing activities |
13,866 | (16,314 | ) | |||||
Net increase in cash and cash equivalents |
18,996 | 9,926 | ||||||
Cash and cash equivalents at beginning of period |
34,719 | 45,433 | ||||||
Cash and cash equivalents at end of period |
$ | 53,715 | $ | 55,359 | ||||
Supplemental Cash Flow Information: |
||||||||
Cash paid during the year for: |
||||||||
Interest |
$ | 1,315 | $ | 1,658 | ||||
Income taxes |
25 | | ||||||
Noncash Investing and Financing Activities: |
||||||||
Transfers of Foreclosures from Loans to Other Real Estate Held for Sale
(net of adjustments made through the allowance for loan losses) |
798 | 2,907 |
4.
Basis of Presentation | ||
The unaudited condensed consolidated financial statements of Mackinac Financial Corporation (the Corporation) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Corporations Annual Report on Form 10-K for the year ended December 31, 2010. | ||
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. | ||
In order to properly reflect some categories of other income and other expenses, reclassifications of expense and income items have been made to prior period numbers. The net other income and other expenses was not changed due to these reclassifications. | ||
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, and the valuation of deferred tax assets and mortgage servicing rights. | ||
Allowance for Loan Losses | ||
The allowance for loan losses includes specific allowances related to commercial loans, when they have been judged to be impaired. A loan is impaired when, based on current information, it is probable that the Corporation will not collect all amounts due in accordance with the contractual terms of the loan agreement. These specific allowances are based on discounted cash flows of expected future payments using the loans initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. | ||
The Corporation continues to maintain a general allowance for loan losses for loans not considered impaired. The allowance for loan losses is maintained at a level which management believes is adequate to provide for possible loan losses. Management periodically evaluates the adequacy of the allowance using the Corporations past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, current economic conditions, and other factors. The allowance does not include the effects of expected losses related to future events or future changes in economic conditions. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change. Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additions to the allowance for loan losses based on their judgments of collectability. | ||
In managements opinion, the allowance for loan losses is adequate to cover probable losses relating to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio as of the balance sheet date. |
5.
1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) | |
Stock Option Plans | ||
The Corporation sponsors three stock option plans. One plan was approved during 2000 and applies to officers, employees, and nonemployee directors. This plan was amended as a part of the December 2004 stock offering and recapitalization. The amendment, approved by shareholders, increased the shares available under this plan by 428,587 shares from the original 25,000 (adjusted for the 1:20 reverse stock split), to a total authorized share balance of 453,587. The other two plans, one for officers and employees and the other for nonemployee directors, were approved in 1997. A total of 30,000 shares (adjusted for the 1:20 split), were made available for grant under these plans. Options under all of the plans are granted at the discretion of a committee of the Corporations Board of Directors. Options to purchase shares of the Corporations stock were granted at a price equal to the market price of the stock at the date of grant. The committee determined the vesting of the options when they were granted as established under the plan. All of the option plans have expired. |
2. | RECENT ACCOUNTING PRONOUNCEMENTS | |
In April 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updated (ASU) No. 2001-02, Receivables (Topic 310): A Creditors Determination of Whether a Restructuring is a Troubled Debt Restructuring. The ASU will improve financial reporting by creating greater consistency in the way GAAP is applied for various types of debt restructurings. The ASU clarifies which loan modifications constitute troubled debt restructurings. The new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption. The provisions of this guidance are not expected to have a significant impact on our consolidated financial condition, results of operation or liquidity. | ||
In May 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements. The ASU is intended to improve financial reporting of repurchase agreements (repos) and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. The amendments to the Codification in this ASU are intended to improve the accounting for these transactions by removing them from the assessment of effective control the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets. The guidance in the ASU is effective for the first interim or annual period beginning on or after December 15, 2011. The provisions of this guidance are not expected to have a significant impact on the Corporations consolidated financial condition, results of operation or liquidity. |
3. | EARNINGS PER SHARE | |
Diluted earnings per share, which reflects the potential dilution that could occur if outstanding stock options were exercised and stock awards were fully vested and resulted in the issuance of common stock that then shared in our earnings, is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, after giving effect for dilutive shares shown issued. |
6.
3. | EARNINGS PER SHARE (Continued) | |
The following shows the computation of basic and diluted earnings per share for the three months ended March 31, 2011 and 2010 (dollars in thousands, except per share data): |
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
(Numerator): |
||||||||
Net income |
$ | 445 | $ | 3,711 | ||||
Preferred stock dividends |
189 | 185 | ||||||
Net income available to common shareholders |
$ | 256 | $ | 3,526 | ||||
(Denominator): |
||||||||
Weighted average shares outstanding basic |
3,419,736 | 3,419,736 | ||||||
Dilutive effect of stock options (1) |
| | ||||||
Dilutive effect of common stock warrants (2) |
90,074 | | ||||||
Weighted average shares outstanding diluted |
3,509,810 | 3,419,736 | ||||||
Income per common share: |
||||||||
Basic |
$ | .07 | $ | 1.03 | ||||
Diluted |
$ | .07 | $ | 1.03 |
(1) | At March 31, 2011 and 2010, there were 394,072 and 411,057 outstanding stock potions, respectively, which are not included in the computation of diluted earnings per share because they are considered anti-dilutive. | |
(2) | At March 31, 2011 and March 31, 2010, there were 379,310 common stock warrants outstanding at an exercise price of $4.35. The dilutive impact for these shares was negligible for the three month period ended March 31, 2011 and not at all dilutive to the three month period ended March 31, 2010. |
4. | INVESTMENT SECURITIES | |
The amortized cost and estimated fair value of investment securities available for sale as of March 31, 2011, December 31, 2010 and March 31, 2010 are as follows (dollars in thousands): |
Gross | Gross | |||||||||||||||
Amortized | Unrealized | Unrealized | Estimated | |||||||||||||
Cost | Gains | Losses | Fair Value | |||||||||||||
March 31, 2011 |
||||||||||||||||
US Agencies |
$ | 7,742 | $ | 11 | $ | | $ | 7,753 | ||||||||
US Agencies MBS |
22,528 | 739 | | 23,267 | ||||||||||||
Obligations of states and political subdivisions |
1,146 | 41 | (4 | ) | 1,183 | |||||||||||
Corporate bonds |
5,338 | 2 | | 5,340 | ||||||||||||
Total securities available for sale |
$ | 36,754 | $ | 793 | $ | (4 | ) | $ | 37,543 | |||||||
December 31, 2010 |
||||||||||||||||
US Agencies |
$ | 5,000 | $ | | $ | (27 | ) | $ | 4,973 | |||||||
US Agencies MBS |
26,787 | 923 | | 27,710 | ||||||||||||
Obligations of states and political subdivisions |
1,146 | 35 | (4 | ) | 1,177 | |||||||||||
Total securities available for sale |
$ | 32,933 | $ | 958 | $ | (31 | ) | $ | 33,860 | |||||||
March 31, 2010 |
||||||||||||||||
US Agencies MBS |
$ | 34,220 | $ | 1,326 | $ | | $ | 35,546 | ||||||||
Obligations of states and political subdivisions |
1,206 | 89 | | 1,295 | ||||||||||||
Total securities available for sale |
$ | 35,426 | $ | 1,415 | $ | | $ | 36,841 | ||||||||
7.
