Mackinac Financial (MFNC) 10-K 18 Mar 19 2018 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Mar. 17, 2019	Jun. 30, 2018
Document and Entity Information
Entity Registrant Name	MACKINAC FINANCIAL CORP /MI/
Entity Central Index Key	0000036506
Document Type	10-K
Document Period End Date	Dec. 31, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Public Float			$ 139,633
Entity Common Stock, Shares Outstanding		10,731,905
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
ASSETS
Cash and due from banks	$ 64,151	$ 37,420
Federal funds sold	6	6
Cash and cash equivalents	64,157	37,426
Interest-bearing deposits in other financial institutions	13,452	13,374
Securities available for sale	116,748	75,897
Federal Home Loan Bank stock	4,924	3,112
Loans:
Commercial	717,032	572,936
Mortgage	301,461	220,708
Consumer	20,371	17,434
Total Loans	1,038,864	811,078
Allowance for loan losses	(5,183)	(5,079)
Net loans	1,033,681	805,999
Premises and equipment	22,783	16,290
Other real estate held for sale	3,119	3,558
Deferred tax asset	5,763	4,970
Deposit based intangibles	5,720	1,922
Goodwill	22,024	5,694
Other assets	25,669	17,125
TOTAL ASSETS	1,318,040	985,367
Deposits:
Noninterest bearing deposits	241,556	148,079
NOW, money market, interest checking	368,890	280,309
Savings	111,358	61,097
CDs less than $250,000	225,236	142,159
CDs more than $250,000	13,737	11,055
Brokered	136,760	175,299
Total deposits	1,097,537	817,998
Federal funds purchased	2,905
Borrowings	57,536	79,552
Other liabilities	7,993	6,417
Total liabilities	1,165,971	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	129,066	61,981
Retained earnings	23,466	19,711
Accumulated other comprehensive income (loss)
Unrealized (losses) on available for sale securities	(245)	(71)
Minimum pension liability	(218)	(221)
Total shareholders' equity	152,069	81,400
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 1,318,040	$ 985,367

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
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

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Interest and fees on loans:
Taxable	$ 51,407	$ 41,770
Tax-exempt	123	95
Interest on securities:
Taxable	2,408	1,606
Tax-exempt	338	298
Other interest income	1,101	607
Total interest income	55,377	44,376
INTEREST EXPENSE:
Deposits	6,492	4,361
Borrowings	1,755	2,077
Total interest expense	8,247	6,438
Net interest income	47,130	37,938
Provision for loan losses	500	625
Net interest income after provision for loan losses	46,630	37,313
OTHER INCOME:
Deposit service fees	1,441	1,056
Income from mortgage loans sold on the secondary market	1,289	1,373
SBA/USDA loan sale gains	661	867
Net mortgage servicing fees (amortization)	197	(31)
Net realized security gains		231
Other	675	545
Total other income	4,263	4,041
OTHER EXPENSE:
Salaries and employee benefits	20,064	15,490
Occupancy	3,640	3,104
Furniture and equipment	2,548	2,209
Data processing	2,503	2,037
Advertising	905	711
Professional service fees	1,575	1,534
Loan origination expenses and deposit and card related fees	1,166	1,335
Writedowns and losses on other real estate held for sale	182	388
FDIC insurance assessment	700	731
Telephone	726	604
Transaction related expenses	2,951	50
Other	3,340	2,143
Total other expenses	40,300	30,336
Income before provision for income taxes	10,593	11,018
Provision for income taxes	2,226	5,539
NET INCOME	$ 8,367	$ 5,479
INCOME PER COMMON SHARE:
Basic (in dollars per share)	$ 0.94	$ 0.87
Diluted (in dollars per share)	$ 0.94	$ 0.87

CONSOLIDATED STATEMENTS COMPREH

CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME
Net income	$ 8,367	$ 5,479
Other comprehensive income
Unrealized (losses) gains arising during the period	(220)	295
Reclassification adjustment for securities gains included in net income		(231)
Tax effect	46	(22)
Net change in unrealized (losses) gains on available for sale securities	(174)	42
Defined benefit pension plan:
Net unrealized actuarial gain (loss) on defined benefit pension obligation	9	(161)
Tax effect	(6)	55
Changes from defined benefit pension plan	3	(106)
Other comprehensive loss, net of tax	(171)	(64)
Total comprehensive income	$ 8,196	$ 5,415

CONSOLIDATED STATEMENTS OF CHAN

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			5,479		5,479
Other comprehensive income (loss):
Net change in unrealized gain on securities available for sale				42	42
Actuarial loss on defined benefit pension obligation				(106)	(106)
Total comprehensive income				(64)	5,415
Stock compensation		398			398
Restricted stock award vesting (in shares)	31,559
Reclassification of certain deferred tax effects			48	(48)
Dividend on common stock			(3,022)		(3,022)
Balance, end 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			8,367		8,367
Other comprehensive income (loss):
Net change in unrealized gain on securities available for sale				(174)	(174)
Actuarial loss on defined benefit pension obligation				3	3
Total comprehensive income				(171)	8,196
Stock compensation		533			533
Restricted stock award vesting (in shares)	45,630
FFNM acquisition		34,101			$ 34,101
FFNM acquisition (in shares)	2,146,378				2,146,378
Capital raise, net of offering costs		32,451			$ 32,451
Capital raise, net of offering costs (in shares)	2,225,807
Dividend on common stock			(4,612)		(4,612)
Balance, end of period at Dec. 31, 2018		$ 129,066	$ 23,466	$ (463)	$ 152,069
Balance (in shares) at Dec. 31, 2018	10,712,745

CONSOLIDATED STATEMENTS OF CH_2

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Parenthetical) $ in Thousands	12 Months Ended
	Dec. 31, 2018USD ($)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Issuance cost	$ 2,050

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash Flows from Operating Activities:
Net income	$ 8,367	$ 5,479
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,607	2,426
Provision for loan losses	500	625
Deferred tax expense	874	4,954
Net realized security gains		(231)
(Gain) on sale of loans sold in the secondary market	(1,019)	(1,130)
Origination of loans held for sale in secondary market	(57,118)	(65,711)
Proceeds from sale of loans in the secondary market	58,137	66,841
Loss (gain) on sale other real estate held for sale	57	81
Writedown of other real estate held for sale	125	307
Stock compensation	533	398
Change in other assets	7,531	2,523
Change in other liabilities	37	(818)
Net cash provided by operating activities	20,631	15,744
Cash Flows from Investing Activities:
Net increase in loans	(6,148)	(33,600)
Net decrease in interest-bearing deposits in other financial institutions	5,807	673
Purchase of securities available for sale	(1,989)	(5,999)
Proceeds from maturities, sales, calls or paydowns of securities available for sale	63,404	16,011
Capital expenditures	(2,549)	(2,377)
Purchase additional FHLB Stock		(531)
Cash paid for acquisitions and reimbursement of fees, net of cash acquired	4,768
Proceeds from sale of premises, equipment, and other real estate	2,190	2,983
Redemption of FHLB stock		330
Net cash provided by (used in) investing activities	65,483	(22,510)
Cash Flows from Financing Activities:
Net (decrease) increase in deposits	(27,389)	(5,514)
Net activity on line of credit		(750)
(Decrease) increase in fed funds purchased	2,905	(6,000)
Dividend on common stock	(4,612)	(3,022)
Proceeds from FHLB borrowing		25,000
Proceeds from common stock offering	32,451
Principal payments on borrowings	(62,738)	(12,277)
Net cash (used in) provided by financing activities	(59,383)	(2,563)
Net (decrease) increase in cash and cash equivalents	26,731	(9,329)
Cash and cash equivalents at beginning of period	37,426	46,755
Cash and cash equivalents at end of period	64,157	37,426
Cash paid during the year for:
Interest	8,178	6,383
Income taxes	1,600	1,100
Business Combinations
Fair value of tangible assets acquired (noncash)	372,967
Goodwill and identifiable intangible assets acquired	20,192
Liabilities assumed	$ 349,464
Common stock issued (in shares)	2,146,378
Noncash Investing and Financing Activities:
Transfers of Foreclosures from Loans to Other Real Estate Held for Sale (net of adjustments made through the allowance for loan losses)	$ 1,878	$ 2,147

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Mackinac Financial Corporation (the “Corporation”) and Subsidiaries conform to accounting principles generally accepted in the United States and prevailing practices within the banking industry. Significant accounting policies are summarized below. Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, mBank (the “Bank”) and other minor subsidiaries, after elimination of intercompany transactions and accounts. Nature of Operations The Corporation’s and the Bank’s revenues and assets are derived primarily from banking activities. The Bank’s primary market area is the Upper Peninsula, the northern portion of the Lower Peninsula of Michigan, Northeastern Wisconsin and Oakland County in Lower Michigan. The Bank provides to its customers commercial, real estate, agricultural, and consumer loans, as well as a variety of traditional deposit products. Less than 1.0% of the Corporation’s business activity is with Canadian customers and denominated in Canadian dollars. While the Corporation’s chief decision makers monitor the revenue streams of the various Corporation products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis. Accordingly, all of the Corporation’s banking operations are considered by management to be aggregated in one reportable operating segment. Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. 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, and the assessment of goodwill for impairment. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing deposits in correspondent banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. Securities The Corporation’s debt securities are classified and accounted for as securities available for sale. These securities are stated at fair value. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Unrealized holding gains and losses on securities available for sale are reported as accumulated other comprehensive income within shareholders’ equity until realized. When it is determined that securities or other investments are impaired and the impairment is other than temporary, an impairment loss is recognized in earnings and a new basis in the affected security is established. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method. Federal Home Loan Bank Stock As a member of the Federal Home Loan Bank (FHLB) system, the Bank is required to hold stock in the FHLB based on the anticipated level of borrowings to be advanced. This stock is recorded at cost, which approximates fair value. Transfer of the stock is substantially restricted. Interest Income and Fees on Loans Interest income on loans is reported on the level-yield method and includes amortization of deferred loan fees and costs over the loan term. Net loan commitment fees or costs for commitment periods greater than one year are deferred and amortized into fee income or other expense on a straight-line basis over the commitment period. The accrual of interest on loans is discontinued when, in the opinion of management, it is probable that the borrower may be unable to meet payments as they become due as well as when required by regulatory provisions. Upon such discontinuance, all unpaid accrued interest is reversed. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Interest income on impaired and nonaccrual loans is recorded on a cash basis. 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 based on the present value of amounts expected to be received, which incorporates assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, collateral values, 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 ASC 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. Servicing Rights Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based on the fair value of the rights compared to amortized cost. Impairment is determined by using prices for similar assets with similar characteristics, such as interest rates and terms. Fair value is determined by using prices for similar assets with similar characteristics, when available, or based on discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum. Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans which 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. Troubled Debt Restructuring Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule. All modified loans are evaluated to determine whether the loans should be reported as a Troubled Debt Restructure (TDR). A loan is a TDR when the Corporation, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying or renewing a loan that the Corporation would not otherwise consider. To make this determination, the Corporation must determine whether (a) the borrower is experiencing financial difficulties and (b) the Corporation granted the borrower a concession. This determination requires consideration of all of the facts and circumstances surrounding the modification. An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties. Other Real Estate Held for Sale Other real estate held for sale consists of assets acquired through, or in lieu of, foreclosure and other long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. Other real estate held for sale is initially recorded at fair value, less costs to sell, establishing a new cost basis. Valuations are periodically performed by management or a third party, and the assets’ carrying values are adjusted to the lower of cost basis or fair value less costs to sell. Impairment losses are recognized for any initial or subsequent write-downs. Net revenue and expenses from operations of other real estate held for sale are included in other expense. Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Maintenance and repair costs are charged to expense as incurred. Gains or losses on disposition of premises and equipment are reflected in income. Depreciation is computed on the straight-line method over the estimated useful lives of the assets. Goodwill and Other Intangible Assets The excess of the cost of acquired entities over the fair value of identifiable assets acquired less liabilities assumed is recorded as goodwill. In accordance with ASC 350, amortization of goodwill and indefinite-lived assets is not recorded. However, the recoverability of goodwill is annually tested for impairment. The Corporation’s core deposit intangible is currently being amortized over its estimated useful life of ten years. 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”), or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. 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. Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is composed of unrealized gains and losses on securities available for sale, and unrecognized actuarial gains and losses in the defined benefit pension plan, arising during the period. These gains and losses for the period are shown as a component of other comprehensive income. The accumulated gains and losses are reported as a component of equity, net of any tax effect. At December 31, 2018, the balance in accumulated other comprehensive income consisted of unrealized losses on available for sales securities of $.245 million and actuarial losses on the defined benefit pension obligation of $.218 million. At December 31, 2017, the balance in accumulated other comprehensive income consisted of unrealized losses on available for sale securities of $71,000 and actuarial losses on the defined benefit pension obligation of $.221 million. The Corporation early adopted ASU No. 2018-02, “Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02) in the fourth quarter 2017. ASU 2018-02, issued in February 2018, provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income (AOCI) to retained earnings resulting from the Tax Cuts and Jobs Act of 2017. As a result, the Corporation reclassified $48,000 from AOCI to retained earnings as of Decemer 31, 2017. Earnings per Common Share Diluted earnings per share, which reflects the potential dilution that could occur if outstanding stock options and warrants were exercised and stock awards were fully vested and resulted in the issuance of common stock that then shared in our earnings, is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, after giving effect for dilutive shares issued. The following shows the computation of basic and diluted earnings per share for the years ended December 31, 2018 and 2017 (dollars in thousands, except per share data): Year Ended December 31, 2018 2017 (Numerator): Net income $ 8,367 $ 5,479 (Denominator): Weighted average shares outstanding 8,891,967 6,288,791 Effect of dilutive stock options, and vesting of restricted stock awards 29,691 33,622 Diluted weighted average shares outstanding 8,921,658 6,322,413 Income per common share: Basic $ .94 $ .87 Diluted $ .94 $ .87 Income Taxes Deferred income taxes have been provided under the liability method. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences are expected to reverse. Deferred tax expense (benefit) is the result of changes in the deferred tax asset and liability. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred asset will not be realized. Off-Balance-Sheet Financial Instruments In the ordinary course of business, the Corporation has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. For letters of credit, the Corporation recognizes a liability for the fair market value of the obligations it assumes under that guarantee. Recent Developments 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 consition or results of operations. 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 the same 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 is effective for public companies for interim and annual periods beginning after December 15, 2017. The Corporation recorded no impact upon adoption of ASU 2016-01 in January 2018. Also, the fair value of financial instruments measured at amortized cost is now determined using an exit price notion. Prior to 2018, entrance pricing was used to determine the fair value of financial instruments measured at amortized cost. 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 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 Corporation expects to recognize right-of-use assets and lease liabilities of approximately $5.481 million, representing substantially all of its operating lease commitments. The amount recognized will be impacted by assumptions around renewals and/or extensions. In September, 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. Reclassifications Certain amounts in the 2017 consolidated financial statements have been reclassified to conform to the 2018 presentation.

RESTRICTIONS ON CASH AND CASH E

RESTRICTIONS ON CASH AND CASH EQUIVALENTS	12 Months Ended
	Dec. 31, 2018
RESTRICTIONS ON CASH AND CASH EQUIVALENTS
RESTRICTIONS ON CASH AND CASH EQUIVALENTS	NOTE 2 — RESTRICTIONS ON CASH AND CASH EQUIVALENTS Cash and cash equivalents in the amount of $29.252 million were restricted on December 31, 2018 to meet the reserve requirements of the Federal Reserve System.In the normal course of business, the Corporation maintains cash and due from bank balances with correspondent banks. Balances in these accounts may exceed the Federal Deposit Insurance Corporation’s insured limit of $250,000. Management believes that these financial institutions have strong credit ratings and the credit risk related to these deposits is minimal.

SECURITIES AVAILABLE FOR SALE

SECURITIES AVAILABLE FOR SALE	12 Months Ended
	Dec. 31, 2018
SECURITIES AVAILABLE FOR SALE
SECURITIES AVAILABLE FOR SALE	NOTE 3 — SECURITIES AVAILABLE FOR SALE The carrying value and estimated fair value of securities available for sale are as follows (dollars in thousands): Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value December 31, 2018 Corporate $ 20,198 $ 24 $ (158) $ 20,064 US Agencies 16,198 5 (233) 15,970 US Agencies - MBS 32,974 124 (258) 32,840 Obligations of states and political subdivisions 47,828 341 (295) 47,874 Total securities available for sale $ 117,198 $ 494 $ (944) $ 116,748 December 31, 2017 Corporate $ 24,852 $ 82 $ (43) $ 24,891 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 $ 75,987 $ 441 $ (531) $ 75,897 Following is information pertaining to securities with gross unrealized losses at December 31, 2018 and 2017 aggregated by investment category and length of time these individual securities have been in a loss position (dollars in thousands): Less Than Twelve Months Over Twelve Months Gross Gross Unrealized Fair Unrealized Fair Losses Value Losses Value December 31, 2018 Corporate $ (50) $ 4,969 $ (108) $ 11,876 US Agencies — 504 (233) 14,439 US Agencies - MBS (73) 3,903 (185) 6,908 Obligations of states and political subdivisions (29) 5,812 (266) 9,533 Total securities available for sale $ (152) $ 15,188 $ (792) $ 42,756 December 31, 2017 Corporate (43) 14,204 — — US Agencies (12) 745 US Agencies - MBS (89) 5,218 Obligations of states and political subdivisions (134) 1,589 Total securities available for sale $ (296) $ 43,648 $ (235) $ 7,552 There were 132 securities in an unrealized loss position in 2018 and 105 in 2017. The gross unrealized losses in the current portfolio are considered temporary in nature and related to interest rate fluctuations. The Corporation has both the ability and intent to hold the investment securities until their respective maturities and therefore does not anticipate the realization of the temporary losses. Following is a summary of the proceeds from sales and calls of securities available for sale, as well as gross gains and losses for the years ended December 31 (dollars in thousands): 2018 2017 Proceeds from sales and calls $ 48,649 $ 11,651 Gross gains on sales and calls — 253 Gross (losses) on sales and calls — (22) The carrying value and estimated fair value of securities available for sale at December 31, 2018, by contractual maturity, are shown below (dollars in thousands): Amortized Estimated Cost Fair Value Due in one year or less $ 13,728 $ 13,583 Due after one year through five years 54,563 54,382 Due after five years through ten years 13,058 13,085 Due after ten years 2,875 2,858 Subtotal 84,224 83,908 US Agencies - MBS 32,974 32,840 Total $ 117,198 $ 116,748 Contractual maturities may differ from expected maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities with a market value of $24.908 million are pledged as collateral to the Federal Home Loan Bank and $5.372 million are pledged to certain customer relationships. See Note 10 for information on securities pledged to secure borrowings from the Federal Home Loan Bank.

