Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2021 | May 12, 2021 | |
Document and Entity Information | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2021 | |
Document Transition Report | false | |
Entity File Number | 0-20167 | |
Entity Registrant Name | MACKINAC FINANCIAL CORP /MI/ | |
Entity Incorporation, State or Country Code | MI | |
Entity Tax Identification Number | 38-2062816 | |
Entity Address, Address Line One | 130 SOUTH CEDAR STREET, | |
Entity Address, City or Town | MANISTIQUE | |
Entity Address, State or Province | MI | |
Entity Address, Postal Zip Code | 49854 | |
City Area Code | 888 | |
Local Phone Number | 343-8147 | |
Trading Symbol | MFNC | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Title of 12(g) Security | Commmon Stock, No par value | |
Entity Common Stock, Shares Outstanding | 10,550,393 | |
Entity Central Index Key | 0000036506 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2021 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
ASSETS | ||
Cash and due from banks | $ 239,831 | $ 218,901 |
Federal funds sold | 3,661 | 76 |
Cash and cash equivalents | 243,492 | 218,977 |
Interest-bearing deposits in other financial institutions | 2,427 | 2,917 |
Securities available for sale | 109,414 | 111,836 |
Federal Home Loan Bank stock | 4,924 | 4,924 |
Loans: | ||
Commercial | 818,584 | 819,907 |
Mortgage | 226,780 | 238,705 |
Consumer | 18,392 | 18,980 |
Total Loans | 1,063,756 | 1,077,592 |
Allowance for loan losses | (5,842) | (5,816) |
Net loans | 1,057,914 | 1,071,776 |
Premises and equipment | 25,010 | 25,518 |
Other real estate held for sale | 1,692 | 1,752 |
Deferred tax asset | 2,492 | 3,303 |
Deposit based intangibles | 4,200 | 4,368 |
Goodwill | 19,574 | 19,574 |
Other assets | 37,109 | 36,785 |
TOTAL ASSETS | 1,508,248 | 1,501,730 |
Deposits: | ||
Noninterest bearing deposits | 443,956 | 414,804 |
NOW, money market, interest checking | 478,181 | 450,556 |
Savings | 137,134 | 130,755 |
CDs less than $250,000 | 190,320 | 202,266 |
CDs more than $250,000 | 10,337 | 15,224 |
Brokered | 13,351 | 45,171 |
Total deposits | 1,273,279 | 1,258,776 |
Borrowings | 53,459 | 63,479 |
Other liabilities | 11,334 | 11,611 |
Total liabilities | 1,338,072 | 1,333,866 |
SHAREHOLDERS' EQUITY: | ||
Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,550,393 and 10,500,758 respectively | 127,397 | 127,164 |
Retained earnings | 41,721 | 39,318 |
Accumulated other comprehensive income | ||
Unrealized gains on available for sale securities | 1,641 | 1,965 |
Minimum pension liability | (583) | (583) |
Total shareholders' equity | 170,176 | 167,864 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 1,508,248 | $ 1,501,730 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Mar. 31, 2021 | Dec. 31, 2020 |
CONSOLIDATED BALANCE SHEETS | ||
Common stock, par value | $ 0 | $ 0 |
Common stock, Authorized shares | 18,000,000 | 18,000,000 |
Common stock, Shares issued | 10,550,393 | 10,500,758 |
Common stock, Shares outstanding | 10,550,393 | 10,500,758 |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Interest and fees on loans: | ||
Taxable | $ 14,121 | $ 14,613 |
Tax-exempt | 20 | 74 |
Interest on securities: | ||
Taxable | 525 | 621 |
Tax-exempt | 142 | 87 |
Other interest income | 84 | 270 |
Total interest income | 14,892 | 15,665 |
INTEREST EXPENSE: | ||
Deposits | 889 | 1,927 |
Borrowings | 225 | 341 |
Total interest expense | 1,114 | 2,268 |
Net interest income | 13,778 | 13,397 |
Provision for loan losses | 50 | 100 |
Net interest income after provision for loan losses | 13,728 | 13,297 |
OTHER INCOME: | ||
Deposit service fees | $ 257 | $ 403 |
Revenue, Product and Service [Extensible List] | us-gaap:DepositAccountMember | us-gaap:DepositAccountMember |
Income from mortgage loans sold on the secondary market | $ 1,302 | $ 538 |
SBA/USDA loan sale gains | 433 | 710 |
Net mortgage servicing fees | 241 | 189 |
Realized security gains | 36 | |
Other | 129 | 97 |
Total other income | 2,398 | 1,937 |
OTHER EXPENSE: | ||
Salaries and employee benefits | 6,824 | 6,051 |
Occupancy | 1,183 | 1,124 |
Furniture and equipment | 842 | 802 |
Data processing | 770 | 825 |
Advertising | 113 | 212 |
Professional service fees | 498 | 498 |
Loan origination expenses and deposit and card related fees | 450 | 381 |
Writedowns and (gains) losses on other real estate held for sale | (52) | 3 |
FDIC insurance assessment | 140 | 150 |
Communications | 241 | 213 |
Other | 839 | 1,113 |
Total other expenses | 11,848 | 11,372 |
Income before provision for income taxes | 4,278 | 3,862 |
Provision for income taxes | 398 | 811 |
NET INCOME | $ 3,880 | $ 3,051 |
INCOME PER COMMON SHARE: | ||
Basic (in dollars per share) | $ 0.37 | $ 0.28 |
Diluted (in dollars per share) | $ 0.37 | $ 0.28 |
CONSOLIDATED STATEMENTS COMPREH
CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
CONSOLIDATED STATEMENTS COMPREHENSIVE INCOME | ||
Net income | $ 3,880 | $ 3,051 |
Other comprehensive income | ||
Unrealized gains arising during the period | (375) | (1,106) |
Reclassification adjustment for securities gains included in net income | (36) | |
Tax effect | 87 | 232 |
Net change in unrealized gains on available for sale securities | (324) | (874) |
Total comprehensive income | $ 3,556 | $ 2,177 |
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, 2019 | $ 129,564 | $ 31,740 | $ 615 | $ 161,919 | |
Balance (in shares) at Dec. 31, 2019 | 10,748,712 | ||||
Increase (Decrease) in Shareholders' Equity | |||||
Net income | 3,051 | 3,051 | |||
Other comprehensive income (loss): | |||||
Net change in unrealized gain on securities available for sale | (874) | (874) | |||
Total comprehensive income | 3,051 | (874) | 2,177 | ||
Stock compensation | 168 | 168 | |||
Restricted stock award vesting (in shares) | 25,521 | ||||
Repurchased of common stock | (2,729) | (2,729) | |||
Repurchased of common stock (in shares) | (240,644) | ||||
Dividend on common stock | (1,475) | (1,475) | |||
Balance, end of period at Mar. 31, 2020 | 127,003 | 33,316 | (259) | 160,060 | |
Balance (in shares) at Mar. 31, 2020 | 10,533,589 | ||||
Balance, beginning of period at Dec. 31, 2019 | 129,564 | 31,740 | 615 | 161,919 | |
Balance (in shares) at Dec. 31, 2019 | 10,748,712 | ||||
Balance, end of period at Dec. 31, 2020 | 127,164 | 39,318 | 1,382 | 167,864 | |
Balance (in shares) at Dec. 31, 2020 | 10,500,758 | ||||
Increase (Decrease) in Shareholders' Equity | |||||
Net income | 3,880 | 3,880 | |||
Other comprehensive income (loss): | |||||
Net change in unrealized gain on securities available for sale | (324) | (324) | |||
Total comprehensive income | 3,880 | (324) | 3,556 | ||
Stock compensation | 233 | 233 | |||
Restricted stock award vesting (in shares) | 49,635 | ||||