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Commercial real estate |
$ | 200,649 | $ | 194,859 | $ | 198,439 | ||||||
Commercial, financial, and agricultural |
63,673 | 68,858 | 69,797 | |||||||||
One to four family residential real estate |
75,663 | 75,074 | 70,087 | |||||||||
Construction : |
||||||||||||
Consumer |
5,741 | 5,682 | 6,909 | |||||||||
Commercial |
23,438 | 33,330 | 28,035 | |||||||||
Consumer |
5,445 | 5,283 | 4,044 | |||||||||
Total loans |
$ | 374,609 | $ | 383,086 | $ | 377,311 | ||||||
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Balance at beginning of period |
$ | 6,613 | $ | 5,225 | $ | 5,225 | ||||||
Recoveries on loans previously charged off |
9 | 374 | 19 | |||||||||
Loans charged off |
(438 | ) | (5,486 | ) | (1,407 | ) | ||||||
Provision |
| 6,500 | 900 | |||||||||
Balance at end of period |
$ | 6,184 | $ | 6,613 | $ | 4,737 | ||||||
Commercial, | One to four | |||||||||||||||||||||||||||||||
Commercial | financial and | Commercial | family residential | Consumer | ||||||||||||||||||||||||||||
real estate | agricultural | construction | real estate | construction | Consumer | Unallocated | Total | |||||||||||||||||||||||||
Allowance for loan loss reserve: |
||||||||||||||||||||||||||||||||
Beginning balance ALLR |
$ | 3,460 | $ | 1,018 | $ | 389 | $ | 1,622 | $ | | $ | | $ | 124 | $ | 6,613 | ||||||||||||||||
Charge-offs |
(215 | ) | (25 | ) | | (190 | ) | | (8 | ) | (438 | ) | ||||||||||||||||||||
Recoveries |
3 | 1 | | | | 5 | | 9 | ||||||||||||||||||||||||
Provision |
(242 | ) | (13 | ) | (128 | ) | 356 | | 3 | 24 | | |||||||||||||||||||||
Unallocated assignment |
| | | | | | | | ||||||||||||||||||||||||
Ending balance ALLR |
$ | 3,006 | $ | 981 | $ | 261 | $ | 1,788 | $ | | $ | | $ | 148 | $ | 6,184 | ||||||||||||||||
Loans: |
||||||||||||||||||||||||||||||||
Ending balance |
$ | 200,649 | $ | 63,673 | $ | 23,438 | $ | 75,663 | $ | 5,741 | $ | 5,445 | $ | | $ | 374,609 | ||||||||||||||||
Ending balance ALLR |
(3,006 | ) | (981 | ) | (261 | ) | (1,788 | ) | | | (148 | ) | (6,184 | ) | ||||||||||||||||||
Net loans |
$ | 197,643 | $ | 62,692 | $ | 23,177 | $ | 73,875 | $ | 5,741 | $ | 5,445 | $ | (148 | ) | $ | 368,425 | |||||||||||||||
Ending balance ALLR |
||||||||||||||||||||||||||||||||
Individually evaluated |
1,144 | 361 | 39 | 845 | | | | 2,389 | ||||||||||||||||||||||||
Collectively evaluated |
1,862 | 620 | 222 | 943 | | | 148 | 3,795 | ||||||||||||||||||||||||
Total |
$ | 3,006 | $ | 981 | $ | 261 | $ | 1,788 | $ | | $ | | $ | 148 | $ | 6,184 | ||||||||||||||||
8.
5. | LOANS (Continued) |
9.
5. | LOANS (Continued) |
(1) | (2) | (3) | (4) | (5) | (6) | (7) | (8) | Rating | ||||||||||||||||||||||||||||||||
Excellent | Good | Average | Acceptable | Sp. Mention | Substandard | Doubtful | Loss | Unassigned | Total | |||||||||||||||||||||||||||||||
Commercial real estate |
$ | 6,418 | $ | 16,899 | $ | 42,970 | $ | 116,110 | $ | 6,490 | $ | 9,049 | $ | 2,582 | $ | | $ | 131 | $ | 200,649 | ||||||||||||||||||||
Commercial, financial
and agricultural |
3,373 | 3,722 | 15,524 | 37,455 | 230 | 2,534 | | | 835 | 63,673 | ||||||||||||||||||||||||||||||
Commercial construction |
186 | 563 | 5,000 | 11,400 | 2,237 | 516 | | | 3,536 | 23,438 | ||||||||||||||||||||||||||||||
One to four family
residential real estate |
33 | 3,584 | 3,118 | 4,256 | 1,454 | 3,786 | | | 59,432 | 75,663 | ||||||||||||||||||||||||||||||
Consumer construction |
| | | | | | | | 5,741 | 5,741 | ||||||||||||||||||||||||||||||
Consumer |
| | 92 | 475 | | | | | 4,878 | 5,445 | ||||||||||||||||||||||||||||||
Total loans |
$ | 10,010 | $ | 24,768 | $ | 66,704 | $ | 169,696 | $ | 10,411 | $ | 15,885 | $ | 2,582 | $ | | $ | 74,553 | $ | 374,609 | ||||||||||||||||||||
(1) | (2) | (3) | (4) | (5) | (6) | (7) | Rating | |||||||||||||||||||||||||||||
Excellent | Good | Average | Acceptable | Sp. Mention | Substandard | Doubtful | Unassigned | Total | ||||||||||||||||||||||||||||
Commercial real estate |
$ | 4,745 | $ | 16,975 | $ | 44,408 | $ | 109,911 | $ | 3,789 | $ | 10,997 | $ | 3,956 | $ | 78 | $ | 194,859 | ||||||||||||||||||
Commercial, financial
and agricultural |
3,726 | 5,275 | 16,466 | 39,844 | 259 | 2,636 | | 652 | 68,858 | |||||||||||||||||||||||||||
Commercial construction |
| 579 | 4,416 | 22,280 | 1,921 | 568 | | 3,566 | 33,330 | |||||||||||||||||||||||||||
One-to-four family
residential real estate |
33 | 3,589 | 3,146 | 4,271 | 1,464 | 3,941 | | 58,630 | 75,074 | |||||||||||||||||||||||||||
Consumer construction |
| | | | | | | 5,682 | 5,682 | |||||||||||||||||||||||||||
Consumer |
| | 34 | 368 | | | | 4,881 | 5,283 | |||||||||||||||||||||||||||
Total loans |
$ | 8,504 | $ | 26,418 | $ | 68,470 | $ | 176,674 | $ | 7,433 | $ | 18,142 | $ | 3,956 | $ | 73,489 | $ | 383,086 | ||||||||||||||||||
10.
5. | LOANS (Continued) |
11.