LOANS

LOANS	12 Months Ended
	Dec. 31, 2018
LOANS
LOANS	NOTE 4 — LOANS The composition of loans at December 31 is as follows (dollars in thousands): 2018 2017 Commercial real estate $ 496,207 $ Commercial, financial, and agricultural 191,060 Commercial construction 29,765 One to four family residential real estate 286,908 Consumer 20,371 Consumer construction 14,553 Total loans $ 1,038,864 $ 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, First Federal of Northern Michigan Bancorp, Inc. (“FFNM”) on May 18, 2018, and Lincoln Community Bank (“Lincoln”) on October 1, 2018. The PFC acquired impaired loans totaled $13.290 million, the Eagle River acquired impaired loans totaled $3.401 million, and the Niagara acquired impaired loans totaled $2.105 million. The FFNM impaired loans totaled $5.440 million and the Lincoln impaired loans totaled $1.901 million. In 2018, the Corporation had positive resolution of acquired nonperforming loans, which resuled in the recognition of accretable interest of approximately $.546 million. In 2017, The Corporation had positive resolution of acquired nonperforming loans, which resulted in the recognition of approximately $.550 million of accretable interest. The table below details the outstanding balances of the PFC acquired portfolio and the acquisition 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 acquisition 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 acquisition 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 acquisition 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 details the outstanding balances of the Lincoln acquired portfolio and the acquisition fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 1,901 $ 37,700 $ 39,601 Nonaccretable difference (546) — (546) Expected cash flows 1,355 37,700 39,055 Accretable yield (561) (493) (1,054) Carrying balance at acquisition date $ 794 $ 37,207 $ 38,001 The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 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 (86) — (86) (22) (587) (609) Reclassification from nonaccretable difference 65 — 65 17 — 17 Balance, December 31, 2018 $ 128 $ — $ 128 $ 213 $ 16 $ 229 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 (48) (212) (260) (515) (1,052) (1,567) Reclassification from nonaccretable difference 36 — 36 386 — 386 Balance, December 31, 2018 $ 26 $ 69 $ 95 $ 571 $ 3,446 $ 4,017 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ — $ — $ — $ 405 $ 884 $ 1,289 Acquisition activity 561 493 1,054 1,261 4,991 6,252 Accretion — (51) (51) (671) (1,902) (2,573) Reclassification from nonaccretable difference — — — 504 — 504 Balance, December 31, 2018 $ 561 $ 442 $ 1,003 $ 1,499 $ 3,973 $ 5,472 The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 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 (460) (642) (1,102) (70) (618) (688) (20) (224) (244) Reclassification from nonaccretable difference 327 — 327 52 — 52 6 — 6 Balance, December 31, 2017 $ 149 $ — $ 149 $ 218 $ 603 $ 821 $ 38 $ 281 $ 319 A breakdown of the allowance for loan losses and recorded balances in loans at December 31, 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 Allowance for loan loss reserve: Beginning balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Charge-offs (198) (132) — (230) — (156) — (716) Recoveries 55 164 2 64 — 35 — 320 Provision 175 40 45 205 — 119 (84) 500 Ending balance ALLR $ 1,682 $ 648 $ 101 $ 199 $ 6 $ 8 $ 2,539 $ 5,183 Loans: Ending balance $ 496,207 $ 191,060 $ 29,765 $ 286,908 $ 14,553 $ 20,371 $ — $ 1,038,864 Ending balance ALLR (1,682) (648) (101) (199) (6) (8) (2,539) (5,183) Net loans $ 494,525 $ 190,412 $ 29,664 $ 286,709 $ 14,547 $ 20,363 $ (2,539) $ 1,033,681 Ending balance ALLR: Individually evaluated $ 486 $ 340 $ — $ — $ — $ — $ — $ 826 Collectively evaluated 1,196 308 101 199 6 8 2,539 4,357 Total $ 1,682 $ 648 $ 101 $ 199 $ 6 $ 8 $ 2,539 $ 5,183 Ending balance Loans: Individually evaluated $ 2,148 $ 577 $ — $ — $ — $ — $ — $ 2,725 Collectively evaluated 491,282 189,023 29,399 285,677 14,336 20,329 — 1,030,046 Acquired with deteriorated credit quality 2,777 1,460 366 1,231 217 42 — 6,093 Total $ 496,207 $ 191,060 $ 29,765 $ 286,908 $ 14,553 $ 20,371 $ — $ 1,038,864 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at December 31, 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 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs (155) (264) — (155) — (229) — (803) Recoveries 80 39 2 65 — 51 — 237 Provision 380 187 (5) (46) — 98 11 625 Ending balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Loans: Ending balance $ 406,742 $ 156,951 $ 9,243 $ 209,890 $ 10,818 $ 17,434 $ — $ 811,078 Ending balance ALLR (1,650) (576) (54) (160) (6) (10) (2,623) (5,079) Net loans $ 405,092 $ 156,375 $ 9,189 $ 209,730 $ 10,812 $ 17,424 $ (2,623) $ 805,999 Ending balance ALLR: Individually evaluated $ 168 $ 166 $ — $ — $ — $ — $ — $ 334 Collectively evaluated 1,482 410 54 160 6 10 2,623 4,745 Total $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Ending balance Loans: Individually evaluated $ 516 $ 166 $ — $ — $ — $ — $ — $ 682 Collectively evaluated 404,835 156,785 9,243 208,269 10,801 17,413 — 807,346 Acquired with deteriorated credit quality 1,391 — — 1,621 17 21 — 3,050 Total $ 406,742 $ 156,951 $ 9,243 $ 209,890 $ 10,818 $ 17,434 $ — $ 811,078 Impaired loans, by definition, are individually evaluated. 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, etc. 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, etc. 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 are 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. Commercial construction loans in the amount of $7.585 million and $3.854 million at December 31, 2018, and 2017, respectively did not receive a specific risk rating. These amounts represent loans made for land development and unimproved land purchases. Below is a breakdown of loans by risk category as of December 31, 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 $ 9,564 $ 22,265 $ 189,898 $ 257,627 $ 5,993 $ 10,860 $ — $ — $ 496,207 Commercial, financial and agricultural 8,077 8,678 72,466 97,441 2,269 2,129 — — 191,060 Commercial construction 734 706 6,844 12,244 829 823 — 7,585 29,765 One-to-four family residential real estate 70 2,873 6,941 15,711 2,095 4,757 — 254,461 286,908 Consumer construction — — — 200 50 11 — 14,292 14,553 Consumer 19 236 625 1,156 42 77 — 18,216 20,371 Total loans $ 18,464 $ 34,758 $ 276,774 $ 384,379 $ 11,278 $ 18,657 $ — $ 294,554 $ 1,038,864 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 loans 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 December 31, 2018 Commercial real estate $ 2,777 $ 2,148 $ 4,925 $ 10,740 $ 486 Commercial, financial and agricultural 1,460 577 2,037 2,249 340 Commercial construction 366 — 366 1,132 — One to four family residential real estate 1,231 — 1,231 4,136 — Consumer construction 217 — 217 — — Consumer 42 — 42 55 — 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 December 31, 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 $ 5,024 $ 410 $ 2,784 $ 141 Commercial, financial and agricultural 374 26 246 1 Commercial construction 383 13 — 3 One to four family residential real estate 2,879 203 2,057 134 Consumer construction 9 — 37 — Consumer 38 4 13 2 Total $ 8,707 $ 656 $ 5,137 $ 281 A summary of past due loans at December 31, is as follows (dollars in thousands): December 31, December 31, 2018 2017 30-89 days 90+ days 30-89 days 90+ days Past Due Past Due Past Due Past Due (accruing) (accruing) Nonaccrual Total (accruing) (accruing) Nonaccrual Total Commercial real estate $ 298 $ — $ 1,700 $ 1,998 $ 460 $ — $ 866 $ 1,326 Commercial, financial and agricultural 398 — 320 718 16 — 338 354 Commercial construction 112 — 266 378 73 — 14 87 One to four family residential real estate 5,456 18 2,725 8,199 3,424 — 1,350 4,774 Consumer construction — — — — — — — — Consumer 108 5 43 156 72 — — 72 Total past due loans $ 6,372 $ 23 $ 5,054 $ 11,449 $ 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 per recently enacted 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 were no new troubled debt restructurings that occurred during the years ended December 31 2018, and December 31, 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): 2018 2017 Loans outstanding, January 1 $ 10,037 $ New loans 660 Net activity on revolving lines of credit (245) Repayment (635) Loans outstanding at end of period $ $ There were no loans to related-parties classified substandard as of December 31, 2018 and 2017. In addition to the outstanding balances above, there were unfunded commitments of $.987 million to related parties at December 31, 2018.

PREMISES AND EQUIPMENT

PREMISES AND EQUIPMENT	12 Months Ended
	Dec. 31, 2018
PREMISES AND EQUIPMENT
PREMISES AND EQUIPMENT	NOTE 5 — PREMISES AND EQUIPMENT Details of premises and equipment at December 31 are as follows (dollars in thousands): 2018 2017 Land $ 4,417 $ 2,998 Buildings and improvements 23,283 18,473 Furniture, fixtures, and equipment 13,428 11,178 Construction in progress 540 — Total cost basis 41,668 32,649 Less - accumulated depreciation 18,885 16,359 Net book value $ 22,783 $ 16,290 Depreciation of premises and equipment charged to operating expenses amounted to $2.432 million in 2018 and $1.978 million in 2017.

OTHER REAL ESTATE HELD FOR SALE

OTHER REAL ESTATE HELD FOR SALE	12 Months Ended
	Dec. 31, 2018
OTHER REAL ESTATE HELD FOR SALE
OTHER REAL ESTATE HELD FOR SALE	NOTE 6 — OTHER REAL ESTATE HELD FOR SALE An analysis of other real estate held for sale for the years ended December 31 is as follows (dollars in thousands): 2018 2017 Balance, January 1 $ 3,558 $ 4,782 Other real estate transferred from loans due to foreclosure 1,878 2,147 Other real estate acquired in business combinations 263 — Proceeds from other real estate sold (2,398) (2,983) Writedowns of other real estate held for sale (125) (307) Gain (loss) on sale of other real estate held for sale (57) (81) Total other real estate held for sale $ 3,119 $ 3,558 Foreclosed residential real estate property of $.596 million is included in other real estate as of December 31, 2018. The recorded investment in consumer mortgage loans secured by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdictions was $.596 as of December 31, 2018.

DEPOSITS

DEPOSITS	12 Months Ended
	Dec. 31, 2018
DEPOSITS
DEPOSITS	NOTE 7 — DEPOSITS The distribution of deposits at December 31 is as follows (dollars in thousands): 2018 2017 Noninterest bearing deposits $ 241,556 $ 148,079 NOW, money market, interest checking 368,890 280,309 Savings 111,358 61,097 CDs <$250,000 225,236 142,159 CDs >$250,000 13,737 11,055 Brokered 136,760 175,299 Total deposits $ 1,097,537 $ 817,998 Maturities of non-brokered time deposits outstanding at December 31, 2018 are as follows (dollars in thousands): 2019 $ 116,806 2020 81,825 2021 22,844 2022 11,996 2023 5,019 Thereafter 483 Total $ 238,973

GOODWILL AND OTHER INTANGIBLE A

GOODWILL AND OTHER INTANGIBLE ASSETS	12 Months Ended
	Dec. 31, 2018
GOODWILL AND OTHER INTANGIBLE ASSETS
GOODWILL AND OTHER INTANGIBLE ASSETS	NOTE 8 — GOODWILL AND OTHER INTANGIBLE ASSETS The Corporation through the acquisition of Peninsula in 2014, Eagle River and Niagara in 2016, and FFNM and Lincoln in 2018, has recorded goodwill and core deposit intangibles as presented below (dollars in thousands): Deposit Based Goodwill Intangible Balance Initital Balance Peninsula $ 3,805 $ 1,206 Eagle River 1,839 993 Niagara 50 300 FFNM 14,915 2,894 Lincoln 1,415 1,353 Total $ 22,024 $ 6,746 Deposit Based Intangible 2018 Future Annual December 31, 2018 Amortization Amortization Balance Expense Expense Peninsula $ 714 $ 121 $ 121 Eagle River 728 99 99 Niagara 230 30 30 FFNM 2,735 159 290 Lincoln 1,313 41 135 Total $ 5,720 $ 450 $ 675 Deposit Based Intangible 2017 December 31, 2017 Amortization Balance Expense Peninsula $ 835 $ 120 Eagle River 827 99 Niagara 260 30 Total $ 1,922 $ 249 The deposit based intangible is reported net of accumulated amortization at $5.720 million at December 31, 2018, compared to $1.922 million at December 31, 2017. Amortization expense in 2018 is $.450 million compared to $.249 million in 2017. Amortization expense for the next five years is expected to be at $.675 million per year.

SERVICING RIGHTS

SERVICING RIGHTS	12 Months Ended
	Dec. 31, 2018
SERVICING RIGHTS
SERVICING RIGHTS	NOTE 9 – SERVICING RIGHTS Mortgage Loans Mortgage servicing rights (“MSRs”) are recorded when loans are sold in the secondary market with servicing retained. As of December 31, 2018, the Corporation had obligations to service $293.771 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. On a quarterly basis, management evaluates the MSRs for impairment. The key economic assumptions used in determining the fair value of the mortgage servicing rights include an annual constant prepayment speed of 8.87% and a discount rate of 10.40% for December 31, 2018, which resulted in a fair value of $2.898 million. In 2017, the fair value was $1.767 million. The following summarizes the fair value of the mortgage servicing rights capitalized and amortized. There was no valuation allowance required (dollars in thousands): December 31, December 31, 2018 2017 Balance at beginning of period $ 1,033 $ 1,573 Additions from loans sold with servicing retained 18 — Acquired MSRs 539 — Amortization (446) (540) Balance at end of period $ 1,144 $ 1,033 Balance of loan servicing portfolio $ 293,771 $ 198,524 Mortgage servicing rights as % of portfolio Fair value of servicing rights $ 2,898 $ 1,767 Commercial Loans The Corporation also retains the servicing on commercial loans that have been sold that 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 December 31, 2018 and December 31, 2017 was approximately $44 million and $44 million, respectively. The Corporation valued these servicing rights at $80,000 as of December 31, 2018 and $.110 million at December 31, 2017. This valuation was established in consideration of the discounted cash flow of expected servicing income over the life of the loans.

BORROWINGS

BORROWINGS	12 Months Ended
	Dec. 31, 2018
BORROWINGS
BORROWINGS	NOTE 10 — BORROWINGS Borrowings consist of the following at December 31 (dollars in thousands): 2018 2017 Federal Home Loan Bank fixed rate advances $ 57,060 $ 60,000 Correspondent bank term note — 18,999 USDA Rural Development note 476 553 $ 57,536 $ 79,552 The Federal Home Loan Bank borrowings bear a weighted average rate of 1.72% and mature in 2019, 2020, 2021, 2023, and 2026. They are collateralized at December 31, 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 $64.918 million; mortgage related and municipal securities with an amortized cost and estimated fair value of $24.919 million and $24.908 million, respectively; and Federal Home Loan Bank stock owned by the Bank totaling $4.924 million. Prepayment of the advances is subject to the provisions and conditions of the credit policies of the Federal Home Loan Bank of Indianapolis in effect as of December 31, 2018. The Corporation currently has one correspondent banking borrowing relationship. The relationship consists of a $15.0 million revolving line of credit, which had no outstanding balance at December 31, 2018. The line of credit bears interest at a rate of LIBOR plus 2.00%, with a floor rate of 3.00% and a ceiling of 22%. The line of credit expires on April 30, 2020. LIBOR was 2.81% at December 31, 2018. The Corporation previously had a term note as part of this relationship that was paid in full during the second quarter of 2018. The relationship is secured by all of the outstanding common stock of mBank. The USDA Rural Development borrowing bears an interest rate of 1.00% and matures in August, 2024. It is collateralized by loans totaling $.476 million originated and held by the Corporation’s wholly owned subsidiary, First Rural Relending, and an assignment of a demand deposit account in the amount of $.537 million, and guaranteed by the Corporation. Maturities and principal payments of borrowings outstanding at December 31, 2018 are as follows (dollars in thousands): 2019 $ 16,290 2020 12,567 2021 25,145 2022 80 2023 373 Thereafter 3,081 Total $ 57,536

INCOME TAXES

INCOME TAXES	12 Months Ended
	Dec. 31, 2018
INCOME TAXES
INCOME TAXES	NOTE 11 — INCOME TAXES The components of the federal income tax provision (credit) for the years ended December 31 are as follows (dollars in thousands): 2018 2017 Current tax expense $ 1,352 $ 585 Adjustment of deferred taxes due to change in enacted tax rate — 2,025 Deferred tax expense 874 2,929 Provision for income taxes $ 2,226 $ 5,539 A summary of the source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes for the years ended December 31 is as follows (dollars in thousands): 2018 2017 Tax expense at statutory rate $ 2,225 $ Increase (decrease) in taxes resulting from: Tax-exempt interest (97) Adjustment of deferred taxes due to change in enacted tax rate — 2,025 Nondeductible transaction expenses 138 17 Other (40) Provision for income taxes, as reported $ 2,226 $ 5,539 Deferred income taxes are provided for the temporary differences between the financial reporting and tax bases of the Corporation’s assets and liabilities. The major components of net deferred tax assets at December 31 are as follows (dollars in thousands): 2018 2017 Deferred tax assets: NOL carryforward $ 2,634 $ 1,580 Allowance for loan losses 1,078 948 Alternative Minimum Tax Credit — 1,463 OREO 168 119 Tax credit carryovers 140 235 Deferred compensation 307 242 Pension liability 221 240 Stock compensation 92 79 Unrealized loss on securities 99 19 Purchase accounting adjustments 2,206 785 Other 808 63 Total deferred tax assets 7,753 5,773 Deferred tax liabilities: Core deposit premium (1,256) (404) FHLB stock dividend (73) (56) Depreciation (101) (79) Mortgage servicing rights 61 (240) Other (621) (24) Total deferred tax liabilities (1,990) (803) Net deferred tax asset $ 5,763 $ 4,970 The Corporation has reported net deferred tax assets of $5.763 million at December 31, 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 December 31, 2018 had a net operating loss and tax credit carryforwards for tax purposes of approximately $12.5 million, and $1.7 million, respectively. As a result of the repeal of the corporate alternative minimum tax in the Tax Cuts and Jobs Act, any outstanding alternative minimum tax credits are believed to be utilized or refundable as of December 31, 2018. Therefore, the $1.6 million of alternative minimum tax credits, was reclassified to a current tax receivable included in other assets during the year. The Corporation evaluated the future benefits from these carryforwards as of December 31, 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 $2.0 million for the NOL and the equivalent value of tax credits, which is approximately $.420 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.