Dividend on common stock | (1,477) | (1,477) | |||
Balance, end of period at Mar. 31, 2021 | $ 127,397 | $ 41,721 | $ 1,058 | $ 170,176 | |
Balance (in shares) at Mar. 31, 2021 | 10,550,393 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Cash Flows from Operating Activities: | ||
Net income | $ 3,880 | $ 3,051 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 812 | 687 |
Provision for loan losses | 50 | 100 |
Deferred tax expense, net | 179 | 456 |
Gain on sale of loans sold in the secondary market | (1,168) | (447) |
Origination of loans held for sale in the secondary market | (35,131) | (18,997) |
Proceeds from sale of loans in the secondary market | 36,597 | 16,900 |
(Gain) on sale other real estate held for sale and fixed assets | (52) | |
Writedown of other real estate held for sale | 3 | |
Stock compensation | 233 | 168 |
Change in other assets | (339) | 2,090 |
Change in other liabilities | (277) | (667) |
Net cash provided by operating activities | 4,784 | 3,344 |
Cash Flows from Investing Activities: | ||
Net increase in loans | 13,962 | 17,200 |
Net decrease in interest bearing deposits in other financial institutions | 490 | 1,470 |
Purchase of securities available for sale | (4,338) | (17,873) |
Proceeds from maturities, sales, calls or paydowns of securities available for sale | 6,279 | 9,988 |
Capital expenditures | (233) | (1,584) |
Proceeds from sale of other real estate, premises and fixed assets | 565 | 67 |
Net cash used in investing activities | 16,725 | 9,268 |
Cash Flows from Financing Activities: | ||
Net increase in deposits | 14,503 | 19,704 |
Net activity on line of credit | 3,000 | |
Net decrease in fed funds purchased | 16,565 | |
New term debt issuance | 10,000 | |
Principal payments on borrowings | (10,020) | (10,431) |
Repurchase of common stock | (2,729) | |
Dividend on common stock | (1,477) | (1,475) |
Net cash provided by financing activities | 3,006 | 34,634 |
Net increase in cash and cash equivalents | 24,515 | 47,246 |
Cash and cash equivalents at beginning of period | 218,977 | 49,826 |
Cash and cash equivalents at end of period | 243,492 | 97,072 |
Cash paid during the year for: | ||
Interest | 1,356 | 2,242 |
Noncash Investing and Financing Activities: | ||
Transfers of Foreclosures from Loans to Other Real Estate Held for Sale | $ 448 | $ 155 |
SUMMARY OF SIGNIFICANT ACCOUNTI
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended |
Mar. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The unaudited condensed consolidated financial statements of Mackinac Financial Corporation (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020. In order to properly reflect some categories of other income and other expenses, reclassifications of expense and income items have been made to prior period numbers. The “net” other income and other expenses were unchanged by these reclassifications. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, the assessment of goodwill for impairment, and the fair value of assets and liabilities acquired in business combinations. Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected. We evaluate at each balance sheet date whether it is probable that we will be unable to collect all cash flows expected at acquisition and if so, recognize a provision for loan loss in our consolidated statement of operations. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans. Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans, when they have been judged to be impaired. A loan is impaired when, based on current information, it is probable that the Corporation will not collect all amounts due in accordance with the contractual terms of the loan agreement. These specific allowances are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated allowance for loan losses for loans not considered impaired. The allowance for loan losses is maintained at a level which management believes is adequate to provide for probable loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, current economic conditions, and other factors. The allowance does not include the effects of expected losses related to future events or future changes in economic conditions. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change. Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additions to the allowance for loan losses based on their judgments of collectability. In management’s opinion, the allowance for loan losses is adequate to cover probable losses relating to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio as of the balance sheet date. Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), stock grants, or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At March 31, 2021 there were 6,560 shares available for issuance under this plan. Awards are made to executive officers at the discretion of the compensation committee of the board of directors. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period. |
RECENT ACCOUNTING PRONOUNCEMENT
RECENT ACCOUNTING PRONOUNCEMENTS | 3 Months Ended |
Mar. 31, 2021 | |
RECENT ACCOUNTING PRONOUNCEMENTS | |
RECENT ACCOUNTING PRONOUNCEMENTS | 2. RECENT ACCOUNTING PRONOUNCEMENTS 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. 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. The Corporation has formed a cross-functional implementation team consisting of individuals from finance, credit and information systems. A project plan and timeline has been developed and the implementation team meets regularly to assess the project status to ensure adherence to the timeline. The implementation team has also been working with a software vendor to assist in implementing required changes to credit loss estimation models and proceses, and is finalizing the historical data collected to be utilized in the credit loss models. The Corporation expects to recognize a cumulative effect adjustment to the opening balance of retained earnings as of the beginning of the first reporting period in which ASU 2016-13 is effective. The Corporation has not yet determined the magnitude of any such one-time adjustment or the potential impact of ASU 2016-13 on its condensed consolidated financial statements. In October 2019 the Financial Accounting Standards Board (FASB) voted to defer the effective date of ASU 2016-13 to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, for smaller reporting companies (as defined by the Securities Exchange Commission). |
EARNINGS PER SHARE
EARNINGS PER SHARE | 3 Months Ended |
Mar. 31, 2021 | |
EARNINGS PER SHARE | |