5. | LOANS (Continued) |
Interest Income | Interest Income | |||||||||||||||||||||||
Nonaccrual | Accrual | Average | Related | Recognized | on | |||||||||||||||||||
Basis | Basis | Investment | Valuation Reserve | During Impairment | Accrual Basis | |||||||||||||||||||
March 31, 2011 |
||||||||||||||||||||||||
With no valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 876 | $ | | $ | 5,602 | $ | | $ | 24 | $ | 30 | ||||||||||||
Commercial, financial and agricultural |
52 | | 63 | | | 1 | ||||||||||||||||||
Commercial construction |
458 | | 458 | | | 8 | ||||||||||||||||||
One to four family residential real estate |
942 | 105 | 785 | | | 11 | ||||||||||||||||||
Consumer construction |
| | 13 | | | | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
With a valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 3,181 | $ | | $ | 1,156 | $ | 770 | $ | 33 | $ | 22 | ||||||||||||
Commercial, financial and agricultural |
1,069 | | 971 | 332 | | 20 | ||||||||||||||||||
Commercial construction |
| | | | | | ||||||||||||||||||
One to four family residential real estate |
3,281 | | 1,633 | 753 | | 35 | ||||||||||||||||||
Consumer construction |
| | | | | | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total: |
||||||||||||||||||||||||
Commercial real estate |
$ | 4,057 | $ | | $ | 6,758 | $ | 770 | $ | 57 | $ | 52 | ||||||||||||
Commercial, financial and agricultural |
1,121 | | 1,034 | 332 | | 21 | ||||||||||||||||||
Commercial construction |
458 | | 458 | | | 8 | ||||||||||||||||||
One to four family residential real estate |
4,223 | 105 | 2,418 | 753 | | 46 | ||||||||||||||||||
Consumer construction |
| | 13 | | | | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total |
$ | 9,859 | $ | 105 | $ | 10,681 | $ | 1,855 | $ | 57 | $ | 127 | ||||||||||||
December 31, 2010 |
||||||||||||||||||||||||
With no valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 960 | $ | | $ | 987 | $ | | $ | | $ | 71 | ||||||||||||
Commercial, financial and agricultural |
51 | | 13 | | | 1 | ||||||||||||||||||
Commercial construction |
458 | | 1,186 | | 11 | 33 | ||||||||||||||||||
One to four family residential real estate |
362 | 105 | 237 | | 1 | 13 | ||||||||||||||||||
Consumer construction |
| | | | | | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
With a valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 2,562 | $ | 4,537 | $ | 6,531 | $ | 1,258 | $ | 117 | $ | 306 | ||||||||||||
Commercial, financial and agricultural |
709 | | 1,660 | 279 | | 95 | ||||||||||||||||||
Commercial construction |
| | | | | 21 | ||||||||||||||||||
One to four family residential real estate |
767 | | 730 | 230 | 12 | 39 | ||||||||||||||||||
Consumer construction |
52 | | 52 | 1 | | 4 | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total: |
||||||||||||||||||||||||
Commercial real estate |
$ | 3,522 | $ | 4,537 | $ | 7,518 | $ | 1,258 | $ | 117 | $ | 377 | ||||||||||||
Commercial, financial and agricultural |
760 | | 1,673 | 279 | | 96 | ||||||||||||||||||
Commercial construction |
458 | | 1,186 | | 11 | 54 | ||||||||||||||||||
One to four family residential real estate |
1,129 | 105 | 967 | 230 | 13 | 52 | ||||||||||||||||||
Consumer construction |
52 | | 52 | 1 | | 4 | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total |
$ | 5,921 | $ | 4,642 | $ | 11,396 | $ | 1,768 | $ | 141 | $ | 583 | ||||||||||||
12.
5. | LOANS (Continued) |
Interest Income | Interest Income | |||||||||||||||||||||||
Nonaccrual | Accrual | Average | Related | Recognized | on | |||||||||||||||||||
Basis | Basis | Investment | Valuation Reserve | During Impairment | Accrual Basis | |||||||||||||||||||
March 31, 2010 |
||||||||||||||||||||||||
With no valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 4,337 | $ | 869 | $ | 5,809 | $ | | $ | 6 | $ | 67 | ||||||||||||
Commercial, financial and agricultural |
526 | | 804 | | | 9 | ||||||||||||||||||
Commercial construction |
818 | | 1,622 | | | 18 | ||||||||||||||||||
One to four family residential real estate |
238 | | 1,156 | | | 10 | ||||||||||||||||||
Consumer construction |
52 | | 52 | | | 1 | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
With a valuation reserve: |
||||||||||||||||||||||||
Commercial real estate |
$ | 1,535 | $ | | $ | 1,532 | $ | 107 | $ | | $ | 35 | ||||||||||||
Commercial, financial and agricultural |
1,521 | | 1,522 | 1,512 | | 22 | ||||||||||||||||||
Commercial construction |
| | | | | | ||||||||||||||||||
One to four family residential real estate |
| | | | | | ||||||||||||||||||
Consumer construction |
| | | | | | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total: |
||||||||||||||||||||||||
Commercial real estate |
$ | 5,872 | $ | 869 | $ | 7,341 | $ | 107 | $ | 6 | $ | 102 | ||||||||||||
Commercial, financial and agricultural |
2,047 | | 2,326 | 1,512 | | 31 | ||||||||||||||||||
Commercial construction |
818 | | 1,622 | | | 18 | ||||||||||||||||||
One to four family residential real estate |
238 | | 1,156 | | | 10 | ||||||||||||||||||
Consumer construction |
52 | | 52 | | | 1 | ||||||||||||||||||
Consumer |
| | | | | | ||||||||||||||||||
Total |
$ | 9,027 | $ | 869 | $ | 12,497 | $ | 1,619 | $ | 6 | $ | 162 | ||||||||||||
March 31, | December 31, | March 31, | ||||||||||||||||||||||||||||||||||
2011 | 2010 | 2010 | ||||||||||||||||||||||||||||||||||
30-89 days | 90+ days | 30-89 days | 90+ days | 30-89 days | 90+ days | |||||||||||||||||||||||||||||||
Past Due | Past Due/ | Past Due | Past Due/ | Past Due | Past Due/ | |||||||||||||||||||||||||||||||
(accruing) | Nonaccrual | Total | (accruing) | Nonaccrual | Total | (accruing) | Nonaccrual | Total | ||||||||||||||||||||||||||||
Commercial real estate |
$ | 649 | $ | 4,057 | $ | 4,706 | $ | 19 | $ | 3,522 | $ | 3,541 | $ | 675 | $ | 5,872 | $ | 6,547 | ||||||||||||||||||
Commercial, financial and agricultural |
1,137 | 1,121 | 2,258 | 382 | 760 | 1,142 | 283 | 2,046 | 2,329 | |||||||||||||||||||||||||||
Commercial construction |
58 | 458 | 516 | | 458 | 458 | 26 | 818 | 844 | |||||||||||||||||||||||||||
One to four family residential real estate |
600 | 4,223 | 4,823 | 923 | 1,129 | 2,052 | 280 | 238 | 518 | |||||||||||||||||||||||||||
Consumer construction |
| | | | 52 | 52 | | 52 | 52 | |||||||||||||||||||||||||||
Consumer |
2 | | 2 | 20 | | 20 | 5 | 1 | 6 | |||||||||||||||||||||||||||
Total past due loans |
$ | 2,446 | $ | 9,859 | $ | 12,305 | $ | 1,344 | $ | 5,921 | $ | 7,265 | $ | 1,269 | $ | 9,027 | $ | 10,296 | ||||||||||||||||||
For the Three Months Ended March 31, 2011 | ||||||||||||||||||||||||||||
Commercial, | One to four | |||||||||||||||||||||||||||
Commercial | Financial and | Commercial | family residential | Consumer | ||||||||||||||||||||||||
Real Estate | Agricultural | Construction | real estate | Construction | Consumer | Total | ||||||||||||||||||||||
NONACCRUAL |
||||||||||||||||||||||||||||
Beginning balance |
$ | 3,522 | $ | 760 | $ | 458 | $ | 1,129 | $ | 52 | $ | | $ | 5,921 | ||||||||||||||
Principal payments |
(458 | ) | (5 | ) | | (15 | ) | | | (478 | ) | |||||||||||||||||
Charge-offs |
(203 | ) | (25 | ) | | (28 | ) | | | (256 | ) | |||||||||||||||||
Advances |
| | | | | | | |||||||||||||||||||||
Class transfers |
| | | | | | | |||||||||||||||||||||
Transfers to OREO |
(644 | ) | | | (101 | ) | (52 | ) | | (797 | ) | |||||||||||||||||
Transfers
to accruing |
(892 | ) | | | | | | (892 | ) | |||||||||||||||||||
Transfers
from accruing |
2,724 | 389 | | 3,237 | | | 6,350 | |||||||||||||||||||||
Other |
8 | 2 | | 1 | | | 11 | |||||||||||||||||||||
Ending balance |
$ | 4,057 | $ | 1,121 | $ | 458 | $ | 4,223 | $ | | $ | | $ | 9,859 | ||||||||||||||
13.
