Exhibit 99.1
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PRESS RELEASE
For Release February 4, 2009
Contact: Investor Relations
(888) 343-8147
Website:www.bankmbank.com
Contact: Investor Relations
(888) 343-8147
Website:www.bankmbank.com
Mackinac Financial Corporation Announces
2008 Results of Operations
2008 Results of Operations
((Manistique, Michigan) — Mackinac Financial Corporation (Nasdaq: MFNC), the holding company for mBank, has reported net income of $1.872 million, or $.55 per share, for the year ended December 31, 2008, compared to a net income of $10.163 million, or $2.96 per share, for 2007. Weighted average shares outstanding amounted to 3,422,012 in 2008 and 3,428,695 in 2007.
The 2008 results included the positive effect, $3.475 million of a lawsuit settlement and the negative effect, $.425 million, of a severance agreement. The results for 2007 included the recognition of a $7.500 million deferred tax benefit for NOL and tax credit carryforward and $.470 million of proceeds from the settlement of a lawsuit against the Corporation’s former accountants.
In 2008, we experienced one of the most difficult and trying times in modern banking history. Our results for 2008 were significantly impacted by the current economic environment. The Prime Rate, currently at 3.25% and the overnight investment rates at near zero, provide evidence of the seriousness in which the Federal Reserve Bank views this recession. This historically low interest rate environment made it extremely difficult to maintain adequate interest margins which stymied our ability to generate earnings growth. We are not satisfied with our operating results. In 2008, we focused our efforts on watchful diligence of our current loan portfolio by shoring up potential problem credits, repricing loans to align our returns with both credit and interest rate risks and by pursuing early resolution of nonperforming assets.
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At 2008 year-end, the Corporation’s loans stood at $370.280 million, an increase of $15.201 million, or 4.3%, from 2007 year-end balances of $355.079 million. Total loan originations in 2008 amounted to $61.6 million. Loan amortization and principal payoffs totaled $51.2 million. A good portion of these payoffs pertained to loan relationships that no longer met our pricing or credit standards. Loan growth was primarily from the Upper Peninsula markets where the economy is more stable.
Total assets of the Corporation at December 31, 2008 were $451.431 million, an increase of $42.551 million, or 10.4% from total assets of $408.880 million reported at December 31, 2007.
Asset quality remains relatively strong when compared to our peers, particularly considering the state of the Michigan economy. Nonperforming loans totaled $4.887 million, or 1.32% of total loans at December 31, 2008. Nonperforming assets at December 31, 2008, were $7.076 million, 1.57% of total assets, compared to $5.234 million or 1.28% of total assets at December 31, 2007. However, we are not immune to the current economic crisis and we are seeing rapid change in Southeast Michigan as the auto industry and manufacturing businesses struggle to survive. This economic risk has caused us to take an extremely hard and cautious look at our entire portfolio of loans in this market and we have been aggressive in our early identification of problem credits. We increased our fourth quarter loan loss provision to provide a specific reserve for one large loan in Southeast Michigan.
Total deposits grew from $320.827 million at December 31, 2007, to $371.097 million at December 31, 2008, an increase of $50.270 million, or 15.7%. This increase is composed of an increase in wholesale brokered deposits of $52.225 million and a decline in bank deposits of $1.955 million. During 2008, we significantly increased our balance sheet liquidity which was funded primarily by issuance of brokered deposits since rates on these deposits were priced lower than in-market bank deposits. We continue to focus our efforts on growing transactional accounts. We have had success in this area as demand, money market and NOW accounts grew from $119.2 million at 2007 year-end to $121.4 million at 2008 year-end. However, overall deposit totals have fallen as we have refused to compete for CDs that are overpriced.
Net interest income for the year ended December 31, 2008 was $12.864 million compared to $13.417 million for the year ended December 31, 2007, a decrease of $.553 million. The margin percentage for 2008 was 3.23% compared to 3.60% in 2007 and 3.51% in 2006. We believe that our margin has seen its low point in December when it fell to 3.01%. During 2008, the prime rate decreased from 7.25% to 3.25%, which created significant margin pressure since a majority of the commercial loan portfolio re-priced downward with each prime rate change, which the majority of the bank’s funding sources had significant lag time in re-pricing. We experienced additional margin pressure due to our brokered deposits, which did not re-price in line with prime rate reductions, due to the overall market liquidity crisis.