EARNINGS PER SHARE | 3. EARNINGS PER SHARE Diluted earnings per share, which reflects the potential dilution that could occur if stock awards were fully vested and resulted in the issuance of common stock that then shared in our earnings, is computed by dividing net income by the weighted average number of common shares outstanding and common stock equivalents, after giving effect for dilutive shares issued. The following shows the computation of basic and diluted earnings per share for the three months ended March 31, 2021 and 2020 (dollars in thousands, except per share data): Three Months Ended March 31, 2021 2020 (Numerator): Net income $ 3,880 $ 3,051 (Denominator): Weighted average shares outstanding 10,522,899 10,717,967 Effect of restricted stock awards — 96,824 Diluted weighted average shares outstanding 10,522,899 10,814,791 Income per common share: Basic $ 0.37 $ 0.28 Diluted $ 0.37 $ 0.28 |
INVESTMENT SECURITIES
INVESTMENT SECURITIES | 3 Months Ended |
Mar. 31, 2021 | |
SECURITIES AVAILABLE FOR SALE | |
SECURITIES AVAILABLE FOR SALE | 4. INVESTMENT SECURITIES At March 31, 2021, the Corporation had an investment security portfolio totaling $109.414 million, a decrease of $2.422 million from the December 31, 2020 balance of $111.836 million. The amortized cost and estimated fair value of investment securities available for sale as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value March 31, 2021 US Treasury $ 1,067 $ 3 $ — $ 1,070 Corporate 29,042 304 (222) 29,124 US Agencies 6,486 78 — 6,564 US Agencies - MBS 30,389 906 (3) 31,292 Obligations of states and political subdivisions 40,353 1,061 (50) 41,364 Total securities available for sale $ 107,337 $ 2,352 $ (275) $ 109,414 December 31, 2020 US Treasury $ — $ — $ — $ — Corporate 27,815 247 (19) 28,043 US Agencies 6,480 109 — 6,589 US Agencies - MBS 33,372 914 (6) 34,280 Obligations of states and political subdivisions 41,682 1,242 — 42,924 Total securities available for sale $ 109,349 $ 2,512 $ (25) $ 111,836 The following table presents the amortized cost and estimated fair value of investment securities by contractual maturity as of March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, December 31, 2021 2020 Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value Available -for-sale securities Under 1 year $ 14,366 $ 14,518 $ 15,645 $ 15,820 After 1 year through 5 years 21,202 21,754 22,554 23,201 After 5 years through 10 years 27,548 27,724 24,965 25,261 After 10 years 13,832 14,126 12,813 13,274 Subtotal 76,948 78,122 75,977 77,556 US Agencies - MBS 30,389 31,292 33,372 34,280 Total available -for-sale securities $ 107,337 $ 109,414 $ 109,349 $ 111,836 The following is information pertaining to securities with gross unrealized losses at March 31, 2021 and December 31, 2020 (dollars in thousands): Less Than Twelve Months Over Twelve Months Total Number Gross Number Gross Number Gross of Fair Unrealized of Fair Unrealized of Fair Unrealized March 31, 2021 Securities Value Loss Securities Value Loss Securities Value Loss Corporate 8 14,753 $ (222) — — $ — 8 $ 14,753 $ (222) US Agencies — — — — — — — — — US Agencies - MBS — — — 4 150 (3) 4 150 (3) Obligations of states and political subdivisions 2 1,373 (50) — — — 2 1,373 (50) Total 10 $ 16,126 $ (272) 4 $ 150 $ (3) 14 $ 16,276 $ (275) Less Than Twelve Months Over Twelve Months Total Number Gross Number Gross Number Gross of Fair Unrealized of Fair Unrealized of Fair Unrealized December 31, 2020 Securities Value Loss Securities Value Loss Securities Value Loss Corporate 4 $ 9,293 $ (19) — $ — $ — 4 $ 9,293 $ (19) US Agencies — — — — — — — — — US Agencies - MBS 4 83 (2) 2 123 (4) 6 206 (6) Obligations of states and political subdivisions — — — — — — — — — Total 8 $ 9,376 $ (21) 2 $ 123 $ (4) 10 $ 9,499 $ (25) The Corporation has evaluated gross unrealized losses that exist within the portfolio and considers them temporary in nature. The Corporation has both the ability and the intent to hold the investment securities until their respective maturities and therefore does not anticipate the realization of the temporary losses. The amortized cost and estimated fair value of investment securities pledged to secure FHLB borrowings and customer relationships were $20.887 million and $2.285 million, respectively, at March 31, 2021. |
LOANS
LOANS | 3 Months Ended |
Mar. 31, 2021 | |
LOANS | |
LOANS | 5. LOANS The composition of loans is as follows (dollars in thousands): March 31, December 31, 2021 2020 Commercial real estate $ 496,257 $ 498,450 Commercial, financial, and agricultural 273,087 273,759 Commercial construction 49,240 47,698 One to four family residential real estate 214,034 227,044 Consumer 18,392 18,980 Consumer construction 12,746 11,661 Total loans $ 1,063,756 $ 1,077,592 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 (“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, the Niagara acquired impaired loans totaled $2.105 million, the FFNM acquired impaired loans totaled $5.440 million, and the Lincoln acquired impaired loans totaled $1.901 million. The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061 The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875 The table below details the outstanding balances of the Niagara acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707 The table below details the outstanding balances of the FFNM acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 5,440 $ 187,302 $ 192,742 Nonaccretable difference (2,100) — (2,100) Expected cash flows 3,340 187,302 190,642 Accretable yield (700) (4,498) (5,198) Carrying balance at acquisition date $ 2,640 $ 182,804 $ 185,444 The table below details the outstanding balances of the Lincoln acquired portfolio and the 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 (421) — (421) Expected cash flows 1,480 37,700 39,180 Accretable yield (140) (493) (633) Carrying balance at acquisition date $ 1,340 $ 37,207 $ 38,547 The table below presents a rollforward of the accretable yield on acquired loans for the three months ended March 31, 2021 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 53 $ — $ 53 $ 183 $ — $ 183 Accretion (2) — (2) — — — Reclassification from nonaccretable difference 2 — 2 — — — Balance, March 31, 2021 $ 53 $ — $ 53 $ 183 $ — $ 183 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 12 $ — $ 12 $ 292 $ 869 $ 1,161 Accretion — — — (3) (205) (208) Reclassification from nonaccretable difference — — — 2 (1) 1 Balance, March 31, 2021 $ 12 $ — $ 12 $ 291 $ 663 $ 954 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 85 $ 130 $ 215 $ 625 $ 999 $ 1,624 Accretion (1) (26) (27) (6) (231) (237) Reclassification from nonaccretable difference 1 — 1 5 (1) 4 Balance, March 31, 2021 $ 85 $ 104 $ 189 $ 624 $ 767 $ 1,391 The table below presents a rollforward of the accretable yield on acquired loans for the three months ended March 31, 2020 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 105 $ — $ 105 $ 209 $ — $ 209 Accretion (90) — (90) (77) — (77) Reclassification from nonaccretable difference 52 — 52 58 — 58 Balance, March 31, 2020 $ 67 $ — $ 67 $ 190 $ — $ 190 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 19 $ — $ 19 $ 518 $ 1,953 $ 2,471 Accretion (4) — (4) (237) (310) (547) Reclassification from nonaccretable difference 3 — 3 177 — 177 Balance, March 31, 2020 $ 18 $ — $ 18 $ 458 $ 1,643 $ 2,101 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 108 $ 264 $ 372 $ 959 $ 2,217 $ 3,176 Accretion (3) (38) (41) (411) (348) (759) Reclassification from nonaccretable difference 3 — 3 293 — 293 Balance, March 31, 2020 $ 108 $ 226 $ 334 $ 841 $ 1,869 $ 2,710 Allowance for Loan Losses An analysis of the allowance for loan losses for the three months ended March 31, 2021 and March 30, 2020 is as follows (dollars in thousands): March 31, March 31, 2021 2020 Balance, January 1 $ 5,816 $ 5,308 Recoveries on loans previously charged off 31 29 Loans charged off (55) (145) Provision 50 100 Balance at end of period $ 5,842 $ 5,292 In the first three months of 2021, net charge-offs were $24,000, compared to net charge-offs of $116,000 in the same period in 2020. In the first three months of 2021, the Corporation recorded a provision for loan loss of $50,000 compared to a $100,000 provision for loan losses in the first three months of 2020. The Corporation’s allowance for loan loss reserve policy calls for a measurement of the adequacy of the reserve at each quarter end. This process includes an analysis of the loan portfolio to take into account increases in loans outstanding and portfolio composition, historical loss rates, and specific reserve requirements of nonperforming loans. A breakdown of the allowance for loan losses and recorded balances in loans at March 31, 2021 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 $ 2,983 $ 1,734 $ 209 $ 605 $ 8 $ 5 $ 272 $ 5,816 Charge-offs (8) — — (18) (29) — — (55) Recoveries 3 11 — 5 12 — — 31 Provision (240) 331 — (32) 17 1 (27) 50 Ending balance ALLR $ 2,738 $ 2,076 $ 209 $ 560 $ 8 $ 6 $ 245 $ 5,842 Loans: Ending balance $ 496,257 $ 273,087 $ 49,240 $ 214,034 $ 12,746 $ 18,392 $ — $ 1,063,756 Ending balance ALLR (2,738) (2,076) (209) (560) (8) (6) (245) (5,842) Net loans $ 493,519 $ 271,011 $ 49,031 $ 213,474 $ 12,738 $ 18,386 $ (245) $ 1,057,914 Ending balance ALLR: Individually evaluated $ 277 $ 594 $ — $ — $ — $ — $ — $ 871 Collectively evaluated 2,461 1,482 209 560 8 6 245 4,971 Total $ 2,738 $ 2,076 $ 209 $ 560 $ 8 $ 6 $ 245 $ 5,842 Ending balance Loans: Individually evaluated $ 1,975 $ 3,887 $ 261 $ — $ — $ — $ — $ 6,123 Collectively evaluated 493,125 268,972 48,890 213,231 12,730 18,392 — 1,055,340 Acquired with deteriorated credit quality 1,157 228 89 803 16 — — 2,293 Total $ 496,257 $ 273,087 $ 49,240 $ 214,034 $ 12,746 $ 18,392 $ — $ 1,063,756 Impaired loans, by definition, are individually evaluated. In the first three months of 2021, the Corporation booked a provision for loan losses of $50,000 as a result of changes in environmental factors. A breakdown of the allowance for loan losses and recorded balances in loans at March 31, 2020 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 $ 1,189 $ 1,197 $ 71 $ 148 $ 11 $ 13 $ 2,679 $ 5,308 Charge-offs — (66) — (22) (8) (49) — (145) Recoveries 6 — — 10 — 13 — 29 Provision 623 502 27 291 7 33 (1,383) 100 Ending balance ALLR $ 1,818 $ 1,633 $ 98 $ 427 $ 10 $ 10 $ 1,296 $ 5,292 Loans: Ending balance $ 522,659 $ 207,727 $ 29,971 $ 244,059 $ 19,386 $ 20,375 $ — $ 1,044,177 Ending balance ALLR (1,818) (1,633) (98) (427) (10) (10) (1,296) (5,292) Net loans $ 520,841 $ 206,094 $ 29,873 $ 243,632 $ 19,376 $ 20,365 $ (1,296) $ 1,038,885 Ending balance ALLR: Individually evaluated $ 913 $ 476 $ — $ — $ — $ — $ — $ 1,389 Collectively evaluated 905 1,157 98 427 10 10 1,296 3,903 Total $ 1,818 $ 1,633 $ 98 $ 427 $ 10 $ 10 $ 1,296 $ 5,292 Ending balance Loans: Individually evaluated $ 2,278 $ 1,454 $ — $ — $ — $ — $ — $ 3,732 Collectively evaluated 518,642 203,857 29,604 243,251 19,386 20,374 — 1,035,114 Acquired with deteriorated credit quality 1,739 2,416 367 808 — 1 — 5,331 Total $ 522,659 $ 207,727 $ 29,971 $ 244,059 $ 19,386 $ 20,375 $ — $ 1,044,177 As part of the management of the loan portfolio, risk ratings are assigned to all commercial loans. Through the loan review process, ratings are modified as believed to be appropriate to reflect changes in the credit. Our ability to manage credit risk depends in large part on our ability to properly identify and manage problem loans. To do so, we operate a credit risk rating system under which our credit management personnel assign a credit risk rating to each loan at the time of origination and review loans on a regular basis to determine each loan’s credit risk rating on a scale of 1 through 8, with higher scores indicating higher risk. The credit risk rating structure used is shown below. In the context of the credit risk rating structure, the term Classified is defined as a problem loan which may or may not be in a nonaccrual status, dependent upon current payment status and collectability. Strong (1) Borrower is not vulnerable to sudden economic or technological changes. They have “strong” balance sheets and are within an industry that is very typical for our markets or type of lending culture. Borrowers also have “strong” financial and cash flow performance and excellent collateral (low loan to value or readily available to liquidate collateral) in conjunction with an impeccable repayment history. Good (2) Borrower shows limited vulnerability to sudden economic change. These borrowers have “above average” financial and cash flow performance and a very good repayment history. The balance sheet of the company is also very good as compared to peer and the company is in an industry that is familiar to our markets or our type of lending. The collateral securing the deal is also very good in terms of its type, loan to value, and other relevant characteristics. Average (3) Borrower is typically a well-seasoned business, however may be susceptible to unfavorable changes in the economy, and could be somewhat affected by seasonal factors. The borrowers within this category exhibit financial and cash flow performance that appear “average” to “slightly above average” when compared to peer standards and they show an adequate payment history. Collateral securing this type of credit is good, exhibiting above average loan to values, and other relevant characteristics. Acceptable (4) A borrower within this category exhibits financial and cash flow performance that appear adequate and satisfactory when compared to peer standards and they show a satisfactory payment history. The collateral securing the request is within supervisory