5. | LOANS (Continued) |
For the Three Months Ended March 31, 2010 | ||||||||||||||||||||||||||||
Commercial, | One to four | |||||||||||||||||||||||||||
Commercial | Financial and | Commercial | family residential | Consumer | ||||||||||||||||||||||||
Real Estate | Agricultural | Construction | real estate | Construction | Consumer | Total | ||||||||||||||||||||||
NONACCRUAL |
||||||||||||||||||||||||||||
Beginning balance |
$ | 8,290 | $ | 2,644 | $ | 1,919 | $ | 1,461 | $ | 52 | $ | 2 | $ | 14,368 | ||||||||||||||
Principal payments |
(4,438 | ) | (665 | ) | (83 | ) | (22 | ) | | (1 | ) | (5,209 | ) | |||||||||||||||
Charge-offs |
(1,119 | ) | (2 | ) | (19 | ) | (1,112 | ) | | | (2,252 | ) | ||||||||||||||||
Advances |
| | | | | | | |||||||||||||||||||||
Class transfers |
| | | | | | | |||||||||||||||||||||
Transfers to OREO |
(466 | ) | (102 | ) | (1,003 | ) | (129 | ) | | | (1,700 | ) | ||||||||||||||||
Transfers to accruing |
(55 | ) | | | | | | (55 | ) | |||||||||||||||||||
Transfers
from accruing |
3,638 | 171 | | 35 | | | 3,844 | |||||||||||||||||||||
Other |
22 | | 4 | 5 | | | 31 | |||||||||||||||||||||
Ending balance |
$ | 5,872 | $ | 2,046 | $ | 818 | $ | 238 | $ | 52 | $ | 1 | $ | 9,027 | ||||||||||||||
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Loans outstanding, beginning of period |
$ | 9,532 | $ | 8,552 | $ | 8,552 | ||||||
New loans |
705 | 5,243 | 1,087 | |||||||||
Net activity on revolving lines of credit |
124 | 2,065 | 1,938 | |||||||||
Repayment |
(1,216 | ) | (6,328 | ) | (2,104 | ) | ||||||
Loans outstanding, end of period |
$ | 9,145 | $ | 9,532 | $ | 9,473 | ||||||
6. | BORROWINGS |
Borrowings consist of the following at March 31, 2011, December 31, 2010 and March 31, 2010 (dollars in thousands): |
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Federal Home Loan Bank fixed rate advances at a weighted average
rate of 1.73% maturing from December 2011 to January 2016 |
$ | 35,000 | $ | 35,000 | $ | 35,000 | ||||||
USDA Rural Development, fixed-rate note payable, maturing
August 24, 2024, interest payable at 1% |
1,069 | 1,069 | 1,140 | |||||||||
$ | 36,069 | $ | 36,069 | $ | 36,140 | |||||||
14.
6. | BORROWINGS (Continued) |
The Federal Home Loan Bank borrowings are collateralized at March 31, 2011 by the following: a collateral agreement on the Corporations one to four family residential real estate loans with a book value of approximately $35.892 million; mortgage related and municipal securities with an amortized cost and estimated fair value of $12.303 million and $12.476 million, respectively; and Federal Home Loan Bank stock owned by the Bank totaling $3.423 million. Prepayment of the remaining advances is subject to the provisions and conditions of the credit policy of the Federal Home Loan Bank of Indianapolis in effect as of March 31, 2011. | ||
The USDA Rural Development borrowing is collateralized by loans totaling $.253 million originated and held by the Corporations wholly owned subsidiary, First Rural Relending, and an assignment of a demand deposit account in the amount of $.925 million, and guaranteed by the Corporation. |
7. | STOCK OPTION PLANS | |
A summary of stock option transactions for the three months ended March 31, 2011 and 2010, and the year ended December 31, 2010, is as follows: |
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Outstanding shares at beginning of year |
394,072 | 411,057 | 411,057 | |||||||||
Granted during the period |
| | | |||||||||
Exercised during the period |
| | | |||||||||
Expired / forfeited during the period |
| (16,985 | ) | | ||||||||
Outstanding shares at end of period |
394,072 | 394,072 | 411,057 | |||||||||
Exercisable shares at end of period |
150,781 | 150,781 | 157,266 | |||||||||
Weighted average exercise price per share at end of period |
$ | 10.98 | $ | 10.98 | $ | 12.03 | ||||||
Shares available for grant at end of period |
| | | |||||||||
There were no options granted in the first three months of 2011 and 2010. | ||
Following is a summary of the options outstanding and exercisable at March 31, 2011: |
Weighted Average | ||||||||||||||||
Exercise | Number | Unvested | Remaining | |||||||||||||
Price | Outstanding | Exercisable | Options | Contractual Life-Years | ||||||||||||
$ | 9.16 | 5,000 |
2,000 | 3,000 | 4.71 | |||||||||||
$ | 9.75 | 257,152 |
120,861 | 136,291 | 3.71 | |||||||||||
$ | 10.65 | 50,000 |
10,000 | 40,000 | 5.71 | |||||||||||
$ | 11.50 | 40,000 |
8,000 | 32,000 | 4.50 | |||||||||||
$ | 12.00 | 40,000 |
8,000 | 32,000 | 4.32 | |||||||||||
$ | 156.00 | 1,920 |
1,920 | | .58 | |||||||||||
394,072 |
150,781 | 243,291 | 4.09 | |||||||||||||
15.
8. | INCOME TAXES | |
A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred tax asset will not be realized. At March 31, 2010 Management evaluated the valuation allowance. An analysis of the deferred tax asset was made to determine the utilization of those tax benefits based upon projected future taxable income. At that time, based upon managements determination and in accordance with the generally accepted accounting principles, that it was more likely than not that a portion of these benefits would be utilized, a $3.500 million valuation adjustment was made as a credit to income tax expense. Among the criteria that management considered in evaluating the deferred tax asset was taxable income for the three most recent taxable years ending December 31, 2009 which totaled $8.2 million. This taxable income allowed the Corporation to utilize NOL carryforwards. | ||
Management assessed the valuation allowance for the second and third quarters of 2010 and determined that no additional adjustment was deemed appropriate. At December 31, 2010, based upon further analysis, and in recognition of the current period operating loss before taxes, management determined that an adjustment to the valuation was appropriate and increased the valuation allowance by $1.364 million with an increase to current tax expense. | ||
Management evaluated the deferred tax valuation allowance as of March 31, 2011 and determined that no adjustment to the valuation was warranted. The Corporation, as of March 31, 2011 had a net operating loss and tax credit carryforwards for tax purposes of approximately $27.0 million, and $2.1 million, respectively. | ||
The Corporation will continue to evaluate the future benefits from these carryforwards and at such time as it became more likely than not that they would be utilized prior to expiration will recognize the additional benefits as an adjustment to the valuation allowance. The net operating loss carryforwards expire twenty years from the date they originated. These carryforwards, if not utilized, will begin to expire in the year 2023. A portion of the NOL, approximately $17.0 million, and all of the credit carryforwards are subject to the limitations for utilization as set forth in Section 382 of the Internal Revenue Code. The annual limitation is $1.400 million for the NOL and the equivalent value of tax credits, which is approximately $.477 million. These limitations for use were established in conjunction with the recapitalization of the Corporation in December 2004. |
9. | FAIR VALUE MEASUREMENTS | |
Fair value estimates, methods, and assumptions are set forth below for the Corporations financial instruments: | ||
Cash, cash equivalents, and interest-bearing deposits - The carrying values approximate the fair values for these assets. | ||
Securities - Fair values are based on quoted market prices where available. If a quoted market price is not available, fair value is estimated using quoted market prices for similar securities. | ||
Federal Home Loan Bank stock Federal Home Loan Bank stock is carried at cost, which is its redeemable value and approximates its fair value, since the market for this stock is limited. | ||
Loans - Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage, and other consumer. The fair value of loans is calculated by discounting scheduled cash flows using discount rates reflecting the credit and interest rate risk inherent in the loan. | ||
The methodology in determining fair value of nonaccrual loans is to average them into the blended interest rate at 0% interest. This has the effect of decreasing the carrying amount below the risk-free rate amount and, therefore, discounts the estimated fair value. | ||
Impaired loans are measured at the estimated fair value of the expected future cash flows at the loans effective interest rate or the fair value of the collateral for loans which are collateral dependent. Therefore, the carrying values of impaired loans approximate the estimated fair values for these assets. |
16.
