Mackinac Financial (MFNC) 10-Q 14 Aug 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2018	Aug. 13, 2018
Document and Entity Information
Entity Registrant Name	MACKINAC FINANCIAL CORP /MI/
Entity Central Index Key	36,506
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		10,712,745
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q2

CONDENSED CONSOLIDATED BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks	$ 64,874	$ 37,420
Federal funds sold	15	6
Cash and cash equivalents	64,889	37,426
Interest-bearing deposits in other financial institutions	10,873	13,374
Securities available for sale	114,182	75,397
Other securities	500	500
Federal Home Loan Bank stock	4,860	3,112
Loans:
Commercial	684,725	572,936
Mortgage	299,450	220,708
Consumer	19,202	17,434
Total Loans	1,003,377	811,078
Allowance for loan losses	(5,141)	(5,079)
Net loans	998,236	805,999
Premises and equipment	21,790	16,290
Other real estate held for sale	2,461	3,558
Deferred tax asset	8,000	4,970
Deposit based intangibles	4,504	1,922
Goodwill	20,389	5,694
Other assets	23,411	17,125
TOTAL ASSETS	1,274,095	985,367
Deposits:
Noninterest bearing deposits	220,176	148,079
NOW, money market, interest checking	337,344	280,309
Savings	106,022	61,097
CDs less than $250,000	181,352	142,159
CDs more than $250,000	18,930	11,055
Brokered	151,677	175,299
Total deposits	1,015,501	817,998
Federal funds purchased	10,000
Borrowings	91,747	79,552
Other liabilities	7,980	6,417
Total liabilities	1,125,228	903,967
SHAREHOLDERS' EQUITY:
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,712,745 and 6,294,930 respectively	128,880	61,981
Retained earnings	19,602	19,711
Accumulated other comprehensive income (loss)
Unrealized gains (losses) on available for sale securities	606	(71)
Minimum pension liability	(221)	(221)
Total shareholders' equity	148,867	81,400
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,274,095	$ 985,367

CONDENSED CONSOLIDATED BALANCE3

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2018	Dec. 31, 2017
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value	$ 0	$ 0
Common stock, Authorized shares	18,000,000	18,000,000
Common stock, Shares issued	10,712,745	6,294,930
Common stock, Shares outstanding	10,712,745	6,294,930

CONDENSED CONSOLIDATED STATEMEN

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
Interest and fees on loans:
Taxable	$ 12,071	$ 10,260	$ 22,461	$ 20,217
Tax-exempt	31	19	56	52
Interest on securities:
Taxable	560	396	932	795
Tax-exempt	79	75	148	154
Other interest income	197	116	396	244
Total interest income	12,938	10,866	23,993	21,462
INTEREST EXPENSE:
Deposits	1,602	1,054	2,838	2,013
Borrowings	523	493	1,033	964
Total interest expense	2,125	1,547	3,871	2,977
Net interest income	10,813	9,319	20,122	18,485
Provision for loan losses	100	50	150	200
Net interest income after provision for loan losses	10,713	9,269	19,972	18,285
OTHER INCOME:
Deposit service fees	323	268	592	540
Income from mortgage loans sold on the secondary market	277	316	454	614
SBA/USDA loan sale gains	83	89	134	149
Net mortgage servicing amortization	(2)	(9)	(10)	(17)
Other	182	131	307	285
Total other income	863	795	1,477	1,571
OTHER EXPENSE:
Salaries and employee benefits	4,923	3,658	9,077	7,455
Occupancy	928	776	1,739	1,561
Furniture and equipment	644	544	1,175	1,025
Data processing	586	489	1,090	950
Advertising	192	174	387	297
Professional service fees	397	405	701	726
Loan origination expenses and deposit and card related fees	148	155	274	334
Writedowns and losses on other real estate held for sale	40	243	66	255
FDIC insurance assessment	187	189	343	346
Telephone	152	134	307	291
Transaction related expenses	1,976		2,165
Other	904	750	1,681	1,454
Total other expenses	11,077	7,517	19,005	14,694
Income before provision for income taxes	499	2,547	2,444	5,162
Provision for income taxes	103	867	511	1,756
NET INCOME	$ 396	$ 1,680	$ 1,933	$ 3,406
INCOME PER COMMON SHARE:
Basic (in dollars per share)	$ 0.05	$ 0.27	$ 0.27	$ 0.54
Diluted (in dollars per share)	$ 0.05	$ 0.27	$ 0.27	$ 0.54

CONDENSED CONSOLIDATED STATEME5

CONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
CONDENSED CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME
Net income	$ 396	$ 1,680	$ 1,933	$ 3,406
Other comprehensive income
Unrealized gains arising during the period	1,392	424	857	924
Tax effect	(292)	(144)	(180)	(314)
Net change in unrealized gains on available for sale securities	1,100	280	677	610
Total comprehensive income	$ 1,496	$ 1,960	$ 2,610	$ 4,016

CONDENSED CONSOLIDATED STATEME6

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY - USD ($) $ in Thousands	Shares of Common Stock	Common Stock and Additional Paid in Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Total
Balance, beginning of period at Dec. 31, 2016		$ 61,583	$ 17,206	$ (180)	$ 78,609
Balance (in shares) at Dec. 31, 2016	6,263,371
Increase (Decrease) in Shareholders' Equity
Net income for period			3,406		3,406
Other comprehensive income
Net unrealized gain on securities available for sale				610	610
Total comprehensive income			3,406	610	4,016
Stock compensation		199			199
Restricted stock award vesting (in shares)	31,559
Dividend on common stock			(1,511)		(1,511)
Balance, end of period at Jun. 30, 2017		61,782	19,101	430	81,313
Balance (in shares) at Jun. 30, 2017	6,294,930
Balance, beginning of period at Dec. 31, 2017		61,981	19,711	(292)	81,400
Balance (in shares) at Dec. 31, 2017	6,294,930
Increase (Decrease) in Shareholders' Equity
Net income for period			1,933		1,933
Other comprehensive income
Net unrealized gain on securities available for sale				677	677
Total comprehensive income			1,933	677	2,610
Stock compensation		274			274
Restricted stock award vesting (in shares)	45,630
FFNM acquisition		34,101			34,101
FFNM acquisition (in shares)	2,146,378
Capital raise, net of offering costs		32,524			32,524
Capital raise, net of offering costs (in shares)	2,225,807
Dividend on common stock			(2,042)		(2,042)
Balance, end of period at Jun. 30, 2018		$ 128,880	$ 19,602	$ 385	$ 148,867
Balance (in shares) at Jun. 30, 2018	10,712,745

CONDENSED CONSOLIDATED STATEME7

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash Flows from Operating Activities:
Net income	$ 1,933	$ 3,406
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,298	1,173
Provision for loan losses	150	200
Deferred tax expense, net	511	1,756
Gain on sale of loans sold in the secondary market	(454)	(614)
Origination of loans held for sale in the secondary market	(20,613)	(30,012)
Proceeds from sale of loans in the secondary market	21,067	30,626
Loss on sale of other real estate held for sale	19	2
Writedown of other real estate held for sale	47	253
Stock compensation	274	199
Change in other assets	1,191	1,529
Change in other liabilities	34	(1,952)
Net cash provided by operating activities	5,457	6,566
Cash Flows from Investing Activities:
Net increase in loans	(7,343)	(9,420)
Net increase (decrease) in interest bearing deposits in other financial institutions	2,501	(265)
Purchase of securities available for sale	(1,063)
Proceeds from maturities, sales, calls or paydowns of securities available for sale	58,760	4,781
Redemption of FHLBI stock		192
Capital expenditures	(1,484)	(1,716)
Purchase additional FHLBI stock		(531)
Acquisition of FFNM	13,267
Proceeds from sale of other real estate, premises and fixed assets	1,624	949
Net cash provided by (used in) investing activities	66,262	(6,010)
Cash Flows from Financing Activities:
Net (decrease) increase in deposits	(56,212)	24,733
Net activity on line of credit	(1,000)	545
Increase (decrease) in fed funds purchased	10,000	(6,000)
New term debt issuance		25,000
Principal payments on borrowings	(27,527)	(1,100)
Proceeds of common stock offering	32,524
Dividend on common stock	(2,041)	(1,511)
Net cash used in financing activities	(44,256)	41,667
Net increase in cash and cash equivalents	27,463	42,223
Cash and cash equivalents at beginning of period	37,426	46,755
Cash and cash equivalents at end of period	64,889	88,978
Cash paid during the year for:
Interest	3,777	2,968
Income taxes	625
Noncash Investing and Financing Activities:
Transfers of Foreclosures from Loans to Other Real Estate Held for Sale	$ 400	$ 659

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
	Jun. 30, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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 Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017. 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 were unchanged by 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, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, the assessment of goodwill for impairment, and the fair value of assets and liabilities acquired in business combinations. Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected. We evaluate at each balance sheet date whether it is probable that we will be unable to collect all cash flows expected at acquisition and if so, recognize a provision for loan loss in our consolidated statement of operations. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans. Allowance for Loan Losses The allowance for loan losses includes specific allowances related to 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 loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated 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 probable loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s 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 management’s 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. Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), stock grants,or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At June 30, 2018 there were 247,279 shares available for issuance under this plan. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period.

RECENT ACCOUNTING PRONOUNCEMENT

RECENT ACCOUNTING PRONOUNCEMENTS	6 Months Ended
	Jun. 30, 2018
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS	2. RECENT ACCOUNTING PRONOUNCEMENTS In May 2014, the Financial Accounting Standards Board (FASB) issued guidance on the recognition of revenue from contracts with customers. Revenue recognition will depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance permits two methods of adoption: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Corporation adopted the new guidance on January 1, 2018. Management’s analysis included: identification of all revenue streams included in the financial statements; determination of scope exclusions to identify “in-scope” revenue streams; determination of size, timing and amount of revenue recognition for in-scope items. Key revenue streams identified include service charges on deposit accounts, and credit card income. The new guidance did not have a material impact on the Corporation’s consolidated financial condition or results of operation. In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities (“ASU 2016-01”). ASU 2016-01 amends current guidance by requiring companies to recognize changes in fair value for equity investments that have a readily determinable fair value through net income rather than through other comprehensive income. Under ASU 2016-01, equity investments that do not have a readily determinable fair value will either be accounted for in the same manner as equity investments that have a readily determinable fair value, with changes in fair value recognized through net income or carried at cost, adjusted for changes in observable prices based on orderly transactions for identical or similar investments issued by the same issuer and further adjusted for impairment, if applicable. ASU 2016-01 also requires a qualitative assessment of impairment indicators each reporting period. If this assessment indicates that impairment exists, companies must adjust the investment to fair value and recognize an impairment loss in net income, even if the impairment is determined to be temporary. ASU 2016-01 was effective for public companies for interim and annual periods beginning after June 30, 2018. The Corporation adopted the new guidance on January 1, 2018. As such, the Corporation reclassified $.500 million of equity securities from available-for-sale securities to other securities on its unaudited condensed consolidated balance sheet. There were no unrealized gains or losses on those securities that required reclassification from accumulated other comprehensive income to retained earnings. The Corporation’s adoption of ASU 2016-01 did not have a material impact on the Corporation’s consolidated financial condition or results of operations. In February 2016, the FASB issued ASU 2016-02, Leases, which will supersede the current lease requirements in ASC 840. The ASU requires lessees to recognize an asset with the right of use and related lease liability for all leases, with a limited exception for short-term leases. Leases will be classified as either finance or operating, with the classification affecting the pattern of expense recognition in the statement of operations. Currently, leases are classified as either capital or operating, with only capital leases recognized on the balance sheet. The reporting of lease related expenses in the statements of operations and cash flows will be generally consistent with the current guidance. The new lease guidance will be effective for the Corporation’s year ending December 31, 2019 and will be applied using modified retrospective transition method to the beginning of the earliest period presented. The effect of applying the new lease guidance on the financial statements should be determined soon. In September 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("ASU 2016-13"). ASU 2016-13 changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. ASU 2016-13 requires an entity to measure expected credit losses for financial assets over the estimated lifetime of expected credit loss and record an allowance that, when deducted from the amortized cost basis of the financial asset, presents the net amount expected to be collected on the financial asset. The standard includes the following core concepts in determining the expected credit loss. The estimate must: (a) be based on an asset’s amortized cost (including premiums or discounts, net deferred fees and costs, foreign exchange and fair value hedge accounting adjustments), (b) reflect losses expected over the remaining contractual life of an asset (considering the effect of voluntary prepayments), (c) consider available relevant information about the estimated collectability of cash flows (including information about past events, current conditions, and reasonable and supportable forecasts), and (d) reflect the risk of loss, even when that risk is remote. ASU 2016-13 also amends the recording of purchased credit-deteriorated assets. Under the new guidance, an allowance will be recognized at acquisition through a gross-up approach whereby an entity will record as the initial amortized cost the sum of (a) the purchase price and (b) an estimate of credit losses as of the date of acquisition. In addition, the guidance also requires immediate recognition in earnings of any subsequent changes, both favorable and unfavorable, in expected cash flows by adjusting this allowance. ASU 2016-13 also amends the impairment model for available-for-sale debt securities and requires entities to determine whether all or a portion of the unrealized loss on an available-for-sale debt security is a credit loss. Management may not use the length of time a security has been in an unrealized loss position as a factor in concluding whether a credit loss exists, as is currently permitted. In addition, an entity will recognize an allowance for credit losses on available-for-sale debt securities as a contra-account to the amortized cost basis rather than as a direct reduction of the amortized cost basis of the investment, as is currently required. As a result, entities will recognize improvements to credit losses on available-for-sale debt securities immediately in earnings rather than as interest income over time under current practice. New disclosures required by ASU 2016-13 include: (a) for financial assets measured at amortized cost, an entity will be required to disclose information about how it developed its allowance, including changes in the factors that influenced management’s estimate of expected credit losses and the reasons for those changes, (b) for financial receivables and net investments in leases measured at amortized cost, an entity will be required to further disaggregate the information it currently discloses about the credit quality of these assets by year or the asset’s origination or vintage for as many as five annual periods, and (c) for available-for-sale debt securities, an entity will be required to provide a roll-forward of the allowance for credit losses and an aging analysis for securities that are past due. Upon adoption of ASU 2016-13, a cumulative-effect adjustment to retained earnings will be recorded as of the beginning of the first reporting period in which the guidance is effective. ASU 2016-13 is effective for public companies for interim and annual periods beginning after December 15, 2019, with early adoption permitted for annual periods beginning after December 15, 2018. The Corporation is currently evaluating the provisions of ASU 2016-13 to determine the potential impact on the Corporation's consolidated financial condition and results of operations. In March 2017, the FASB issued ASU 2017-07, Compensation – Retirement Benefits (Topic 715). ASU 2017-07 provides additional guidance on the presentation of net periodic pension and postretirement benefit costs in the income statement. The amendment in ASU 2017-07 requires thtat the service cost component be disaggregated from other components of net periodic benefit cost in the income statement. ASU 2017-07 is effective for public companies for interim and annual periods beginning after December 15, 2017. Implementation of the new guidance did not have a material effect on the Corporation’s consolidated financial condition and result of operations. In May 2017, the FASB issued ASU 2017-09, Compensation – Stock Compensation (Topic 718). ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718 to the modification to the terms and conditions of a share-based payment award. The updated guidance is effective for interim and annual reporting periods beginning after December 15, 2017. Implementation of the new guidance did not have any effect on its consolidated financial statements, as there were no changes in terms or conditions of the Corporation’s current share-based compensation programs. Future changes, should they occur, will be accounted for in accordance with ASU 2017-09.