limits and overall is acceptable. Borrowers rated acceptable could also be newer businesses that are typically susceptible to unfavorable changes in the economy, and more than likely could be affected by seasonal factors. Acceptable Watch (44) The borrower may have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Acceptable Watch assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Examples of this type of credit include a start-up company fully based on projections, a documentation issue that needs to be corrected or a general market condition that the borrower is working through to get corrected. Substandard (6) Substandard loans are classified assets exhibiting a number of well-defined weaknesses that jeopardize normal repayment. The assets are no longer adequately protected due to declining net worth, lack of earning capacity, or insufficient collateral offering the distinct possibility of the loss of a portion of the loan principal. Loans classified as substandard clearly represent troubled and deteriorating credit situations requiring constant supervision. Doubtful (7) Loans in this category exhibit the same, if not more pronounced weaknesses used to describe the substandard credit. Loans are frozen with collection improbable. Such loans are not yet rated as Charge-off because certain actions may yet occur which would salvage the loan. Charge-off/Loss (8) Loans in this category are largely uncollectible and should be charged against the loan loss reserve immediately. General Reserves: For loans with a credit risk rating of 44 or better and any loans with a risk rating of 6 or 7 not considered impaired, reserves are established based on the type of loan collateral, if any, and the assigned credit risk rating. Determination of the allowance is inherently subjective as it requires significant estimates, including the amounts and timing of expected future cash flows on impaired loans, estimated losses on pools of homogenous loans based on historical loss experience, and consideration of current environmental factors and economic trends, all of which may be susceptible to significant change. Using a historical average loss by loan type as a base, each loan graded as higher risk is assigned a specific percentage. The residential real estate and consumer loan portfolios are assigned a loss percentage as a homogenous group. If, however, on an individual loan the projected loss based on collateral value and payment histories is in excess of the computed allowance, the allocation is increased for the higher anticipated loss. These computations provide the basis for the allowance for loan losses as recorded by the Corporation. Below is a breakdown of loans by risk category as of March 31, 2021 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 7,621 $ 10,114 $ 225,610 $ 246,287 $ 2,632 $ 3,993 $ — $ — $ 496,257 Commercial, financial and agricultural 120,509 12,715 48,855 86,331 597 4,080 — — 273,087 Commercial construction — 37 20,465 16,530 488 381 — 11,339 49,240 One-to-four family residential real estate — 2,120 4,698 16,766 365 1,605 — 188,480 214,034 Consumer construction — — — — — — — 12,746 12,746 Consumer — 60 114 1,234 — 51 — 16,933 18,392 Total loans $ 128,130 $ 25,046 $ 299,742 $ 367,148 $ 4,082 $ 10,110 $ — $ 229,498 $ 1,063,756 At March 31, 2021, $109.733 million of Paycheck Protection Program (“PPP”) loans are included with a risk rating of “1” in the Commercial, financial and agricultural category. Below is a breakdown of loans by risk category as of December 31, 2020 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 7,425 $ 10,521 $ 223,875 $ 249,159 $ 3,352 $ 4,118 $ — $ — $ 498,450 Commercial, financial and agricultural 116,107 6,760 51,150 94,743 656 4,343 — — 273,759 Commercial construction — 40 19,063 16,671 600 385 — 10,939 47,698 One-to-four family residential real estate — 3,139 5,614 18,864 369 1,814 — 197,244 227,044 Consumer construction — — — — — — — 11,661 11,661 Consumer — 79 128 1,141 — 67 — 17,565 18,980 Total loans $ 123,532 $ 20,539 $ 299,830 $ 380,578 $ 4,977 $ 10,727 $ — $ 237,409 $ 1,077,592 Impaired Loans Impaired loans are those which are contractually past due 90 days or more as to interest or principal payments, on nonaccrual status, or loans, the terms of which have been renegotiated to provide a reduction or deferral on interest or principal. Loans are considered impaired when, based on current information and events, it is probable the Corporation will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement, including scheduled principal and interest payments. Impairment is evaluated in total for smaller-balance loans of a similar nature and on an individual loan basis for other loans. If a loan is impaired, a specific valuation allowance is allocated, if necessary, so that the loan is reported net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. Interest payments on impaired loans are typically applied to principal unless collectability of the principal amount is reasonably assured, in which case interest is recognized on a cash basis. Impaired loans, or portions thereof, are charged off when deemed uncollectible. The following is a summary of impaired loans and their effect on interest income (dollars in thousands): Impaired Loans Impaired Loans Total Unpaid Related with No Related with Related Impaired Principal Allowance for Allowance Allowance Loans Balance Loan Losses March 31, 2021 Commercial real estate $ 1,587 $ 1,545 $ 3,132 $ 5,343 $ 277 Commercial, financial and agricultural 2,885 1,230 4,115 4,247 594 Commercial construction 350 — 350 480 — One to four family residential real estate 803 — 803 2,057 — Consumer construction — — — — — Consumer 16 — 16 17 — Total $ 5,641 $ 2,775 $ 8,416 $ 12,144 $ 871 December 31, 2020 Commercial real estate $ 1,251 $ 2,309 $ 3,560 $ 5,786 $ 476 Commercial, financial and agricultural 2,423 1,445 3,868 3,946 679 Commercial construction 537 — 537 678 — One to four family residential real estate 869 — 869 1,993 — Consumer construction — — — — — Consumer 16 — 16 19 — Total $ 5,096 $ 3,754 $ 8,850 $ 12,422 $ 1,155 Individually Evaluated Impaired Loans March 31, 2021 December 31, 2020 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 $ 5,671 $ 62 $ 6,860 $ 270 Commercial, financial and agricultural 883 4 1,204 13 Commercial construction 117 6 541 27 One to four family residential real estate 2,571 31 3,064 135 Consumer construction — — — — Consumer 28 — 37 1 Total $ 9,270 $ 103 $ 11,706 $ 446 A summary of past due loans at March 31, 2021 and December 31, 2020 is as follows (dollars in thousands): March 31, December 31, 2021 2020 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 $ — $ — $ 1,446 $ 1,446 $ 24 $ — $ 1,481 $ 1,505 Commercial, financial