9. | FAIR VALUE MEASUREMENTS (Continued) | |
Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits and savings, is equal to the amount payable on demand at the reporting date. The fair value of time deposits is based on the discounted value of contractual cash flows applying interest rates currently being offered on similar time deposits. | ||
Borrowings - Rates currently available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The fair value of borrowed funds due on demand is the amount payable at the reporting date. | ||
Accrued interest - The carrying amount of accrued interest approximates fair value. | ||
Off-balance-sheet instruments - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the counterparties. Since the differences in the current fees and those reflected to the off-balance-sheet instruments at year-end are immaterial, no amounts for fair value are presented. | ||
The following table presents information for financial instruments at March 31, 2011 and December 31, 2010 (dollars in thousands): |
March 31, 2011 | December 31, 2010 | |||||||||||||||
Carrying | Estimated | Carrying | Estimated | |||||||||||||
Amount | Fair Value | Amount | Fair Value | |||||||||||||
Financial assets: |
||||||||||||||||
Cash and cash equivalents |
$ | 53,715 | $ | 53,715 | $ | 34,719 | $ | 34,719 | ||||||||
Interest-bearing deposits |
734 | 734 | 713 | 713 | ||||||||||||
Securities available for sale |
37,543 | 37,543 | 33,860 | 33,860 | ||||||||||||
Federal Home Loan Bank stock |
3,423 | 3,423 | 3,423 | 3,423 | ||||||||||||
Net loans |
368,425 | 368,436 | 376,473 | 376,713 | ||||||||||||
Accrued interest receivable |
1,401 | 1,401 | 1,155 | 1,155 | ||||||||||||
Total financial assets |
$ | 465,241 | $ | 465,252 | $ | 450,343 | $ | 450,583 | ||||||||
Financial liabilities: |
||||||||||||||||
Deposits |
$ | 400,783 | $ | 402,311 | $ | 386,779 | $ | 387,885 | ||||||||
Borrowings |
36,069 | 35,658 | 36,069 | 36,234 | ||||||||||||
Accrued interest payable |
276 | 276 | 232 | 232 | ||||||||||||
Total financial liabilities |
$ | 437,128 | $ | 438,245 | $ | 423,080 | $ | 424,351 | ||||||||
Limitations - Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Corporations entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporations financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on existing on-and off-balance-sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Significant assets and liabilities that are not considered financial assets or liabilities include premises and equipment, other assets, and other liabilities. In addition, the tax ramifications related to the realization of the unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. |
17.
9. | FAIR VALUE MEASUREMENTS (Continued) | |
The following is information about the Corporations assets and liabilities measured at fair value on a recurring basis at December 31, 2010, and the valuation techniques used by the Corporation to determine those fair values. |
Level 1:
|
In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access. | |
Level 2:
|
Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. | |
Level 3:
|
Level 3 inputs are unobservable inputs, including inputs available in situations where there is little, if any, market activity for the related asset or liability. |
The fair value of all investment securities at March 31, 2011 and March 31, 2010 were based on level 2 inputs. There are no other assets or liabilities measured on a recurring basis at fair value. For additional information regarding investment securities, please refer to Note 4 Investment Securities. | ||
The Corporation had no Level 3 assets or liabilities on a recurring basis as of March 31, 2011, December 31, 2010 or March 31, 2010. | ||
In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporations assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. | ||
The Corporation also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include loans and other real estate owned. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections. |
Assets Measured at Fair Value on a Nonrecurring Basis | ||||||||||||||||||||
Quoted Prices | Significant | Significant | ||||||||||||||||||
in Active Markets | Other Observable | Unobservable | Total Losses for | |||||||||||||||||
Balance at | for Identical Assets | Inputs | Inputs | Three Months Ended | ||||||||||||||||
(dollars in thousands) | March 31, 2011 | (Level 1) | (Level 2) | (Level 3) | March 31, 2011 | |||||||||||||||
Assets |
||||||||||||||||||||
Impaired loans |
$ | 9,964 | $ | | $ | | $ | 9,964 | $ | 426 | ||||||||||
Other real estate owned |
5,081 | | | 5,081 | 467 | |||||||||||||||
$ | 893 | |||||||||||||||||||
Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2010 | ||||||||||||||||||||
Quoted Prices | Significant | Significant | ||||||||||||||||||
in Active Markets | Other Observable | Unobservable | Total Losses for | |||||||||||||||||
Balance at | for Identical Assets | Inputs | Inputs | Year Ended | ||||||||||||||||
(dollars in thousands) | December 31, 2010 | (Level 1) | (Level 2) | (Level 3) | December 31, 2010 | |||||||||||||||
Assets |
||||||||||||||||||||
Impaired loans |
$ | 10,563 | $ | | $ | | $ | 10,563 | $ | 1,666 | ||||||||||
Other real estate owned |
5,562 | | | 5,562 | 2,753 | |||||||||||||||
$ | 4,419 | |||||||||||||||||||
The Corporation had no investments subject to fair value measurement on a nonrecurring basis. |
18.
19.
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Commitments to extend credit: |
||||||||||||
Variable rate |
$ | 27,814 | $ | 18,092 | $ | 26,629 | ||||||
Fixed rate |
11,325 | 13,034 | 9,853 | |||||||||
Standby letters of credit Variable rate |
2,137 | 2,192 | 1,170 | |||||||||
Credit card commitments Fixed rate |
2,991 | 2,737 | 2,761 | |||||||||
$ | 44,267 | $ | 36,055 | $ | 40,413 | |||||||
20.
21.
| The highly regulated environment in which the Corporation operates could adversely affect its ability to carry out its strategic plan due to restrictions on new products, funding opportunities or new market entrances; | ||
| General economic conditions, either nationally or in the state(s) in which the Corporation does business; | ||
| Legislation or regulatory changes which affect the business in which the Corporation is engaged; | ||
| Changes in the level and volatility of interest rates which may negatively affect the Corporations interest margin; | ||
| Changes in securities markets with respect to the market value of financial assets and the level of volatility in certain markets such as foreign exchange; | ||
| Significant increases in competition in the banking and financial services industry resulting from industry consolidation, regulatory changes and other factors, as well as action taken by particular competitors; | ||
| The ability of borrowers to repay loans; | ||
| The effects on liquidity of unusual decreases in deposits; | ||
| Changes in consumer spending, borrowing, and saving habits; | ||
| Technological changes; | ||
| Acquisitions and unanticipated occurrences which delay or reduce the expected benefits of acquisitions; | ||
| Difficulties in hiring and retaining qualified management and banking personnel; | ||
| The Corporations ability to increase market share and control expenses; | ||
| The effect of compliance with legislation or regulatory changes; | ||
| The effect of changes in accounting policies and practices; | ||
| The costs and effects of existing and future litigation and of adverse outcomes in such litigation; and | ||
| An increase in the Corporations FDIC insurance premiums, or the collection of special assessments by the FDIC. |
22.
