First takeover of the year. A 100% gainer to start us off right

Keep in mind we have to hold to get the special dividend so dont rush to sell FFNM. We also own MFNC and this looks to be a good deal for them so we may just take the offer.

  • The merger will include 7 full service banking locations of First Federal of Northern Michigan (following the previously announced sale of the Oscoda location to a third party), approximately $320 million in assets and $283 million in deposits, primarily all core deposits. Combined offices will equate to 30 banking centers.
  • The transaction is expected to close in the 2nd Quarter of 2018.
  • Anticipated results include earnings per share accretion of 8.0% in 2018 (exclusive of deal costs) and an expected tangible book value earn back period of 3 years or less.
  • The transaction is the 4th strategic expansion by Mackinac since late 2014.

MANISTIQUE, Mich. and ALPENA, Mich., Jan. 16, 2018 (GLOBE NEWSWIRE) -- The Directors of Mackinac Financial Corporation (MFNC) (Mackinac), the holding company for mBank, and the Directors of First Federal of Northern Michigan Bancorp, Inc. (FFNM) (FFNM), the holding company for First Federal of Northern Michigan today announced the execution of a definitive agreement for Mackinac to acquire FFNM through an all-stock merger of FFNM with and into a subsidiary of Mackinac. FFNM shareholders will receive .576 shares of Mackinac common stock for each share of FFNM common stock. The aggregate value of the stock consideration, based on an assumed price of Mackinac shares of $15.75, is $33.8 million. MFNC expects to issue approximately 2.15 million shares to FFNM shareholders in connection with the transaction. Under the terms of the agreement, shareholders of FFNM will also receive a special cash dividend immediately prior to close of $8.0 million subject to maintenance of a minimum equity requirement. Total consideration to FFNM shareholders in connection with the transaction would equate to $41.8 million, or $11.22 per share, based upon the assumed value of Mackinac common shares.

The transaction will increase mBank’s market position as the largest bank headquartered in the Upper Peninsula of Michigan with post-transaction assets estimated at approximately $1.3 billion and gross balance sheet loans of approximately $1 billion. Combined deposits are expected to total approximately $1.1 billion. It is also anticipated that mBank will rank as the 10th largest bank headquartered in Michigan, out of 97 (ranked by total assets of such institutions as of September 30, 2017, after giving effect to the acquisition.) Upon the closing of the transaction, Michael W. Mahler, First Federal of Northern Michigan CEO, will remain with mBank (at its Alpena, MI location) as EVP of Community Banking and Administration. In this position Mr. Mahler will oversee company-wide retail lending and branch banking platforms, as well as human resources, professional development, and marketing. In addition, one mutually agreeable director from FFNM will join the Mackinac and mBank boards.

“We are extremely pleased and excited to be able to partner with another long-standing community-focused institution in First Federal and have Mike join our Executive Leadership Team as Alpena becomes another key commerce and operational hub of the organization.” said Kelly W. George, mBank President and CEO. “mBank remains a safe and sound community bank, and we believe the customer-centric cultures and community bank oriented traditions of our two organizations are very complementary and were the driving impetus for the combination of the two banks. The combined organization will have a strong capital position and well-structured balance sheet to further actively compete and grow within our expanding geographic footprint along with providing accretive financial returns to our shareholders. From the entire mBank staff, management, and Board of Directors, we all look forward to working with First Federal. We want to assure the FFNM customers, shareholders and employees that as we move through to the closing of the transaction, we will work transparently in making the transaction as smooth as possible. More details of the transaction will be forthcoming in the next several weeks and then ongoing.”

FFNM CEO, Michael W. Mahler commented on the transaction, “We believe this merger is an excellent opportunity to create long term value for FFNM shareholders and continue a strong community focused banking presence in Alpena and the other communities we serve. Further, the scale and lending limits of the commercial banking platform that Mackinac brings will combine with our robust mortgage platform to offer our valued clients an even more complete banking experience. More importantly, we have spent significant time with mBank’s leadership to ensure their culture, customer service approach, commitment to their employees and community focus is consistent with First Federal’s. We have determined that our business approaches are very similar. In my new role based in Alpena, I am excited to remain heavily involved in the bank, our community and with our clients.”

Mackinac anticipates the transaction to be accretive to earnings per share, exclusive of transaction related costs, for 2018 of 8.0% with increasing accretion estimated of 16.0% for 2019 and 18.0% for 2020. Operating economies of scale and other combined efficiencies are initially projected to be approximately 35% and are targeted to be fully phased in by the end of 2018. The Tangible Book Value earn back for Mackinac is currently expected to be approximately 3 years or less.

“Strategically, this transaction makes sense for us on all fronts” commented Paul D. Tobias, Chairman of Mackinac and mBank. “Our strategy has been to deliver loan centric banking services to communities that have both commercial and consumer opportunities and low-cost core deposits. We build our annual plan on organic growth but have been and will continue to seek out acquisitions that create scale and support our strategy. FFNM in Alpena and surrounding markets adds low cost deposits and a very strong mortgage business. More importantly we are adding quality team members to help us execute our strategy. We look forward to working with FFNM Board members and employees to continue FFNM’s traditional support of the community.”

In closing, FFNM Board Chairman Martin Thomson commented, "Given mBank’s presence and commitment to many Northern Michigan communities, businesses and residents, they are an excellent fit for our organization and customer base. We believe our similar business philosophies will result in the preeminent bank in Northern Michigan. The FFNM Board and Management team also believe the partnership with mBank will deliver significant value for current FFNM shareholders and give them the opportunity to realize additional value in the future as shareholders of Mackinac Financial Corporation."

Posted to Banking on Profit on Jan 17, 2018 — 8:01 AM
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