EARNINGS PER SHARE

EARNINGS PER SHARE	6 Months Ended
	Jun. 30, 2018
EARNINGS PER SHARE
EARNINGS PER SHARE	3. EARNINGS PER SHARE Diluted earnings per share, which reflects the potential dilution that could occur if 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 issued. The following shows the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (dollars in thousands, except per share data): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (Numerator): Net income $ 396 $ $ 1,933 $ (Denominator): Weighted average shares outstanding 7,769,720 7,041,010 Effect of dilutive stock options, and vesting of restricted stock awards 39,298 33,622 Diluted weighted average shares outstanding 7,809,018 6,307,883 7,074,632 6,298,515 Income per common share: Basic $ 0.05 $ 0.27 $ 0.27 $ 0.54 Diluted $ 0.05 $ 0.27 $ 0.27 $ 0.54

INVESTMENT SECURITIES

INVESTMENT SECURITIES	6 Months Ended
	Jun. 30, 2018
INVESTMENT SECURITIES
INVESTMENT SECURITIES	4. INVESTMENT SECURITIES At June 30, 2018 the Corporation has an investment security portfolio totaling $114.682 million, composed of $114.182 million of available for sale securities and $.500 million of equity securities. There is no unrealized gain or loss associated with the equity securities. The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2018 and December 31, 2017 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value June 30, 2018 Corporate $ 19,466 $ 32 $ (191) $ 19,307 US Agencies 14,948 444 (290) 15,102 US Agencies - MBS 33,770 596 (273) 34,093 Obligations of states and political subdivisions 45,231 656 (207) 45,680 Total securities available for sale $ 113,415 $ 1,728 $ (961) $ 114,182 December 31, 2017 Corporate $ 24,352 $ 82 $ (43) $ 24,391 US Agencies 16,935 10 (99) 16,846 US Agencies - MBS 12,830 42 (156) 12,716 Obligations of states and political subdivisions 21,370 307 (233) 21,444 Total securities available for sale $ 75,487 $ 441 $ (531) $ 75,397 The Corporation has evaluated gross unrealized losses that exist within the portfolio and considers them temporary in nature. The Corporation has both the ability and the intent to hold the investment securities until their respective maturities and therefore does not anticipate the realization of the temporary losses. The amortized cost and estimated fair value of investment securities pledged to secure FHLB borrowings and customer relationships were $44.646 million and $43.280 million, respectively, at June 30, 2018.

LOANS

LOANS	6 Months Ended
	Jun. 30, 2018
LOANS
LOANS	5. LOANS The composition of loans is as follows (dollars in thousands): June 30, December 31, 2018 2017 Commercial real estate $ 478,798 $ 406,742 Commercial, financial, and agricultural 185,032 156,951 Commercial construction 20,895 9,243 One to four family residential real estate 284,041 209,890 Consumer 19,202 17,434 Consumer construction 15,409 10,818 Total loans $ 1,003,377 $ 811,078 The Corporation completed the acquisition of Peninsula Financial Corporation (“PFC”) on December 5, 2014, The First National Bank of Eagle River (“Eagle River”) on April 29, 2016, Niagara Bancorporation (“Niagara”) on August 31, 2016 and First Federal of Northern Michigan Bancorp (“FFNM”) on May 18, 2018. The PFC acquired impaired loans totaled $13.290 million, the Eagle River acquired impaired loans totaled $3.401 million, the Niagara acquired impaired loans totaled $2.105 million, and the FFNM acquired impaired loans totaled $5.440 million. In the first six months of 2018, the Corporation had positive resolution of acquired impaired loans, which resulted in the recognition of approximately $30,000 of accretable interest. In the first six months of 2017, the Corporation had positive resolution of one PFC acquired impaired loan which resulted in the recognition of approximately $100,000 of accretable interest. The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061 The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875 The table below details the outstanding balances of the Niagara acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707 The table below details the outstanding balances of the FFNM acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 5,440 $ 187,302 $ 192,742 Nonaccretable difference (2,100) — (2,100) Expected cash flows 3,340 187,302 190,642 Accretable yield (700) (4,498) (5,198) Carrying balance at acquisition date $ 2,640 $ 182,804 $ 185,444 The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2018 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ 149 $ — $ 149 $ 218 $ 603 $ 821 Accretion (30) — (30) — (297) (297) Reclassification from nonaccretable difference 23 — 23 — — — Balance, June 30, 2018 $ 142 $ — $ 142 $ 218 $ 306 $ 524 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ 38 $ 281 $ 319 $ — $ — $ — Acquisition activity — — — 700 4,498 5,198 Accretion — (108) (108) — (83) (83) Reclassification from nonaccretable difference — — — — — — Balance, June 30, 2018 $ 38 $ 173 $ 211 $ 700 $ 4,415 $ 5,115 The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2017 (dollars in thousands): PFC Eagle River Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2016 $ 282 $ 642 $ 924 $ 236 $ 1,221 $ 1,457 $ 52 $ 505 $ 557 Accretion (100) (350) (450) — (313) (313) — (114) (114) Reclassification from nonaccretable difference 32 — 32 — — — (8) — (8) Balance, June 30, 2017 $ 214 $ 292 $ 506 $ 236 $ 908 $ 1,144 $ 44 $ 391 $ 435 Allowance for Loan Losses An analysis of the allowance for loan losses for the six months ended June 30, 2018 and June 30, 2017 is as follows (dollars in thousands): June 30, June 30, 2018 2017 Balance, January 1 $ 5,079 $ 5,020 Recoveries on loans previously charged off 264 168 Loans charged off (352) Provision 150 200 Balance at end of period $ 5,141 $ 5,133 In the first six months of 2018, net charge-offs were $88,000, compared to net charge-offs of $87,000 in the same period in 2017. In the first six months of 2018, the Corporation recorded a provision for loan loss of $.150 million compared to a $.200 million provision for loan losses in the first six months of 2017. The Corporation’s allowance for loan loss reserve policy calls for a measurement of the adequacy of the reserve at each quarter end. This process includes an analysis of the loan portfolio to take into account increases in loans outstanding and portfolio composition, historical loss rates, and specific reserve requirements of nonperforming loans. A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2018 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended June 30, 2018 Allowance for loan loss reserve: Beginning balance ALLR $ 1,127 $ 547 $ 54 $ 173 $ 6 $ 9 $ 3,185 $ 5,101 Charge-offs (1) (128) — (100) — (70) — (299) Recoveries 23 156 — 50 — 10 — 239 Provision 319 (80) (1) 157 1 60 (356) 100 Ending balance ALLR $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 Six Months Ended June 30, 2018 Allowance for loan loss reserve: Beginning balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Charge-offs (1) (128) — (147) — (76) — (352) Recoveries 30 159 1 52 — 22 — 264 Provision (211) (112) (2) 215 1 53 206 150 Ending balance ALLR $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 At June 30, 2018 Loans: Ending balance $ 478,798 $ 185,032 $ 20,895 $ 284,041 $ 15,409 $ 19,202 $ — $ 1,003,377 Ending balance ALLR (1,468) (495) (53) (280) (7) (9) (2,829) (5,141) Net loans $ 477,330 $ 184,537 $ 20,842 $ 283,761 $ 15,402 $ 19,193 $ (2,829) $ 998,236 Ending balance ALLR: Individually evaluated $ 500 $ 264 $ — $ — $ — $ — $ — $ 764 Collectively evaluated 968 231 53 280 7 9 2,829 4,377 Total $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 Ending balance Loans: Individually evaluated $ 2,447 $ 1,324 $ 372 $ — $ — $ — $ — $ 4,143 Collectively evaluated 467,159 183,535 20,523 281,144 15,364 19,117 — 986,842 Acquired with deteriorated credit quality 9,192 173 — 2,897 45 85 — 12,392 Total $ 478,798 $ 185,032 $ 20,895 $ 284,041 $ 15,409 $ 19,202 $ — $ 1,003,377 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2017 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended June 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,360 $ 650 $ 95 $ 265 $ 7 $ 15 $ 2,754 $ 5,146 Charge-offs — (93) — — — (36) — (129) Recoveries 28 3 — 1 1 33 — 66 Provision 75 135 — (7) (2) 3 (154) 50 Ending balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Six Months Ended June 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs — (93) — (49) — (113) — (255) Recoveries 62 4 — 62 1 39 — 168 Provision 56 170 38 (50) (1) (1) (12) 200 Ending balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 At June 30, 2017 Loans: Ending balance $ 397,655 $ 151,588 $ 10,145 $ 200,771 $ 11,535 $ 19,059 $ — $ 790,753 Ending balance ALLR (1,463) (695) (95) (259) (6) (15) (2,600) (5,133) Net loans $ 396,192 $ 150,893 $ 10,050 $ 200,512 $ 11,529 $ 19,044 $ (2,600) $ 785,620 Ending balance ALLR: Individually evaluated $ 525 $ 415 $ 38 $ 39 $ — $ 5 $ — $ 1,022 Collectively evaluated 938 280 57 220 6 10 2,600 4,111 Total $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Ending balance Loans: Individually evaluated $ 1,536 $ 1,456 $ 381 $ 733 $ — $ 5 $ — $ 4,111 Collectively evaluated 393,322 150,132 9,764 198,400 11,482 19,054 — 782,154 Acquired with deteriorated credit quality 2,797 — — 1,638 53 — — 4,488 Total $ 397,655 $ 151,588 $ 10,145 $ 200,771 $ 11,535 $ 19,059 $ — $ 790,753 As part of the management of the loan portfolio, risk ratings are assigned to all commercial loans. Through the loan review process, ratings are modified as believed to be appropriate to reflect changes in the credit. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 8, with higher scores indicating higher risk. The credit risk rating structure used is shown below. In the context of the credit risk rating structure, the term Classified is defined as a problem loan which may or may not be in a nonaccrual status, dependent upon current payment status and collectability. Strong (1) Borrower is not vulnerable to sudden economic or technological changes. They have “strong” balance sheets and are within an industry that is very typical for our markets or type of lending culture. Borrowers also have “strong” financial and cash flow performance and excellent collateral (low loan to value or readily available to liquidate collateral) in conjunction with an impeccable repayment history. Good (2) Borrower shows limited vulnerability to sudden economic change. These borrowers have “above average” financial and cash flow performance and a very good repayment history. The balance sheet of the company is also very good as compared to peer and the company is in an industry that is familiar to our markets or our type of lending. The collateral securing the deal is also very good in terms of its type, loan to value, and other relevant characteristics. Average (3) Borrower is typically a well-seasoned business, however may be susceptible to unfavorable changes in the economy, and could be somewhat affected by seasonal factors. The borrowers within this category exhibit financial and cash flow performance that appear “average” to “slightly above average” when compared to peer standards and they show an adequate payment history. Collateral securing this type of credit is good, exhibiting above average loan to values, and other relevant characteristics. Acceptable (4) A borrower within this category exhibits financial and cash flow performance that appear adequate and satisfactory when compared to peer standards and they show a satisfactory payment history. The collateral securing the request is within supervisory limits and overall is acceptable. Borrowers rated acceptable could also be newer businesses that are typically susceptible to unfavorable changes in the economy, and more than likely could be affected by seasonal factors. Acceptable Watch (44) The borrower may have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Acceptable Watch assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Examples of this type of credit include a start-up company fully based on projections, a documentation issue that needs to be corrected or a general market condition that the borrower is working through to get corrected. Substandard (6) Substandard loans are classified assets exhibiting a number of well-defined weaknesses that jeopardize normal repayment. The assets are no longer adequately protected due to declining net worth, lack of earning capacity, or insufficient collateral offering the distinct possibility of the loss of a portion of the loan principal. Loans classified as substandard clearly represent troubled and deteriorating credit situations requiring constant supervision. Doubtful (7) Loans in this category exhibit the same, if not more pronounced weaknesses used to describe the substandard credit. Loans are frozen with collection improbable. Such loans are not yet rated as Charge-off because certain actions may yet occur which would salvage the loan. Charge-off/Loss (8) Loans in this category are largely uncollectible and should be charged against the loan loss reserve immediately. General Reserves: For loans with a credit risk rating of 44 or better and any loans with a risk rating of 6 or 7 not considered impaired, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change. Using a historical average loss by loan type as a base, each loan graded as higher risk is assigned a specific percentage. The residential real estate and consumer loan portfolios are assigned a loss percentage as a homogenous group. If, however, on an individual loan the projected loss based on collateral value and payment histories is in excess of the computed allowance, the allocation is increased for the higher anticipated loss. These computations provide the basis for the allowance for loan losses as recorded by the Corporation. Below is a breakdown of loans by risk category as of June 30, 2018 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 10,788 $ 24,122 $ 176,912 $ 248,143 $ 16,215 $ 2,618 $ — $ — $ 478,798 Commercial, financial and agricultural 11,434 8,990 64,757 95,680 2,808 1,363 — — 185,032 Commercial construction 471 284 3,934 6,858 639 371 — 8,338 20,895 One-to-four family residential real estate — 1,358 2,509 6,191 1,138 3,068 — 269,777 284,041 Consumer construction — — — — — 12 — 15,397 15,409 Consumer — — — 25 3 21 — 19,153 19,202 Total loans $ 22,693 $ 34,754 $ 248,112 $ 356,897 $ 20,803 $ 7,453 $ — $ 312,665 $ 1,003,377 Below is a breakdown of loans by risk category as of December 31, 2017 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 2,775 $ 23,929 $ 159,385 $ 207,921 $ 8,700 $ 4,032 $ — $ — $ 406,742 Commercial, financial and agricultural 11,528 8,980 53,448 77,964 3,658 1,373 — — 156,951 Commercial construction — 308 2,749 1,310 648 374 — 3,854 9,243 One-to-four family residential real estate — 1,377 2,575 5,449 1,212 3,515 — 195,762 209,890 Consumer construction — — — — — 14 — 10,804 10,818 Consumer — — — 28 5 96 — 17,305 17,434 Total loans $ 14,303 $ 34,594 $ 218,157 $ 292,672 $ 14,223 $ 9,404 $ — $ 227,725 $ 811,078 Impaired Loans Impaired loans are those which are contractually past due 90 days or more as to interest or principal payments, on nonaccrual status, or loans, the terms of which have been renegotiated to provide a reduction or deferral on interest or principal. Loans are considered impaired when, based on current information and events, it is probable the Corporation will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The following is a summary of impaired loans and their effect on interest income (dollars in thousands): Impaired Loans Impaired Loans Total Unpaid Related with No Related with Related Impaired Principal Allowance for Allowance Allowance Loans Balance Loan Losses June 30, 2018 Commercial real estate $ 9,192 $ 2,447 $ 11,639 $ 10,549 $ 500 Commercial, financial and agricultural 173 1,324 1,497 1,700 264 Commercial construction — 372 372 372 — One to four family residential real estate 2,897 — 2,897 3,809 — Consumer construction 45 — 45 105 — Consumer 85 — 85 104 — Total $ $ $ $ $ December 31, 2017 Commercial real estate $ 1,511 $ 516 $ 2,027 $ 3,326 $ 168 Commercial, financial and agricultural — 166 166 326 166 Commercial construction — — — — — One to four family residential real estate 1,621 — 1,621 2,315 — Consumer construction 17 — 17 66 — Consumer 21 — 21 21 — Total $ 3,170 $ 682 $ 3,852 $ 6,054 $ 334 Individually Evaluated Impaired Loans June 30, 2018 December 31, 2017 Average Interest Income Average Interest Income Balance for Recognized for Balance for Recognized for the Period the Period the Period the Period Commercial real estate $ 3,269 $ 96 $ 2,784 $ 141 Commercial, financial and agricultural 826 34 246 1 Commercial construction 186 11 — — One to four family residential real estate 2,141 53 2,057 134 Consumer construction 63 2 37 3 Consumer 20 1 13 2 Total $ 6,505 $ 197 $ 5,137 $ 281 A summary of past due loans at June 30, 2018 and December 31, 2017 is as follows (dollars in thousands): June 30, December 31, 2018 2017 30-89 days 30-89 days Past Due 90+ days Past Due 90+ days (accruing) Past Due Nonaccrual Total (accruing) Past Due Nonaccrual Total Commercial real estate $ 1,443 $ — $ 1,231 $ 2,674 $ 460 $ — $ 866 $ 1,326 Commercial, financial and agricultural 482 — 334 816 16 — 338 354 Commercial construction 56 — 645 701 73 — 14 87 One to four family residential real estate 2,398 — 2,794 5,192 3,424 — 1,350 4,774 Consumer construction — — — — — — — — Consumer 39 — 21 60 72 — — 72 Total past due loans $ 4,418 $ — $ 5,025 $ 9,443 $ 4,045 $ — $ 2,568 $ 6,613 Troubled Debt Restructuring Troubled debt restructurings (“TDR”) are determined on a loan-by-loan basis. Generally restructurings are related to interest rate reductions, loan term extensions and short term payment forbearance as means to maximize collectability of troubled credits. If a portion of the TDR loan is uncollectible (including forgiveness of principal), the uncollectible amount will be charged off against the allowance at the time of the restructuring. In general, a borrower must make at least six consecutive timely payments before the Corporation would consider a return of a restructured loan to accruing status in accordance with FDIC guidelines regarding restoration of credits to accrual status. The Corporation has, in accordance with generally accepted accounting principles and applicable accounting standard updates, evaluated all loan modifications to determine the fair value impact of the underlying asset. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral. There was one troubled debt restructuring that occurred during the six months ended June 30, 2018 and no troubled debt restructurings during the six months ended June 30, 2017. Insider Loans The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands): Six Months Ended Six Months Ended June 30, June 30, 2018 2017 Loans outstanding, January 1 $ 10,037 $ 9,195 Net activity on revolving lines of credit — 561 Repayment (1,143) (386) Loans outstanding at end of period $ 8,894 $ 9,370 There were no loans to related parties classified substandard as of June 30, 2018 or June 30, 2017. In addition to the outstanding balances above, there were unfunded commitments of $.756 million to related parties at June 30, 2018.