23.
March 31, | Percent of | December 31, | Percent of | March 31, | Percent of | |||||||||||||||||||
2011 | Total | 2010 | Total | 2010 | Total | |||||||||||||||||||
Commercial real estate |
$ | 200,649 | 53.56 | % | $ | 194,859 | 50.87 | % | $ | 198,439 | 52.59 | % | ||||||||||||
Commercial, financial, and agricultural |
63,673 | 17.00 | 68,858 | 17.97 | 69,797 | 18.50 | ||||||||||||||||||
One to four family residential real
estate |
75,663 | 20.20 | 75,074 | 19.60 | 70,087 | 18.58 | ||||||||||||||||||
Construction: |
||||||||||||||||||||||||
Consumer |
5,741 | 1.53 | 5,682 | 1.48 | 6,909 | 1.83 | ||||||||||||||||||
Commercial |
23,438 | 6.26 | 33,330 | 8.70 | 28,035 | 7.43 | ||||||||||||||||||
Consumer |
5,445 | 1.45 | 5,283 | 1.38 | 4,044 | 1.07 | ||||||||||||||||||
Total loans |
$ | 374,609 | 100.00 | % | $ | 383,086 | 100.00 | % | $ | 377,311 | 100.00 | % | ||||||||||||
March 31, 2011 | December 31, 2010 | March 31, 2010 | ||||||||||||||||||||||||||||||||||
Percent of | Percent of | Percent of | Percent of | Percent of | Percent of | |||||||||||||||||||||||||||||||
Outstanding | Commercial | Shareholders | Outstanding | Commercial | Shareholders | Outstanding | Commercial | Shareholders | ||||||||||||||||||||||||||||
Balance | Loans | Equity | Balance | Loans | Equity | Balance | Loans | Equity | ||||||||||||||||||||||||||||
Real estate operators
of nonres bldgs |
$ | 58,132 | 20.20 | % | 107.46 | % | $ | 58,114 | 19.56 | % | 107.85 | % | $ | 49,753 | 16.79 | % | 84.73 | % | ||||||||||||||||||
Hospitality and tourism |
35,016 | 12.17 | 64.73 | 37,737 | 12.70 | 70.04 | 44,820 | 15.13 | 76.33 | |||||||||||||||||||||||||||
Commercial construction |
23,438 | 8.15 | 43.33 | 33,330 | 11.22 | 61.86 | 28,035 | 9.46 | 47.74 | |||||||||||||||||||||||||||
Operators of
nonresidential
buildings |
17,091 | 5.94 | 31.59 | 16,598 | 5.59 | 30.80 | 13,170 | 4.45 | 22.43 | |||||||||||||||||||||||||||
Real estate agents and
managers |
15,518 | 5.39 | 28.69 | 15,857 | 5.34 | 29.43 | 21,529 | 7.27 | 36.66 | |||||||||||||||||||||||||||
Other |
138,565 | 48.15 | 256.14 | 135,411 | 45.59 | 251.31 | 138,964 | 46.90 | 236.65 | |||||||||||||||||||||||||||
Total Commercial Loans |
$ | 287,760 | 100.00 | % | $ | 297,047 | 100.00 | % | $ | 296,271 | 100.00 | % | ||||||||||||||||||||||||
24.
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Nonperforming Assets: |
||||||||||||
Nonaccrual Loans |
$ | 9,859 | $ | 5,921 | $ | 9,027 | ||||||
Loans past due 90 days or more |
| | | |||||||||
Restructured loans |
105 | 4,642 | 869 | |||||||||
Total nonperforming loans |
9,964 | 10,563 | 9,896 | |||||||||
Other real estate owned |
5,081 | 5,562 | 7,723 | |||||||||
Total nonperforming assets |
$ | 15,045 | $ | 16,125 | $ | 17,619 | ||||||
Nonperforming loans as a % of loans |
2.66 | % | 2.76 | % | 2.62 | % | ||||||
Nonperforming assets as a % of assets |
3.05 | % | 3.37 | % | 3.51 | % | ||||||
Reserve for Loan Losses: |
||||||||||||
At period end |
$ | 6,184 | $ | 6,613 | $ | 4,737 | ||||||
As a % of loans |
1.65 | % | 1.73 | % | 1.26 | % | ||||||
As a % of nonperforming loans |
62.06 | % | 62.61 | % | 47.87 | % | ||||||
As a % of nonaccrual loans |
62.72 | % | 111.69 | % | 52.48 | % | ||||||
Texas ratio* |
24.96 | % | 26.66 | % | 27.75 | % | ||||||
* | calculated by taking total nonperforming assets divided by total equity plus reserve for loan losses |
At Period End | ||||||||||||
March 31, 2011 | December 31, 2010 | March 31, 2010 | ||||||||||
Total loans, at period end |
$ | 374,609 | $ | 386,086 | $ | 377,311 | ||||||
Average loans for the year |
$ | 380,066 | $ | 384,347 | $ | 384,640 | ||||||
For the Period Ended | ||||||||||||
Three Months Ended | Twelve Months Ended | Three Months Ended | ||||||||||
March 31, 2011 | December 31, 2010 | March 31, 2010 | ||||||||||
Net charge-offs during the period |
$ | 429 | $ | 5,112 | $ | 1,388 | ||||||
Net charge-offs to average loans |
.11 | % | 1.33 | % | .36 | % | ||||||
Net charge-offs to beginning allowance balance |
6.49 | % | 97.84 | % | 26.56 | % | ||||||
25.
Three Months Ended | Year Ended | Three Months Ended | ||||||||||
March 31, 2011 | December 31, 2010 | March 31, 2010 | ||||||||||
Balance at beginning of period |
$ | 5,562 | $ | 5,804 | $ | 5,804 | ||||||
Other real estate transferred
from loans due to foreclosure |
798 | 5,373 | 2,907 | |||||||||
Other real estate sold |
(812 | ) | (2,862 | ) | (839 | ) | ||||||
OREO write downs |
(452 | ) | (2,703 | ) | (128 | ) | ||||||
Loss on sale of other real estate |
(15 | ) | (50 | ) | (21 | ) | ||||||
Balance at end of period |
$ | 5,081 | $ | 5,562 | $ | 7,723 | ||||||
March 31, | December 31, | March 31, | ||||||||||||||||||||||
2011 | % of Total | 2010 | % of Total | 2010 | % of Total | |||||||||||||||||||
Non-interest-bearing |
$ | 39,269 | 9.80 | % | $ | 41,264 | 10.67 | % | $ | 30,356 | 7.49 | % | ||||||||||||
NOW, money market, checking |
154,420 | 38.54 | 134,703 | 34.83 | 109,374 | 26.99 | ||||||||||||||||||
Savings |
17,691 | 4.41 | 17,670 | 4.57 | 20,675 | 5.10 | ||||||||||||||||||
Certificates of Deposit <$100,000 |
104,258 | 26.01 | 96,977 | 25.07 | 75,822 | 18.71 | ||||||||||||||||||
Total core deposits |
315,638 | 78.76 | 290,614 | 75.14 | 236,227 | 58.29 | ||||||||||||||||||
Certificates of Deposit >$100,000 |
21,803 | 5.44 | 22,698 | 5.87 | 30,173 | 7.45 | ||||||||||||||||||
Brokered CDs |
63,342 | 15.80 | 73,467 | 18.99 | 138,812 | 34.26 | ||||||||||||||||||
Total non-core deposits |
85,145 | 21.24 | 96,165 | 24.86 | 168,985 | 41.71 | ||||||||||||||||||
Total deposits |
$ | 400,783 | 100.00 | % | $ | 386,779 | 100.00 | % | $ | 405,212 | 100.00 | % | ||||||||||||
26.