and agricultural — — 384 384 42 — 478 520 Commercial construction — — 61 61 — — 79 79 One to four family residential real estate 1,230 — 3,100 4,330 1,925 3,371 5,296 Consumer construction — — — — — — — — Consumer 51 — 33 84 78 — 49 127 Total past due loans $ 1,281 $ — $ 5,024 $ 6,305 $ 2,069 $ — $ 5,458 $ 7,527 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 a 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. More recent regulatory guidelines and accounting standards indicate that loan modifications or forbearances related to the COVID-19 pandemic will generally not be considered TDRs. The Corporation has, in accordance with generally accepted accounting principles and applicable accounting standard updates, evaluated all loan modifications to determine the fair value impact of the underlying asset. The carrying amount of the loan is compared to the expected payments to be received, discounted at the loan’s original rate, or for collateral dependent loans, to the fair value of the collateral. There were no TDRs that occurred during the three months ended March 31, 2021 and 3 TDRs during the three months ended March 31, 2020. 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): Three Months Ended Three Months Ended March 31, March 31, 2021 2020 Loans outstanding, January 1 $ 11,778 $ 12,196 New loans 500 — Net activity on revolving lines of credit (18) (354) Repayment (69) (100) Loans outstanding at end of period $ 12,191 $ 11,742 There were no loans to related parties classified as substandard as of March 31, 2021 or March 31, 2020. In addition to the outstanding balances above, there were no unfunded commitments to related parties at March 31, 2021. |
GOODWILL AND OTHER INTANGIBLE A
GOODWILL AND OTHER INTANGIBLE ASSETS | 3 Months Ended |
Mar. 31, 2021 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
GOODWILL AND OTHER INTANGIBLE ASSETS | 6. 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 Amortization Expense Intangible for the Future Annual March 31, 2021 period end Amortization Balance March 31, 2021 Expense Peninsula $ 443 $ 30 $ 121 Eagle River 505 25 99 Niagara 163 8 30 FFNM 2,074 72 290 Lincoln 1,015 34 135 Total $ 4,200 $ 169 $ 675 Deposit Based Intangible 2020 December 31, 2020 Amortization Balance Expense Peninsula $ 473 $ 121 Eagle River 529 99 Niagara 170 30 FFNM 2,147 290 Lincoln 1,049 135 Total $ 4,368 $ 675 The deposit based intangible asset is reported net of accumulated amortization at $4.200 million at March 31, 2021. Amortization expense in the first three months of 2021 is $.169 million. Amortization expense for the next five years is expected to be at $.675 million per year. The Corporation, in accordance with GAAP, evaluates goodwill annually for impairment. |
SERVICING RIGHTS
SERVICING RIGHTS | 3 Months Ended |
Mar. 31, 2021 | |
SERVICING RIGHTS | |
SERVICING RIGHTS | 7. SERVICING RIGHTS Mortgage Loans Mortgage servicing rights (“MSRs”) are recorded when loans are sold in the secondary market with servicing retained. As of March 31, 2021, the Corporation had obligations to service approximately $191.363 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 MSRs include an annual constant prepayment speed of 19.01% and a discount rate of 7.75% as of March 31, 2021. The following table summarizes MSRs capitalized and amortized (dollars in thousands) for the three month periods ending March 31, 2021 and March 31, 2020: March 31, March 31, 2021 2020 Balance at beginning of period $ 1,359 $ 1,499 Additions from loans sold with servicing retained 75 — Amortization (38) (35) Balance at end of period $ 1,396 $ 1,464 Balance of loan servicing portfolio $ 191,363 $ 246,370 Mortgage servicing rights as % of portfolio .73% .59% Fair value of servicing rights 1,436 2,159 Commercial Loans The Corporation periodically retains the servicing on certain commercial loans that have been sold. These loans were originated and underwritten under the SBA and USDA government guarantee programs, in which the guaranteed portion of the loan was sold to a third party with servicing retained. The balance of these sold loans with servicing retained at March 31, 2021 was approximately as of March 31, 2020. This valuation was established in consideration of the discounted cash flow of net expected servicing income over the life of the loans. |
BORROWINGS
BORROWINGS | 3 Months Ended |
Mar. 31, 2021 | |
BORROWINGS | |
BORROWINGS | 8. BORROWINGS Borrowings consist of the following at March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, December 31, 2021 2020 Federal Home Loan Bank fixed rate advances $ 53,135 $ 63,155 USDA Rural Development note 324 324 $ 53,459 $ 63,479 The Federal Home Loan Bank borrowings bear a weighted average rate of 1.64 % and mature at various dates through 2026. They are collateralized at March 31, 2021 by the following: a collateral agreement on the Corporation’s one to four family residential real estate loans with a book value of approximately $66.740 million; mortgage related and municipal securities with an amortized cost and estimated fair value of $20.318 million and $20.887 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 policy of the Federal Home Loan Bank of Indianapolis in effect as of March 31, 2021. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), created the Paycheck Protection Program to support lending to small businesses that have been affected by the disruption caused by COVID-19. The Federal Reserve created the Paycheck Protection Program Lending Facility (PPPLF) to offer a source of liquidity to the financial institution lenders who lend to small businesses through the Small Business Administration’s (SBA) Paycheck Protection Program. The PPPLF bears an interest rate of 0.35% and is collateralized by the PPP loans pledged. There were no PPP loans pledged as of March 31, 2021 as the PPPLF was repaid during the third quarter of 2020. The Corporation currently has one correspondent banking borrowing relationship. As of March 31, 2021 the relationship consisted of a $15.0 million revolving line of credit, which had no balance. The line of credit bears an interest rate of LIBOR plus 2.00%, with a floor rate of 3.00% and a ceiling of 22 %. The line of credit expires April 30, 2022. LIBOR at March 31, 2021 was 0.20 %. This relationship is secured by all of the outstanding mBank stock. The USDA Rural Development borrowing bears an interest rate of 1.00% and matures in August, 2024. It is collateralized by an assignment of a demand deposit account held by the Corporation’s wholly owned subsidiary, First Rural Relending, in the amount of $.389 million, and guaranteed by the Corporation. |
DEFINED BENEFIT PENSION PLAN
DEFINED BENEFIT PENSION PLAN | 3 Months Ended |
Mar. 31, 2021 | |