GOODWILL AND OTHER INTANGIBLE A

GOODWILL AND OTHER INTANGIBLE ASSETS	6 Months Ended
	Jun. 30, 2018
GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS	6. GOODWILL AND OTHER INTANGIBLE ASSETS During the fourth quarter of 2014, the Corporation recorded $3.805 million of goodwill and $1.206 million of deposit based intangible assets associated with the acquisition of PFC. During 2016, the Corporation recorded $1.839 million of goodwill and $.993 million of deposit based intangible assets associated with the acquisition of Eagle River. Also in 2016, the Corporation recorded $50,000 of goodwill and $.300 million of deposit based intangible assets associated with the acquisition of Niagara. In connection with the acquisition of FFNM in May of 2018, th Corporation recorded, on a preliminary basis, $14.695 million of goodwill and $2.729 million of deposit based intangible assets. The deposit based intangible asset is reported net of accumulated amortization at $4.504 million at June 30, 2018. Amortization expense in the first six months of 2018 is $.148 million. Amortization expense for the next five years is expected to be at $.523 million per year.

SERVICING RIGHTS

SERVICING RIGHTS	6 Months Ended
	Jun. 30, 2018
SERVICING RIGHTS
SERVICING RIGHTS	7. SERVICING RIGHTS Mortgage Loans Mortgage servicing rights (“MSRs”) are recorded when loans are sold in the secondary market with servicing retained. As of June 30, 2018, the Corporation had obligations to service approximately $292.739 million of residential first mortgage loans. The valuation of MSRs is based upon the net present value of the projected revenues over the expected life of the loans being serviced, as reduced by estimated internal costs to service these loans. The fair value of the capitalized servicing rights approximates the carrying value which management estimates at $1.737 million. On a quarterly basis, management evaluates the MSRs for impairment. The key economic assumptions used in determining the fair value of the MSRs include an annual constant prepayment speed of 10.57% and a discount rate of 10.17% for June 30, 2018. During 2016, management decided to no longer regularly retain the servicing on mortgage loans sold. The following table summarizes MSRs capitalized and amortized, along with the aggregate activity in related valuation allowances (dollars in thousands): June 30, June 30, 2018 2017 Balance at beginning of period $ 1,033 $ 1,573 Additions from loans sold with servicing retained — 44 Acquired MSRs 386 — Amortization (219) (323) Balance at end of period $ 1,200 $ 1,294 Balance of loan servicing portfolio $ 292,739 $ 210,160 Mortgage servicing rights as % of portfolio .41% .61% Commercial Loans The Corporation periodically retains the servicing on certain commercial loans that have been sold. These loans were originated and underwritten under the SBA and USDA government guarantee programs, in which the guaranteed portion of the loan was sold to a third party with servicing retained. The balance of these sold loans with servicing retained at June 30, 2018 and June 30, 2017 was approximately $40.809 million and $40.097 million, respectively. The Corporation valued these servicing rights at $95,000 as of June 30, 2018 and at $125,000 as of June 30, 2017. This valuation was established in consideration of the discounted cash flow of net expected servicing income over the life of the loans.

BORROWINGS

BORROWINGS	6 Months Ended
	Jun. 30, 2018
BORROWINGS
BORROWINGS	8. BORROWINGS Borrowings consist of the following at June 30, 2018 and December 31, 2017 (dollars in thousands): 2018 2017 Federal Home Loan Bank fixed rate advances $ 91,194 $ 60,000 Correspondent bank term note — 18,999 USDA Rural Development note 553 553 $ 91,747 $ 79,552 The Federal Home Loan Bank borrowings bear a weighted average rate of 1.88% and mature at various dates through 2026. They are collateralized at June 30, 2018 by the following: a collateral agreement on the Corporation’s one to four family residential real estate loans with a book value of approximately $72.787 million; mortgage related and municipal securities with an amortized cost and estimated fair value of $44.646 million and $43.280 million, respectively; and Federal Home Loan Bank stock owned by the Bank totaling $4.860 million. Prepayment of the advances is subject to the provisions and conditions of the credit policy of the Federal Home Loan Bank of Indianapolis in effect as of June 30, 2018. The Corporation currently has one correspondent banking borrowing relationship. The relationship currently consists of a $15.0 million revolving line of credit, which had a zero balance at June 30, 2018. The line of credit bears an interest rate of 90-day LIBOR plus 2.00%, with a floor rate of 2.00% and a ceiling of 22%. The line of credit expires on April 30, 2020. LIBOR at June 30, 2018 was 2.34%. The Corporation previously had a term note as part of this relationship that was paid in full during the second quarter of 2018. This relationship is secured by all of the outstanding mBank stock. The USDA Rural Development borrowing bears an interest rate of 1.00% and matures in August, 2024. It is collateralized by an assignment of a demand deposit account held by the Corporation’s wholly owned subsidiary, First Rural Relending, in the amount of $.553 million, and guaranteed by the Corporation.

DEFINED BENEFIT PENSION PLAN

DEFINED BENEFIT PENSION PLAN	6 Months Ended
	Jun. 30, 2018
DEFINED BENEFIT PENSION PLAN
DEFINED BENEFIT PENSION PLAN	9. The Corporation acquired the Peninsula Financial Corporation noncontributory defined benefit pension plan in 2014. Effective December 31, 2005, the plan was amended to freeze participation in the plan; therefore, no additional employees are eligible to become participants in the plan. The benefits are based on years of service and the employee’s compensation at the time of retirement. The Plan was amended effective December 31, 2010, to freeze benefit accrual for all participants. Expected contributions to the Plan in 2018 are $64,000. The anticipated distributions over the next five years and through December 31, 2027 are detailed in the table below (dollars in thousands): 2018 $ 133 2019 130 2020 126 2021 125 2022 131 2023-2027 796 Total $ 1,441 At June 30, 2018, the plan’s assets had a fair value of $2.191 million and the Corporation had a net unfunded liability of $1.121 million. The accumulated benefit obligation at June 30, 2018 was $3.331 million. At June 30, 2017, the plan’s assets had a fair value of $2.049 million and the Corporation had a net unfunded liability of $1.138 million. The accumulated benefit obligation at June 30, 2017 was $3.187 million. Assumptions in the actuarial valuation are: 2018 2017 Weighted average discount rate Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets The expected long-term rate of return on plan assets reflects management’s expectations of long-term average rates of return on funds invested to provide for benefits included in the projected benefit obligation. The expected return is based on the outlook for inflation, fixed income returns and equity returns, while also considering historical returns, asset allocation and investment strategy. The discount rate assumption is based on investment yields available on AA rated long-term corporate bonds. The primary investment objective is to maximize growth of the pension plan assets to meet the projected obligations to the beneficiaries over a long period of time, and to do so in a manner that is consistent with the Corporation’s risk tolerance. The intention of the plan sponsor is to invest the plan assets in mutual funds with the following asset allocation; which was in place at both June 30, 2018 and December 31, 2017. Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50%

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS	6 Months Ended
	Jun. 30, 2018
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS	10. STOCK COMPENSATION PLANS Restricted Stock Awards The Corporation’s restricted stock awards are service-based and awarded based on performance. Each award has a vesting period of four years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants. The Corporation has historically granted RSAs to members of the Board of Directors and management. Awards granted are set to vest equally over their award terms and are issued at no cost to the recipient. The table below summarizes each of the grant awards: Market Value at Date of Award Units Granted grant date Vesting Term March, 2015 37,730 11.15 4 years May, 2015 3,000 10.77 Immediate February, 2016 35,733 9.91 4 years February, 2017 28,427 13.39 4 years February, 2018 18,643 16.30 4 years April, 2018 8,000 16.00 Immediate On August 31, 2013, 2014, 2015 and 2016, the Corporation issued 37,125 shares of its common stock for vested RSAs, in each year. In March 2015, the Corporation issued 13,194 shares of its common stock for vested RSAs. In May 2015, the Corporation granted 3,000 shares, which were immediately vested and issued. In March 2016, the Corporation issued 22,626 shares of its common stock for vested RSAs. In the first six months of 2017, the Corporation issued 31,559 shares of its common stock for vested RSAs. In the first six months of 2018, the Corporation issued 45,630 shares of its common stock for vested RSAs. A summary of changes in our nonvested shares for the period follows: Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2018 87,285 $ 11.78 Granted during the period 26,643 16.21 Vested during the period (45,630) 12.65 Nonvested balance at June 30, 2018 68,298 $ 12.93

INCOME TAXES

INCOME TAXES	6 Months Ended
	Jun. 30, 2018
INCOME TAXES
INCOME TAXES	11. INCOME TAXES The Corporation has reported deferred tax assets of $8.000 million at June 30, 2018. 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. The Corporation, as of June 30, 2018 had a net operating loss and tax credit carryforwards for tax purposes of approximately $5.9 million, and $1.7 million, respectively. Tax credit carryforwards include alternative minimum tax credits and general business credits. The Corporation evaluated the future benefits from these carryforwards as of June 30, 2018 and determined that it was “more likely than not” that they would be utilized prior to expiration. 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 and credit carryforwards are subject to the limitations for utilization as set forth in Section 382 of the Internal Revenue Code. The annual limitation is $1.404 million for the NOL and the equivalent value of tax credits, which is approximately $.295 million. These limitations for use were established in conjunction with the recapitalization of the Corporation in December 2004. The Corporation will continue to evaluate the future benefits from these carryforwards in order to determine if any adjustment to the deferred tax asset is warranted. The Corporation recognized a federal income tax expense of approximately $.511 million for the six months ended June 30, 2018 and $1.756 million for the six months ended June 30, 2017.