27.
Three Months Ended | ||||||||||||||||||||||||||||||||||||||||||||
2011-2010 | ||||||||||||||||||||||||||||||||||||||||||||
Average Balances | Average Rates | Interest | Income/ | Rate/ | ||||||||||||||||||||||||||||||||||||||||
March 31, | Increase/ | March 31, | March 31, | Expense | Volume | Rate | Volume | |||||||||||||||||||||||||||||||||||||
(dollars in thousands) | 2011 | 2010 | (Decrease) | 2011 | 2010 | 2011 | 2010 | Variance | Variance | Variance | Variance | |||||||||||||||||||||||||||||||||
Loans (1,2,3) |
$ | 380,066 | $ | 384,640 | $ | (4,574 | ) | 5.55 | % | 5.56 | % | $ | 5,199 | $ | 5,270 | $ | (71 | ) | $ | (63 | ) | $ | (8 | ) | $ | | ||||||||||||||||||
Taxable securities |
32,271 | 37,393 | (5,122 | ) | 3.54 | 4.31 | 282 | 397 | (115 | ) | (54 | ) | (71 | ) | 10 | |||||||||||||||||||||||||||||
Nontaxable securities (2) |
855 | 844 | 11 | 5.22 | 4.81 | 11 | 10 | 1 | | 1 | | |||||||||||||||||||||||||||||||||
Federal funds sold |
11,611 | 37,833 | (26,222 | ) | .24 | 0.25 | 7 | 23 | (16 | ) | (16 | ) | | | ||||||||||||||||||||||||||||||
Other interest-earning assets |
4,140 | 4,470 | (330 | ) | 2.55 | 1.54 | 26 | 17 | 9 | (1 | ) | 11 | (1 | ) | ||||||||||||||||||||||||||||||
Total earning assets |
428,943 | 465,180 | (36,237 | ) | 5.22 | 4.98 | 5,525 | 5,717 | (192 | ) | (134 | ) | (67 | ) | 9 | |||||||||||||||||||||||||||||
Reserve for loan losses |
(6,687 | ) | (5,073 | ) | (1,614 | ) | ||||||||||||||||||||||||||||||||||||||
Cash and due from banks |
27,254 | 19,772 | 7,482 | |||||||||||||||||||||||||||||||||||||||||
Fixed Assets |
9,684 | 10,131 | (447 | ) | ||||||||||||||||||||||||||||||||||||||||
Other Real Estate |
4,921 | 5,768 | (847 | ) | ||||||||||||||||||||||||||||||||||||||||
Other assets |
14,746 | 12,717 | 2,029 | |||||||||||||||||||||||||||||||||||||||||
Total assets |
$ | 478,861 | $ | 508,495 | $ | (29,634 | ) | |||||||||||||||||||||||||||||||||||||
NOW and money market deposits |
$ | 120,034 | $ | 87,700 | $ | 32,334 | .79 | % | 1.04 | % | $ | 234 | $ | 225 | $ | 9 | $ | 83 | $ | (54 | ) | $ | (20 | ) | ||||||||||||||||||||
Interest checking |
23,829 | 15,475 | 8,354 | 1.17 | 1.73 | 69 | 66 | 3 | 35 | (21 | ) | (11 | ) | |||||||||||||||||||||||||||||||
Savings deposits |
17,741 | 18,378 | (637 | ) | .27 | .66 | 12 | 30 | (18 | ) | (1 | ) | (18 | ) | 1 | |||||||||||||||||||||||||||||
CDs <$100,000 |
96,735 | 66,187 | 30,548 | 1.90 | 2.21 | 453 | 361 | 92 | 167 | (51 | ) | (24 | ) | |||||||||||||||||||||||||||||||
CDs >$100,000 |
22,122 | 33,112 | (10,990 | ) | 1.74 | 1.71 | 95 | 140 | (45 | ) | (46 | ) | 2 | (1 | ) | |||||||||||||||||||||||||||||
Brokered deposits |
66,380 | 159,501 | (93,121 | ) | 2.18 | 1.61 | 356 | 635 | (279 | ) | (370 | ) | 220 | (129 | ) | |||||||||||||||||||||||||||||
Borrowings |
36,069 | 36,140 | (71 | ) | 1.57 | 2.33 | 140 | 208 | (68 | ) | | (68 | ) | | ||||||||||||||||||||||||||||||
Total interest-bearing liabilities |
382,910 | 416,493 | (33,583 | ) | 1.44 | 1.62 | 1,359 | 1,665 | (306 | ) | (132 | ) | 10 | (184 | ) | |||||||||||||||||||||||||||||
Demand deposits |
39,902 | 33,544 | 6,358 | |||||||||||||||||||||||||||||||||||||||||
Other liabilities |
2,179 | 3,349 | (1,170 | ) | ||||||||||||||||||||||||||||||||||||||||
Shareholders equity |
53,870 | 55,109 | (1,239 | ) | ||||||||||||||||||||||||||||||||||||||||
Total liabilities and
shareholders equity |
$ | 478,861 | $ | 508,495 | $ | (29,634 | ) | |||||||||||||||||||||||||||||||||||||
Rate spread |
3.78 | % | 3.36 | % | ||||||||||||||||||||||||||||||||||||||||
Net interest margin/revenue |
3.94 | % | 3.53 | % | $ | 4,166 | $ | 4,052 | $ | 114 | $ | (2 | ) | $ | (77 | ) | $ | 193 | ||||||||||||||||||||||||||
(1) | For purposes of these computations, nonaccruing loans are included in the daily average loan amounts outstanding. | |
(2) | The amount of interest income on loans and nontaxable securities has been adjusted to a tax equivalent basis, using a 34% tax rate |
28.
Three Months Ended | ||||||||||||||||
March 31, | ||||||||||||||||
Increase/(Decrease) | ||||||||||||||||
2011 | 2010 | Dollars | Percent | |||||||||||||
Service fees |
$ | 217 | $ | 223 | $ | (6 | ) | (2.69 | )% | |||||||
Income from loans sold |
314 | 316 | (2 | ) | (0.63 | ) | ||||||||||
Other noninterest income |
46 | 53 | (7 | ) | (13.21 | ) | ||||||||||
Subtotal |
577 | 592 | (15 | ) | (2.53 | ) | ||||||||||
Net security gain (loss) |
| 215 | (215 | ) | | |||||||||||
Total noninterest income |
$ | 577 | $ | 807 | $ | (230 | ) | (28.50 | )% | |||||||
Three Months Ended | ||||||||||||||||
March 31, | ||||||||||||||||
Increase/(Decrease) | ||||||||||||||||
2011 | 2010 | Dollars | Percentage | |||||||||||||
Salaries and employee benefits |
$ | 1,824 | $ | 1,720 | $ | 104 | 6.05 | % | ||||||||
Occupancy |
365 | 345 | 20 | 5.80 | ||||||||||||
Furniture and equipment |
194 | 194 | | | ||||||||||||
Data processing |
176 | 189 | (13 | ) | (6.88 | ) | ||||||||||
Professional service fees |
153 | 173 | (20 | ) | (11.56 | ) | ||||||||||
Loan and deposit |
179 | 268 | (89 | ) | (33.21 | ) | ||||||||||
OREO writedowns and (gains)
losses on sale |
467 | 147 | 320 | 217.69 | ||||||||||||
FDIC insurance premiums |
285 | 222 | 63 | 28.38 | ||||||||||||
Telephone |
51 | 47 | 4 | 8.51 | ||||||||||||
Advertising |
88 | 72 | 16 | 22.22 | ||||||||||||
Other operating expenses |
277 | 252 | 25 | 9.92 | ||||||||||||
Total noninterest expense |
$ | 4,059 | $ | 3,629 | $ | 430 | 11.85 | % | ||||||||
29.