We recognize the importance of cost control, especially in times of economic slowdown. Excluding extraordinary items, noninterest expense totaled $12.1 million in 2008 compared to $12.1 million in 2007 and $11.6 million in 2006. Salaries and benefits were reduced from $6.8 million in 2007 to $6.5 million in 2008. Assets per employee totaled $4.6 million
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Shareholders’ equity totaled $41.552 million at December 31, 2008, compared to $39.321 million at the end of 2007, an increase of $2.231 million. This increase reflects consolidated net income of $1.872 million, the capital contribution impact of stock options and also the increase in equity due to the increase in the market value of held-for-sale investments, which amounted to $.385 million and the purchase of odd lot shares for $.110 million. The book value per share at December 31, 2008, amounted to $12.15 compared to $11.47 at the end of 2007.
Late in 2008, the corporation elected to apply for $11 million in equity participation under the Troubled Asset Relief Program (TARP). We have received preliminary approval from the US Treasury Department and are now evaluating the merits of the program. Participation in this program would provide additional capital for future growth during a time when other sources for additional capital are scarce and expensive.
Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $450 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 12 branch locations; eight in the Upper Peninsula, three in the Northern Lower Peninsula and one in Oakland County, Michigan. The Company’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 economies 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.
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
SELECTED FINANCIAL HIGHLIGHTS
For The Years Ended December 31, | ||||||||
(Dollars in thousands, except per share data) | 2008 | 2007 | ||||||
(Unaudited) | (Unaudited) | |||||||
Selected Financial Condition Data(at end of period): | ||||||||
Assets | $ | 451,431 | $ | 408,880 | ||||
Loans | 370,280 | 355,079 | ||||||
Investment securities | 47,490 | 21,597 | ||||||
Deposits | 371,097 | 320,827 | ||||||
Borrowings | 36,210 | 45,949 | ||||||
Shareholders’ equity | 41,552 | 39,321 | ||||||
Selected Statements of Income Data: | ||||||||
Net interest income | $ | 12,864 | $ | 13,417 | ||||
Income before taxes | 2,659 | 2,923 | ||||||
Net income | 1,872 | 10,163 | ||||||
Income per common share — Basic | .55 | 2.96 | ||||||
Income per common share — Diluted | .55 | 2.96 | ||||||
Weighted average shares outstanding | 3,422,012 | 3,428,695 | ||||||
Selected Financial Ratios and Other Data: | ||||||||
Performance Ratios: | ||||||||
Net interest margin | 3.23 | % | 3.60 | % | ||||
Efficiency ratio | 85.51 | 79.46 | ||||||
Return on average assets | .44 | 2.59 | ||||||
Return on average equity | 4.61 | 31.05 | ||||||
Average total assets | $ | 425,343 | $ | 392,313 | ||||
Average total shareholders’ equity | 40,630 | 32,731 | ||||||
Average loans to average deposits ratio | 105.61 | % | 104.94 | % | ||||
Common Share Data at end of period: | ||||||||
Market price per common share | $ | 4.40 | $ | 8.98 | ||||
Book value per common share | $ | 12.15 | $ | 11.47 | ||||
Common shares outstanding | 3,419,736 | 3,428,695 | ||||||
Other Data at end of period: | ||||||||
Allowance for loan losses | $ | 4,277 | $ | 4,146 | ||||
Non-performing assets | $ | 7,076 | $ | 5,234 | ||||
Allowance for loan losses to total loans | 1.16 | % | 1.17 | % | ||||
Non-performing assets to total assets | 1.57 | % | 1.28 | % | ||||
Number of: | ||||||||