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	6 Months Ended
	Jun. 30, 2018
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS	12. FAIR VALUE MEASUREMENTS Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments. As part of the adoption of ASU 2016-01, the Corporation reviewed its calculations to determine fair values of 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 and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. 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 loan’s 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. 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 June 30, 2018 and December 31, 2017 (dollars in thousands): June 30, 2018 December 31, 2017 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 64,889 $ 64,889 $ 37,426 $ 37,426 Interest-bearing deposits Level 2 10,873 10,873 13,374 13,374 Securities available for sale Level 2 113,194 113,194 74,397 74,397 Securities available for sale Level 3 988 988 1,000 1,000 Other securities Level 3 500 500 500 500 Federal Home Loan Bank stock Level 2 4,860 4,860 3,112 3,112 Net loans Level 3 998,236 982,633 805,999 797,726 Accrued interest receivable Level 3 3,014 3,018 2,276 2,276 Total financial assets $ 1,196,554 $ 1,180,955 $ 938,084 $ 929,811 Financial liabilities: Deposits Level 2 $ 1,015,501 $ 970,149 $ 817,998 $ 788,632 Borrowings Level 2 91,747 90,478 79,552 79,242 Accrued interest payable Level 3 420 420 322 322 Total financial liabilities $ 1,107,668 $ 1,061,047 $ 897,872 $ 868,196 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 Corporation’s entire holdings of a particular financial instrument. Because no market exists for a significant portion of the Corporation’s 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. The following is information about the Corporation’s assets and liabilities measured at fair value on a recurring basis at June 30, 2018, 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 June 30, 2018 and December 31, 2017 were based on level 2 and level 3 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 table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Six Months Ended (dollars in thousands) June 30, 2018 (Level 1) (Level 2) (Level 3) June 30, 2018 June 30, 2018 Assets Corporate $ $ — $ 19,307 $ — $ — $ — Equity — — — — US Agencies — 15,102 — — — US Agencies - MBS — 34,093 — — — Obligations of state and political subdivisions 45,680 — 44,692 988 — — $ 114,682 $ — — Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Corporate $ $ — $ 24,391 $ — $ — Equity — — — US Agencies — 16,846 — — US Agencies - MBS — 12,716 — — Obligations of state and political subdivisions 21,444 — 20,444 1,000 — $ 75,897 $ — The Corporation had no Level 3 assets or liabilities measured at fair value on a recurring basis as of June 30, 2018, or December 31, 2017 other than as described above. 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 Corporation’s 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 certain impaired 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 at June 30, 2018 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Six Months Ended (dollars in thousands) June 30, 2018 (Level 1) (Level 2) (Level 3) June 30, 2018 June 30, 2018 Assets Impaired loans $ 16,535 $ — $ — $ 16,535 $ 1 $ Other real estate owned 2,461 — — 2,461 40 66 $ 41 67 Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2017 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Impaired loans $ $ — $ — $ $ 141 Other real estate held for sale — — 388 $ 529 Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Corporation estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals).

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY	6 Months Ended
	Jun. 30, 2018
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY	13. SHAREHOLDERS’ EQUITY The Corporation currently has a share repurchase program. The program is conducted under authorizations by the Board of Directors. The Corporation repurchased 14,000 shares in 2016, 102,455 shares in 2015, 13,700 shares in 2014 and 55,594 shares in 2013. The share repurchases were conducted under Board authorizations made and publically announced of $.600 million on February 27, 2013, $.600 million on December 17, 2013 and an additional $.750 million on April 28, 2015. None of these authorizations has an expiration date. As of June 30, 2018, approximately $25,000 of the total authorization was available for future purchases. On May 18, 2018, the Corporation completed the acquisition of FFNM, resulting in the issuance of 2,146,378 shares, and and increase of $34.101 million. On June 15, 2018, the Corporation closed a common stock offering with gross proceeds of approximately $34.5 million and net proceeds of approximately $32.5 million. The Corporation issued 2,225,807 shares in connection with the stock offering.

COMMITMENTS, CONTINGENCIES AND

COMMITMENTS, CONTINGENCIES AND CREDIT RISK	6 Months Ended
	Jun. 30, 2018
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
COMMITMENTS, CONTINGENCIES AND CREDIT RISK	14. COMMITMENTS, CONTINGENCIES AND CREDIT RISK Financial Instruments With Off-Balance-Sheet Risk The Corporation is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Corporation’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. These commitments are as follows (dollars in thousands): June 30, December 31, 2018 2017 Commitments to extend credit: Variable rate $ 82,252 $ 72,187 Fixed rate 53,681 37,468 Standby letters of credit - Variable rate 7,305 7,753 Credit card commitments - Fixed rate 6,110 5,788 $ 149,348 $ 123,196 The increase in commitments is largely a result of the FFNM transaction. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The commitments are structured to allow for 100% collateralization on all standby letters of credit. Credit card commitments are commitments on credit cards issued by the Corporation’s subsidiary and serviced by other companies. These commitments are unsecured. Legal Proceedings and Contingencies In the normal course of business, the Corporation is involved in various legal proceedings. For an expanded discussion on the Corporation’s legal proceedings, see Part II, Item 1, “Legal Proceedings” in this report. C oncentration of Credit Risk The Bank grants commercial, residential, agricultural, and consumer loans throughout Michigan and Northeastern Wisconsin. The Bank’s most prominent concentration in the loan portfolio relates to commercial real estate loans to operators of nonresidential buildings. This concentration at June 30, 2018 represents $117.285 million, or 17.13%,compared to $119.025 million, or 20.77%, of the commercial loan portfolio on December 31, 2017. The remainder of the commercial loan portfolio is diversified in such categories as hospitality and tourism, real estate agents and managers, new car dealers, gas stations and convenience sotres, petroleum, forestry, agriculture and construction. Due to the diversity of the Bank’s locations, the ability of debtors of residential and consumer loans to honor their obligations is not tied to any particular economic sector.

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS	6 Months Ended
	Jun. 30, 2018
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS	15. BUSINESS COMBINATIONS The First National Bank of Eagle River The Corporation completed its acquisition of The First National Bank of Eagle River (“Eagle River”) in April 2016. Eagle River had three branch offices and approximately $125 million in assets as of April 29, 2016, including total loans of $84 million and total deposits of $105 million. The results of operations due to the merger have been included in the Corporation’s results since the acquisition date. The merger was effected by a cash payment of $12.500 million. The Corporation recorded a $.933 million core deposit intangible asset and $1.839 million of goodwill in conjunction with the acquisition. Goodwill was recorded due to the synergies and economies of scale expected from combining operations of the Corporation with Eagle River. Niagara Bancorporation The Corporation completed its acquisition of Niagara Bancorporation, Inc. (“Niagara”) in August 2016. Niagara had four branch offices and approximately $67 million in assets as of August 31, 2016 including total loans of $33 million and total deposits of $59 million. The results of operations due to the merger have been included in the Corporation’s results since the acquisition date. The merger was effected by a cash payment of $7.325 million. The corporation recorded a $.300 million core deposit intangible asset and $50,000 of goodwill in conjunction with the acquisition. Goodwill was recorded due to the synergies and economies of scale expected from combining operations of the Corporation with Niagara. First Federal of Northern Michigan Bancorp, Inc. The Corporation completed its acquisition of First Federal of Northern Michigan Bancorp, Inc in May 2018. FFNM had seven branch offices, one of which was consolidated into an existing mBank branch shortly after consummation of the transaction. Total assets of FFNM as of May 18, 2018 were $318 million, including total loans of $192 million and deposits, the majority of which are core deposits, of $254 million. The results of operations due to the merger have been included in the Corporation’s results since the acquisition date. As consideration in the acquisition, the Corporation issued 2,146,378 new shares, approximating $34.1 million. The Corporation recorded preliminary deposit based intangibles of $2.7 million and goodwill of $14.7 million. While the Corporation believes the majority of the business combination and purchase accounting activity is complete, it is expected there will be minor adjustments in the normal course within the allotted GAAP adjustment period. Purchase accounting activity still being analyzed primarily includes certain tax implications. The table below highlights the allocation of purchase price for the FFNM acquisition (dollars in thousands, except per share data): Purchase Price: FFNM shares outstanding 3,726,925 Price per share $ 9.15 Total purchase price $ 34,101 Net assets acquired: Cash and cash equivalents $ 13,267 Securities available for sale 96,297 FHLB Stock 1,748 Total loans 185,444 Premises and equipment 5,134 Other real estate owned 194 Deposit based intangible 2,729 Mortgage servicing rights 386 Deferred tax assets 3,229 Bank owned life insurance 5,170 Other assets 1,775 Total assets 315,373 Non-interest bearing deposits 60,616 Interest bearing deposits 193,099 Total deposits 253,715 FHLB borrowings 40,722 Deferred tax liability 133 Other liabilities 1,397 Total liabilities 295,967 Net assets acquired 19,406 Goodwill $ 14,695 The following table provides the unaudited pro forma information for the results of operations for the six months ended June 30, 2018, and the year ended December 31, 2017 as if the acquisition had occurred on January 1 of each year. These adjustments reflect the impact of certain purchase accounting fair value measurements, primarily on the loan and deposit portfolios of FFNM. In addition, the merger related costs noted above are excluded from the six months ended June 30, 2018 results of operations, for comparative pro forma purposes. Further operating cost savings are expected along with additional business synergies as a result of the merger which are not presented in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual results of operations of the combined banking organization that would have been achieved had the merger occurred at the beginning of the period presented, nor are they intended to represent or be indicative of future results of the Corporation. Pro forma Mackinac Financial Combined with FFNM Six months ended Year Ended June 30, 2018 December 31, 2017 Net interest income $ 25,700 $ 51,495 Noninterest income 2,800 5,615 Noninterest expense 20,500 41,140 Net income 5,800 11,650 Net income per diluted share $ .54 1.09 Lincoln Community Bank On June 7, 2018 the Corporation announced the execution of a definitive agreement to acquire Lincoln Community Bank (“Lincoln”) located in Merrill, WI, for $8.50 million in cash. Lincoln currently operates two (2) banking centers, one each in Merrill and Gleason, WI. As of June 30, 2018, Lincoln has total assets in excess of $59 million, loans of approximately $40 million and deposits in excess of $52 million. The transaction is expected to close late in the third quarter of 2018 or early in the fourth quarter of 2018. The transaction remains subject to approval by federal and state regulatory authorities as well as the satisfaction of other customary closing conditions provided in the purchase agreement. The purchase agreement also provides that Lincoln will be consolidated into mBank.

SUMMARY OF SIGNIFICANT ACCOUN23

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	6 Months Ended
	Jun. 30, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	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 and six month periods ended June 30, 2018 are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. 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 Corporation’s Annual Report on Form 10-K for the year ended December 31, 2017. 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 were unchanged by 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, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, the assessment of goodwill for impairment, and the fair value of assets and liabilities acquired in business combinations.
Acquired Loans	Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected. We evaluate at each balance sheet date whether it is probable that we will be unable to collect all cash flows expected at acquisition and if so, recognize a provision for loan loss in our consolidated statement of operations. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans.
Allowance for Loan Losses	Allowance for Loan Losses The allowance for loan losses includes specific allowances related to 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 loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated 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 probable loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s 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 management’s 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.
Stock Compensation Plans	Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), stock grants,or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At June 30, 2018 there were 247,279 shares available for issuance under this plan. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period.