DEFINED BENEFIT PENSION PLAN | |
DEFINED BENEFIT PENSION PLAN | 9. DEFINED BENEFIT PENSION PLAN The Corporation acquired the Peninsula Financial Corporation noncontributory defined benefit pension plan in 2014. Effective December 31, 2005, the plan was amended to freeze participation in the plan; therefore, no additional employees are eligible to become participants in the plan. The benefits are based on years of service and the employee’s compensation at the time of retirement. The Plan was amended effective December 31, 2010, to freeze benefit accrual for all participants. Expected contributions to the Plan in 2021 are $57,000. The anticipated distributions over the next five years and through December 31, 2030 are detailed in the table below (dollars in thousands): 2021 $ 133 2022 140 2023 144 2024 142 2025 157 2026-2030 901 Total $ 1,617 The Corporation receives a valuation of the Plan annually. As such, at March 31, 2021, the plan’s assets had a fair value of $2.264 million and the Corporation had a net unfunded liability of $1.370 million. The accumulated benefit obligation at March 31, 2021 was $3.634 million. Assumptions in the actuarial valuation are: 2021 2020 Weighted average discount rate 2.45% 2.45% Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets 2.00% 2.00% 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 March 31, 2021 and December 31, 2020. Target Actual Allocation Allocation Equity securities 50% to 70% 36% Fixed income securities 30% to 50% 64% |
STOCK COMPENSATION PLANS
STOCK COMPENSATION PLANS | 3 Months Ended |
Mar. 31, 2021 | |
STOCK COMPENSATION PLANS | |
STOCK COMPENSATION PLANS | 10. STOCK COMPENSATION PLANS Restricted Stock Awards The Corporation’s restricted stock awards are service-based and awarded based on performance. Each award has a vesting period of four years . Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants. The Corporation has historically granted RSAs to members of the Board of Directors and management. Awards granted are set to vest equally over their award terms and are issued at no cost to the recipient. The table below summarizes each of the grant awards: Market Value at Date of Award Units Granted grant date Vesting Term February, 2017 28,427 13.39 4 years February, 2018 18,643 16.30 4 years April, 2018 8,000 16.00 Immediate February, 2019 27,790 15.70 4 years October, 2019 8,000 15.40 Immediate February, 2020 132,000 15.46 4 years October, 2020 8,000 9.46 Immediate January, 2021 64,000 13.43 4 years In the first three months of 2021, the Corporation issued 49,635 shares of its common stock for vested RSAs. In the first three months of 2020, the Corporation issued 25,521 shares of its common stock for vested RSAs. A summary of changes in our nonvested shares for the period follows: Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2021 $ Granted during the period 170,153 14.90 Forfeited during the period 64,000 13.43 Vested during the period (49,635) 12.91 Nonvested balance at March 31, 2021 184,518 $ 14.94 |
INCOME TAXES
INCOME TAXES | 3 Months Ended |
Mar. 31, 2021 | |
INCOME TAXES | |
INCOME TAXES | 11. INCOME TAXES The Corporation has reported deferred tax assets of $2.492 million at March 31, 2021. 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 March 31, 2021 had a net operating loss carryforwards for tax purposes of approximately $8.0 million. The 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. The Corporation recognized a federal income tax expense of approximately $.398 million for the three months ended March 31, 2021 and $.811 million for the three months ended March 31, 2020. |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 3 Months Ended |
Mar. 31, 2021 | |
FAIR VALUE | |
FAIR VALUE | 12. FAIR VALUE MEASUREMENTS Fair value estimates, methods, and assumptions are set forth below for the Corporation’s financial instruments. Cash, cash equivalents, and interest-bearing deposits 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 – Loans - Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, residential mortgage, and other consumer. The fair value of loans is calculated by discounting scheduled cash flows using discount rates reflecting the credit and interest rate risk inherent in the loan. The methodology in determining fair value of nonaccrual loans is to average them into the blended interest rate at 0 % interest. This has the effect of decreasing the carrying amount below the risk-free rate amount and, therefore, discounts the estimated fair value. Impaired loans are measured at the estimated fair value of the expected future cash flows at the loan’s effective interest rate or the fair value of the collateral for loans which are collateral dependent. Therefore, the carrying values of impaired loans approximate the estimated fair values for these assets. Deposits - The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits and savings, is equal to the amount payable on demand at the reporting date. The fair value of time deposits is based on the discounted value of contractual cash flows applying interest rates currently being offered on similar time deposits. Borrowings - Rates currently available for debt with similar terms and remaining maturities are used to estimate the fair value of existing debt. The fair value of borrowed funds due on demand is the amount payable at the reporting date. Accrued interest Off-balance-sheet instruments - The fair value of commitments is estimated using the fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements, the current interest rates, and the present creditworthiness of the counterparties. Since the differences in the current fees and those reflected to the off-balance-sheet instruments at year-end are immaterial, no amounts for fair value are presented. The following table presents information for financial instruments at March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, 2021 December 31, 2020 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 243,492 $ 243,492 $ 218,977 $ 218,977 Interest-bearing deposits Level 2 2,427 2,427 2,917 2,917 Securities available for sale Level 2 108,083 108,083 110,505 110,505 Securities available for sale Level 3 1,331 1,331 1,331 1,331 Federal Home Loan Bank stock Level 2 4,924 4,924 4,924 4,924 Net loans Level 3 1,057,914 1,061,119 1,071,776 1,072,770 Accrued interest receivable Level 3 4,176 4,176 4,310 4,310 Total financial assets $ 1,422,347 $ 1,425,552 $ 1,414,740 $ 1,415,734 Financial liabilities: Deposits Level 2 $ 1,273,279 $ 1,288,686 $ 1,258,776 $ 1,262,930 Borrowings Level 2 53,459 52,427 63,479 61,975 Accrued interest payable Level 3 211 211 453 453 Total financial liabilities $ 1,326,949 $ 1,341,324 $ 1,322,708 $ 1,325,358 