OPERATING LEASES

OPERATING LEASES	12 Months Ended
	Dec. 31, 2018
OPERATING LEASES
OPERATING LEASES	NOTE 12 — OPERATING LEASES The Corporation currently maintains five operating leases for branch locations in Birmingham, Manistique, Marquette, Negaunee and Traverse City. Future minimum payments for base rent, by year and in the aggregate, under the initial terms of the operating lease agreements, consist of the following (dollars in thousands): 2019 $ 747 2020 608 2021 503 2022 499 2023 495 Thereafter 2,629 Total $ 5,481 Rent expense for all operating leases amounted to $1.096 million in 2018 and $1.109 million in 2017.

RETIREMENT PLAN

RETIREMENT PLAN	12 Months Ended
	Dec. 31, 2018
DEFINED BENEFIT PENSION PLAN
RETIREMENT PLAN	NOTE 13 — RETIREMENT PLAN The Corporation has established a 401(k) profit sharing plan. Employees who have completed three months of service and attained the age of 18 are eligible to participate in the plan. Eligible employees can elect to have a portion, not to exceed 80%, of their annual compensation paid into the plan. In addition, the Corporation may make discretionary contributions into the plan. Retirement plan contributions charged to operations totaled $.400 million and $.341 million in 2018 and 2017 respectively.

DEFINED BENEFIT PENSION PLAN

DEFINED BENEFIT PENSION PLAN	12 Months Ended
	Dec. 31, 2018
DEFINED BENEFIT PENSION PLAN
DEFINED BENEFIT PENSION PLAN	NOTE 14 — DEFINED BENEFIT PENSION PLAN The Corporation acquired the Peninsula Financial Corporation noncontributory defined benefit pension plan. 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 2019 are $22,000. The anticipated distributions over the next five years and through December 31, 2028 are detailed in the table below (dollars in thousands): 2019 $ 136 2020 132 2021 131 2022 137 2023 143 2024-2028 823 Total $ 1,502 The following table sets forth the plan’s funded status and amounts recognized in the Corporation’s balance sheets and the activity from date of acquisition (dollars in thousands): 2018 2017 Change in benefit obligation: Benefit obligation, beginning of year $ 3,331 $ 3,187 Interest cost 109 118 Actuarial (gain) loss (315) 161 Benefits paid (134) (135) Benefit obligation at end of year 2,991 3,331 Change in plan assets: Fair value of plan assets, beginning of year 2,191 2,049 Actual return on plan assets (134) 259 Employer contributions 64 18 Benefits paid (134) (135) Fair value of plan assets at end of year 1,987 2,191 Funded status, included with other liabilities $ (1,004) $ (1,140) Net pension costs included in the Corporation’s results of operations was immaterial. Assumptions in the actuarial valuation were: 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 December 31, 2018 and December 31, 2017: Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50%

DEFERRED COMPENSATION PLAN

DEFERRED COMPENSATION PLAN	12 Months Ended
	Dec. 31, 2018
DEFERRED COMPENSATION PLAN
DEFERRED COMPENSATION PLAN	NOTE 15 — DEFERRED COMPENSATION PLAN Prior to the recapitalization in 2004, as an incentive to retain key members of management and directors, the Corporation established a deferred compensation plan, with benefits based on the number of years the individuals have served the Corporation. This plan was discontinued and no longer applies to current officers and directors. A liability was recorded on a present value basis and discounted using the rates in effect at the time the deferred compensation agreement was entered into. The liability may change depending upon changes in long-term interest rates. The liability at December 31, 2018 and 2017, for vested benefits under this plan, was $82,000 and $.113 million, respectively. These benefits were originally contracted to be paid over a ten to fifteen-year period. The final payment is scheduled to occur in 2023. The deferred compensation plan is unfunded; however, the Bank maintains life insurance policies on the majority of the plan participants. The cash surrender value of the policies was $1.443 million and $1.465 million at December 31, 2018 and 2017, respectively. Peninsula Financial Corporation, acquired by the Corporation in December 2014, also had a deferred compensation plan, which was similar in nature to the Corporation’s discontinued plan. The liability for this plan at December 31, 2018 and 2017, for vested benefits under this plan was $.900 million and $1.038 million, respectively. The bank owned life insurance policy as of December 31, 2018 and 2017 had cash surrender values of $1.760 million and $1.741 million, respectively. This Plan was also discontinued by the Corporation and will not apply to future employees or directors of the Corporation. First Federal of Northern Michigan, acquired in May 2018 had a deferred compensation plan, which was similar in nature to the Corporation’s discontinued plan. The liability for this plan at December 31, 2018, for vested benefits under this plan was $.417 million. The bank owned life insurance policy as of December 31, 2018 had a cash surrender value of $5.239 million. This Plan was also discontinued by the Corporation and will not apply to future employees or directors of the Corporation. Deferred compensation expense for the three plans was $92,000 and $65,000 for 2018 and 2017 respectively.

REGULATORY MATTERS

REGULATORY MATTERS	12 Months Ended
	Dec. 31, 2018
REGULATORY MATTERS
REGULATORY MATTERS	NOTE 16 — REGULATORY MATTERS The Corporation is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory—and possibly additional discretionary—actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation must meet specific capital guidelines that involve quantitative measures of the Corporation’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Corporation’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Corporation to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average assets. Management has determined that, as of December 31, 2018, the Corporation is well capitalized. The Corporation’s and the Bank’s actual capital and ratios compared to generally applicable regulatory requirements as of December 31, 2018 are as follows (dollars in thousands): Actual Adequacy Purposes Well-Capitalized Amount Ratio Amount Ratio Amount Ratio Total capital to risk weighted assets: Consolidated $ 124,207 > $ 79,705 > > N/A N/A mBank $ 121,406 > $ 79,464 > > $ 99,329 Tier 1 capital to risk weighted assets: Consolidated $ 119,024 > $ 59,779 > > N/A N/A mBank $ 116,264 > $ 59,598 > > $ 79,464 Common equity Tier 1 capital to risk weighted assets Consolidated $ 119,024 > $ 44,834 > > N/A N/A mBank $ 116,264 > $ 44,698 > > $ 64,564 Tier 1 capital to average assets: Consolidated $ 119,024 > $ 51,552 > > N/A N/A mBank $ 116,264 > $ 51,556 > > $ 64,445 The Corporation’s and the Bank’s actual capital and ratios compared to generally applicable regulatory requirements as of December 31, 2017 are as follows (dollars in thousands): Actual Adequacy Purposes Well-Capitalized Amount Ratio Amount Ratio Amount Ratio Total capital to risk weighted assets: Consolidated $ 74,533 > $ 64,190 > > N/A N/A mBank $ 93,598 > $ 64,202 > > $ 80,252 Tier 1 capital to risk weighted assets: Consolidated $ 69,454 > $ 48,142 > > N/A N/A mBank $ 88,560 > $ 48,151 > > $ 64,202 Common equity Tier 1 capital to risk weighted assets Consolidated $ 69,454 > $ 36,107 > > N/A N/A mBank $ 88,560 > $ 36,113 > > $ 52,164 Tier 1 capital to average assets: Consolidated $ 69,454 > $ 39,375 > > N/A N/A mBank $ 88,560 > $ 39,279 > > $ 49,098

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS	12 Months Ended
	Dec. 31, 2018
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS	NOTE 17 — STOCK COMPENSATION PLANS Restricted Stock Awards The Corporation’s restricted stock awards (“RSAs”) require certain service-based or performance requirements and have 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, 2016, the Corporation issued 37,125 shares of its common stock for vested RSAs. In March 2016, the Corporation issued 22,626 shares of its common stock for vested RSAs. In the first quarter of 2017, the Corporation issued 31,559 shares of its common stock for vested RSAs. In 2018, the Corporation issued 46,666 shares for vested RSAs. The Corporation recognized annual compensation expense of $.533 million in 2018 and $.398 million in 2017. Unrecognized compensation expense at the end of 2018 was $.550 million. A summary of changes in our nonvested awards for the year 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 Forfeited during the period 2,060 14.75 Vested during the period (46,666) 12.65 Nonvested balance at December 31, 2018 69,322 $ 12.79

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY	12 Months Ended
	Dec. 31, 2018
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY	NOTE 18 — 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 publicly announced of $600,000 on February 27, 2013, $600,000 on December 17, 2013 and an additional $750,000 on April 28, 2015. None of these authorizations has an expiration date. As of December 31, 2018, $25,000 of the total authorization was available for future purchases.

COMMITMENTS, CONTINGENCIES AND

COMMITMENTS, CONTINGENCIES AND CREDIT RISK	12 Months Ended
	Dec. 31, 2018
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
COMMITMENTS, CONTINGENCIES AND CREDIT RISK	NOTE 19 — 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 at December 31 are as follows (dollars in thousands): 2018 2017 Commitments to extend credit: Variable rate $ 88,862 $ 72,187 Fixed rate 54,434 37,468 Standby letters of credit - Variable rate 7,208 7,753 Credit card commitments - Fixed rate 5,107 5,788 $ 155,611 $ 123,196 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 At December 31, 2018, there were no pending material legal proceedings to which the Corporation is a party or to which any of its property was subject, except for proceedings which arise in the ordinary course of business. In the opinion of management, pending legal proceedings will not have a material effect on the consolidated financial position or results of operations of the Corporation. Concentration 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 December 31, 2018 represents $150.251 million, or 20.95%, 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 stores, 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.

FAIR VALUE

FAIR VALUE	12 Months Ended
	Dec. 31, 2018
FAIR VALUE
FAIR VALUE	NOTE 20 — FAIR VALUE Fair value estimates, methods, and assumptions are set forth below for the Corporation’s 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 using an exit notion as of December 31, 2018. As of December 31, 2017 an entrance price was used to measure the fair value of loans. 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 December 31 (dollars in thousands): December 31, 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 $ 64,157 $ 64,157 $ 37,426 $ 37,426 Interest-bearing deposits Level 2 13,452 13,452 13,374 13,374 Securities available for sale Level 2 115,260 115,260 74,397 74,397 Securities available for sale Level 3 1,488 1,488 1,500 1,500 Federal Home Loan Bank stock Level 2 4,924 4,924 3,112 3,112 Net loans Level 3 1,033,681 1,013,214 805,999 797,726 Accrued interest receivable Level 3 3,005 3,005 2,276 2,276 Total financial assets $ 1,235,967 $ 1,215,500 $ 938,084 $ 929,811 Financial liabilities: Deposits Level 2 $ 1,097,537 $ 1,047,709 $ 817,998 $ 788,632 Borrowings Level 2 57,536 56,771 79,552 79,242 Accrued interest payable Level 3 391 391 322 322 Total financial liabilities $ 1,155,464 $ 1,104,871 $ 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 December 31, 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 December 31, 2018 and 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 3 — Investment Securities.” The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): 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, 2018 (Level 1) (Level 2) (Level 3) December 31, 2018 Assets Corporate $ $ — $ 19,564 $ 500 $ — US Agencies — 15,970 — — US Agencies - MBS — 32,840 — — Obligations of state and political subdivisions 47,874 — 46,886 988 — $ 116,748 $ — 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 $ 500 $ — US Agencies — 16,846 — — US Agencies - MBS — 12,716 — — Obligations of state and political subdivisions — 20,444 1,000 — $ 75,897 $ — The Corporation had no other Level 3 assets or liabilities on a recurring basis as of December 31, 2018. 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 loans and other real estate held for sale. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections. The table below shows the activity in level three assets for the years ended, December 31, 2018 and 2017 (dollars in thousands): Balance at Transfers Balance Beginning Net Gains (losses) in (out) of at end of Period Realized Unrealized Level 3 Purchases Sales of Period Year Ended December 31, 2018 Corporate $ 500 $ — $ — $ — $ — $ — $ 500 Obligations of state and political subdivisions 1,000 — — (12) — — 988 Balance at Transfers Balance Beginning Net Gains (losses) in (out) of at end of Period Realized Unrealized Level 3 Purchases Sales of Period Year Ended December 31, 2017 Corporate $ 500 $ — $ — $ — $ — $ — $ 500 US Agencies- MBS 1,150 38 — — — (1,188) — Obligations of state and political subdivisions — — — 740 260 — 1,000 Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2018 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, 2018 (Level 1) (Level 2) (Level 3) December 31, 2018 Assets Impaired loans $ $ — $ — $ $ 198 Other real estate held for sale — — 182 $ 380 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 Year Ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Impaired loans $ 3,852 $ — $ — $ 3,852 $ 141 Other real estate held for sale 3,558 — — 3,558 388 $ 529 The Corporation had no investments subject to fair value measurement on a nonrecurring basis. 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 or collateral values 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).

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS	12 Months Ended
	Dec. 31, 2018
BUSINESS COMBINATIONS
BUSINESS COMBINATIONS	NOTE 21 — BUSINESS COMBINATIONS 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. Deposits garnered in the acquisition the majority of which are core deposits, totaled $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 $34.101 million. The Corporation recorded preliminary deposit based intangibles of $2.894 million and goodwill of $14.915 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 2,894 Mortgage servicing rights 386 Deferred tax assets 2,844 Bank owned life insurance 5,170 Other assets 1,775 Total assets 315,153 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 19,186 Goodwill $ 14,915 Lincoln Community Bank The Corporation completed its acquisition of Lincoln Community Bank on October 1, 2018. Lincoln had two branch offices, one of which was subsequently closed in 2018, and total assets of $60 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 with a cash payment of $8.500 million. Purchase Price: Cash consideration $ 8,500 Net assets acquired: Cash and cash equivalents $ 10,971 Securities available for sale 6,947 Total loans 38,001 Premises and equipment 1,249 Other real estate owned 69 Deposit based intangible 1,353 Bank owned life insurance 1,653 Other assets 339 Total assets 60,582 Non-interest bearing deposits 15,559 Interest bearing deposits 37,654 Total deposits 53,213 Deferred tax liability 231 Other liabilities 53 Total liabilities 53,497 Net assets acquired 7,085 Goodwill $ 1,415 The following table provides the unaudited pro forma information for the results of operations for the twelve months ended December 31, 2018 and 2017, as if both the FFNM acquisition and Lincoln acquisition had occurred on January 1. These adjustments reflec the impact of certain purchase accounting fair value measurements, primarily on the loan and deposit portfolios of FFNM and Lincoln. In addition, merger-related costs noted above are excluded from the 2017 results of operations, for comparative purposes. Further operating cost savings are expected along with additional business synergies as a result of the mergers 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, nor are they intended to represent or be indicative of the future results of the Corporation. 2018 2017 Net interest income $ 50,787 $ 49,728 Noninterest income 5,071 6,366 Noninterest expense 47,529 49,360 Net income 8,329 6,734 Net income per diluted share $ 0.75 $ 0.80 Fair Value In most instances, determining the fair value of the acquired assets and assumed liabilities required the Corporation to estimate the cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations is related to the valuation of acquired loans. For such loans, the excess cash flows expected at merger over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at merger and the cash flows expected to be collected at merger reflects the impact of estimated credit losses, interest rate changes, and other factors, such as prepayments. In accordance with the applicable accounting guidance for business combinations, there was no carry-over of the acquired banks’ previously established allowance for loan losses. Goodwill recognized in these acquisitions was based primarily due to the synergies and economies of scale expected from combining the operations of the Corporation with FFNM and Lincoln.