EARNINGS PER SHARE (Tables)

EARNINGS PER SHARE (Tables)	6 Months Ended
	Jun. 30, 2018
EARNINGS PER SHARE
Schedule showing the computation of basic and diluted earnings per share	The following shows the computation of basic and diluted earnings per share for the three and six months ended June 30, 2018 and 2017 (dollars in thousands, except per share data): Three Months Ended June 30, Six Months Ended June 30, 2018 2017 2018 2017 (Numerator): Net income $ 396 $ $ 1,933 $ (Denominator): Weighted average shares outstanding 7,769,720 7,041,010 Effect of dilutive stock options, and vesting of restricted stock awards 39,298 33,622 Diluted weighted average shares outstanding 7,809,018 6,307,883 7,074,632 6,298,515 Income per common share: Basic $ 0.05 $ 0.27 $ 0.27 $ 0.54 Diluted $ 0.05 $ 0.27 $ 0.27 $ 0.54

INVESTMENT SECURITIES (Tables)

INVESTMENT SECURITIES (Tables)	6 Months Ended
	Jun. 30, 2018
INVESTMENT SECURITIES
Schedule of carrying value and estimated fair value of securities available for sale	The amortized cost and estimated fair value of investment securities available for sale as of June 30, 2018 and December 31, 2017 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value June 30, 2018 Corporate $ 19,466 $ 32 $ (191) $ 19,307 US Agencies 14,948 444 (290) 15,102 US Agencies - MBS 33,770 596 (273) 34,093 Obligations of states and political subdivisions 45,231 656 (207) 45,680 Total securities available for sale $ 113,415 $ 1,728 $ (961) $ 114,182 December 31, 2017 Corporate $ 24,352 $ 82 $ (43) $ 24,391 US Agencies 16,935 10 (99) 16,846 US Agencies - MBS 12,830 42 (156) 12,716 Obligations of states and political subdivisions 21,370 307 (233) 21,444 Total securities available for sale $ 75,487 $ 441 $ (531) $ 75,397

LOANS (Tables)

LOANS (Tables)	6 Months Ended
	Jun. 30, 2018
Schedule of composition of loans	The composition of loans is as follows (dollars in thousands): June 30, December 31, 2018 2017 Commercial real estate $ 478,798 $ 406,742 Commercial, financial, and agricultural 185,032 156,951 Commercial construction 20,895 9,243 One to four family residential real estate 284,041 209,890 Consumer 19,202 17,434 Consumer construction 15,409 10,818 Total loans $ 1,003,377 $ 811,078
Schedule of the accretable yield by acquisition	The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2018 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ 149 $ — $ 149 $ 218 $ 603 $ 821 Accretion (30) — (30) — (297) (297) Reclassification from nonaccretable difference 23 — 23 — — — Balance, June 30, 2018 $ 142 $ — $ 142 $ 218 $ 306 $ 524 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ 38 $ 281 $ 319 $ — $ — $ — Acquisition activity — — — 700 4,498 5,198 Accretion — (108) (108) — (83) (83) Reclassification from nonaccretable difference — — — — — — Balance, June 30, 2018 $ 38 $ 173 $ 211 $ 700 $ 4,415 $ 5,115 The table below presents a rollforward of the accretable yield on acquired loans for the six months ended June 30, 2017 (dollars in thousands): PFC Eagle River Niagara Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2016 $ 282 $ 642 $ 924 $ 236 $ 1,221 $ 1,457 $ 52 $ 505 $ 557 Accretion (100) (350) (450) — (313) (313) — (114) (114) Reclassification from nonaccretable difference 32 — 32 — — — (8) — (8) Balance, June 30, 2017 $ 214 $ 292 $ 506 $ 236 $ 908 $ 1,144 $ 44 $ 391 $ 435
Schedule of the allowance for loan losses	An analysis of the allowance for loan losses for the six months ended June 30, 2018 and June 30, 2017 is as follows (dollars in thousands): June 30, June 30, 2018 2017 Balance, January 1 $ 5,079 $ 5,020 Recoveries on loans previously charged off 264 168 Loans charged off (352) Provision 150 200 Balance at end of period $ 5,141 $ 5,133
Schedule of breakdown of the allowance for loan losses and recorded balances in loans	A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2018 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended June 30, 2018 Allowance for loan loss reserve: Beginning balance ALLR $ 1,127 $ 547 $ 54 $ 173 $ 6 $ 9 $ 3,185 $ 5,101 Charge-offs (1) (128) — (100) — (70) — (299) Recoveries 23 156 — 50 — 10 — 239 Provision 319 (80) (1) 157 1 60 (356) 100 Ending balance ALLR $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 Six Months Ended June 30, 2018 Allowance for loan loss reserve: Beginning balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Charge-offs (1) (128) — (147) — (76) — (352) Recoveries 30 159 1 52 — 22 — 264 Provision (211) (112) (2) 215 1 53 206 150 Ending balance ALLR $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 At June 30, 2018 Loans: Ending balance $ 478,798 $ 185,032 $ 20,895 $ 284,041 $ 15,409 $ 19,202 $ — $ 1,003,377 Ending balance ALLR (1,468) (495) (53) (280) (7) (9) (2,829) (5,141) Net loans $ 477,330 $ 184,537 $ 20,842 $ 283,761 $ 15,402 $ 19,193 $ (2,829) $ 998,236 Ending balance ALLR: Individually evaluated $ 500 $ 264 $ — $ — $ — $ — $ — $ 764 Collectively evaluated 968 231 53 280 7 9 2,829 4,377 Total $ 1,468 $ 495 $ 53 $ 280 $ 7 $ 9 $ 2,829 $ 5,141 Ending balance Loans: Individually evaluated $ 2,447 $ 1,324 $ 372 $ — $ — $ — $ — $ 4,143 Collectively evaluated 467,159 183,535 20,523 281,144 15,364 19,117 — 986,842 Acquired with deteriorated credit quality 9,192 173 — 2,897 45 85 — 12,392 Total $ 478,798 $ 185,032 $ 20,895 $ 284,041 $ 15,409 $ 19,202 $ — $ 1,003,377 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at June 30, 2017 is as follows (dollars in thousands): Commercial, One to four Commercial financial and Commercial family residential Consumer real estate agricultural construction real estate construction Consumer Unallocated Total Three Months Ended June 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,360 $ 650 $ 95 $ 265 $ 7 $ 15 $ 2,754 $ 5,146 Charge-offs — (93) — — — (36) — (129) Recoveries 28 3 — 1 1 33 — 66 Provision 75 135 — (7) (2) 3 (154) 50 Ending balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Six Months Ended June 30, 2017 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs — (93) — (49) — (113) — (255) Recoveries 62 4 — 62 1 39 — 168 Provision 56 170 38 (50) (1) (1) (12) 200 Ending balance ALLR $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 At June 30, 2017 Loans: Ending balance $ 397,655 $ 151,588 $ 10,145 $ 200,771 $ 11,535 $ 19,059 $ — $ 790,753 Ending balance ALLR (1,463) (695) (95) (259) (6) (15) (2,600) (5,133) Net loans $ 396,192 $ 150,893 $ 10,050 $ 200,512 $ 11,529 $ 19,044 $ (2,600) $ 785,620 Ending balance ALLR: Individually evaluated $ 525 $ 415 $ 38 $ 39 $ — $ 5 $ — $ 1,022 Collectively evaluated 938 280 57 220 6 10 2,600 4,111 Total $ 1,463 $ 695 $ 95 $ 259 $ 6 $ 15 $ 2,600 $ 5,133 Ending balance Loans: Individually evaluated $ 1,536 $ 1,456 $ 381 $ 733 $ — $ 5 $ — $ 4,111 Collectively evaluated 393,322 150,132 9,764 198,400 11,482 19,054 — 782,154 Acquired with deteriorated credit quality 2,797 — — 1,638 53 — — 4,488 Total $ 397,655 $ 151,588 $ 10,145 $ 200,771 $ 11,535 $ 19,059 $ — $ 790,753
Schedule of breakdown of loans by risk category	Below is a breakdown of loans by risk category as of June 30, 2018 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 10,788 $ 24,122 $ 176,912 $ 248,143 $ 16,215 $ 2,618 $ — $ — $ 478,798 Commercial, financial and agricultural 11,434 8,990 64,757 95,680 2,808 1,363 — — 185,032 Commercial construction 471 284 3,934 6,858 639 371 — 8,338 20,895 One-to-four family residential real estate — 1,358 2,509 6,191 1,138 3,068 — 269,777 284,041 Consumer construction — — — — — 12 — 15,397 15,409 Consumer — — — 25 3 21 — 19,153 19,202 Total loans $ 22,693 $ 34,754 $ 248,112 $ 356,897 $ 20,803 $ 7,453 $ — $ 312,665 $ 1,003,377 Below is a breakdown of loans by risk category as of December 31, 2017 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 2,775 $ 23,929 $ 159,385 $ 207,921 $ 8,700 $ 4,032 $ — $ — $ 406,742 Commercial, financial and agricultural 11,528 8,980 53,448 77,964 3,658 1,373 — — 156,951 Commercial construction — 308 2,749 1,310 648 374 — 3,854 9,243 One-to-four family residential real estate — 1,377 2,575 5,449 1,212 3,515 — 195,762 209,890 Consumer construction — — — — — 14 — 10,804 10,818 Consumer — — — 28 5 96 — 17,305 17,434 Total loans $ 14,303 $ 34,594 $ 218,157 $ 292,672 $ 14,223 $ 9,404 $ — $ 227,725 $ 811,078
Summary of impaired loans and their effect on interest income	The following is a summary of impaired loans and their effect on interest income (dollars in thousands): Impaired Loans Impaired Loans Total Unpaid Related with No Related with Related Impaired Principal Allowance for Allowance Allowance Loans Balance Loan Losses June 30, 2018 Commercial real estate $ 9,192 $ 2,447 $ 11,639 $ 10,549 $ 500 Commercial, financial and agricultural 173 1,324 1,497 1,700 264 Commercial construction — 372 372 372 — One to four family residential real estate 2,897 — 2,897 3,809 — Consumer construction 45 — 45 105 — Consumer 85 — 85 104 — Total $ $ $ $ $ December 31, 2017 Commercial real estate $ 1,511 $ 516 $ 2,027 $ 3,326 $ 168 Commercial, financial and agricultural — 166 166 326 166 Commercial construction — — — — — One to four family residential real estate 1,621 — 1,621 2,315 — Consumer construction 17 — 17 66 — Consumer 21 — 21 21 — Total $ 3,170 $ 682 $ 3,852 $ 6,054 $ 334 Individually Evaluated Impaired Loans June 30, 2018 December 31, 2017 Average Interest Income Average Interest Income Balance for Recognized for Balance for Recognized for the Period the Period the Period the Period Commercial real estate $ 3,269 $ 96 $ 2,784 $ 141 Commercial, financial and agricultural 826 34 246 1 Commercial construction 186 11 — — One to four family residential real estate 2,141 53 2,057 134 Consumer construction 63 2 37 3 Consumer 20 1 13 2 Total $ 6,505 $ 197 $ 5,137 $ 281
Summary of past due loans	A summary of past due loans at June 30, 2018 and December 31, 2017 is as follows (dollars in thousands): June 30, December 31, 2018 2017 30-89 days 30-89 days Past Due 90+ days Past Due 90+ days (accruing) Past Due Nonaccrual Total (accruing) Past Due Nonaccrual Total Commercial real estate $ 1,443 $ — $ 1,231 $ 2,674 $ 460 $ — $ 866 $ 1,326 Commercial, financial and agricultural 482 — 334 816 16 — 338 354 Commercial construction 56 — 645 701 73 — 14 87 One to four family residential real estate 2,398 — 2,794 5,192 3,424 — 1,350 4,774 Consumer construction — — — — — — — — Consumer 39 — 21 60 72 — — 72 Total past due loans $ 4,418 $ — $ 5,025 $ 9,443 $ 4,045 $ — $ 2,568 $ 6,613
Schedule of activity in insider loans granted to the entity's executive officers and directors, including their families and firms	The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands): Six Months Ended Six Months Ended June 30, June 30, 2018 2017 Loans outstanding, January 1 $ 10,037 $ 9,195 Net activity on revolving lines of credit — 561 Repayment (1,143) (386) Loans outstanding at end of period $ 8,894 $ 9,370
PFC
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061
Eagle River
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875
Niagara Bancorporation
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the Niagara acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707
FFNM
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the FFNM acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 5,440 $ 187,302 $ 192,742 Nonaccretable difference (2,100) — (2,100) Expected cash flows 3,340 187,302 190,642 Accretable yield (700) (4,498) (5,198) Carrying balance at acquisition date $ 2,640 $ 182,804 $ 185,444

SERVICING RIGHTS (Tables)

SERVICING RIGHTS (Tables)	6 Months Ended
	Jun. 30, 2018
SERVICING RIGHTS
Summary of mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances	The following table summarizes MSRs capitalized and amortized, along with the aggregate activity in related valuation allowances (dollars in thousands): June 30, June 30, 2018 2017 Balance at beginning of period $ 1,033 $ 1,573 Additions from loans sold with servicing retained — 44 Acquired MSRs 386 — Amortization (219) (323) Balance at end of period $ 1,200 $ 1,294 Balance of loan servicing portfolio $ 292,739 $ 210,160 Mortgage servicing rights as % of portfolio .41% .61%

BORROWINGS (Tables)

BORROWINGS (Tables)	6 Months Ended
	Jun. 30, 2018
BORROWINGS
Schedule of borrowings	Borrowings consist of the following at June 30, 2018 and December 31, 2017 (dollars in thousands): 2018 2017 Federal Home Loan Bank fixed rate advances $ 91,194 $ 60,000 Correspondent bank term note — 18,999 USDA Rural Development note 553 553 $ 91,747 $ 79,552

DEFINED BENEFIT PENSION PLAN (T

DEFINED BENEFIT PENSION PLAN (Tables)	6 Months Ended
	Jun. 30, 2018
DEFINED BENEFIT PENSION PLAN
Schedule of anticipated distributions over the next five years	The anticipated distributions over the next five years and through December 31, 2027 are detailed in the table below (dollars in thousands): 2018 $ 133 2019 130 2020 126 2021 125 2022 131 2023-2027 796 Total $ 1,441
Schedule of assumptions in the actuarial valuation	2018 2017 Weighted average discount rate Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets
Schedule of asset allocation	Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50%

STOCK COMPENSATION PLANS (Table

STOCK COMPENSATION PLANS (Tables)	6 Months Ended
	Jun. 30, 2018
STOCK COMPENSATION PLANS
Summary of restricted stock units awards granted	Market Value at Date of Award Units Granted grant date Vesting Term March, 2015 37,730 11.15 4 years May, 2015 3,000 10.77 Immediate February, 2016 35,733 9.91 4 years February, 2017 28,427 13.39 4 years February, 2018 18,643 16.30 4 years April, 2018 8,000 16.00 Immediate
Summary of changes in nonvested shares	Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2018 87,285 $ 11.78 Granted during the period 26,643 16.21 Vested during the period (45,630) 12.65 Nonvested balance at June 30, 2018 68,298 $ 12.93