Branch locations | 12 | 12 | ||||||
FTE Employees | 100 | 100 |
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
December 31, | December 31, | |||||||
(Dollars in thousands) | 2008 | 2007 | ||||||
(unaudited) | (audited) | |||||||
ASSETS | ||||||||
Cash and due from banks | $ | 10,112 | $ | 6,196 | ||||
Federal funds sold | — | 166 | ||||||
Cash and cash equivalents | 10,112 | 6,362 | ||||||
Interest-bearing deposits in other financial institutions | 582 | 1,810 | ||||||
Securities available for sale | 47,490 | 21,597 | ||||||
Federal Home Loan Bank stock | 3,794 | 3,794 | ||||||
Loans: | ||||||||
Commercial | 296,088 | 288,839 | ||||||
Mortgage | 70,447 | 62,703 | ||||||
Installment | 3,745 | 3,537 | ||||||
Total Loans | 370,280 | 355,079 | ||||||
Allowance for loan losses | (4,277 | ) | (4,146 | ) | ||||
Net loans | 366,003 | 350,933 | ||||||
Premises and equipment | 11,189 | 11,609 | ||||||
Other real estate held for sale | 2,189 | 1,226 | ||||||
Other assets | 10,072 | 11,549 | ||||||
TOTAL ASSETS | $ | 451,431 | $ | 408,880 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Liabilities: | ||||||||
Non-interest-bearing deposits | $ | 30,099 | $ | 25,557 | ||||
Interest-bearing deposits: | ||||||||
NOW, Money Market, Checking | 70,584 | 81,160 | ||||||
Savings | 20,730 | 12,485 | ||||||
CDs<$100,000 | 73,752 | 80,607 | ||||||
CDs>$100,000 | 25,044 | 22,355 | ||||||
Brokered | 150,888 | 98,663 | ||||||
Total deposits | 371,097 | 320,827 | ||||||
Borrowings: | ||||||||
Federal funds purchased | — | 7,710 | ||||||
Short-term | — | 1,959 | ||||||
Long-term | 36,210 | 36,280 | ||||||
Total borrowings | 36,210 | 45,949 | ||||||
Other liabilities | 2,572 | 2,783 | ||||||
Total liabilities | 409,879 | 369,559 | ||||||
Shareholders’ equity: | ||||||||
Preferred stock — No par value: | ||||||||
Authorized 500,000 shares, no shares outstanding | ||||||||
Common stock and additional paid in capital — No par value | ||||||||
Authorized - 18,000,000 shares | ||||||||
Issued and outstanding —3,419,736and 3,428,695, respectively | 42,815 | 42,843 | ||||||
Accumulated deficit | (1,708 | ) | (3,582 | ) | ||||
Accumulated other comprehensive income (loss) | 445 | 60 | ||||||
Total shareholders’ equity | 41,552 | 39,321 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 451,431 | $ | 408,880 | ||||
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31, | ||||||||||||
(Dollars in thousands, except per share data) | 2008 | 2007 | 2006 | |||||||||
(unaudited) | (audited) | (audited) | ||||||||||
INTEREST INCOME: | ||||||||||||
Interest and fees on loans: | ||||||||||||
Taxable | $ | 22,555 | $ | 26,340 | $ | 21,239 | ||||||
Tax-exempt | 404 | 533 | 753 | |||||||||
Interest on securities: | ||||||||||||
Taxable | 1,293 | 1,100 | 1,186 | |||||||||
Tax-exempt | 5 | — | 87 | |||||||||
Other interest income | 305 | 722 | 787 | |||||||||
Total interest income | 24,562 | 28,695 | 24,052 | |||||||||
INTEREST EXPENSE: | ||||||||||||
Deposits | 10,115 | 13,224 | 10,575 | |||||||||
Borrowings | 1,583 | 2,054 | 1,884 | |||||||||
Total interest expense | 11,698 | 15,278 | 12,459 | |||||||||
Net interest income | 12,864 | 13,417 | 11,593 | |||||||||
Provision for loan losses | 2,300 | 400 | (861 | ) | ||||||||
Net interest income after provision for loan losses | 10,564 | 13,017 | 12,454 | |||||||||
OTHER INCOME: | ||||||||||||
Service fees | 838 | 688 | 547 | |||||||||
Net security gains | 64 | — | — | |||||||||
Net gains on sale of secondary market loans | 120 | 498 | 197 | |||||||||
Proceeds from settlement of lawsuit | 3,475 | 470 | — | |||||||||
Other | 156 | 350 | 239 | |||||||||