PARENT COMPANY ONLY FINANCIAL S

PARENT COMPANY ONLY FINANCIAL STATEMENTS	12 Months Ended
	Dec. 31, 2018
PARENT COMPANY ONLY FINANCIAL STATEMENTS
PARENT COMPANY ONLY FINANCIAL STATEMENTS	NOTE 23 — PARENT COMPANY ONLY FINANCIAL STATEMENTS BALANCE SHEETS December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 ASSETS Cash and cash equivalents $ 2,470 $ 198 Investment in subsidiaries 146,516 97,984 Other assets 4,306 3,263 TOTAL ASSETS $ 153,292 $ 101,445 LIABILITIES AND SHAREHOLDERS’ EQUITY Other borrowing — 18,999 Other liabilities 1,223 1,046 Total liabilities 1,223 20,045 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 shares respectively 129,066 61,981 Retained earnings 23,466 19,711 Accumulated other comprehensive income (463) (292) Total shareholders’ equity 152,069 81,400 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 153,292 $ 101,445 STATEMENTS OF OPERATIONS Years Ended December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 INCOME: Interest income $ 1 $ — Miscellaneous income 17 — Total income $ 18 $ — EXPENSES: Interest expense on borrowings 320 868 Salaries and benefits 835 698 Professional service fees 242 279 Transaction related expenses 814 50 Other 350 294 Total expenses 2,561 2,189 Loss before income taxes and equity in net income of subsidiaries (2,543) (2,189) Provision for (benefit of) income taxes (534) (27) Loss before equity in net income of subsidiaries (2,009) (2,162) Equity in net income of subsidiaries 10,376 7,641 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,367 $ 5,479 STATEMENTS OF CASH FLOWS Years Ended December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 Cash Flows from Operating Activities: Net income $ 8,367 $ 5,479 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net (income) of subsidiaries (10,376) (7,641) Increase in capital from stock based compensation 533 398 Change in other assets 1,043 751 Change in other liabilities 365 77 Net cash provided by (used in) operating activities (68) (936) Cash Flows from Investing Activities: Investments in subsidiaries 2,000 7,000 Net cash paid in acquisitions (8,500) — Net cash provided by (used in) investing activities (6,500) 7,000 Cash Flows from Financing Activities: Increase on term borrowing — — Principal payments on term borrowings (18,999) (2,200) Net activity on line of credit — (750) Repurchase of common stock — — Dividend on common stock (4,612) (3,022) Net cash from capital raise 32,451 — Net cash provided by (used in) financing activities 8,840 (5,972) Net increase (decrease) in cash and cash equivalents 2,272 92 Cash and cash equivalents at beginning of period 198 106 Cash and cash equivalents at end of period $ 2,470 $ 198

SUMMARY OF SIGNIFICANT ACCOUN_2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation	The accounting policies of Mackinac Financial Corporation (the “Corporation”) and Subsidiaries conform to accounting principles generally accepted in the United States and prevailing practices within the banking industry. Significant accounting policies are summarized below.
Principles of Consolidation	Principles of Consolidation The consolidated financial statements include the accounts of the Corporation and its wholly owned subsidiaries, mBank (the “Bank”) and other minor subsidiaries, after elimination of intercompany transactions and accounts.
Nature of Operations	Nature of Operations The Corporation’s and the Bank’s revenues and assets are derived primarily from banking activities. The Bank’s primary market area is the Upper Peninsula, the northern portion of the Lower Peninsula of Michigan, Northeastern Wisconsin and Oakland County in Lower Michigan. The Bank provides to its customers commercial, real estate, agricultural, and consumer loans, as well as a variety of traditional deposit products. Less than 1.0% of the Corporation’s business activity is with Canadian customers and denominated in Canadian dollars. While the Corporation’s chief decision makers monitor the revenue streams of the various Corporation products and services, operations are managed and financial performance is evaluated on a Corporation-wide basis. Accordingly, all of the Corporation’s banking operations are considered by management to be aggregated in one reportable operating segment.
Use of Estimates in Preparation of Financial Statements	Use of Estimates in Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. 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, and the assessment of goodwill for impairment.
Cash and Cash Equivalents	Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, noninterest-bearing deposits in correspondent banks, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods.
Securities	Securities The Corporation’s debt securities are classified and accounted for as securities available for sale. These securities are stated at fair value. Premiums and discounts are recognized in interest income using the interest method over the period to maturity. Unrealized holding gains and losses on securities available for sale are reported as accumulated other comprehensive income within shareholders’ equity until realized. When it is determined that securities or other investments are impaired and the impairment is other than temporary, an impairment loss is recognized in earnings and a new basis in the affected security is established. Gains and losses on the sale of securities are recorded on the trade date and determined using the specific-identification method.
Federal Home Loan Bank Stock	Federal Home Loan Bank Stock As a member of the Federal Home Loan Bank (FHLB) system, the Bank is required to hold stock in the FHLB based on the anticipated level of borrowings to be advanced. This stock is recorded at cost, which approximates fair value. Transfer of the stock is substantially restricted.
Interest Income and Fees on Loans	Interest Income and Fees on Loans Interest income on loans is reported on the level-yield method and includes amortization of deferred loan fees and costs over the loan term. Net loan commitment fees or costs for commitment periods greater than one year are deferred and amortized into fee income or other expense on a straight-line basis over the commitment period. The accrual of interest on loans is discontinued when, in the opinion of management, it is probable that the borrower may be unable to meet payments as they become due as well as when required by regulatory provisions. Upon such discontinuance, all unpaid accrued interest is reversed. Loans are returned to accrual status when all principal and interest amounts contractually due are brought current and future payments are reasonably assured. Interest income on impaired and nonaccrual loans is recorded on a cash basis.
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 based on the present value of amounts expected to be received, which incorporates assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, collateral values, 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 ASC 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.
Servicing Rights	Servicing Rights Servicing assets are recognized as separate assets when rights are acquired through purchase or through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment based on the fair value of the rights compared to amortized cost. Impairment is determined by using prices for similar assets with similar characteristics, such as interest rates and terms. Fair value is determined by using prices for similar assets with similar characteristics, when available, or based on discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.
Allowance for Loan Losses	Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans which 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.
Troubled Debt Restructuring	Troubled Debt Restructuring Troubled debt restructuring of loans is undertaken to improve the likelihood that the loan will be repaid in full under the modified terms in accordance with a reasonable repayment schedule. All modified loans are evaluated to determine whether the loans should be reported as a Troubled Debt Restructure (TDR). A loan is a TDR when the Corporation, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower by modifying or renewing a loan that the Corporation would not otherwise consider. To make this determination, the Corporation must determine whether (a) the borrower is experiencing financial difficulties and (b) the Corporation granted the borrower a concession. This determination requires consideration of all of the facts and circumstances surrounding the modification. An overall general decline in the economy or some deterioration in a borrower’s financial condition does not automatically mean the borrower is experiencing financial difficulties.
Other Real Estate Held for Sale	Other Real Estate Held for Sale Other real estate held for sale consists of assets acquired through, or in lieu of, foreclosure and other long-lived assets to be disposed of by sale, whether previously held and used or newly acquired. Other real estate held for sale is initially recorded at fair value, less costs to sell, establishing a new cost basis. Valuations are periodically performed by management or a third party, and the assets’ carrying values are adjusted to the lower of cost basis or fair value less costs to sell. Impairment losses are recognized for any initial or subsequent write-downs. Net revenue and expenses from operations of other real estate held for sale are included in other expense.
Premises and Equipment	Premises and Equipment Premises and equipment are stated at cost less accumulated depreciation. Maintenance and repair costs are charged to expense as incurred. Gains or losses on disposition of premises and equipment are reflected in income. Depreciation is computed on the straight-line method over the estimated useful lives of the assets.
Goodwill and Other Intangible Assets	Goodwill and Other Intangible Assets The excess of the cost of acquired entities over the fair value of identifiable assets acquired less liabilities assumed is recorded as goodwill. In accordance with ASC 350, amortization of goodwill and indefinite-lived assets is not recorded. However, the recoverability of goodwill is annually tested for impairment. The Corporation’s core deposit intangible is currently being amortized over its estimated useful life of ten years.
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”), or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. 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.
Comprehensive Income (Loss)	Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) is composed of unrealized gains and losses on securities available for sale, and unrecognized actuarial gains and losses in the defined benefit pension plan, arising during the period. These gains and losses for the period are shown as a component of other comprehensive income. The accumulated gains and losses are reported as a component of equity, net of any tax effect. At December 31, 2018, the balance in accumulated other comprehensive income consisted of unrealized losses on available for sales securities of $.245 million and actuarial losses on the defined benefit pension obligation of $.218 million. At December 31, 2017, the balance in accumulated other comprehensive income consisted of unrealized losses on available for sale securities of $71,000 and actuarial losses on the defined benefit pension obligation of $.221 million. The Corporation early adopted ASU No. 2018-02, “Income Statement- Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income” (ASU 2018-02) in the fourth quarter 2017. ASU 2018-02, issued in February 2018, provides for the reclassification of the effect of remeasuring deferred tax balances related to items within accumulated other comprehensive income (AOCI) to retained earnings resulting from the Tax Cuts and Jobs Act of 2017. As a result, the Corporation reclassified $48,000 from AOCI to retained earnings as of Decemer 31, 2017.
Earnings per Common Share	Earnings per Common Share Diluted earnings per share, which reflects the potential dilution that could occur if outstanding stock options and warrants were exercised and stock awards were fully vested and resulted in the issuance of common stock that then shared in our earnings, is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, after giving effect for dilutive shares issued. The following shows the computation of basic and diluted earnings per share for the years ended December 31, 2018 and 2017 (dollars in thousands, except per share data): Year Ended December 31, 2018 2017 (Numerator): Net income $ 8,367 $ 5,479 (Denominator): Weighted average shares outstanding 8,891,967 6,288,791 Effect of dilutive stock options, and vesting of restricted stock awards 29,691 33,622 Diluted weighted average shares outstanding 8,921,658 6,322,413 Income per common share: Basic $ .94 $ .87 Diluted $ .94 $ .87
Income Taxes	Income Taxes Deferred income taxes have been provided under the liability method. Deferred tax assets and liabilities are determined based upon the difference between the financial statement and tax bases of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences are expected to reverse. Deferred tax expense (benefit) is the result of changes in the deferred tax asset and liability. A valuation allowance is provided against deferred tax assets when it is more likely than not that some or all of the deferred asset will not be realized.
Off-Balance-Sheet Financial Instruments	Off-Balance-Sheet Financial Instruments In the ordinary course of business, the Corporation has entered into off-balance-sheet financial instruments consisting of commitments to extend credit, commitments under credit card arrangements, commercial letters of credit, and standby letters of credit. For letters of credit, the Corporation recognizes a liability for the fair market value of the obligations it assumes under that guarantee.
Recent Developments	Recent Developments 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 consition or results of operations. 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 the same 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 is effective for public companies for interim and annual periods beginning after December 15, 2017. The Corporation recorded no impact upon adoption of ASU 2016-01 in January 2018. Also, the fair value of financial instruments measured at amortized cost is now determined using an exit price notion. Prior to 2018, entrance pricing was used to determine the fair value of financial instruments measured at amortized cost. 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 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 Corporation expects to recognize right-of-use assets and lease liabilities of approximately $5.481 million, representing substantially all of its operating lease commitments. The amount recognized will be impacted by assumptions around renewals and/or extensions. In September, 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.
Reclassifications	Reclassifications Certain amounts in the 2017 consolidated financial statements have been reclassified to conform to the 2018 presentation.

SUMMARY OF SIGNIFICANT ACCOUN_3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	12 Months Ended
	Dec. 31, 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 years ended December 31, 2018 and 2017 (dollars in thousands, except per share data): Year Ended December 31, 2018 2017 (Numerator): Net income $ 8,367 $ 5,479 (Denominator): Weighted average shares outstanding 8,891,967 6,288,791 Effect of dilutive stock options, and vesting of restricted stock awards 29,691 33,622 Diluted weighted average shares outstanding 8,921,658 6,322,413 Income per common share: Basic $ .94 $ .87 Diluted $ .94 $ .87

SECURITIES AVAILABLE FOR SALE (

SECURITIES AVAILABLE FOR SALE (Tables)	12 Months Ended
	Dec. 31, 2018
SECURITIES AVAILABLE FOR SALE
Schedule of carrying value and estimated fair value of securities available for sale	The carrying value and estimated fair value of securities available for sale are as follows (dollars in thousands): Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value December 31, 2018 Corporate $ 20,198 $ 24 $ (158) $ 20,064 US Agencies 16,198 5 (233) 15,970 US Agencies - MBS 32,974 124 (258) 32,840 Obligations of states and political subdivisions 47,828 341 (295) 47,874 Total securities available for sale $ 117,198 $ 494 $ (944) $ 116,748 December 31, 2017 Corporate $ 24,852 $ 82 $ (43) $ 24,891 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 $ 75,987 $ 441 $ (531) $ 75,897
Schedule of securities with gross unrealized losses aggregated by investment category and length of time these individual securities have been in a loss position	Following is information pertaining to securities with gross unrealized losses at December 31, 2018 and 2017 aggregated by investment category and length of time these individual securities have been in a loss position (dollars in thousands): Less Than Twelve Months Over Twelve Months Gross Gross Unrealized Fair Unrealized Fair Losses Value Losses Value December 31, 2018 Corporate $ (50) $ 4,969 $ (108) $ 11,876 US Agencies — 504 (233) 14,439 US Agencies - MBS (73) 3,903 (185) 6,908 Obligations of states and political subdivisions (29) 5,812 (266) 9,533 Total securities available for sale $ (152) $ 15,188 $ (792) $ 42,756 December 31, 2017 Corporate (43) 14,204 — — US Agencies (12) 745 US Agencies - MBS (89) 5,218 Obligations of states and political subdivisions (134) 1,589 Total securities available for sale $ (296) $ 43,648 $ (235) $ 7,552
Summary of the proceeds from sales and calls of securities available for sale, as well as gross gains and losses	Following is a summary of the proceeds from sales and calls of securities available for sale, as well as gross gains and losses for the years ended December 31 (dollars in thousands): 2018 2017 Proceeds from sales and calls $ 48,649 $ 11,651 Gross gains on sales and calls — 253 Gross (losses) on sales and calls — (22)
Schedule of carrying value and estimated fair value of securities available for sale by contractual maturity	The carrying value and estimated fair value of securities available for sale at December 31, 2018, by contractual maturity, are shown below (dollars in thousands): Amortized Estimated Cost Fair Value Due in one year or less $ 13,728 $ 13,583 Due after one year through five years 54,563 54,382 Due after five years through ten years 13,058 13,085 Due after ten years 2,875 2,858 Subtotal 84,224 83,908 US Agencies - MBS 32,974 32,840 Total $ 117,198 $ 116,748

LOANS (Tables)

LOANS (Tables)	12 Months Ended
	Dec. 31, 2018
Schedule of composition of loans	The composition of loans at December 31 is as follows (dollars in thousands): 2018 2017 Commercial real estate $ 496,207 $ Commercial, financial, and agricultural 191,060 Commercial construction 29,765 One to four family residential real estate 286,908 Consumer 20,371 Consumer construction 14,553 Total loans $ 1,038,864 $ 811,078
Schedule of the accretable yield by acquisition	The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 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 (86) — (86) (22) (587) (609) Reclassification from nonaccretable difference 65 — 65 17 — 17 Balance, December 31, 2018 $ 128 $ — $ 128 $ 213 $ 16 $ 229 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 (48) (212) (260) (515) (1,052) (1,567) Reclassification from nonaccretable difference 36 — 36 386 — 386 Balance, December 31, 2018 $ 26 $ 69 $ 95 $ 571 $ 3,446 $ 4,017 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2017 $ — $ — $ — $ 405 $ 884 $ 1,289 Acquisition activity 561 493 1,054 1,261 4,991 6,252 Accretion — (51) (51) (671) (1,902) (2,573) Reclassification from nonaccretable difference — — — 504 — 504 Balance, December 31, 2018 $ 561 $ 442 $ 1,003 $ 1,499 $ 3,973 $ 5,472 The table below presents a rollforward of the accretable yield on acquired loans for year ended December 31, 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 (460) (642) (1,102) (70) (618) (688) (20) (224) (244) Reclassification from nonaccretable difference 327 — 327 52 — 52 6 — 6 Balance, December 31, 2017 $ 149 $ — $ 149 $ 218 $ 603 $ 821 $ 38 $ 281 $ 319
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 December 31, 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 Allowance for loan loss reserve: Beginning balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Charge-offs (198) (132) — (230) — (156) — (716) Recoveries 55 164 2 64 — 35 — 320 Provision 175 40 45 205 — 119 (84) 500 Ending balance ALLR $ 1,682 $ 648 $ 101 $ 199 $ 6 $ 8 $ 2,539 $ 5,183 Loans: Ending balance $ 496,207 $ 191,060 $ 29,765 $ 286,908 $ 14,553 $ 20,371 $ — $ 1,038,864 Ending balance ALLR (1,682) (648) (101) (199) (6) (8) (2,539) (5,183) Net loans $ 494,525 $ 190,412 $ 29,664 $ 286,709 $ 14,547 $ 20,363 $ (2,539) $ 1,033,681 Ending balance ALLR: Individually evaluated $ 486 $ 340 $ — $ — $ — $ — $ — $ 826 Collectively evaluated 1,196 308 101 199 6 8 2,539 4,357 Total $ 1,682 $ 648 $ 101 $ 199 $ 6 $ 8 $ 2,539 $ 5,183 Ending balance Loans: Individually evaluated $ 2,148 $ 577 $ — $ — $ — $ — $ — $ 2,725 Collectively evaluated 491,282 189,023 29,399 285,677 14,336 20,329 — 1,030,046 Acquired with deteriorated credit quality 2,777 1,460 366 1,231 217 42 — 6,093 Total $ 496,207 $ 191,060 $ 29,765 $ 286,908 $ 14,553 $ 20,371 $ — $ 1,038,864 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at December 31, 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 Allowance for loan loss reserve: Beginning balance ALLR $ 1,345 $ 614 $ 57 $ 296 $ 6 $ 90 $ 2,612 $ 5,020 Charge-offs (155) (264) — (155) — (229) — (803) Recoveries 80 39 2 65 — 51 — 237 Provision 380 187 (5) (46) — 98 11 625 Ending balance ALLR $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Loans: Ending balance $ 406,742 $ 156,951 $ 9,243 $ 209,890 $ 10,818 $ 17,434 $ — $ 811,078 Ending balance ALLR (1,650) (576) (54) (160) (6) (10) (2,623) (5,079) Net loans $ 405,092 $ 156,375 $ 9,189 $ 209,730 $ 10,812 $ 17,424 $ (2,623) $ 805,999 Ending balance ALLR: Individually evaluated $ 168 $ 166 $ — $ — $ — $ — $ — $ 334 Collectively evaluated 1,482 410 54 160 6 10 2,623 4,745 Total $ 1,650 $ 576 $ 54 $ 160 $ 6 $ 10 $ 2,623 $ 5,079 Ending balance Loans: Individually evaluated $ 516 $ 166 $ — $ — $ — $ — $ — $ 682 Collectively evaluated 404,835 156,785 9,243 208,269 10,801 17,413 — 807,346 Acquired with deteriorated credit quality 1,391 — — 1,621 17 21 — 3,050 Total $ 406,742 $ 156,951 $ 9,243 $ 209,890 $ 10,818 $ 17,434 $ — $ 811,078
Schedule of breakdown of loans by risk category	Below is a breakdown of loans by risk category as of December 31, 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 $ 9,564 $ 22,265 $ 189,898 $ 257,627 $ 5,993 $ 10,860 $ — $ — $ 496,207 Commercial, financial and agricultural 8,077 8,678 72,466 97,441 2,269 2,129 — — 191,060 Commercial construction 734 706 6,844 12,244 829 823 — 7,585 29,765 One-to-four family residential real estate 70 2,873 6,941 15,711 2,095 4,757 — 254,461 286,908 Consumer construction — — — 200 50 11 — 14,292 14,553 Consumer 19 236 625 1,156 42 77 — 18,216 20,371 Total loans $ 18,464 $ 34,758 $ 276,774 $ 384,379 $ 11,278 $ 18,657 $ — $ 294,554 $ 1,038,864 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 December 31, 2018 Commercial real estate $ 2,777 $ 2,148 $ 4,925 $ 10,740 $ 486 Commercial, financial and agricultural 1,460 577 2,037 2,249 340 Commercial construction 366 — 366 1,132 — One to four family residential real estate 1,231 — 1,231 4,136 — Consumer construction 217 — 217 — — Consumer 42 — 42 55 — 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 December 31, 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 $ 5,024 $ 410 $ 2,784 $ 141 Commercial, financial and agricultural 374 26 246 1 Commercial construction 383 13 — 3 One to four family residential real estate 2,879 203 2,057 134 Consumer construction 9 — 37 — Consumer 38 4 13 2 Total $ 8,707 $ 656 $ 5,137 $ 281
Summary of past due loans	A summary of past due loans at December 31, is as follows (dollars in thousands): December 31, December 31, 2018 2017 30-89 days 90+ days 30-89 days 90+ days Past Due Past Due Past Due Past Due (accruing) (accruing) Nonaccrual Total (accruing) (accruing) Nonaccrual Total Commercial real estate $ 298 $ — $ 1,700 $ 1,998 $ 460 $ — $ 866 $ 1,326 Commercial, financial and agricultural 398 — 320 718 16 — 338 354 Commercial construction 112 — 266 378 73 — 14 87 One to four family residential real estate 5,456 18 2,725 8,199 3,424 — 1,350 4,774 Consumer construction — — — — — — — — Consumer 108 5 43 156 72 — — 72 Total past due loans $ 6,372 $ 23 $ 5,054 $ 11,449 $ 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	Activity in such loans is summarized below (dollars in thousands): 2018 2017 Loans outstanding, January 1 $ 10,037 $ New loans 660 Net activity on revolving lines of credit (245) Repayment (635) Loans outstanding at end of period $ $
PFC
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the PFC acquired portfolio and the acquisition 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 acquisition 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 acquisition 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 acquisition 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
Lincoln Community Bank
Schedule of acquired portfolio at acquisition date	The table below details the outstanding balances of the Lincoln acquired portfolio and the acquisition fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 1,901 $ 37,700 $ 39,601 Nonaccretable difference (546) — (546) Expected cash flows 1,355 37,700 39,055 Accretable yield (561) (493) (1,054) Carrying balance at acquisition date $ 794 $ 37,207 $ 38,001