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	6 Months Ended
	Jun. 30, 2018
FAIR VALUE MEASUREMENTS
Schedule presenting information for financial instruments	The following table presents information for financial instruments at June 30, 2018 and December 31, 2017 (dollars in thousands): June 30, 2018 December 31, 2017 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 64,889 $ 64,889 $ 37,426 $ 37,426 Interest-bearing deposits Level 2 10,873 10,873 13,374 13,374 Securities available for sale Level 2 113,194 113,194 74,397 74,397 Securities available for sale Level 3 988 988 1,000 1,000 Other securities Level 3 500 500 500 500 Federal Home Loan Bank stock Level 2 4,860 4,860 3,112 3,112 Net loans Level 3 998,236 982,633 805,999 797,726 Accrued interest receivable Level 3 3,014 3,018 2,276 2,276 Total financial assets $ 1,196,554 $ 1,180,955 $ 938,084 $ 929,811 Financial liabilities: Deposits Level 2 $ 1,015,501 $ 970,149 $ 817,998 $ 788,632 Borrowings Level 2 91,747 90,478 79,552 79,242 Accrued interest payable Level 3 420 420 322 322 Total financial liabilities $ 1,107,668 $ 1,061,047 $ 897,872 $ 868,196
Schedule of investment securities measured at fair value on a recurring basis	The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Six Months Ended (dollars in thousands) June 30, 2018 (Level 1) (Level 2) (Level 3) June 30, 2018 June 30, 2018 Assets Corporate $ $ — $ 19,307 $ — $ — $ — Equity — — — — US Agencies — 15,102 — — — US Agencies - MBS — 34,093 — — — Obligations of state and political subdivisions 45,680 — 44,692 988 — — $ 114,682 $ — — Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Corporate $ $ — $ 24,391 $ — $ — Equity — — — US Agencies — 16,846 — — US Agencies - MBS — 12,716 — — Obligations of state and political subdivisions 21,444 — 20,444 1,000 — $ 75,897 $ —
Schedule of assets measured at fair value on a non-recurring basis	Assets Measured at Fair Value on a Nonrecurring Basis at June 30, 2018 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended Six Months Ended (dollars in thousands) June 30, 2018 (Level 1) (Level 2) (Level 3) June 30, 2018 June 30, 2018 Assets Impaired loans $ 16,535 $ — $ — $ 16,535 $ 1 $ Other real estate owned 2,461 — — 2,461 40 66 $ 41 67 Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2017 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Impaired loans $ $ — $ — $ $ 141 Other real estate held for sale — — 388 $ 529

COMMITMENTS, CONTINGENCIES, AND

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Tables)	6 Months Ended
	Jun. 30, 2018
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
Schedule of commitments	These commitments are as follows (dollars in thousands): June 30, December 31, 2018 2017 Commitments to extend credit: Variable rate $ 82,252 $ 72,187 Fixed rate 53,681 37,468 Standby letters of credit - Variable rate 7,305 7,753 Credit card commitments - Fixed rate 6,110 5,788 $ 149,348 $ 123,196

BUSINESS COMBINATIONS (Tables)

BUSINESS COMBINATIONS (Tables)	6 Months Ended
	Jun. 30, 2018
Schedule of unaudited proforma results	Six months ended Year Ended June 30, 2018 December 31, 2017 Net interest income $ 25,700 $ 51,495 Noninterest income 2,800 5,615 Noninterest expense 20,500 41,140 Net income 5,800 11,650 Net income per diluted share $ .54 1.09
Lincoln Community Bank
Schedule of allocation of the purchase price	The table below highlights the allocation of purchase price for the FFNM acquisition (dollars in thousands, except per share data): Purchase Price: FFNM shares outstanding 3,726,925 Price per share $ 9.15 Total purchase price $ 34,101 Net assets acquired: Cash and cash equivalents $ 13,267 Securities available for sale 96,297 FHLB Stock 1,748 Total loans 185,444 Premises and equipment 5,134 Other real estate owned 194 Deposit based intangible 2,729 Mortgage servicing rights 386 Deferred tax assets 3,229 Bank owned life insurance 5,170 Other assets 1,775 Total assets 315,373 Non-interest bearing deposits 60,616 Interest bearing deposits 193,099 Total deposits 253,715 FHLB borrowings 40,722 Deferred tax liability 133 Other liabilities 1,397 Total liabilities 295,967 Net assets acquired 19,406 Goodwill $ 14,695

SUMMARY OF SIGNIFICANT ACCOUN34

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)- - shares	Jun. 30, 2018	May 22, 2012
Stock Compensation Plans
Shares available for grant	247,279
2012 Incentive Compensation Plan
Stock Compensation Plans
Total authorized share balance		575,000

RECENT ACCOUNTING PRONOUNCEME35

RECENT ACCOUNTING PRONOUNCEMENTS (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
RECENT ACCOUNTING PRONOUNCEMENTS
Other securities	$ 500	$ 500

EARNINGS PER SHARE (Details)

EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
(Numerator):
Net income	$ 396	$ 1,680	$ 1,933	$ 3,406
(Denominator):
Weighted average shares outstanding	7,769,720	6,294,930	7,041,010	6,282,550
Effect of dilutive stock options, and vesting of restricted stock awards	39,298	12,953	33,622	15,965
Diluted weighted average shares outstanding	7,809,018	6,307,883	7,074,632	6,298,515
Income per common share:
Basic (in dollars per share)	$ 0.05	$ 0.27	$ 0.27	$ 0.54
Diluted (in dollars per share)	$ 0.05	$ 0.27	$ 0.27	$ 0.54

INVESTMENT SECURITIES (Details)

INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
SECURITIES AVAILABLE FOR SALE
Securities available for sale	$ 114,182	$ 75,397
Estimated Fair Value	114,682
Collateral Pledged
SECURITIES AVAILABLE FOR SALE
Available for sale equity securities	44,646
Amortized cost estimated fair value	43,280
Available-for-sale Securities
SECURITIES AVAILABLE FOR SALE
Total amortized cost	113,415	75,487
Gross Unrealized Gains	1,728	441
Gross Unrealized Losses	(961)	(531)
Estimated Fair Value	114,182	75,397
Corporate
SECURITIES AVAILABLE FOR SALE
Total amortized cost	19,466	24,352
Gross Unrealized Gains	32	82
Gross Unrealized Losses	(191)	(43)
Estimated Fair Value	19,307	24,391
US Agencies
SECURITIES AVAILABLE FOR SALE
Total amortized cost	14,948	16,935
Gross Unrealized Gains	444	10
Gross Unrealized Losses	(290)	(99)
Estimated Fair Value	15,102	16,846
US Agencies - MBS
SECURITIES AVAILABLE FOR SALE
Total amortized cost	33,770	12,830
Gross Unrealized Gains	596	42
Gross Unrealized Losses	(273)	(156)
Estimated Fair Value	34,093	12,716
Obligations of states and political subdivisions
SECURITIES AVAILABLE FOR SALE
Total amortized cost	45,231	21,370
Gross Unrealized Gains	656	307
Gross Unrealized Losses	(207)	(233)
Estimated Fair Value	45,680	$ 21,444
Equity securities
SECURITIES AVAILABLE FOR SALE
Unrealized gain or loss associated with the equity securities	0
Estimated Fair Value	$ 500

LOANS (Details)

LOANS (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2017	Jun. 30, 2018	Jun. 30, 2017	Dec. 31, 2017
Loans
Total loans		$ 1,003,377	$ 790,753	$ 811,078
Changes in the allowance for loan losses
Net charge off activity		88	87
PFC
Acquired portfolio
Loans acquired - contractual payments		67,139
Nonaccretable difference		(2,234)
Expected cash flows		64,905
Accretable yield		(2,844)
Carrying balance at acquisition date		62,061
Balance at the beginning of period	$ 924	149	924
Accretion		(30)	(450)
Reclassification from nonaccretable difference		23	(32)
Balance at the end of period		142	506
Eagle River
Acquired portfolio
Loans acquired - contractual payments		84,138
Nonaccretable difference		(1,172)
Expected cash flows		82,966
Accretable yield		(2,091)
Carrying balance at acquisition date		80,875
Balance at the beginning of period	1,457	821	1,457
Accretion		(297)	(313)
Balance at the end of period		524	1,144
Niagara Bancorporation
Acquired portfolio
Loans acquired - contractual payments		32,660
Nonaccretable difference		(265)
Expected cash flows		32,395
Accretable yield		(688)
Carrying balance at acquisition date		31,707
Balance at the beginning of period	557	319	557
Accretion		(108)	(114)
Reclassification from nonaccretable difference			8
Balance at the end of period		211	435
FFNM
Acquired portfolio
Loans acquired - contractual payments		192,742
Nonaccretable difference		(2,100)
Expected cash flows		190,642
Accretable yield		(5,198)
Carrying balance at acquisition date		185,444
Acquisition activity		5,198
Accretion		(83)
Balance at the end of period		5,115
Commercial real estate
Loans
Total loans		478,798	397,655	406,742
Commercial, financial, and agricultural
Loans
Total loans		185,032	151,588	156,951
Commercial construction
Loans
Total loans		20,895	10,145	9,243
One to four family residential real estate
Loans
Total loans		284,041	200,771	209,890
Consumer
Loans
Total loans		19,202	19,059	17,434
Consumer construction
Loans
Total loans		15,409	11,535	$ 10,818
Acquired Impaired
Acquired portfolio
Accretion	(100)	(30)
Acquired Impaired | PFC
Acquired portfolio
Loans acquired - contractual payments		13,290
Nonaccretable difference		(2,234)
Expected cash flows		11,056
Accretable yield		(744)
Carrying balance at acquisition date		10,312
Balance at the beginning of period	282	149	282
Accretion		(30)	(100)
Reclassification from nonaccretable difference		23	(32)
Balance at the end of period		142	214
Acquired Impaired | Eagle River
Acquired portfolio
Loans acquired - contractual payments		3,401
Nonaccretable difference		(1,172)
Expected cash flows		2,229
Accretable yield		(391)
Carrying balance at acquisition date		1,838
Balance at the beginning of period	236	218	236
Balance at the end of period		218	236
Acquired Impaired | Niagara Bancorporation
Acquired portfolio
Loans acquired - contractual payments		2,105
Nonaccretable difference		(265)
Expected cash flows		1,840
Accretable yield		(88)
Carrying balance at acquisition date		1,752
Balance at the beginning of period	52	38	52
Reclassification from nonaccretable difference			8
Balance at the end of period		38	44
Acquired Impaired | FFNM
Acquired portfolio
Loans acquired - contractual payments		5,440
Nonaccretable difference		(2,100)
Expected cash flows		3,340
Accretable yield		(700)
Carrying balance at acquisition date		2,640
Acquisition activity		700
Balance at the end of period		700
Acquired Non-impaired | PFC
Acquired portfolio
Loans acquired - contractual payments		53,849
Expected cash flows		53,849
Accretable yield		(2,100)
Carrying balance at acquisition date		51,749
Balance at the beginning of period	642		642
Accretion			(350)
Balance at the end of period			292
Acquired Non-impaired | Eagle River
Acquired portfolio
Loans acquired - contractual payments		80,737
Expected cash flows		80,737
Accretable yield		(1,700)
Carrying balance at acquisition date		79,037
Balance at the beginning of period	1,221	603	1,221
Accretion		(297)	(313)
Balance at the end of period		306	908
Acquired Non-impaired | Niagara Bancorporation
Acquired portfolio
Loans acquired - contractual payments		30,555
Expected cash flows		30,555
Accretable yield		(600)
Carrying balance at acquisition date		29,955
Balance at the beginning of period	$ 505	281	505
Accretion		(108)	(114)
Balance at the end of period		173	$ 391
Acquired Non-impaired | FFNM
Acquired portfolio
Loans acquired - contractual payments		187,302
Expected cash flows		187,302
Accretable yield		(4,498)
Carrying balance at acquisition date		182,804
Acquisition activity		4,498
Accretion		(83)
Balance at the end of period		$ 4,415

LOANS - ALLOWANCE (Details)

LOANS - ALLOWANCE (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Allowance for loan loss reserve:
Balance at beginning of period	$ 5,101	$ 5,146	$ 5,079	$ 5,020
Recoveries	239	66	264	168
Charge-offs	(299)	(129)	(352)	(255)
Provision	100	50	150	200
Balance at end of period	5,141	5,133	5,141	5,133
Loans:
Ending balance					$ 1,003,377	$ 811,078	$ 790,753
Ending balance ALLR	(5,101)	(5,146)	(5,079)	(5,020)	(5,141)	(5,079)	(5,133)
Net loans					998,236	805,999	785,620
Ending balance ALLR:
Individually evaluated					764		1,022
Collectively evaluated					4,377		4,111
Total	5,101	5,146	5,079	5,020	5,141	5,079	5,133
Ending balance Loans:
Individually evaluated					4,143		4,111
Collectively evaluated					986,842		782,154
Acquired with deteriorated credit quality					12,392		4,488
Total Loans					1,003,377	811,078	790,753
Commercial real estate
Allowance for loan loss reserve:
Balance at beginning of period	1,127	1,360	1,650	1,345
Recoveries	23	28	30	62
Charge-offs	(1)		(1)
Provision	319	75	(211)	56
Balance at end of period	1,468	1,463	1,468	1,463
Loans:
Ending balance					478,798	406,742	397,655
Ending balance ALLR	(1,127)	(1,360)	(1,650)	(1,345)	(1,468)	(1,650)	(1,463)
Net loans					477,330		396,192
Ending balance ALLR:
Individually evaluated					500		525
Collectively evaluated					968		938
Total	1,127	1,360	1,650	1,345	1,468	1,650	1,463
Ending balance Loans:
Individually evaluated					2,447		1,536
Collectively evaluated					467,159		393,322
Acquired with deteriorated credit quality					9,192		2,797
Total Loans					478,798	406,742	397,655
Commercial, financial, and agricultural
Allowance for loan loss reserve:
Balance at beginning of period	547	650	576	614
Recoveries	156	3	159	4
Charge-offs	(128)	(93)	(128)	(93)
Provision	(80)	135	(112)	170
Balance at end of period	495	695	495	695
Loans:
Ending balance					185,032	156,951	151,588
Ending balance ALLR	(547)	(650)	(576)	(614)	(495)	(576)	(695)
Net loans					184,537		150,893
Ending balance ALLR:
Individually evaluated					264		415
Collectively evaluated					231		280
Total	547	650	576	614	495	576	695
Ending balance Loans:
Individually evaluated					1,324		1,456
Collectively evaluated					183,535		150,132
Acquired with deteriorated credit quality					173
Total Loans					185,032	156,951	151,588
Commercial construction
Allowance for loan loss reserve:
Balance at beginning of period	54	95	54	57
Recoveries			1
Provision	(1)		(2)	38
Balance at end of period	53	95	53	95
Loans:
Ending balance					20,895	9,243	10,145
Ending balance ALLR	(54)	(95)	(54)	(57)	(53)	(54)	(95)
Net loans					20,842		10,050
Ending balance ALLR:
Individually evaluated							38
Collectively evaluated					53		57
Total	54	95	54	57	53	54	95
Ending balance Loans:
Individually evaluated					372		381
Collectively evaluated					20,523		9,764
Total Loans					20,895	9,243	10,145
One to four family residential real estate
Allowance for loan loss reserve:
Balance at beginning of period	173	265	160	296
Recoveries	50	1	52	62
Charge-offs	(100)		(147)	(49)
Provision	157	(7)	215	(50)
Balance at end of period	280	259	280	259
Loans:
Ending balance					284,041	209,890	200,771
Ending balance ALLR	(173)	(265)	(160)	(296)	(280)	(160)	(259)
Net loans					283,761		200,512
Ending balance ALLR:
Individually evaluated							39
Collectively evaluated					280		220
Total	173	265	160	296	280	160	259
Ending balance Loans:
Individually evaluated							733
Collectively evaluated					281,144		198,400
Acquired with deteriorated credit quality					2,897		1,638
Total Loans					284,041	209,890	200,771
Consumer construction
Allowance for loan loss reserve:
Balance at beginning of period	6	7	6	6
Recoveries		1		1
Provision	1	(2)	1	(1)
Balance at end of period	7	6	7	6
Loans:
Ending balance					15,409	10,818	11,535
Ending balance ALLR	(6)	(7)	(6)	(6)	(7)	(6)	(6)
Net loans					15,402		11,529
Ending balance ALLR:
Collectively evaluated					7		6
Total	6	7	6	6	7	6	6
Ending balance Loans:
Collectively evaluated					15,364		11,482
Acquired with deteriorated credit quality					45		53
Total Loans					15,409	10,818	11,535
Consumer
Allowance for loan loss reserve:
Balance at beginning of period	9	15	10	90
Recoveries	10	33	22	39
Charge-offs	(70)	(36)	(76)	(113)
Provision	60	3	53	(1)
Balance at end of period	9	15	9	15
Loans:
Ending balance					19,202	17,434	19,059
Ending balance ALLR	(9)	(15)	(10)	(90)	(9)	(10)	(15)
Net loans					19,193		19,044
Ending balance ALLR:
Individually evaluated							5
Collectively evaluated					9		10
Total	9	15	10	90	9	10	15
Ending balance Loans:
Individually evaluated							5
Collectively evaluated					19,117		19,054
Acquired with deteriorated credit quality					85
Total Loans					19,202	17,434	19,059
Unallocated
Allowance for loan loss reserve:
Balance at beginning of period	3,185	2,754	2,623	2,612
Provision	(356)	(154)	206	(12)
Balance at end of period	2,829	2,600	2,829	2,600
Loans:
Ending balance ALLR	(3,185)	(2,754)	(2,623)	(2,612)	(2,829)	(2,623)	(2,600)
Net loans					(2,829)		(2,600)
Ending balance ALLR:
Collectively evaluated					2,829		2,600
Total	$ 3,185	$ 2,754	$ 2,623	$ 2,612	$ 2,829	$ 2,623	$ 2,600