Total other income | 4,653 | 2,006 | 983 | |||||||||
OHER EXPENSES: | ||||||||||||
Salaries and employee benefits | 6,886 | 6,757 | 6,132 | |||||||||
Occupancy | 1,374 | 1,272 | 1,264 | |||||||||
Furniture and equipment | 771 | 678 | 631 | |||||||||
Data processing | 844 | 785 | 691 | |||||||||
Professional service fees | 508 | 532 | 1,425 | |||||||||
Loan and deposit | 569 | 285 | 392 | |||||||||
Telephone | 170 | 228 | 210 | |||||||||
Advertising | 305 | 370 | 346 | |||||||||
Other | 1,131 | 1,193 | 1,130 | |||||||||
Total other expenses | 12,558 | 12,100 | 12,221 | |||||||||
Income (loss) before provision for income taxes | 2,659 | 2,923 | 1,216 | |||||||||
Provision for (benefit of) income taxes | 787 | (7,240 | ) | (500 | ) | |||||||
NET INCOME (LOSS) | $ | 1,872 | $ | 10,163 | $ | 1,716 | ||||||
INCOME (LOSS) PER COMMON SHARE | ||||||||||||
Basic | $ | .55 | $ | 2.96 | $ | .50 | ||||||
Diluted | $ | .55 | $ | 2.96 | $ | .50 | ||||||
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY
LOAN PORTFOLIO AND CREDIT QUALITY
(Dollars in thousands)
Loan Portfolio Balances (at end of period):
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | (audited) | |||||||
Commercial Loans: | ||||||||
Real estate — operators of nonresidential buildings | $ | 41,299 | $ | 41,597 | ||||
Hospitality and tourism | 35,086 | 37,604 | ||||||
Real estate agents and managers | 29,292 | 29,571 | ||||||
Operators of nonresidential buildings | 13,467 | 10,569 | ||||||
Other | 145,831 | 130,546 | ||||||
Total Commercial Loans | 264,975 | 249,887 | ||||||
1-4 family residential real estate | 65,595 | 57,613 | ||||||
Consumer | 3,745 | 3,537 | ||||||
Construction | ||||||||
Commercial | 31,113 | 38,952 | ||||||
Consumer | 4,852 | 5,090 | ||||||
Total Loans | $ | 370,280 | $ | 355,079 | ||||
Credit Quality (at end of period): | ||||||||
December 31, | December 31, | |||||||
2008 | 2007 | |||||||
(unaudited) | (audited) | |||||||
Nonperforming Assets : | ||||||||
Nonaccrual loans | $ | 4,887 | $ | 3,298 | ||||
Loans past due 90 days or more | — | 710 | ||||||
Total nonperforming loans | 4,887 | 4,008 | ||||||
Other real estate owned | 2,189 | 1,226 | ||||||
Total nonperforming assets | $ | 7,076 | $ | 5,234 | ||||
Nonperforming loans as a % of loans | 1.32 | % | 1.13 | % | ||||
Nonperforming assets as a % of assets | 1.57 | % | 1.28 | % | ||||
Reserve for Loan Losses: | ||||||||
At period end | $ | 4,277 | $ | 4,146 | ||||
As a % of average loans | 1.18 | % | 1.24 | % | ||||
As a % of nonperforming loans | 87.52 | % | 103.44 | % | ||||
As a % of nonaccrual loans | 87.52 | % | 125.71 | % | ||||
Charge-off Information (year to date): | ||||||||
Average loans | 361,324 | 333,415 | ||||||
Net charge-offs | 2,168 | 1,260 | ||||||
Charge-offs as a % of average loans | .60 | % | .38 | % | ||||
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
QUARTERLY FINANCIAL HIGHLIGHTS
QUARTER ENDED | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
December 31, | September 30, | June 30, | March 31, | December 31, | ||||||||||||||||
2008 | 2008 | 2008 | 2008 | 2007 | ||||||||||||||||
BALANCE SHEET(Dollars in thousands) | ||||||||||||||||||||
Total loans | $ | 370,280 | $ | 361,521 | $ | 362,122 | $ | 360,056 | $ | 355,079 | ||||||||||
Allowance for loan losses | (4,277 | ) | (3,385 | ) | (3,585 | ) | (3,924 | ) | (4,146 | ) | ||||||||||
Total loans, net | 366,003 | 358,136 | 358,537 | 356,132 | 350,933 | |||||||||||||||
Intangible assets | 46 | 65 | 85 | 104 | 124 | |||||||||||||||
Total assets | 451,431 | 440,953 | 437,327 | 417,175 | 408,880 | |||||||||||||||
Core deposits | 195,165 | 208,940 | 200,293 | 203,445 | 199,809 | |||||||||||||||