PREMISES AND EQUIPMENT (Tables)

PREMISES AND EQUIPMENT (Tables)	12 Months Ended
	Dec. 31, 2018
PREMISES AND EQUIPMENT
Schedule of details of premises and equipment	Details of premises and equipment at December 31 are as follows (dollars in thousands): 2018 2017 Land $ 4,417 $ 2,998 Buildings and improvements 23,283 18,473 Furniture, fixtures, and equipment 13,428 11,178 Construction in progress 540 — Total cost basis 41,668 32,649 Less - accumulated depreciation 18,885 16,359 Net book value $ 22,783 $ 16,290

OTHER REAL ESTATE HELD FOR SA_2

OTHER REAL ESTATE HELD FOR SALE (Tables)	12 Months Ended
	Dec. 31, 2018
OTHER REAL ESTATE HELD FOR SALE
Schedule of analysis of other real estate held for sale	An analysis of other real estate held for sale for the years ended December 31 is as follows (dollars in thousands): 2018 2017 Balance, January 1 $ 3,558 $ 4,782 Other real estate transferred from loans due to foreclosure 1,878 2,147 Other real estate acquired in business combinations 263 — Proceeds from other real estate sold (2,398) (2,983) Writedowns of other real estate held for sale (125) (307) Gain (loss) on sale of other real estate held for sale (57) (81) Total other real estate held for sale $ 3,119 $ 3,558

DEPOSITS (Tables)

DEPOSITS (Tables)	12 Months Ended
	Dec. 31, 2018
DEPOSITS
Schedule of distribution of deposits	The distribution of deposits at December 31 is as follows (dollars in thousands): 2018 2017 Noninterest bearing deposits $ 241,556 $ 148,079 NOW, money market, interest checking 368,890 280,309 Savings 111,358 61,097 CDs <$250,000 225,236 142,159 CDs >$250,000 13,737 11,055 Brokered 136,760 175,299 Total deposits $ 1,097,537 $ 817,998
Schedule of maturities of non-brokered time deposits outstanding	Maturities of non-brokered time deposits outstanding at December 31, 2018 are as follows (dollars in thousands): 2019 $ 116,806 2020 81,825 2021 22,844 2022 11,996 2023 5,019 Thereafter 483 Total $ 238,973

GOODWILL AND OTHER INTANGIBLE_2

GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)	12 Months Ended
	Dec. 31, 2018
GOODWILL AND OTHER INTANGIBLE ASSETS
Schedule of goodwill and deposit based intangible initial balance	Deposit Based Goodwill Intangible Balance Initital Balance Peninsula $ 3,805 $ 1,206 Eagle River 1,839 993 Niagara 50 300 FFNM 14,915 2,894 Lincoln 1,415 1,353 Total $ 22,024 $ 6,746
Schedule of deposit based intangible asset amortization	Deposit Based Intangible 2018 Future Annual December 31, 2018 Amortization Amortization Balance Expense Expense Peninsula $ 714 $ 121 $ 121 Eagle River 728 99 99 Niagara 230 30 30 FFNM 2,735 159 290 Lincoln 1,313 41 135 Total $ 5,720 $ 450 $ 675 Deposit Based Intangible 2017 December 31, 2017 Amortization Balance Expense Peninsula $ 835 $ 120 Eagle River 827 99 Niagara 260 30 Total $ 1,922 $ 249

SERVICING RIGHTS (Tables)

SERVICING RIGHTS (Tables)	12 Months Ended
	Dec. 31, 2018
SERVICING RIGHTS
Summary of mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances	The following summarizes the fair value of the mortgage servicing rights capitalized and amortized. There was no valuation allowance required (dollars in thousands): December 31, December 31, 2018 2017 Balance at beginning of period $ 1,033 $ 1,573 Additions from loans sold with servicing retained 18 — Acquired MSRs 539 — Amortization (446) (540) Balance at end of period $ 1,144 $ 1,033 Balance of loan servicing portfolio $ 293,771 $ 198,524 Mortgage servicing rights as % of portfolio Fair value of servicing rights $ 2,898 $ 1,767

BORROWINGS (Tables)

BORROWINGS (Tables)	12 Months Ended
	Dec. 31, 2018
BORROWINGS
Schedule of borrowings	Borrowings consist of the following at December 31 (dollars in thousands): 2018 2017 Federal Home Loan Bank fixed rate advances $ 57,060 $ 60,000 Correspondent bank term note — 18,999 USDA Rural Development note 476 553 $ 57,536 $ 79,552
Schedule of maturities and principal payments of borrowings outstanding	Maturities and principal payments of borrowings outstanding at December 31, 2018 are as follows (dollars in thousands): 2019 $ 16,290 2020 12,567 2021 25,145 2022 80 2023 373 Thereafter 3,081 Total $ 57,536

INCOME TAXES (Tables)

INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2018
INCOME TAXES
Schedule of components of the federal income tax provision (credit)	The components of the federal income tax provision (credit) for the years ended December 31 are as follows (dollars in thousands): 2018 2017 Current tax expense $ 1,352 $ 585 Adjustment of deferred taxes due to change in enacted tax rate — 2,025 Deferred tax expense 874 2,929 Provision for income taxes $ 2,226 $ 5,539
Summary of the source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes	A summary of the source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes for the years ended December 31 is as follows (dollars in thousands): 2018 2017 Tax expense at statutory rate $ 2,225 $ Increase (decrease) in taxes resulting from: Tax-exempt interest (97) Adjustment of deferred taxes due to change in enacted tax rate — 2,025 Nondeductible transaction expenses 138 17 Other (40) Provision for income taxes, as reported $ 2,226 $ 5,539
Schedule of major components of net deferred tax assets	The major components of net deferred tax assets at December 31 are as follows (dollars in thousands): 2018 2017 Deferred tax assets: NOL carryforward $ 2,634 $ 1,580 Allowance for loan losses 1,078 948 Alternative Minimum Tax Credit — 1,463 OREO 168 119 Tax credit carryovers 140 235 Deferred compensation 307 242 Pension liability 221 240 Stock compensation 92 79 Unrealized loss on securities 99 19 Purchase accounting adjustments 2,206 785 Other 808 63 Total deferred tax assets 7,753 5,773 Deferred tax liabilities: Core deposit premium (1,256) (404) FHLB stock dividend (73) (56) Depreciation (101) (79) Mortgage servicing rights 61 (240) Other (621) (24) Total deferred tax liabilities (1,990) (803) Net deferred tax asset $ 5,763 $ 4,970

OPERATING LEASES (Tables)

OPERATING LEASES (Tables)	12 Months Ended
	Dec. 31, 2018
OPERATING LEASES
Schedule of future minimum payments for base rent, by year and in the aggregate, under the initial terms of the operating lease agreements	Future minimum payments for base rent, by year and in the aggregate, under the initial terms of the operating lease agreements, consist of the following (dollars in thousands): 2019 $ 747 2020 608 2021 503 2022 499 2023 495 Thereafter 2,629 Total $ 5,481

DEFINED BENEFIT PENSION PLAN (T

DEFINED BENEFIT PENSION PLAN (Tables)	12 Months Ended
	Dec. 31, 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, 2028 are detailed in the table below (dollars in thousands): 2019 $ 136 2020 132 2021 131 2022 137 2023 143 2024-2028 823 Total $ 1,502
Schedule of funded status, amounts recognized in the balance sheets and activity from the date of acquisition	The following table sets forth the plan’s funded status and amounts recognized in the Corporation’s balance sheets and the activity from date of acquisition (dollars in thousands): 2018 2017 Change in benefit obligation: Benefit obligation, beginning of year $ 3,331 $ 3,187 Interest cost 109 118 Actuarial (gain) loss (315) 161 Benefits paid (134) (135) Benefit obligation at end of year 2,991 3,331 Change in plan assets: Fair value of plan assets, beginning of year 2,191 2,049 Actual return on plan assets (134) 259 Employer contributions 64 18 Benefits paid (134) (135) Fair value of plan assets at end of year 1,987 2,191 Funded status, included with other liabilities $ (1,004) $ (1,140)
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	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 December 31, 2018 and December 31, 2017: Target Actual Allocation Allocation Equity securities 50% to 70% Fixed income securities 30% to 50%

REGULATORY MATTERS (Tables)

REGULATORY MATTERS (Tables)	12 Months Ended
	Dec. 31, 2018
REGULATORY MATTERS
Schedule of the Corporation's and the Bank's actual and capital amounts and ratios compared to generally applicable regulatory requirements	The Corporation’s and the Bank’s actual capital and ratios compared to generally applicable regulatory requirements as of December 31, 2018 are as follows (dollars in thousands): Actual Adequacy Purposes Well-Capitalized Amount Ratio Amount Ratio Amount Ratio Total capital to risk weighted assets: Consolidated $ 124,207 > $ 79,705 > > N/A N/A mBank $ 121,406 > $ 79,464 > > $ 99,329 Tier 1 capital to risk weighted assets: Consolidated $ 119,024 > $ 59,779 > > N/A N/A mBank $ 116,264 > $ 59,598 > > $ 79,464 Common equity Tier 1 capital to risk weighted assets Consolidated $ 119,024 > $ 44,834 > > N/A N/A mBank $ 116,264 > $ 44,698 > > $ 64,564 Tier 1 capital to average assets: Consolidated $ 119,024 > $ 51,552 > > N/A N/A mBank $ 116,264 > $ 51,556 > > $ 64,445 The Corporation’s and the Bank’s actual capital and ratios compared to generally applicable regulatory requirements as of December 31, 2017 are as follows (dollars in thousands): Actual Adequacy Purposes Well-Capitalized Amount Ratio Amount Ratio Amount Ratio Total capital to risk weighted assets: Consolidated $ 74,533 > $ 64,190 > > N/A N/A mBank $ 93,598 > $ 64,202 > > $ 80,252 Tier 1 capital to risk weighted assets: Consolidated $ 69,454 > $ 48,142 > > N/A N/A mBank $ 88,560 > $ 48,151 > > $ 64,202 Common equity Tier 1 capital to risk weighted assets Consolidated $ 69,454 > $ 36,107 > > N/A N/A mBank $ 88,560 > $ 36,113 > > $ 52,164 Tier 1 capital to average assets: Consolidated $ 69,454 > $ 39,375 > > N/A N/A mBank $ 88,560 > $ 39,279 > > $ 49,098

STOCK COMPENSATION PLANS (Table

STOCK COMPENSATION PLANS (Tables)	12 Months Ended
	Dec. 31, 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 Forfeited during the period 2,060 14.75 Vested during the period (46,666) 12.65 Nonvested balance at December 31, 2018 69,322 $ 12.79

COMMITMENTS, CONTINGENCIES, AND

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Tables)	12 Months Ended
	Dec. 31, 2018
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
Schedule of commitments	These commitments at December 31 are as follows (dollars in thousands): 2018 2017 Commitments to extend credit: Variable rate $ 88,862 $ 72,187 Fixed rate 54,434 37,468 Standby letters of credit - Variable rate 7,208 7,753 Credit card commitments - Fixed rate 5,107 5,788 $ 155,611 $ 123,196

FAIR VALUE (Tables)

FAIR VALUE (Tables)	12 Months Ended
	Dec. 31, 2018
FAIR VALUE
Schedule presenting information for financial instruments	The following table presents information for financial instruments at December 31 (dollars in thousands): December 31, 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 $ 64,157 $ 64,157 $ 37,426 $ 37,426 Interest-bearing deposits Level 2 13,452 13,452 13,374 13,374 Securities available for sale Level 2 115,260 115,260 74,397 74,397 Securities available for sale Level 3 1,488 1,488 1,500 1,500 Federal Home Loan Bank stock Level 2 4,924 4,924 3,112 3,112 Net loans Level 3 1,033,681 1,013,214 805,999 797,726 Accrued interest receivable Level 3 3,005 3,005 2,276 2,276 Total financial assets $ 1,235,967 $ 1,215,500 $ 938,084 $ 929,811 Financial liabilities: Deposits Level 2 $ 1,097,537 $ 1,047,709 $ 817,998 $ 788,632 Borrowings Level 2 57,536 56,771 79,552 79,242 Accrued interest payable Level 3 391 391 322 322 Total financial liabilities $ 1,155,464 $ 1,104,871 $ 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 in Active Markets Other Observable Unobservable Total Losses for Balance at for Identical Assets Inputs Inputs Twelve months ended (dollars in thousands) December 31, 2018 (Level 1) (Level 2) (Level 3) December 31, 2018 Assets Corporate $ $ — $ 19,564 $ 500 $ — US Agencies — 15,970 — — US Agencies - MBS — 32,840 — — Obligations of state and political subdivisions 47,874 — 46,886 988 — $ 116,748 $ — 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 $ 500 $ — US Agencies — 16,846 — — US Agencies - MBS — 12,716 — — Obligations of state and political subdivisions — 20,444 1,000 — $ 75,897 $ —
Schedule of activity in level three assets	Balance at Transfers Balance Beginning Net Gains (losses) in (out) of at end of Period Realized Unrealized Level 3 Purchases Sales of Period Year Ended December 31, 2018 Corporate $ 500 $ — $ — $ — $ — $ — $ 500 Obligations of state and political subdivisions 1,000 — — (12) — — 988 Balance at Transfers Balance Beginning Net Gains (losses) in (out) of at end of Period Realized Unrealized Level 3 Purchases Sales of Period Year Ended December 31, 2017 Corporate $ 500 $ — $ — $ — $ — $ — $ 500 US Agencies- MBS 1,150 38 — — — (1,188) — Obligations of state and political subdivisions — — — 740 260 — 1,000
Schedule of assets measured at fair value on a non-recurring basis	Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2018 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, 2018 (Level 1) (Level 2) (Level 3) December 31, 2018 Assets Impaired loans $ $ — $ — $ $ 198 Other real estate held for sale — — 182 $ 380 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 Year Ended (dollars in thousands) December 31, 2017 (Level 1) (Level 2) (Level 3) December 31, 2017 Assets Impaired loans $ 3,852 $ — $ — $ 3,852 $ 141 Other real estate held for sale 3,558 — — 3,558 388 $ 529

BUSINESS COMBINATIONS (Tables)

BUSINESS COMBINATIONS (Tables)	12 Months Ended
	Dec. 31, 2018
Schedule of unaudited proforma results	2018 2017 Net interest income $ 50,787 $ 49,728 Noninterest income 5,071 6,366 Noninterest expense 47,529 49,360 Net income 8,329 6,734 Net income per diluted share $ 0.75 $ 0.80
FFNM
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 2,894 Mortgage servicing rights 386 Deferred tax assets 2,844 Bank owned life insurance 5,170 Other assets 1,775 Total assets 315,153 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 19,186 Goodwill $ 14,915
Lincoln Community Bank
Schedule of allocation of the purchase price	Purchase Price: Cash consideration $ 8,500 Net assets acquired: Cash and cash equivalents $ 10,971 Securities available for sale 6,947 Total loans 38,001 Premises and equipment 1,249 Other real estate owned 69 Deposit based intangible 1,353 Bank owned life insurance 1,653 Other assets 339 Total assets 60,582 Non-interest bearing deposits 15,559 Interest bearing deposits 37,654 Total deposits 53,213 Deferred tax liability 231 Other liabilities 53 Total liabilities 53,497 Net assets acquired 7,085 Goodwill $ 1,415