LOANS - LOANS BY RISK CATEGORY

LOANS - LOANS BY RISK CATEGORY (Details) $ in Thousands	Jun. 30, 2018USD ($)item	Dec. 31, 2017USD ($)	Jun. 30, 2017USD ($)
Breakdown of loans by risk category
Total loans	$ 1,003,377	$ 811,078	$ 790,753
Minimum
Breakdown of loans by risk category
Credit risk rating for which reserves are established if no specific reserves made | item	6
Maximum
Breakdown of loans by risk category
Credit risk rating for which general reserves are established | item	44
Credit risk rating for which reserves are established if no specific reserves made | item	7
Commercial real estate
Breakdown of loans by risk category
Total loans	$ 478,798	406,742	397,655
Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	185,032	156,951	151,588
Commercial construction
Breakdown of loans by risk category
Total loans	20,895	9,243	10,145
One to four family residential real estate
Breakdown of loans by risk category
Total loans	284,041	209,890	200,771
Consumer construction
Breakdown of loans by risk category
Total loans	15,409	10,818	11,535
Consumer
Breakdown of loans by risk category
Total loans	19,202	17,434	$ 19,059
Strong (1)
Breakdown of loans by risk category
Total loans	22,693	14,303
Strong (1) | Commercial real estate
Breakdown of loans by risk category
Total loans	10,788	2,775
Strong (1) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	11,434	11,528
Strong (1) | Commercial construction
Breakdown of loans by risk category
Total loans	471
Good (2)
Breakdown of loans by risk category
Total loans	34,754	34,594
Good (2) | Commercial real estate
Breakdown of loans by risk category
Total loans	24,122	23,929
Good (2) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	8,990	8,980
Good (2) | Commercial construction
Breakdown of loans by risk category
Total loans	284	308
Good (2) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	1,358	1,377
Average (3)
Breakdown of loans by risk category
Total loans	248,112	218,157
Average (3) | Commercial real estate
Breakdown of loans by risk category
Total loans	176,912	159,385
Average (3) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	64,757	53,448
Average (3) | Commercial construction
Breakdown of loans by risk category
Total loans	3,934	2,749
Average (3) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	2,509	2,575
Acceptable
Breakdown of loans by risk category
Total loans	356,897	292,672
Acceptable | Commercial real estate
Breakdown of loans by risk category
Total loans	248,143	207,921
Acceptable | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	95,680	77,964
Acceptable | Commercial construction
Breakdown of loans by risk category
Total loans	6,858	1,310
Acceptable | One to four family residential real estate
Breakdown of loans by risk category
Total loans	6,191	5,449
Acceptable | Consumer
Breakdown of loans by risk category
Total loans	25	28
Acceptable Watch
Breakdown of loans by risk category
Total loans	20,803	14,223
Acceptable Watch | Commercial real estate
Breakdown of loans by risk category
Total loans	16,215	8,700
Acceptable Watch | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	2,808	3,658
Acceptable Watch | Commercial construction
Breakdown of loans by risk category
Total loans	639	648
Acceptable Watch | One to four family residential real estate
Breakdown of loans by risk category
Total loans	1,138	1,212
Acceptable Watch | Consumer
Breakdown of loans by risk category
Total loans	3	5
Substandard (6)
Breakdown of loans by risk category
Total loans	7,453	9,404
Substandard (6) | Commercial real estate
Breakdown of loans by risk category
Total loans	2,618	4,032
Substandard (6) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	1,363	1,373
Substandard (6) | Commercial construction
Breakdown of loans by risk category
Total loans	371	374
Substandard (6) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	3,068	3,515
Substandard (6) | Consumer construction
Breakdown of loans by risk category
Total loans	12	14
Substandard (6) | Consumer
Breakdown of loans by risk category
Total loans	21	96
Rating Unassigned
Breakdown of loans by risk category
Total loans	312,665	227,725
Rating Unassigned | Commercial construction
Breakdown of loans by risk category
Total loans	8,338	3,854
Rating Unassigned | One to four family residential real estate
Breakdown of loans by risk category
Total loans	269,777	195,762
Rating Unassigned | Consumer construction
Breakdown of loans by risk category
Total loans	15,397	10,804
Rating Unassigned | Consumer
Breakdown of loans by risk category
Total loans	$ 19,153	$ 17,305

LOANS - IMPAIRED LOANS AND EFFE

LOANS - IMPAIRED LOANS AND EFFECT ON INTEREST INCOME (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Impaired Loans
Number of days past due to be considered as nonperforming loans	90 days
Recorded investment
With no valuation reserve	$ 12,392	$ 3,170
With a valuation reserve	4,143	682
Total	16,535	3,852
Unpaid Principal Balance	16,639	6,054
Related Allowance for Loan Losses	764	334
Average investment
Average Balance for the Period	6,505	5,137
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	197	281
Commercial real estate
Recorded investment
With no valuation reserve	9,192	1,511
With a valuation reserve	2,447	516
Total	11,639	2,027
Unpaid Principal Balance	10,549	3,326
Related Allowance for Loan Losses	500	168
Average investment
Average Balance for the Period	3,269	2,784
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	96	141
Commercial, financial, and agricultural
Recorded investment
With no valuation reserve	173
With a valuation reserve	1,324	166
Total	1,497	166
Unpaid Principal Balance	1,700	326
Related Allowance for Loan Losses	264	166
Average investment
Average Balance for the Period	826	246
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	34	1
Commercial construction
Recorded investment
With a valuation reserve	372
Total	372
Unpaid Principal Balance	372
Average investment
Average Balance for the Period	186
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	11
One to four family residential real estate
Recorded investment
With no valuation reserve	2,897	1,621
Total	2,897	1,621
Unpaid Principal Balance	3,809	2,315
Average investment
Average Balance for the Period	2,141	2,057
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	53	134
Consumer construction
Recorded investment
With no valuation reserve	45	17
Total	45	17
Unpaid Principal Balance	105	66
Average investment
Average Balance for the Period	63	37
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	2	3
Consumer
Recorded investment
With no valuation reserve	85	21
Total	85	21
Unpaid Principal Balance	104	21
Average investment
Average Balance for the Period	20	13
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	$ 1	$ 2

LOANS - PAST DUE (Details)

LOANS - PAST DUE (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Past due loans
90+ days Past Due/Nonaccrual	$ 5,025	$ 2,568
Total	9,443	6,613
30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	4,418	4,045
Commercial real estate
Past due loans
90+ days Past Due/Nonaccrual	1,231	866
Total	2,674	1,326
Commercial real estate | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	1,443	460
Commercial, financial, and agricultural
Past due loans
90+ days Past Due/Nonaccrual	334	338
Total	816	354
Commercial, financial, and agricultural | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	482	16
Commercial construction
Past due loans
90+ days Past Due/Nonaccrual	645	14
Total	701	87
Commercial construction | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	56	73
One to four family residential real estate
Past due loans
90+ days Past Due/Nonaccrual	2,794	1,350
Total	5,192	4,774
One to four family residential real estate | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	2,398	3,424
Consumer
Past due loans
90+ days Past Due/Nonaccrual	21
Total	60	72
Consumer | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	$ 39	$ 72

LOANS - TROUBLED DEBT RESTRUCTU

LOANS - TROUBLED DEBT RESTRUCTURING (Details)	6 Months Ended
	Jun. 30, 2018loanitem	Jun. 30, 2017loan
LOANS
Number of consecutive timely payments before being considered return to accruing status | item	6
Number of troubled debt restructurings | loan	1	0

LOANS - INSIDER LOANS (Details)

LOANS - INSIDER LOANS (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms
Loans outstanding, beginning of period	$ 10,037,000	$ 9,195,000
Net activity on revolving lines of credit		561,000
Repayment	(1,143,000)	(386,000)
Loans outstanding, end of period	8,894,000	9,370,000
Loans outstanding	10,037,000	9,195,000	$ 8,894,000
Unfunded commitments			756,000
Substandard (6)
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms
Loans outstanding, end of period	0	0
Loans outstanding	$ 0	$ 0	$ 0

GOODWILL AND OTHER INTANGIBLE45

GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	May 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Aug. 31, 2016	Apr. 30, 2016	Dec. 31, 2014
Goodwill	$ 20,389		$ 5,694
Deposit based intangible assets	4,504		$ 1,922
Amortization expense	148
Amortization expense year one	523
Amortization expense year two	523
Amortization expense year three	523
Amortization expense year four	523
Amortization expense year five	$ 523
PFC
Goodwill							$ 3,805
Deposit based intangible assets							$ 1,206
Eagle River
Goodwill				$ 1,839		$ 1,839
Deposit based intangible assets				$ 993
Niagara Bancorporation
Goodwill					$ 50
Deposit based intangible assets					$ 300
FFNM
Goodwill		$ 14,695
Deposit based intangible assets		$ 2,729

SERVICING RIGHTS (Details)

SERVICING RIGHTS (Details) - USD ($)	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Changes in mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances
Capitalized servicing rights as estimated by management	$ 1,737,000
Commercial loans
Commercial Loans
Commercial Loans	40,809,000	$ 40,097,000
Servicing rights	$ 95,000	125,000
Mortgage loans
Mortgage Loans
Annual constant prepayment speed (as a percent)	10.57%
Discount rate (as a percent)	10.17%
Changes in mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances
Balance at beginning of period	$ 1,033,000	1,573,000
Additions from loans sold with servicing retained		44,000
Acquired MSRs	386,000
Amortization	(219,000)	(323,000)
Balance at end of period	1,200,000	1,294,000
Balance of loan servicing portfolio	$ 292,739,000	$ 210,160,000
Mortgage servicing rights as % of portfolio	0.41%	0.61%

BORROWINGS (Details)

BORROWINGS (Details)	6 Months Ended
	Jun. 30, 2018USD ($)item	Dec. 31, 2017USD ($)
BORROWINGS
Borrowings	$ 91,747,000	$ 79,552,000
Collateral Pledged
BORROWINGS
Available for sale equity securities	44,646,000
Amortized cost estimated fair value	43,280,000
Federal Home Loan Bank borrowings
BORROWINGS
Borrowings	$ 91,194,000	60,000,000
Federal Home Loan Bank Borrowing Weighted Average Interest Rate	1.88%
Federal Home Loan Bank borrowings | Mortgage related and municipal securities | Collateral Pledged
BORROWINGS
Available for sale equity securities	$ 44,646,000
Amortized cost estimated fair value	43,280,000
Federal Home Loan Bank borrowings | FHLB stock
BORROWINGS
Stock owned and pledged as collateral	4,860,000
Federal Home Loan Bank borrowings | One to four family residential real estate
BORROWINGS
Loans pledged as collateral	$ 72,787,000
Correspondent bank line of credit
BORROWINGS
Number of banking borrowing relationships | item	1
Correspondent bank line of credit | LIBOR
BORROWINGS
Variable rate basis	90-day LIBOR
Variable rate (as a percent)	2.00%
Correspondent bank line of credit | LIBOR | Minimum
BORROWINGS
Floor rate (as a percent)	2.00%
Correspondent bank line of credit | LIBOR | Maximum
BORROWINGS
Floor rate (as a percent)	22.00%
Correspondent bank term note
BORROWINGS
Borrowings		18,999,000
USDA Rural Development note
BORROWINGS
Borrowings	$ 553,000	$ 553,000
Interest rate on note (as a percent)	1.00%
USDA Rural Development note | First Rural Relending
BORROWINGS
Demand deposit account pledged as collateral	$ 553,000
Revolving Credit Facility
BORROWINGS
Line of Credit	0
Maximum borrowing capacity	$ 15,000,000
Revolving Credit Facility | LIBOR
BORROWINGS
LIBOR rate at point of time	2.34%