Noncore deposits(1) | 175,932 | 151,754 | 156,683 | 122,602 | 121,018 | |||||||||||||||
Total deposits | 371,097 | 360,694 | 356,976 | 326,047 | 320,827 | |||||||||||||||
Total borrowings | 36,210 | 36,210 | 36,280 | 48,849 | 45,949 | |||||||||||||||
Total shareholders’ equity | 41,552 | 41,427 | 40,975 | 39,633 | 39,321 | |||||||||||||||
Total shares outstanding | 3,419,736 | 3,419,736 | 3,419,736 | 3,428,695 | 3,428,695 | |||||||||||||||
AVERAGE BALANCES(Dollars in thousands) | ||||||||||||||||||||
Assets | $ | 441,583 | $ | 423,702 | $ | 418,246 | $ | 417,682 | $ | 406,308 | ||||||||||
Loans | 366,077 | 358,844 | 362,574 | 357,778 | 350,050 | |||||||||||||||
Deposits | 358,213 | 341,377 | 332,725 | 336,016 | 324,194 | |||||||||||||||
Equity | 41,516 | 41,097 | 40,399 | 39,491 | 38,973 | |||||||||||||||
INCOME STATEMENT(Dollars in thousands) | ||||||||||||||||||||
Net interest income | $ | 3,330 | $ | 3,371 | $ | 3,118 | $ | 3,045 | $ | 3,410 | ||||||||||
Provision for loan losses | 1,100 | 450 | 750 | — | — | |||||||||||||||
Net interest income after provision | 2,230 | 2,921 | 2,368 | 3,045 | 3,410 | |||||||||||||||
Total noninterest income | 308 | 288 | 3,747 | 310 | 355 | |||||||||||||||
Total noninterest expense | 2,961 | 2,935 | 3,471 | 3,191 | 2,978 | |||||||||||||||
Income before taxes | (423 | ) | 274 | 2,644 | 164 | 787 | ||||||||||||||
Provision for income taxes | (171 | ) | 58 | 875 | 25 | 260 | ||||||||||||||
Net income | $ | (252 | ) | $ | 216 | $ | 1,769 | $ | 139 | $ | 527 | |||||||||
PER SHARE DATA | ||||||||||||||||||||
Earnings — basic | $ | (.07 | ) | $ | .06 | $ | .52 | $ | .04 | $ | .15 | |||||||||
Earnings — diluted | (.07 | ) | .06 | .52 | .04 | .15 | ||||||||||||||
Book value | 12.15 | 12.11 | 11.98 | 11.56 | 11.47 | |||||||||||||||
Market value, closing price | 4.40 | 5.26 | 7.00 | 8.50 | 8.98 | |||||||||||||||
ASSET QUALITY RATIOS | ||||||||||||||||||||
Nonperforming loans/total loans | 1.32 | % | 1.29 | % | 1.27 | % | .94 | % | 1.13 | % | ||||||||||
Nonperforming assets/total assets | 1.57 | 1.45 | 1.83 | 1.08 | 1.28 | |||||||||||||||
Allowance for loan losses/total loans | 1.16 | .94 | .99 | 1.09 | 1.17 | |||||||||||||||
Allowance for loan losses/nonperforming loans | 87.52 | 72.81 | 77.22 | 116.06 | 103.42 | |||||||||||||||
PROFITABILITY RATIOS | ||||||||||||||||||||
Return on average assets | (.23 | )% | .20 | % | 1.70 | % | .13 | % | .51 | % | ||||||||||
Return on average equity | (2.42 | ) | 2.08 | 17.62 | 1.42 | 5.36 | ||||||||||||||
Net interest margin | 3.20 | 3.39 | 3.19 | 3.13 | 3.55 | |||||||||||||||
Efficiency ratio | 80.30 | 79.12 | 88.45 | 95.34 | 78.02 | |||||||||||||||
Average loans/average deposits | 102.20 | 105.12 | 108.97 | 106.48 | 107.98 | |||||||||||||||
CAPITAL ADEQUACY RATIOS | ||||||||||||||||||||
Leverage ratio | 8.01 | % | 8.31 | % | 8.56 | % | 7.85 | % | 8.05 | % | ||||||||||
Tier 1 capital ratio | 9.25 | 9.40 | 9.48 | 8.84 | 8.97 | |||||||||||||||
Total capital ratio | 10.38 | 10.31 | 10.45 | 9.92 | 10.13 | |||||||||||||||
Average equity/average assets | 9.40 | 9.70 | 9.66 | 9.45 | 9.59 | |||||||||||||||
Tangible equity/tangible assets | 9.20 | 9.38 | 9.35 | 9.48 | 9.59 |
(1) | Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000 |
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS
QUARTERLY FINANCIAL HIGHLIGHTS
LOAN PORTFOLIO BALANCES![]() | TRANSACTIONAL ACCOUNT DEPOSITS![]() | |
NET INTEREST MARGIN![]() | EFFICIENCY RATIO![]() |
COMMON SHARE DATA
BOOK VERSUS MARKET VALUE
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BOOK VERSUS MARKET VALUE
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