PARENT COMPANY ONLY FINANCIAL_2

PARENT COMPANY ONLY FINANCIAL STATEMENTS (Tables)	12 Months Ended
	Dec. 31, 2018
PARENT COMPANY ONLY FINANCIAL STATEMENTS
Balance sheet	BALANCE SHEETS December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 ASSETS Cash and cash equivalents $ 2,470 $ 198 Investment in subsidiaries 146,516 97,984 Other assets 4,306 3,263 TOTAL ASSETS $ 153,292 $ 101,445 LIABILITIES AND SHAREHOLDERS’ EQUITY Other borrowing — 18,999 Other liabilities 1,223 1,046 Total liabilities 1,223 20,045 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 shares respectively 129,066 61,981 Retained earnings 23,466 19,711 Accumulated other comprehensive income (463) (292) Total shareholders’ equity 152,069 81,400 TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 153,292 $ 101,445
Statements of operations	STATEMENTS OF OPERATIONS Years Ended December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 INCOME: Interest income $ 1 $ — Miscellaneous income 17 — Total income $ 18 $ — EXPENSES: Interest expense on borrowings 320 868 Salaries and benefits 835 698 Professional service fees 242 279 Transaction related expenses 814 50 Other 350 294 Total expenses 2,561 2,189 Loss before income taxes and equity in net income of subsidiaries (2,543) (2,189) Provision for (benefit of) income taxes (534) (27) Loss before equity in net income of subsidiaries (2,009) (2,162) Equity in net income of subsidiaries 10,376 7,641 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 8,367 $ 5,479
Statements of cash flows	STATEMENTS OF CASH FLOWS Years Ended December 31, 2018 and 2017 (Dollars in Thousands) 2018 2017 Cash Flows from Operating Activities: Net income $ 8,367 $ 5,479 Adjustments to reconcile net income to net cash provided by operating activities: Equity in net (income) of subsidiaries (10,376) (7,641) Increase in capital from stock based compensation 533 398 Change in other assets 1,043 751 Change in other liabilities 365 77 Net cash provided by (used in) operating activities (68) (936) Cash Flows from Investing Activities: Investments in subsidiaries 2,000 7,000 Net cash paid in acquisitions (8,500) — Net cash provided by (used in) investing activities (6,500) 7,000 Cash Flows from Financing Activities: Increase on term borrowing — — Principal payments on term borrowings (18,999) (2,200) Net activity on line of credit — (750) Repurchase of common stock — — Dividend on common stock (4,612) (3,022) Net cash from capital raise 32,451 — Net cash provided by (used in) financing activities 8,840 (5,972) Net increase (decrease) in cash and cash equivalents 2,272 92 Cash and cash equivalents at beginning of period 198 106 Cash and cash equivalents at end of period $ 2,470 $ 198

SUMMARY OF SIGNIFICANT ACCOUN_4

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2018USD ($)item$ / sharesshares	Dec. 31, 2017USD ($)$ / sharesshares	Jan. 01, 2019USD ($)	May 22, 2012shares
Nature of Operations
Maximum percentage of the entity's business activity with Canadian customers denominated in Canadian dollars	1.00%
Number of reportable operating segments | item	1
Cash and Cash Equivalents
Number of days for which federal funds are purchased and sold	1 day
Interest Income and Fees on Loans
Minimum commitment period required before loan commitment fees or costs are deferred	1 year
Goodwill and Other Intangible Assets
Core deposit estimated useful life	10 years
Comprehensive Income (Loss)
Unrealized (losses) on available for sale securities	$ (245,000)	$ (71,000)
Minimum pension liability	218,000	221,000
Computation of basic and diluted earnings per share
Net income (in dollars)	$ 8,367,000	$ 5,479,000
(Denominator):
Weighted average shares outstanding | shares	8,891,967	6,288,791
Effect of dilutive stock options, and vesting of restricted stock awards | shares	29,691	33,622
Diluted weighted average shares outstanding | shares	8,921,658	6,322,413
Income per common share:
Basic (in dollars per share) | $ / shares	$ 0.94	$ 0.87
Diluted (in dollars per share) | $ / shares	$ 0.94	$ 0.87
Accounting Standards Update 2018-02
Comprehensive Income (Loss)
Reclassification of certain deferred tax effects		$ 48,000
Adjustment | Forecast | Accounting Standards Update 2016-02
Recent Developments
Right-of-use assets			$ 5,481,000
Lease liabilities			$ 5,481,000
2012 Incentive Compensation Plan
Stock Compensation Plans
Total authorized share balance | shares				575,000

RESTRICTIONS ON CASH AND CASH_2

RESTRICTIONS ON CASH AND CASH EQUIVALENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
RESTRICTIONS ON CASH AND CASH EQUIVALENTS
Restricted cash and cash equivalents	$ 29,252
Cash and due from banks	$ 64,151	$ 37,420

SECURITIES AVAILABLE FOR SALE_2

SECURITIES AVAILABLE FOR SALE (Details) $ in Thousands	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)item
SECURITIES AVAILABLE FOR SALE
Estimated Fair Value	$ 116,748
Available-for-sale Securities
SECURITIES AVAILABLE FOR SALE
Total amortized cost	117,198	$ 75,987
Gross Unrealized Gains	494	441
Gross Unrealized Losses	(944)	(531)
Estimated Fair Value	116,748	75,897
Securities with gross unrealized losses aggregated by investment category and length of time the individual securities have been in a loss position
Less Than Twelve Months, Gross Unrealized Losses	(152)	(296)
Less Than Twelve Months, Fair Value	15,188	43,648
Twelve Months or Longer, Gross Unrealized Losses	(792)	(235)
Twelve Months or Longer, Fair Value	$ 42,756	$ 7,552
Number of securities in an unrealized loss position | item	132	105
Corporate
SECURITIES AVAILABLE FOR SALE
Total amortized cost	$ 20,198	$ 24,852
Gross Unrealized Gains	24	82
Gross Unrealized Losses	(158)	(43)
Estimated Fair Value	20,064	24,891
Securities with gross unrealized losses aggregated by investment category and length of time the individual securities have been in a loss position
Less Than Twelve Months, Gross Unrealized Losses	(50)	(43)
Less Than Twelve Months, Fair Value	4,969	14,204
Twelve Months or Longer, Gross Unrealized Losses	(108)
Twelve Months or Longer, Fair Value	11,876
US Agencies
SECURITIES AVAILABLE FOR SALE
Total amortized cost	16,198	16,935
Gross Unrealized Gains	5	10
Gross Unrealized Losses	(233)	(99)
Estimated Fair Value	15,970	16,846
Securities with gross unrealized losses aggregated by investment category and length of time the individual securities have been in a loss position
Less Than Twelve Months, Gross Unrealized Losses		(87)
Less Than Twelve Months, Fair Value	504	14,799
Twelve Months or Longer, Gross Unrealized Losses	(233)	(12)
Twelve Months or Longer, Fair Value	14,439	745
US Agencies - MBS
SECURITIES AVAILABLE FOR SALE
Total amortized cost	32,974	12,830
Gross Unrealized Gains	124	42
Gross Unrealized Losses	(258)	(156)
Estimated Fair Value	32,840	12,716
Securities with gross unrealized losses aggregated by investment category and length of time the individual securities have been in a loss position
Less Than Twelve Months, Gross Unrealized Losses	(73)	(67)
Less Than Twelve Months, Fair Value	3,903	4,400
Twelve Months or Longer, Gross Unrealized Losses	(185)	(89)
Twelve Months or Longer, Fair Value	6,908	5,218
Obligations of states and political subdivisions
SECURITIES AVAILABLE FOR SALE
Total amortized cost	47,828	21,370
Gross Unrealized Gains	341	307
Gross Unrealized Losses	(295)	(233)
Estimated Fair Value	47,874	21,444
Securities with gross unrealized losses aggregated by investment category and length of time the individual securities have been in a loss position
Less Than Twelve Months, Gross Unrealized Losses	(29)	(99)
Less Than Twelve Months, Fair Value	5,812	10,245
Twelve Months or Longer, Gross Unrealized Losses	(266)	(134)
Twelve Months or Longer, Fair Value	$ 9,533	$ 1,589

SECURITIES AVAILABLE FOR SALE -

SECURITIES AVAILABLE FOR SALE - BY CONTRACTUAL MATURITY (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Summary of the proceeds from sales and calls of securities available for sale, as well as gross gains and losses
Proceeds from sales and calls	$ 48,649	$ 11,651
Gross gains on sales and calls		253
Gross (losses) on sales and calls		$ (22)
Amortized Cost
Due in one year or less	13,728
Due after one year through five years	54,563
Due after five years through ten years	13,058
Due after ten years	2,875
Subtotal	84,224
US Agencies - MBS	32,974
Total amortized cost	117,198
Estimated Fair Value
Due in one year or less	13,583
Due after one year through five years	54,382
Due after five years through ten years	13,085
Due after ten years	2,858
Subtotal	83,908
US Agencies - MBS	32,840
Estimated Fair Value	116,748
FHLB
Estimated Fair Value
Securities held as collateral	24,908
Customer Relationship
Estimated Fair Value
Securities held as collateral	$ 5,372

LOANS (Details)

LOANS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Loans
Total loans	$ 1,038,864	$ 811,078
Acquired portfolio
Balance at the beginning of period	1,289
Acquisition activity	6,252
Accretion	(2,573)
Reclassification from nonaccretable difference	504
Balance at the end of period	5,472	1,289
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	149	924
Accretion	(86)	(1,102)
Reclassification from nonaccretable difference	65	327
Balance at the end of period	128	149
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	821	1,457
Accretion	(609)	(688)
Reclassification from nonaccretable difference	17	52
Balance at the end of period	229	821
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	319	557
Accretion	(260)	(244)
Reclassification from nonaccretable difference	36	6
Balance at the end of period	95	319
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	(1,567)
Reclassification from nonaccretable difference	386
Balance at the end of period	4,017
Lincoln Community Bank
Acquired portfolio
Loans acquired - contractual payments	39,601
Nonaccretable difference	(546)
Expected cash flows	39,055
Accretable yield	(1,054)
Carrying balance at acquisition date	38,001
Acquisition activity	1,054
Accretion	(51)
Balance at the end of period	1,003
Commercial real estate
Loans
Total loans	496,207	406,742
Commercial, financial, and agricultural
Loans
Total loans	191,060	156,951
Commercial construction
Loans
Total loans	29,765	9,243
One to four family residential real estate
Loans
Total loans	286,908	209,890
Consumer
Loans
Total loans	20,371	17,434
Consumer construction
Loans
Total loans	14,553	10,818
Acquired Impaired
Acquired portfolio
Balance at the beginning of period	405
Acquisition activity	1,261
Accretion	(671)	(550)
Reclassification from nonaccretable difference	504
Balance at the end of period	1,499	405
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	149	282
Accretion	(86)	(460)
Reclassification from nonaccretable difference	65	327
Balance at the end of period	128	149
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	218	236
Accretion	(22)	(70)
Reclassification from nonaccretable difference	17	52
Balance at the end of period	213	218
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	38	52
Accretion	(48)	(20)
Reclassification from nonaccretable difference	36	6
Balance at the end of period	26	38
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
Accretion	(515)
Reclassification from nonaccretable difference	386
Balance at the end of period	571
Acquired Impaired | Lincoln Community Bank
Acquired portfolio
Loans acquired - contractual payments	1,901
Nonaccretable difference	(546)
Expected cash flows	1,355
Accretable yield	(561)
Carrying balance at acquisition date	794
Acquisition activity	561
Balance at the end of period	561
Acquired Non-impaired
Acquired portfolio
Balance at the beginning of period	884
Acquisition activity	4,991
Accretion	(1,902)
Balance at the end of period	3,973	884
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
Accretion		(642)
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	603	1,221
Accretion	(587)	(618)
Balance at the end of period	16	603
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	281	505
Accretion	(212)	(224)
Balance at the end of period	69	281
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	(1,052)
Balance at the end of period	3,446
Acquired Non-impaired | Lincoln Community Bank
Acquired portfolio
Loans acquired - contractual payments	37,700
Expected cash flows	37,700
Accretable yield	(493)
Carrying balance at acquisition date	37,207
Acquisition activity	493
Accretion	(51)
Balance at the end of period	442
Receivables Acquired with Deteriorated Credit Quality
Acquired portfolio
Accretion		$ (546)
Receivables Acquired with Deteriorated Credit Quality | FFNM
Acquired portfolio
Loans acquired - contractual payments	5,440
Receivables Acquired with Deteriorated Credit Quality | Lincoln Community Bank
Acquired portfolio
Loans acquired - contractual payments	$ 1,901

LOANS - ALLOWANCE (Details)

LOANS - ALLOWANCE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Allowance for loan loss reserve:
Balance at beginning of period	$ 5,079	$ 5,020
Charge-offs	(716)	(803)
Recoveries	320	237
Provision	500	625
Balance at end of period	5,183	5,079
Loans:
Ending balance			$ 1,038,864	$ 811,078
Ending balance ALLR	(5,079)	(5,020)	(5,183)	(5,079)
Net loans			1,033,681	805,999
Ending balance ALLR:
Individually evaluated			826	334
Collectively evaluated			4,357	4,745
Total	5,079	5,020	5,183	5,079
Ending balance Loans:
Individually evaluated			2,725	682
Collectively evaluated			1,030,046	807,346
Acquired with deteriorated credit quality			6,093	3,050
Total Loans			1,038,864	811,078
Commercial real estate
Allowance for loan loss reserve:
Balance at beginning of period	1,650	1,345
Charge-offs	(198)	(155)
Recoveries	55	80
Provision	175	380
Balance at end of period	1,682	1,650
Loans:
Ending balance			496,207	406,742
Ending balance ALLR	(1,650)	(1,345)	(1,682)	(1,650)
Net loans			494,525	405,092
Ending balance ALLR:
Individually evaluated			486	168
Collectively evaluated			1,196	1,482
Total	1,650	1,345	1,682	1,650
Ending balance Loans:
Individually evaluated			2,148	516
Collectively evaluated			491,282	404,835
Acquired with deteriorated credit quality			2,777	1,391
Total Loans			496,207	406,742
Commercial, financial, and agricultural
Allowance for loan loss reserve:
Balance at beginning of period	576	614
Charge-offs	(132)	(264)
Recoveries	164	39
Provision	40	187
Balance at end of period	648	576
Loans:
Ending balance			191,060	156,951
Ending balance ALLR	(576)	(614)	(648)	(576)
Net loans			190,412	156,375
Ending balance ALLR:
Individually evaluated			340	166
Collectively evaluated			308	410
Total	576	614	648	576
Ending balance Loans:
Individually evaluated			577	166
Collectively evaluated			189,023	156,785
Acquired with deteriorated credit quality			1,460
Total Loans			191,060	156,951
Commercial construction
Allowance for loan loss reserve:
Balance at beginning of period	54	57
Recoveries	2	2
Provision	45	(5)
Balance at end of period	101	54
Loans:
Ending balance			29,765	9,243
Ending balance ALLR	(54)	(57)	(101)	(54)
Net loans			29,664	9,189
Ending balance ALLR:
Collectively evaluated			101	54
Total	54	57	101	54
Ending balance Loans:
Collectively evaluated			29,399	9,243
Acquired with deteriorated credit quality			366
Total Loans			29,765	9,243
One to four family residential real estate
Allowance for loan loss reserve:
Balance at beginning of period	160	296
Charge-offs	(230)	(155)
Recoveries	64	65
Provision	205	(46)
Balance at end of period	199	160
Loans:
Ending balance			286,908	209,890
Ending balance ALLR	(160)	(296)	(199)	(160)
Net loans			286,709	209,730
Ending balance ALLR:
Collectively evaluated			199	160
Total	160	296	199	160
Ending balance Loans:
Collectively evaluated			285,677	208,269
Acquired with deteriorated credit quality			1,231	1,621
Total Loans			286,908	209,890
Consumer construction
Allowance for loan loss reserve:
Balance at beginning of period	6	6
Balance at end of period	6	6
Loans:
Ending balance			14,553	10,818
Ending balance ALLR	(6)	(6)	(6)	(6)
Net loans			14,547	10,812
Ending balance ALLR:
Collectively evaluated			6	6
Total	6	6	6	6
Ending balance Loans:
Collectively evaluated			14,336	10,801
Acquired with deteriorated credit quality			217	17
Total Loans			14,553	10,818
Consumer
Allowance for loan loss reserve:
Balance at beginning of period	10	90
Charge-offs	(156)	(229)
Recoveries	35	51
Provision	119	98
Balance at end of period	8	10
Loans:
Ending balance			20,371	17,434
Ending balance ALLR	(10)	(90)	(8)	(10)
Net loans			20,363	17,424
Ending balance ALLR:
Collectively evaluated			8	10
Total	10	90	8	10
Ending balance Loans:
Collectively evaluated			20,329	17,413
Acquired with deteriorated credit quality			42	21
Total Loans			20,371	17,434
Unallocated
Allowance for loan loss reserve:
Balance at beginning of period	2,623	2,612
Provision	(84)	11
Balance at end of period	2,539	2,623
Loans:
Ending balance ALLR	(2,623)	(2,612)	(2,539)	(2,623)
Net loans			(2,539)	(2,623)
Ending balance ALLR:
Collectively evaluated			2,539	2,623
Total	$ 2,623	$ 2,612	$ 2,539	$ 2,623