DEFINED BENEFIT PENSION PLAN (D

DEFINED BENEFIT PENSION PLAN (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2018USD ($)item	Jun. 30, 2017USD ($)	Dec. 31, 2017
Defined Benefit Pension Plan
Number of years over which anticipated pension distributions disclosed | item	5
Anticipated distributions from the plan
2,018	$ 133
2,019	130
2,020	126
2,021	125
2,022	131
2023-2027	796
Total	1,441
Peninsula Financial Corporation noncontributory defined benefit pension plan
Defined Benefit Pension Plan
Expected contributions to the plan	64
Change in plan assets
Fair value of plan assets at end of year	2,191	$ 2,049
Accrued pension expense, included with other assets or liabilities	1,121	1,138
Accumulated benefit obligation	$ 3,331	$ 3,187
Assumptions in the actuarial valuation
Weighted average discount rate	3.33%	3.78%
Expected long-term rate of return on plan assets	8.00%	8.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Minimum
Plan assets
Target Allocation	50.00%		50.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Maximum
Plan assets
Target Allocation	70.00%		70.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan
Plan assets
Actual Allocation	60.00%		60.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Minimum
Plan assets
Target Allocation	30.00%		30.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Maximum
Plan assets
Target Allocation	50.00%		50.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan
Plan assets
Actual Allocation	40.00%		40.00%

STOCK COMPENSATION PLANS (Detai

STOCK COMPENSATION PLANS (Details) - $ / shares	Aug. 31, 2016	Aug. 31, 2015	Aug. 31, 2014	Aug. 31, 2013	Apr. 30, 2018	Feb. 28, 2018	Feb. 28, 2017	Mar. 31, 2016	Feb. 29, 2016	May 31, 2015	Mar. 31, 2015	Jun. 30, 2018	Jun. 30, 2017
Stock Compensation Plans
Shares available for grant at end of period												247,279
Summary of nonvested shares
Nonvested beginning balance (in shares)												87,285
Granted during the period (in shares)												26,643
Vested during the period (in shares)												(45,630)
Nonvested ending balance (in shares)												68,298
Weighted Average Grant Date Fair Value
Nonvested beginning balance (in dollars per share)												$ 11.78
Granted during the period (in dollars per share)												16.21
Vested during the period (in dollars per share)												12.65
Nonvested ending balance (in dollars per share)												$ 12.93
RSUs
Stock Compensation Plans
Market value at grant date (in dollars per share)					$ 16	$ 16.30	$ 13.39		$ 9.91	$ 10.77	$ 11.15
Stock issued for vested restricted stocks	37,125	37,125	37,125	37,125				22,626		3,000	13,194	45,630	31,559
Vesting period						4 years	4 years		4 years		4 years	4 years
Summary of nonvested shares
Granted during the period (in shares)					8,000	18,643	28,427		35,733	3,000	37,730

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
INCOME TAXES
Deferred tax assets, net of valuation allowance	$ 8,000
Net operating loss (NOL) carryforwards	5,900
Tax credit carryforwards	$ 1,700
Expiration period from date of origination for net operating loss carryforwards	20 years
Annual limitation for usage of NOL	$ 1,404
Annual limitation for usage of tax credits	295
Deferred tax expense	$ 511	$ 1,756

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Fair Value Measurements
Blended interest rate for determining fair value of nonaccrual loans (as a percent)	0.00%
Fair value of commitments	$ 0
Financial assets:
Interest-bearing deposits	10,873	$ 13,374
Marketable securities	114,682
Carrying Amount
Financial assets:
Total financial assets	1,196,554	938,084
Financial liabilities:
Total financial liabilities	1,107,668	897,872
Estimated Fair Value
Financial assets:
Total financial assets	1,180,955	929,811
Financial liabilities:
Total financial liabilities	1,061,047	868,196
Level 1 | Carrying Amount
Financial assets:
Cash and cash equivalents	64,889	37,426
Level 1 | Estimated Fair Value
Financial assets:
Cash and cash equivalents	64,889	37,426
Level 2 | Carrying Amount
Financial assets:
Interest-bearing deposits	10,873	13,374
Federal Home Loan Bank stock	4,860	3,112
Financial liabilities:
Deposits	1,015,501	817,998
Borrowings	91,747	79,552
Level 2 | Estimated Fair Value
Financial assets:
Interest-bearing deposits	10,873	13,374
Federal Home Loan Bank stock	4,860	3,112
Financial liabilities:
Deposits	970,149	788,632
Borrowings	90,478	79,242
Level 3 | Carrying Amount
Financial assets:
Net loans	998,236	805,999
Accrued interest receivable	3,014	2,276
Financial liabilities:
Accrued interest payable	420	322
Level 3 | Estimated Fair Value
Financial assets:
Net loans	982,633	797,726
Accrued interest receivable	3,018	2,276
Financial liabilities:
Accrued interest payable	420	322
Available-for-sale Securities
Financial assets:
Marketable securities	114,182	75,397
Available-for-sale Securities | Level 2 | Carrying Amount
Financial assets:
Marketable securities	113,194	74,397
Available-for-sale Securities | Level 2 | Estimated Fair Value
Financial assets:
Marketable securities	113,194	74,397
Available-for-sale Securities | Level 3 | Carrying Amount
Financial assets:
Marketable securities	988	1,000
Available-for-sale Securities | Level 3 | Estimated Fair Value
Financial assets:
Marketable securities	988	1,000
Corporate
Financial assets:
Marketable securities	19,307	24,391
US Agencies
Financial assets:
Marketable securities	15,102	16,846
US Agencies - MBS
Financial assets:
Marketable securities	34,093	12,716
Obligations of states and political subdivisions
Financial assets:
Marketable securities	45,680	21,444
Equity securities
Financial assets:
Marketable securities	500
Equity securities | Level 3 | Carrying Amount
Financial assets:
Marketable securities	500	500
Equity securities | Level 3 | Estimated Fair Value
Financial assets:
Marketable securities	$ 500	$ 500

FAIR VALUE MEASUREMENTS - OTHER

FAIR VALUE MEASUREMENTS - OTHER ASSETS AND OTHER LIABILITIES (Details) - Recurring - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Fair value measurements
Other assets	$ 0	$ 0
Other liabilities	0	0
Level 3
Fair value measurements
Assets	0	0
Liabilities	$ 0	$ 0

FAIR VALUE MEASUREMENTS - RECUR

FAIR VALUE MEASUREMENTS - RECURRING (Details) - USD ($) $ in Thousands	Jun. 30, 2018	Dec. 31, 2017
Marketable Securities	$ 114,682
Recurring
Marketable Securities	114,682	$ 75,897
Available-for-sale Securities
Marketable Securities	114,182	75,397
Corporate
Marketable Securities	19,307	24,391
Corporate | Recurring
Marketable Securities	19,307	24,391
Corporate | Level 2 | Recurring
Marketable Securities	19,307	24,391
US Agencies
Marketable Securities	15,102	16,846
US Agencies | Recurring
Marketable Securities	15,102	16,846
US Agencies | Level 2 | Recurring
Marketable Securities	15,102	16,846
US Agencies - MBS
Marketable Securities	34,093	12,716
US Agencies - MBS | Recurring
Marketable Securities	34,093	12,716
US Agencies - MBS | Level 2 | Recurring
Marketable Securities	34,093	12,716
Obligations of states and political subdivisions
Marketable Securities	45,680	21,444
Obligations of states and political subdivisions | Recurring
Marketable Securities	45,680	21,444
Obligations of states and political subdivisions | Level 2 | Recurring
Marketable Securities	44,692	20,444
Obligations of states and political subdivisions | Level 3 | Recurring
Marketable Securities	988	1,000
Equity securities
Marketable Securities	500
Equity securities | Recurring
Marketable Securities	500	500
Equity securities | Level 3 | Recurring
Marketable Securities	$ 500	$ 500

FAIR VALUE MEASUREMENTS - NONRE

FAIR VALUE MEASUREMENTS - NONRECURRING BASIS (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Jun. 30, 2018	Dec. 31, 2017
Fair value
Impaired loans	$ 16,535	$ 16,535	$ 3,852
Other real estate owned	2,461	2,461	3,558
Nonrecurring
Fair value
Total (Gains) Losses	41	67	529
Nonrecurring | Impaired loans
Fair value
Total (Gains) Losses	1	1	141
Nonrecurring | Other real estate owned
Fair value
Total (Gains) Losses	40	66	388
Nonrecurring | Level 3 | Impaired loans
Fair value
Impaired loans	16,535	16,535	3,852
Nonrecurring | Level 3 | Other real estate owned
Fair value
Other real estate owned	$ 2,461	$ 2,461	$ 3,558

SHAREHOLDERS' EQUITY (Details)

SHAREHOLDERS' EQUITY (Details) - USD ($)	Jun. 15, 2018	Jun. 30, 2018	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Apr. 28, 2015	Dec. 17, 2013	Feb. 27, 2013
Participation in the TARP Capital Purchase Program
Increase in shareholders equity as a result of common stock issued		$ 34,101,000
Number of shares authorized to be repurchased		25,000						$ 600,000	$ 600,000
Number of additional shares authorized to be repurchased							$ 750,000
Gross proceeds	$ 34,500,000
Net proceeds	$ 32,500,000	$ 32,524,000
Shares issued (in shares)	2,225,807
Shares of Common Stock
Participation in the TARP Capital Purchase Program
Common stocks issued for FFNM acquisition (in shares)		2,146,378
Number of shares repurchased			14,000	102,455	13,700	55,594
Shares issued (in shares)		2,225,807

COMMITMENTS, CONTINGENCIES, A56

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2018	Dec. 31, 2017
Financial Instruments with Off-Balance-Sheet Risk
Commitments	$ 149,348	$ 123,196
Commitments to extend credit
Financial Instruments with Off-Balance-Sheet Risk
Commitments, variable rate	82,252	72,187
Commitments, fixed rate	53,681	37,468
Standby letters of credit
Financial Instruments with Off-Balance-Sheet Risk
Commitments, variable rate	$ 7,305	7,753
Percentage collateralization on financial instruments allowed under commitments	100.00%
Credit card commitments
Financial Instruments with Off-Balance-Sheet Risk
Commitments, fixed rate	$ 6,110	$ 5,788

COMMITMENTS, CONTINGENCIES, A57

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK - CREDIT RISK (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2018	Dec. 31, 2017	Jun. 30, 2017
Concentration of Credit Risk
Loan portfolio	$ 998,236	$ 805,999	$ 785,620
Commercial real estate
Concentration of Credit Risk
Loan portfolio	477,330		$ 396,192
Bank | Commercial real estate | Commercial loan portfolio | Credit risk concentration
Concentration of Credit Risk
Loan portfolio	$ 117,285	$ 119,025
Percentage of concentration risk under a specified benchmark	17.13%	20.77%

BUSINESS COMBINATIONS (Details)

BUSINESS COMBINATIONS (Details) $ / shares in Units, $ in Thousands	Jun. 07, 2018USD ($)item	May 31, 2018USD ($)item$ / sharesshares	Aug. 31, 2016USD ($)item	Apr. 30, 2016USD ($)	Apr. 29, 2016USD ($)item	Jun. 30, 2018USD ($)$ / sharesshares	Dec. 31, 2017USD ($)$ / sharesshares	May 18, 2018USD ($)	Dec. 31, 2016USD ($)
Business Acquisition [Line Items]
Assets						$ 1,274,095	$ 985,367
FFNM acquisition						$ 34,101
Purchase Price:
Shares outstanding (in Shares) | shares						10,712,745	6,294,930
Net assets acquired:
Goodwill						$ 20,389	$ 5,694
Eagle River
Business Acquisition [Line Items]
Number of banking offices | item					3
Assets					$ 125,000
Total purchase price				$ 12,500
Net assets acquired:
Total loans				84,000
Deposit based intangible				933
Total deposits				105,000
Goodwill				$ 1,839					$ 1,839
Niagara Bancorporation
Business Acquisition [Line Items]
Number of banking offices | item			4
Assets			$ 67,000
Net cash paid			7,325
Net assets acquired:
Total loans			33,000
Deposit based intangible			300
Total deposits			59,000
Goodwill			$ 50
FFNM
Business Acquisition [Line Items]
Number of banking offices | item		7
Purchase Price:
Shares outstanding (in Shares) | shares		3,726,925
Price per share / Cash Price | $ / shares		$ 9.15
Purchase price		$ 34,101
Net assets acquired:
Cash and cash equivalents		13,267
Securities available for sale		96,297
FHLB Stock		1,748
Total loans		185,444						$ 192,000
Premises and equipment		5,134
Other real estate owned		194
Deposit based intangible		2,729
Mortgage service rights		386
Deferred tax assets		3,229
Bank owned life insurance		5,170
Other assets		1,775
Total assets		315,373
Non-interest bearing deposits		60,616
Interest bearing deposits		193,099
Total deposits		253,715						254,000
FHLB Borrowings		40,722
Deferred tax liability		133
Other liabilities		1,397
Total liabilities		295,967
Net assets acquired		19,406
Goodwill		$ 14,695
Unaudited proforma results
Net interest income						25,700	51,495
Noninterest income						2,800	5,615
Noninterest expense						20,500	41,140
Net income						$ 5,800	$ 11,650
Net income per diluted share | $ / shares						$ 0.54	$ 1.09
FFNM | Minimum
Business Acquisition [Line Items]
Assets								$ 318,000
Lincoln Community Bank
Business Acquisition [Line Items]
Cash consideration	$ 8,500
Number of banking centers | item	2
Net assets acquired:
Total loans						$ 40,000
Lincoln Community Bank | Minimum
Business Acquisition [Line Items]
Assets						59,000
Net assets acquired:
Total deposits						$ 52,000