30.
31.
March 31, | December 31, | March 31, | ||||||||||
2011 | 2010 | 2010 | ||||||||||
Capital Structure |
||||||||||||
Shareholders equity |
$ | 54,097 | $ | 53,882 | $ | 58,722 | ||||||
Total capitalization |
$ | 54,097 | $ | 53,882 | $ | 58,722 | ||||||
Tangible capital |
$ | 54,097 | $ | 53,882 | $ | 58,722 | ||||||
Intangible Assets |
||||||||||||
Core deposit premium |
$ | | $ | | $ | | ||||||
Other identifiable intangibles |
| | | |||||||||
Total intangibles |
$ | | $ | | $ | | ||||||
Regulatory capital |
||||||||||||
Tier 1 capital: |
||||||||||||
Shareholders equity |
$ | 54,097 | $ | 53,882 | $ | 58,722 | ||||||
Net unrealized (gains) losses on
available for sale securities |
(520 | ) | (612 | ) | (934 | ) | ||||||
Less: disallowed deferred tax asset |
(8,000 | ) | (9,028 | ) | (8,700 | ) | ||||||
Less: intangibles |
| | | |||||||||
Total Tier 1 capital |
$ | 45,577 | $ | 44,242 | $ | 49,088 | ||||||
Tier 2 Capital: |
||||||||||||
Allowable reserve for loan losses |
$ | 4,891 | $ | 4,890 | $ | 4,737 | ||||||
Qualifying long-term debt |
| | | |||||||||
Total Tier 2 capital |
4,891 | 4,890 | 4,737 | |||||||||
Total capital |
$ | 50,468 | $ | 49,132 | $ | 53,825 | ||||||
Risk-adjusted assets |
$ | 389,967 | $ | 389,468 | $ | 393,226 | ||||||
Capital ratios: |
||||||||||||
Tier 1 Capital to average assets |
9.70 | % | 9.25 | % | 9.85 | |||||||
Tier 1 Capital to risk weighted assets |
11.69 | % | 11.36 | % | 12.48 | |||||||
Total Capital to risk weighted assets |
12.94 | % | 12.62 | % | 13.69 |
Shareholders | Tangible | Tier 1 | Tier 1 | Total | ||||||||||||||||
Equity to | Equity to | Capital to | Capital to | Capital to | ||||||||||||||||
Quarter-end | Quarter-end | Average | Risk-Weighted | Risk-Weighted | ||||||||||||||||
Assets | Assets | Assets | Assets | Assets | ||||||||||||||||
Regulatory minumum
for capital
adequacy purposes |
N/A | N/A | 4.00 | % | 4.00 | % | 8.00 | % | ||||||||||||
Regulatory defined
well capitalized
guideline |
N/A | N/A | 5.00 | % | 6.00 | % | 10.00 | % | ||||||||||||
The Corporation: |
||||||||||||||||||||
March 31, 2011 |
10.98 | % | 10.98 | % | 9.70 | % | 11.69 | % | 12.94 | % | ||||||||||
March 31, 2010 |
11.69 | % | 11.69 | % | 9.85 | % | 12.48 | % | 13.69 | % | ||||||||||
The Bank: |
||||||||||||||||||||
March 31, 2011 |
10.02 | % | 10.02 | % | 8.54 | % | 10.29 | % | 11.54 | % | ||||||||||
March 31, 2010 |
10.34 | % | 10.34 | % | 8.43 | % | 10.67 | % | 11.86 | % |
32.
33.
1-90 | 91 - 365 | >1-5 | Over 5 | |||||||||||||||||
Days | Days | Years | Years | Total | ||||||||||||||||
Interest-earning assets: |
||||||||||||||||||||
Loans |
$ | 266,025 | $ | 6,195 | $ | 23,491 | $ | 78,898 | $ | 374,609 | ||||||||||
Securities |
134 | 17,187 | 19,690 | 532 | 37,543 | |||||||||||||||
Other (1) |
12,734 | | | 3,423 | 16,157 | |||||||||||||||
Total interest-earning assets |
278,893 | 23,382 | 43,181 | 82,853 | 428,309 | |||||||||||||||
Interest-bearing obligations: |
||||||||||||||||||||
NOW, money market, savings,
interest checking |
172,111 | | | | 172,111 | |||||||||||||||
Time deposits |
18,653 | 41,363 | 65,740 | 305 | 126,061 | |||||||||||||||
Brokered CDs |
20,398 | 40,216 | | 2,728 | 63,342 | |||||||||||||||
Borrowings |
| 5,000 | 30,000 | 1,069 | 36,069 | |||||||||||||||
Total interest-bearing obligations |
211,162 | 86,579 | 95,740 | 4,102 | 397,583 | |||||||||||||||
Gap |
$ | 67,731 | $ | (63,197 | ) | $ | (52,559 | ) | $ | 78,751 | $ | 30,726 | ||||||||
Cumulative gap |
$ | 67,731 | $ | 4,534 | $ | (48,025 | ) | $ | 30,726 | |||||||||||
(1) | Includes Federal Home Loan Bank Stock |
34.
35.
36.
(a) | Exhibits: |
Exhibit 31.1 | Rule 13a-14(a) Certification of Chief Executive Officer. | |||
Exhibit 31.2 | Rule 13a-14(a) Certification of Chief Financial Officer. | |||
Exhibit 32.1 | Section 1350 Certification of Chief Executive Officer. | |||
Exhibit 32.2 | Section 1350 Certification of Chief Financial Officer. |
37.
MACKINAC FINANCIAL CORPORATION (Registrant) |
||||
Date: May 16, 2011 | By: | /s/ Paul D. Tobias | ||
PAUL D. TOBIAS, | ||||
CHAIRMAN AND CHIEF EXECUTIVE OFFICER (principal executive officer) |
||||
By: | /s/ Ernie R. Krueger | |||
ERNIE R. KRUEGER | ||||
EVP/CHIEF FINANCIAL OFFICER (principal financial and accounting officer) |
38.
1. | I have reviewed this report on Form 10-Q of Mackinac Financial Corporation (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements and other financial information included in this report fairly present, in all material respects, the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 16, 2011 | /s/ Paul D. Tobias | |||
Paul D. Tobias | ||||
Chairman and Chief Executive Officer
(principal executive officer) |
39.
1. | I have reviewed this report on Form 10-Q of Mackinac Financial Corporation (the registrant); | |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | |
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15(d)-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
(c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
(d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: May 16, 2011 | /s/ Ernie R. Krueger | |||
Ernie R. Krueger | ||||
Executive Vice President/Chief Financial Officer (principal financial officer) |
40.
(1) | The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and | ||
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of the Issuer. |
/s/ Paul D. Tobias | ||||
Paul D. Tobias | ||||
Chairman and Chief Executive Officer (chief executive officer) |
||||
41.
(1) | The Form 10-Q fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 78o(d)); and | ||
(2) | The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operation of the Issuer. |
/s/ Ernie R. Krueger | ||||
Executive Vice President and Chief Financial Officer | ||||
(principal financial officer) | ||||
42.