LOANS - LOANS BY RISK CATEGORY

LOANS - LOANS BY RISK CATEGORY (Details) $ in Thousands	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)
Breakdown of loans by risk category
Total loans	$ 1,038,864	$ 811,078
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	$ 496,207	406,742
Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	191,060	156,951
Commercial construction
Breakdown of loans by risk category
Total loans	29,765	9,243
One to four family residential real estate
Breakdown of loans by risk category
Total loans	286,908	209,890
Consumer construction
Breakdown of loans by risk category
Total loans	14,553	10,818
Consumer
Breakdown of loans by risk category
Total loans	20,371	17,434
Strong (1)
Breakdown of loans by risk category
Total loans	18,464	14,303
Strong (1) | Commercial real estate
Breakdown of loans by risk category
Total loans	9,564	2,775
Strong (1) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	8,077	11,528
Strong (1) | Commercial construction
Breakdown of loans by risk category
Total loans	734
Strong (1) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	70
Strong (1) | Consumer
Breakdown of loans by risk category
Total loans	19
Good (2)
Breakdown of loans by risk category
Total loans	34,758	34,594
Good (2) | Commercial real estate
Breakdown of loans by risk category
Total loans	22,265	23,929
Good (2) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	8,678	8,980
Good (2) | Commercial construction
Breakdown of loans by risk category
Total loans	706	308
Good (2) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	2,873	1,377
Good (2) | Consumer
Breakdown of loans by risk category
Total loans	236
Average (3)
Breakdown of loans by risk category
Total loans	276,774	218,157
Average (3) | Commercial real estate
Breakdown of loans by risk category
Total loans	189,898	159,385
Average (3) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	72,466	53,448
Average (3) | Commercial construction
Breakdown of loans by risk category
Total loans	6,844	2,749
Average (3) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	6,941	2,575
Average (3) | Consumer
Breakdown of loans by risk category
Total loans	625
Acceptable
Breakdown of loans by risk category
Total loans	384,379	292,672
Acceptable | Commercial real estate
Breakdown of loans by risk category
Total loans	257,627	207,921
Acceptable | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	97,441	77,964
Acceptable | Commercial construction
Breakdown of loans by risk category
Total loans	12,244	1,310
Acceptable | One to four family residential real estate
Breakdown of loans by risk category
Total loans	15,711	5,449
Acceptable | Consumer construction
Breakdown of loans by risk category
Total loans	200
Acceptable | Consumer
Breakdown of loans by risk category
Total loans	1,156	28
Acceptable Watch
Breakdown of loans by risk category
Total loans	11,278	14,223
Acceptable Watch | Commercial real estate
Breakdown of loans by risk category
Total loans	5,993	8,700
Acceptable Watch | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	2,269	3,658
Acceptable Watch | Commercial construction
Breakdown of loans by risk category
Total loans	829	648
Acceptable Watch | One to four family residential real estate
Breakdown of loans by risk category
Total loans	2,095	1,212
Acceptable Watch | Consumer construction
Breakdown of loans by risk category
Total loans	50
Acceptable Watch | Consumer
Breakdown of loans by risk category
Total loans	42	5
Substandard (6)
Breakdown of loans by risk category
Total loans	18,657	9,404
Substandard (6) | Commercial real estate
Breakdown of loans by risk category
Total loans	10,860	4,032
Substandard (6) | Commercial, financial, and agricultural
Breakdown of loans by risk category
Total loans	2,129	1,373
Substandard (6) | Commercial construction
Breakdown of loans by risk category
Total loans	823	374
Substandard (6) | One to four family residential real estate
Breakdown of loans by risk category
Total loans	4,757	3,515
Substandard (6) | Consumer construction
Breakdown of loans by risk category
Total loans	11	14
Substandard (6) | Consumer
Breakdown of loans by risk category
Total loans	77	96
Rating Unassigned
Breakdown of loans by risk category
Total loans	294,554	227,725
Rating Unassigned | Commercial construction
Breakdown of loans by risk category
Total loans	7,585	3,854
Rating Unassigned | One to four family residential real estate
Breakdown of loans by risk category
Total loans	254,461	195,762
Rating Unassigned | Consumer construction
Breakdown of loans by risk category
Total loans	14,292	10,804
Rating Unassigned | Consumer
Breakdown of loans by risk category
Total loans	$ 18,216	$ 17,305

LOANS - IMPAIRED LOANS AND EFFE

LOANS - IMPAIRED LOANS AND EFFECT ON INTEREST INCOME (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 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	$ 6,093	$ 3,170
With a valuation reserve	2,725	682
Total	8,818	3,852
Unpaid Principal Balance	18,312	6,054
Related Allowance for Loan Losses	826	334
Average investment
Average Balance for the Period	8,707	5,137
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	656	281
Commercial real estate
Recorded investment
With no valuation reserve	2,777	1,511
With a valuation reserve	2,148	516
Total	4,925	2,027
Unpaid Principal Balance	10,740	3,326
Related Allowance for Loan Losses	486	168
Average investment
Average Balance for the Period	5,024	2,784
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	410	141
Commercial, financial, and agricultural
Recorded investment
With no valuation reserve	1,460
With a valuation reserve	577	166
Total	2,037	166
Unpaid Principal Balance	2,249	326
Related Allowance for Loan Losses	340	166
Average investment
Average Balance for the Period	374	246
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	26	1
Commercial construction
Recorded investment
With no valuation reserve	366
Total	366
Unpaid Principal Balance	1,132
Average investment
Average Balance for the Period	383
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	13	3
One to four family residential real estate
Recorded investment
With no valuation reserve	1,231	1,621
Total	1,231	1,621
Unpaid Principal Balance	4,136	2,315
Average investment
Average Balance for the Period	2,879	2,057
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	203	134
Consumer construction
Recorded investment
With no valuation reserve	217	17
Total	217	17
Unpaid Principal Balance		66
Average investment
Average Balance for the Period	9	37
Consumer
Recorded investment
With no valuation reserve	42	21
Total	42	21
Unpaid Principal Balance	55	21
Average investment
Average Balance for the Period	38	13
Interest Income Recognized During Impairment
Interest Income Recognized for the Period	$ 4	$ 2

LOANS - PAST DUE (Details)

LOANS - PAST DUE (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Past due loans
Nonaccrual	$ 5,054	$ 2,568
Total	11,449	6,613
30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	6,372	4,045
90+ days Past Due
Past due loans
90+ days Past Due	23
Commercial real estate
Past due loans
Nonaccrual	1,700	866
Total	1,998	1,326
Commercial real estate | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	298	460
Commercial, financial, and agricultural
Past due loans
Nonaccrual	320	338
Total	718	354
Commercial, financial, and agricultural | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	398	16
Commercial construction
Past due loans
Nonaccrual	266	14
Total	378	87
Commercial construction | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	112	73
One to four family residential real estate
Past due loans
Nonaccrual	2,725	1,350
Total	8,199	4,774
One to four family residential real estate | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	5,456	3,424
One to four family residential real estate | 90+ days Past Due
Past due loans
90+ days Past Due	18
Consumer
Past due loans
Nonaccrual	43
Total	156	72
Consumer | 30-89 days Past Due
Past due loans
30-89 days Past Due (accruing)	108	$ 72
Consumer | 90+ days Past Due
Past due loans
90+ days Past Due	$ 5

LOANS - TROUBLED DEBT RESTRUCTU

LOANS - TROUBLED DEBT RESTRUCTURING (Details) - item	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
LOANS
Number of consecutive timely payments before being considered return to accruing status	6
Number of troubled debt restructurings	0	0

LOANS - INSIDER LOANS (Details)

LOANS - INSIDER LOANS (Details) - Bank - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 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	$ 9,195
New loans	660	2,018
Net activity on revolving lines of credit	(245)	237
Repayment	(635)	(1,413)
Loans outstanding, end of period	9,817	10,037
Loans outstanding	10,037	9,195	$ 9,817
Unfunded commitments			987
Substandard (6)
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms
Loans outstanding, beginning of period	0
Loans outstanding, end of period	0	0
Loans outstanding	$ 0	$ 0	$ 0

PREMISES AND EQUIPMENT (Details

PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Premises and Equipment
Total cost basis	$ 41,668	$ 32,649
Less - accumulated depreciation	18,885	16,359
Net book value	22,783	16,290
Depreciation charged to operating expenses	2,432	1,978
Land
Premises and Equipment
Total cost basis	4,417	2,998
Buildings and improvements
Premises and Equipment
Total cost basis	23,283	18,473
Furniture Fixtures And Equipment
Premises and Equipment
Total cost basis	13,428	$ 11,178
Construction in progress
Premises and Equipment
Total cost basis	$ 540

OTHER REAL ESTATE HELD FOR SA_3

OTHER REAL ESTATE HELD FOR SALE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Changes in other real estate held for sale
Balance, January 1	$ 3,558	$ 4,782
Other real estate transferred from loans due to foreclosure	1,878	2,147
Other real estate acquired in business combinations	263
Proceeds from other real estate sold	2,398	2,983
Writedowns of other real estate held for sale	(125)	(307)
Gain (loss) on sale of other real estate held for sale	(57)	(81)
Total other real estate held for sale	3,119	$ 3,558
Foreclosed residential real estate property	596
Mortgage loans secured by residential real estate property in process of foreclosure	$ 596

DEPOSITS (Details)

DEPOSITS (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Distribution of deposits
Noninterest bearing deposits	$ 241,556	$ 148,079
NOW, money market, interest checking	368,890	280,309
Savings	111,358	61,097
CDs less than $250,000	225,236	142,159
CDs more than $250,000	13,737	11,055
Brokered	136,760	175,299
Total deposits	1,097,537	$ 817,998
Maturities of non-brokered time deposits outstanding
2019	116,806
2020	81,825
2021	22,844
2022	11,996
2023	5,019
Thereafter	483
Total	$ 238,973

GOODWILL AND OTHER INTANGIBLE_3

GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Oct. 01, 2018	May 31, 2018	May 18, 2018	Aug. 31, 2016	Apr. 29, 2016	Dec. 05, 2014
Goodwill	$ 22,024	$ 5,694	$ 22,024
Deposit based intangible assets	5,720	1,922	6,746
Amortization expense	450	249
Future Amortization Expense	675
Amortization expense year one	675
Amortization expense year two	675
Amortization expense year three	675
Amortization expense year four	675
Amortization expense year five	675
PFC
Goodwill								$ 3,805
Deposit based intangible assets	714	835						$ 1,206
Amortization expense	121	120
Future Amortization Expense	121
Eagle River
Goodwill							$ 1,839
Deposit based intangible assets	728	827					$ 993
Amortization expense	99	99
Future Amortization Expense	99
Niagara Bancorporation
Goodwill						$ 50
Deposit based intangible assets	230	260				$ 300
Amortization expense	30	$ 30
Future Amortization Expense	30
FFNM
Goodwill				$ 14,915	$ 14,915
Deposit based intangible assets	2,735				$ 2,894
Amortization expense	159
Future Amortization Expense	290
Lincoln Community Bank
Goodwill			1,415
Deposit based intangible assets	1,313		$ 1,353
Amortization expense	41
Future Amortization Expense	$ 135

SERVICING RIGHTS (Details)

SERVICING RIGHTS (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Changes in mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances
Valuation allowance	$ 0
Commercial loans
Commercial Loans
Commercial Loans	44,000,000	$ 44,000,000
Servicing rights	$ 80,000	110,000
Mortgage loans
Mortgage Loans
Annual constant prepayment speed (as a percent)	8.87%
Discount rate (as a percent)	10.40%
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	18,000
Acquired MSRs	539,000
Amortization	(446,000)	(540,000)
Balance at end of period	1,144,000	1,033,000
Balance of loan servicing portfolio	$ 293,771,000	$ 198,524,000
Mortgage servicing rights as % of portfolio	0.34%	0.52%
Fair value of servicing rights	$ 2,898,000	$ 1,767,000

BORROWINGS (Details)

BORROWINGS (Details)	12 Months Ended
	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)
BORROWINGS
Borrowings	$ 57,536,000	$ 79,552,000
Available for sale equity securities	117,198,000
Federal Home Loan Bank borrowings
BORROWINGS
Borrowings	$ 57,060,000	60,000,000
Interest rate on note (as a percent)	1.72%
Federal Home Loan Bank borrowings | Mortgage related and municipal securities | Collateral Pledged
BORROWINGS
Available for sale equity securities	$ 24,919,000
Amortized cost estimated fair value	24,908,000
Federal Home Loan Bank borrowings | FHLB stock
BORROWINGS
Stock owned and pledged as collateral	4,924,000
Federal Home Loan Bank borrowings | One to four family residential real estate
BORROWINGS
Loans pledged as collateral	$ 64,918,000
Correspondent bank line of credit
BORROWINGS
Number of banking borrowing relationships | item	1
Correspondent bank line of credit | LIBOR
BORROWINGS
Variable rate basis	LIBOR
Variable rate (as a percent)	2.00%
Correspondent bank line of credit | LIBOR | Minimum
BORROWINGS
Floor rate (as a percent)	3.00%
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	$ 476,000	$ 553,000
Interest rate on note (as a percent)	1.00%
USDA Rural Development note | First Rural Relending
BORROWINGS
Loans pledged as collateral	$ 476,000
Demand deposit account pledged as collateral	537,000
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	2.81%

BORROWINGS - MATURITIES (Detail

BORROWINGS - MATURITIES (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Maturities and principal payments of borrowings outstanding
2019	$ 16,290
2020	12,567
2021	25,145
2022	80
2023	373
Thereafter	3,081
Borrowings	$ 57,536	$ 79,552

INCOME TAXES (Details)

INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Components of the federal income tax provision (credit)
Current tax expense	$ 1,352	$ 585
Adjustment of deferred taxes due to change in enacted tax rate		2,025
Deferred tax expense	874	2,929
Provision for income taxes	2,226	5,539
Source of differences between income taxes at the federal statutory rate and the provision (credit) for income taxes
Tax expense at statutory rate	2,225	3,746
Tax-exempt interest	(97)	(133)
Adjustment of deferred taxes due to change in enacted tax rate		2,025
Nondeductible transaction expenses	138	17
Other	(40)	(116)
Provision for income taxes	2,226	5,539
Deferred tax assets:
NOL carryforward	2,634	1,580
Allowance for loan losses	1,078	948
Alternative Minimum Tax Credit		1,463
OREO	168	119
Tax credit carryovers	140	235
Deferred compensation	307	242
Pension Liability	221	240
Stock compensation	92	79
Unrealized loss on securities	99	19
Purchase accounting adjustments	2,206	785
Other	808	63
Total deferred tax assets	7,753	5,773
Deferred tax liabilities:
Core deposit premium	(1,256)	(404)
FHLB stock dividend	(73)	(56)
Depreciation	(101)	(79)
Mortgage servicing rights	61	(240)
Other	(621)	(24)
Total deferred tax liabilities	(1,990)	(803)
Net deferred tax asset	5,763	4,970
INCOME TAXES
Alternative minimum tax credits was reclassified to current tax receivable	1,600
Deferred tax asset	$ 5,763
Net operating loss (NOL) carryforwards		12,500
Tax credit carryforwards		$ 1,700
Expiration period from date of origination for net operating loss carryforwards	20 years
Annual limitation for usage of NOL	$ 2,000
Annual limitation for usage of tax credits	$ 420

OPERATING LEASES (Details)

OPERATING LEASES (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)
OPERATING LEASES
Number of operating leases | item	5
Future minimum payments, by year and in the aggregate, under the initial terms of the operating lease agreements
2019	$ 747
2020	608
2021	503
2022	499
2023	495
Thereafter	2,629
Total	5,481
Rent Expenses
Rent expense for all operating leases	$ 1,096	$ 1,109

RETIREMENT PLAN (Details)

RETIREMENT PLAN (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
DEFINED BENEFIT PENSION PLAN
Minimum period of service to be completed in order to participate in the retirement plan	3 months
Minimum age to be attained in order to participate in the retirement plan	18 years
Employee's contribution limit as a percentage of annual compensation under the 401 (k) profit sharing plan	80.00%
Retirement plan contributions charged to operations	$ 400	$ 341

DEFINED BENEFIT PENSION PLAN (D

DEFINED BENEFIT PENSION PLAN (Details)	12 Months Ended
	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)
Defined Benefit Pension Plan
Number of years over which anticipated pension distributions disclosed | item	5
Anticipated distributions from the plan
2019	$ 136,000
2020	132,000
2021	131,000
2022	137,000
2023	143,000
2024-2028	823,000
Total	1,502,000
Peninsula Financial Corporation noncontributory defined benefit pension plan
Defined Benefit Pension Plan
Expected contributions to the plan next fiscal year	22,000
Change in benefit obligation:
Benefit obligation, beginning of year	3,331,000	$ 3,187,000
Interest cost	109,000	118,000
Actuarial (gain) loss	(315,000)	161,000
Benefits paid	(134,000)	(135,000)
Benefit obligation at end of year	2,991,000	3,331,000
Change in plan assets
Fair value of plan assets, beginning of year	2,191,000	2,049,000
Actual return on plan assets	(134,000)	259,000
Employer contributions	64,000	18,000
Benefits paid	(134,000)	(135,000)
Fair value of plan assets at end of year	1,987,000	2,191,000
Funded status, included with other liabilities	$ (1,004,000)	$ (1,140,000)
Assumptions in the actuarial valuation
Weighted average discount rate	4.02%	3.33%
Expected long-term rate of return on plan assets	8.00%	8.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan
Plan assets
Actual Allocation	59.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan | Minimum
Plan assets
Target Allocation	50.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan | Maximum
Plan assets
Target Allocation	70.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan
Plan assets
Actual Allocation	41.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan | Minimum
Plan assets
Target Allocation	30.00%
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan | Maximum
Plan assets
Target Allocation	50.00%

DEFERRED COMPENSATION PLAN (Det

DEFERRED COMPENSATION PLAN (Details) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
DEFERRED COMPENSATION PLAN
Liability for vested benefits under the plan	$ 82,000,000,000	$ 113,000
Cash surrender value of life insurance policies of the plan participants	1,443,000	1,465,000
Deferred compensation expense	$ 92,000	65,000
Minimum
DEFERRED COMPENSATION PLAN
Original contractual term	10 years
Maximum
DEFERRED COMPENSATION PLAN
Original contractual term	15 years
PFC
DEFERRED COMPENSATION PLAN
Liability for vested benefits under the plan	$ 900,000	1,038,000
Cash surrender value of life insurance policies of the plan participants	1,760,000	$ 1,741,000
FFNM
DEFERRED COMPENSATION PLAN
Liability for vested benefits under the plan	417,000
Cash surrender value of life insurance policies of the plan participants	$ 5,239,000

REGULATORY MATTERS (Details)

REGULATORY MATTERS (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Consolidated
Corporation's and the Bank's actual and required capital amounts and ratios
Total capital to risk weighted assets, Actual Amount	$ 124,207	$ 74,533
Total capital to risk weighted assets, Actual Ratio (as a percent)	12.50%	9.30%
Tier 1 capital to risk weighted assets, Actual Amount	$ 119,024	$ 69,454
Tier 1 capital to risk weighted assets, Actual Ratio (as a percent)	12.00%	8.70%
Common equity Tier 1 capital to risk weighted assets, Actual Amount	$ 119,024	$ 69,454
Common equity Tier 1 capital to risk weighted assets, Actual Ratio (as a percent)	12.00%	8.70%
Tier 1 capital to average assets, Actual Amount	$ 119,024	$ 69,454
Tier 1 capital to average assets, Actual Ratio (as a percent)	9.20%	7.10%
Consolidated | Minimum
Corporation's and the Bank's actual and required capital amounts and ratios
Total capital to risk weighted assets, Adequacy Purposes Amount	$ 79,705	$ 64,190
Total capital to risk weighted assets, Adequacy Purposes Ratio (as a percent)	8.00%	8.00%
Tier 1 capital to risk weighted assets, Adequacy Purposes Amount	$ 59,779	$ 48,142
Tier 1 capital to risk weighted assets, Adequacy Purposes Ratio (as a percent)	6.00%	6.00%
Common equity Tier 1 capital to risk weighted assets, Adequacy Purpose Amount	$ 44,834	$ 36,107
Common equity Tier 1 capital to risk weighted assets, Adequacy Purpose Ratio (as a percent)	4.50%	4.50%
Tier 1 capital to average assets, Adequacy Purposes Amount	$ 51,552	$ 39,375
Tier 1 capital to average assets, Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
Bank
Corporation's and the Bank's actual and required capital amounts and ratios
Total capital to risk weighted assets, Actual Amount	$ 121,406	$ 93,598
Total capital to risk weighted assets, Actual Ratio (as a percent)	12.20%	11.70%
Tier 1 capital to risk weighted assets, Actual Amount	$ 116,264	$ 88,560
Tier 1 capital to risk weighted assets, Actual Ratio (as a percent)	11.70%	11.00%
Common equity Tier 1 capital to risk weighted assets, Actual Amount	$ 116,264	$ 88,560
Common equity Tier 1 capital to risk weighted assets, Actual Ratio (as a percent)	11.70%	11.00%
Tier 1 capital to average assets, Actual Amount	$ 116,264	$ 88,560
Tier 1 capital to average assets, Actual Ratio (as a percent)	9.00%	9.00%
Bank | Minimum
Corporation's and the Bank's actual and required capital amounts and ratios
Total capital to risk weighted assets, Adequacy Purposes Amount	$ 79,464	$ 64,202
Total capital to risk weighted assets, Adequacy Purposes Ratio (as a percent)	8.00%	8.00%
Total capital to risk weighted assets, Action Provisions Amount	$ 99,329	$ 80,252
Total capital to risk weighted assets, Action Provisions Ratio (as a percent)	10.00%	10.00%
Tier 1 capital to risk weighted assets, Adequacy Purposes Amount	$ 59,598	$ 48,151
Tier 1 capital to risk weighted assets, Adequacy Purposes Ratio (as a percent)	6.00%	6.00%
Tier 1 capital to risk weighted assets, Action Provisions Amount	$ 79,464	$ 64,202
Tier 1 capital to risk weighted assets, Action Provisions Ratio (as a percent)	8.00%	8.00%
Common equity Tier 1 capital to risk weighted assets, Adequacy Purpose Amount	$ 44,698	$ 36,113
Common equity Tier 1 capital to risk weighted assets, Adequacy Purpose Ratio (as a percent)	4.50%	4.50%
Common equity Tier 1 capital to risk weighted assets, Well-Capitalized Amount	$ 64,564	$ 52,164
Common equity Tier 1 capital to risk weighted assets, Well-Capitalized Ratio (as a percent)	6.50%	6.50%
Tier 1 capital to average assets, Adequacy Purposes Amount	$ 51,556	$ 39,279
Tier 1 capital to average assets, Adequacy Purposes Ratio (as a percent)	4.00%	4.00%
Tier 1 capital to average assets, Action Provisions Amount	$ 64,445	$ 49,098
Tier 1 capital to average assets, Action Provisions Ratio (as a percent)	5.00%	5.00%

STOCK COMPENSATION PLANS (Detai

STOCK COMPENSATION PLANS (Details) - USD ($) $ / shares in Units, $ in Thousands	Aug. 31, 2016	Apr. 30, 2018	Feb. 28, 2018	Feb. 28, 2017	Mar. 31, 2016	Feb. 29, 2016	May 31, 2015	Mar. 31, 2015	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Stock Compensation Plans
Annual Compensation cost										$ 533	$ 398
Unrecognized compensation expenses										$ 550
Summary of nonvested shares
Nonvested beginning balance (in shares)										87,285
Granted during the period (in shares)										26,643
Forfeited during the period (in shares)										2,060
Vested during the period (in shares)										(46,666)
Nonvested ending balance (in shares)										69,322	87,285
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
Forfeited during the period (in dollars per share)										14.75
Vested during the period (in dollars per share)										12.65
Nonvested ending balance (in dollars per share)										$ 12.79	$ 11.78
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				22,626				31,559	46,666
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

SHAREHOLDERS' EQUITY (Details)

SHAREHOLDERS' EQUITY (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2018	Apr. 28, 2015	Dec. 17, 2013	Feb. 27, 2013
Participation in the TARP Capital Purchase Program
Number of shares authorized to be repurchased					$ 25,000		$ 600,000	$ 600,000
Number of additional shares authorized to be repurchased						$ 750,000
Shares of Common Stock
Participation in the TARP Capital Purchase Program
Number of shares repurchased	14,000	102,455	13,700	55,594

COMMITMENTS, CONTINGENCIES, A_2

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2018USD ($)item	Dec. 31, 2017USD ($)
Financial Instruments with Off-Balance-Sheet Risk
Commitments	$ 155,611	$ 123,196
Number of pending material legal proceedings | item	0
Commitments to extend credit
Financial Instruments with Off-Balance-Sheet Risk
Commitments, variable rate	$ 88,862	72,187
Commitments, fixed rate	54,434	37,468
Standby letters of credit
Financial Instruments with Off-Balance-Sheet Risk
Commitments, variable rate	$ 7,208	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	$ 5,107	$ 5,788

COMMITMENTS, CONTINGENCIES, A_3

COMMITMENTS, CONTINGENCIES, AND CREDIT RISK - CREDIT RISK (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Concentration of Credit Risk
Loan portfolio	$ 1,033,681	$ 805,999
Commercial real estate
Concentration of Credit Risk
Loan portfolio	494,525	405,092
Bank | Commercial real estate | Commercial loan portfolio | Credit risk concentration
Concentration of Credit Risk
Loan portfolio	$ 150,251	$ 119,025
Percentage of concentration risk under a specified benchmark	20.95%	20.77%

FAIR VALUE (Details)

FAIR VALUE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
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	13,452	$ 13,374
Securities available for sale	116,748	75,897
Marketable Securities	116,748
Carrying Amount
Financial assets:
Total financial assets	1,235,967	938,084
Financial liabilities:
Total financial liabilities	1,155,464	897,872
Estimated Fair Value
Financial assets:
Total financial assets	1,215,500	929,811
Financial liabilities:
Total financial liabilities	1,104,871	868,196
Level 1 | Carrying Amount
Financial assets:
Cash and cash equivalents	64,157	37,426
Level 1 | Estimated Fair Value
Financial assets:
Cash and cash equivalents	64,157	37,426
Level 2 | Carrying Amount
Financial assets:
Interest-bearing deposits	13,452	13,374
Securities available for sale	115,260	74,397
Federal Home Loan Bank stock	4,924	3,112
Financial liabilities:
Deposits	1,097,537	817,998
Borrowings	57,536	79,552
Level 2 | Estimated Fair Value
Financial assets:
Interest-bearing deposits	13,452	13,374
Securities available for sale	115,260	74,397
Federal Home Loan Bank stock	4,924	3,112
Financial liabilities:
Deposits	1,047,709	788,632
Borrowings	56,771	79,242
Level 3 | Carrying Amount
Financial assets:
Securities available for sale	1,488	1,500
Net loans	1,033,681	805,999
Accrued interest receivable	3,005	2,276
Financial liabilities:
Accrued interest payable	391	322
Level 3 | Estimated Fair Value
Financial assets:
Securities available for sale	1,488	1,500
Net loans	1,013,214	797,726
Accrued interest receivable	3,005	2,276
Financial liabilities:
Accrued interest payable	391	322
Available-for-sale Securities
Financial assets:
Marketable Securities	116,748	75,897
Corporate
Financial assets:
Marketable Securities	20,064	24,891
Corporate | Level 3
Financial assets:
Securities available for sale	500	500	$ 500
US Agencies
Financial assets:
Marketable Securities	15,970	16,846
US Agencies - MBS
Financial assets:
Marketable Securities	32,840	12,716
US Agencies - MBS | Level 3
Financial assets:
Securities available for sale			$ 1,150
Obligations of states and political subdivisions
Financial assets:
Marketable Securities	47,874	21,444
Obligations of states and political subdivisions | Level 3
Financial assets:
Securities available for sale	$ 988	$ 1,000

FAIR VALUE - OTHER ASSETS AND O

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

FAIR VALUE - RECURRING (Details

FAIR VALUE - RECURRING (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Marketable Securities	$ 116,748
Recurring
Marketable Securities		$ 116,748	$ 75,897
Available-for-sale Securities
Marketable Securities	116,748	75,897
Corporate
Marketable Securities	20,064	24,891
Corporate | Recurring
Marketable Securities		20,064	24,891
Corporate | Level 2 | Recurring
Marketable Securities	19,564	24,391
Corporate | Level 3 | Recurring
Marketable Securities	500	500
US Agencies
Marketable Securities	15,970	16,846
US Agencies | Recurring
Marketable Securities		15,970	16,846
US Agencies | Level 2 | Recurring
Marketable Securities	15,970	16,846
US Agencies - MBS
Marketable Securities	32,840	12,716
US Agencies - MBS | Recurring
Marketable Securities		32,840	12,716
US Agencies - MBS | Level 2 | Recurring
Marketable Securities	32,840	12,716
Obligations of states and political subdivisions
Marketable Securities	47,874	21,444
Obligations of states and political subdivisions | Recurring
Marketable Securities		47,874	$ 21,444
Obligations of states and political subdivisions | Level 2 | Recurring
Marketable Securities	46,886	20,444
Obligations of states and political subdivisions | Level 3 | Recurring
Marketable Securities	$ 988	$ 1,000

FAIR VALUE - LEVEL 3 ACTIVITIES

FAIR VALUE - LEVEL 3 ACTIVITIES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Fair values of assets using Level 3 inputs, specifically discounted cash flow projections
Balance at the beginning	$ 75,897
Balance at the end	116,748	$ 75,897
Level 3 | Corporate
Fair values of assets using Level 3 inputs, specifically discounted cash flow projections
Balance at the beginning	500	500
Balance at the end	500	500
Level 3 | US Agencies - MBS
Fair values of assets using Level 3 inputs, specifically discounted cash flow projections
Balance at the beginning		1,150
Realized net gain (losses)		38
Sales		(1,188)
Level 3 | Obligations of states and political subdivisions
Fair values of assets using Level 3 inputs, specifically discounted cash flow projections
Balance at the beginning	1,000
Transfers in (out) of level 3	(12)	740
Purchases		260
Balance at the end	$ 988	$ 1,000

FAIR VALUE - NONRECURRING BASIS

FAIR VALUE - NONRECURRING BASIS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Fair value
Impaired loans	$ 8,818	$ 3,852
Other real estate owned	3,119	3,558	$ 4,782
Nonrecurring
Fair value
Total (Gains) Losses	380	529
Investments	0
Nonrecurring | Impaired loans
Fair value
Impaired loans		8,818	3,852
Total (Gains) Losses	198	141
Nonrecurring | Other real estate owned
Fair value
Other real estate owned		3,119	$ 3,558
Total (Gains) Losses	182	388
Nonrecurring | Level 3 | Impaired loans
Fair value
Impaired loans	8,818	3,852
Nonrecurring | Level 3 | Other real estate owned
Fair value
Other real estate owned	$ 3,119	$ 3,558

BUSINESS COMBINATIONS (Details)

BUSINESS COMBINATIONS (Details) $ / shares in Units, $ in Thousands	Oct. 01, 2018USD ($)item	May 31, 2018USD ($)item$ / sharesshares	Dec. 31, 2018USD ($)$ / sharesshares	Dec. 31, 2017USD ($)$ / sharesshares	May 18, 2018USD ($)	Aug. 31, 2016USD ($)	Apr. 29, 2016USD ($)
Business Acquisition [Line Items]
Assets			$ 1,318,040	$ 985,367
Net cash paid			$ (4,768)
FFNM acquisition (in shares) | shares			2,146,378
FFNM acquisition			$ 34,101
Purchase Price:
Shares outstanding (in Shares) | shares			10,712,745	6,294,930
Net assets acquired:
Goodwill	$ 22,024		$ 22,024	$ 5,694
Unaudited proforma results
Net interest income			50,787	49,728
Noninterest income			5,071	6,366
Noninterest expense			47,529	49,360
Net income			$ 8,329	$ 6,734
Net income per diluted share | $ / shares			$ 0.75	$ 0.80
Eagle River
Net assets acquired:
Goodwill							$ 1,839
Niagara Bancorporation
Net assets acquired:
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		2,894
Mortgage service rights		386
Deferred tax assets		2,844
Bank owned life insurance		5,170
Other assets		1,775
Total assets		315,153
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		19,186
Goodwill		$ 14,915			14,915
FFNM | Minimum
Business Acquisition [Line Items]
Assets					$ 318,000
Lincoln Community Bank
Business Acquisition [Line Items]
Cash consideration	$ 8,500
Number of banking offices | item	2
Assets	$ 60,000
Net cash paid	8,500
Net assets acquired:
Cash and cash equivalents	10,971
Securities available for sale	6,947
Total loans	38,001
Premises and equipment	1,249
Other real estate owned	69
Deposit based intangible	1,353
Bank owned life insurance	1,653
Other assets	339
Total assets	60,582
Non-interest bearing deposits	15,559
Interest bearing deposits	37,654
Total deposits	53,213
Deferred tax liability	231
Other liabilities	53
Total liabilities	53,497
Net assets acquired	7,085
Goodwill	$ 1,415
PARENT COMPANY
Business Acquisition [Line Items]
Assets			$ 153,292	$ 101,445
Purchase Price:
Shares outstanding (in Shares) | shares			10,712,745	6,294,930
Purchase price			$ 8,500
Shares of Common Stock
Business Acquisition [Line Items]
FFNM acquisition (in shares) | shares			2,146,378
Common Stock and Additional Paid in Capital
Business Acquisition [Line Items]
FFNM acquisition			$ 34,101

PARENT COMPANY ONLY FINANCIAL_3

PARENT COMPANY ONLY FINANCIAL STATEMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
ASSETS
Cash and cash equivalents	$ 64,157	$ 37,426
Other assets	25,669	17,125
TOTAL ASSETS	1,318,040	985,367
LIABILITIES AND SHAREHOLDERS' EQUITY
Other liabilities	7,993	6,417
Total liabilities	1,165,971	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 shares respectively	129,066	61,981
Retained earnings	23,466	19,711
Total shareholders' equity	152,069	81,400	$ 78,609
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	1,318,040	985,367
PARENT COMPANY
ASSETS
Cash and cash equivalents	2,470	198
Investment in subsidiaries	146,516	97,984
Other assets	4,306	3,263
TOTAL ASSETS	153,292	101,445
LIABILITIES AND SHAREHOLDERS' EQUITY
Other borrowing		18,999
Other liabilities	1,223	1,046
Total liabilities	1,223	20,045
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 shares respectively	129,066	61,981
Retained earnings	23,466	19,711
Accumulated other comprehensive income	(463)	(292)
Total shareholders' equity	152,069	81,400
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 153,292	$ 101,445

PARENT COMPANY ONLY FINANCIAL_4

PARENT COMPANY ONLY FINANCIAL STATEMENTS - BALANCE SHEET (Details) - $ / shares	Dec. 31, 2018	Dec. 31, 2017
BALANCE SHEET
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
PARENT COMPANY
BALANCE SHEET
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

PARENT COMPANY ONLY FINANCIAL_5

PARENT COMPANY ONLY FINANCIAL STATEMENTS - STATEMENT OF OPERATIONS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
INCOME:
Interest income	$ 55,377	$ 44,376
EXPENSES:
Interest expense on borrowings	1,755	2,077
Salaries and benefits	20,064	15,490
Professional service fees	1,575	1,534
Transaction related expenses	2,951	50
Other	3,340	2,143
Total other expenses	40,300	30,336
Loss before income taxes and equity in net income of subsidiaries	10,593	11,018
Provision for (benefit of) income taxes	2,226	5,539
NET INCOME	8,367	5,479
PARENT COMPANY
INCOME:
Interest income	1
Miscellaneous income	17
Total income	18
EXPENSES:
Interest expense on borrowings	320	868
Salaries and benefits	835	698
Professional service fees	242	279
Transaction related expenses	814	50
Other	350	294
Total other expenses	2,561	2,189
Loss before income taxes and equity in net income of subsidiaries	(2,543)	(2,189)
Provision for (benefit of) income taxes	(534)	(27)
Loss before equity in net income of subsidiaries	(2,009)	(2,162)
Equity in net income of subsidiaries	10,376	7,641
NET INCOME	$ 8,367	$ 5,479

PARENT COMPANY ONLY FINANCIAL_6

PARENT COMPANY ONLY FINANCIAL STATEMENTS - CASH FLOWS (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Cash Flows from Operating Activities:
Net income	$ 8,367	$ 5,479
Adjustments to reconcile net income to net cash provided by operating activities:
Increase in capital from stock compensation	533	398
Change in other assets	7,531	2,523
Change in other liabilities	37	(818)
Net cash provided by operating activities	20,631	15,744
Cash Flows from Investing Activities:
Net cash provided by (used in) investing activities	65,483	(22,510)
Cash Flows from Financing Activities:
Principal payments on term borrowings	(62,738)	(12,277)
Net activity on line of credit		(750)
Dividend on common stock	4,612	3,022
Net cash from capital raise	32,451
Net cash (used in) provided by financing activities	(59,383)	(2,563)
Net (decrease) increase in cash and cash equivalents	26,731	(9,329)
Cash and cash equivalents at beginning of period	37,426	46,755
Cash and cash equivalents at end of period	64,157	37,426
PARENT COMPANY
Cash Flows from Operating Activities:
Net income	8,367	5,479
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in net (income) of subsidiaries	(10,376)	(7,641)
Increase in capital from stock compensation	533	398
Change in other assets	1,043	751
Change in other liabilities	365	77
Net cash provided by operating activities	(68)	(936)
Cash Flows from Investing Activities:
Investments in subsidiaries	2,000	7,000
Net cash paid in acquisitions	(8,500)
Net cash provided by (used in) investing activities	(6,500)	7,000
Cash Flows from Financing Activities:
Principal payments on term borrowings	(18,999)	(2,200)
Net activity on line of credit		(750)
Dividend on common stock	(4,612)	(3,022)
Net cash from capital raise	32,451
Net cash (used in) provided by financing activities	8,840	(5,972)
Net (decrease) increase in cash and cash equivalents	2,272	92
Cash and cash equivalents at beginning of period	198	106
Cash and cash equivalents at end of period	$ 2,470	$ 198