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 March 31, 2021, and the valuation techniques used by the Corporation to determine those fair values. Level 1: In general, fair values determined by Level 1 inputs use quoted prices in active markets for identical assets or liabilities that the Corporation has the ability to access. Level 2: Fair values determined by Level 2 inputs use other inputs that are observable, either directly or indirectly. These Level 2 inputs include quoted prices for similar assets and liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals. Level 3: Level 3 inputs are unobservable inputs, including inputs available in situations where there is little, if any, market activity for the related asset or liability. The fair value of all investment securities at March 31, 2021 and December 31, 2020 were based on level 2 and level 3 inputs. There are no other assets or liabilities measured on a recurring basis at fair value. For additional information regarding investment securities, please refer to “Note 4 - Investment Securities.” The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended (dollars in thousands) March 31, 2021 (Level 1) (Level 2) (Level 3) March 31, 2021 Assets Corporate $ 29,124 $ — $ 28,624 $ 500 $ — US Treasury 1,070 — 1,070 — — US Agencies 6,564 — 6,564 — — US Agencies - MBS 31,292 — 31,292 — — Obligations of state and political subdivisions 41,364 — 40,533 831 2 $ 109,414 $ 2 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Twelve Months Ended (dollars in thousands) December 31, 2020 (Level 1) (Level 2) (Level 3) December 31, 2020 Assets Corporate $ 28,043 $ — $ 27,543 $ 500 $ — US Agencies 6,589 — 6,589 — — US Agencies - MBS 34,280 — 34,280 — — Obligations of state and political subdivisions 42,924 — 42,093 831 2 $ 111,836 $ 2 The Corporation had no Level 3 assets or liabilities measured at fair value on a recurring basis as of March 31, 2021, or December 31, 2020 other than as described above. In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability. The Corporation also has assets that under certain conditions are subject to measurement at fair value on a non-recurring basis. These assets include certain impaired loans and other real estate owned. The Corporation has estimated the fair values of these assets using Level 3 inputs, specifically discounted cash flow projections. Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2021 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended (dollars in thousands) March 31, 2021 (Level 1) (Level 2) (Level 3) March 31, 2021 Assets Impaired loans $ 8,416 $ — $ — $ 8,416 $ — Other real estate owned 1,692 — — 1,692 (52) $ (52) Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2020 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Year Ended (dollars in thousands) December 31, 2020 (Level 1) (Level 2) (Level 3) December 31, 2020 Assets Impaired loans $ 8,850 $ — $ — $ 8,850 $ 186 Other real estate held for sale 1,752 — — 1,752 (22) $ 164 Impaired loans categorized as Level 3 assets consist of non-homogeneous loans that are considered impaired. The Corporation estimates the fair value of the loans based on the present value of expected future cash flows using management’s best estimate of key assumptions. These assumptions include future payment ability, timing of payment streams, and estimated realizable values of available collateral (typically based on outside appraisals). |
SHAREHOLDERS' EQUITY
SHAREHOLDERS' EQUITY | 3 Months Ended |
Mar. 31, 2021 | |
SHAREHOLDERS' EQUITY | |
SHAREHOLDERS' EQUITY | 13. SHAREHOLDERS’ EQUITY The Corporation currently has one active share repurchase program and one repurchase program that has since expired. All share repurchase programs are conducted under authorizations by the Board of Directors. Under the now expired program, the Corporation repurchased 1,661 shares in 2020, 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 million on February 27, 2013, $.600 million on December 17, 2013 and an additional $.750 million on April 28, 2015. On August 28, 2019, the Corporation, under the authorization of the Board of Directors announced a new common stock repurchase program. Under the Repurchase Program, the Company is authorized to repurchase up to approximately 5 % of the Company’s outstanding common stock, and has no expiration date. During 2020, the Corporation repurchased 283,779 shares under this plan. The Corporation has formally paused any repurchase activity, with no repurchases made during 2021. |
COMMITMENTS, CONTINGENCIES AND
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | 3 Months Ended |
Mar. 31, 2021 | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | 14. COMMITMENTS, CONTINGENCIES AND CREDIT RISK Financial Instruments With Off-Balance-Sheet Risk The Corporation is a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The Corporation’s exposure to credit loss, in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit, is represented by the contractual amount of those instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. These commitments are as follows (dollars in thousands): March 31, December 31, 2021 2020 Commitments to extend credit: Variable rate $ 121,102 $ 114,458 Fixed rate 53,659 58,175 Standby letters of credit - Variable rate 8,003 8,781 Credit card commitments - Fixed rate 7,569 7,136 $ 190,333 $ 188,550 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation upon extension of credit, is based on management’s credit evaluation of the party. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties. Standby letters of credit are conditional commitments issued by the Corporation to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The commitments are structured to allow for 100% collateralization on all standby letters of credit. Credit card commitments are commitments on credit cards issued by the Corporation’s subsidiary and serviced by other companies. These commitments are unsecured. Legal Proceedings and Contingencies In the normal course of business, the Corporation is involved in various legal proceedings. For an expanded discussion on the Corporation’s legal proceedings, see Part II, Item 1, “Legal Proceedings” in this report. C oncentration of Credit Risk The Bank grants commercial, residential, agricultural, and consumer loans throughout Michigan and Northeastern Wisconsin. The Bank’s most prominent concentration in the loan portfolio relates to commercial real estate loans to operators of nonresidential buildings. This concentration at March 31, 2021 represents $137.356 million, or 16.78%, compared to $138.992 million, or 16.95 %, of the commercial loan portfolio on December 31, 2020. 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. |
SUBSEQUENT EVENT
SUBSEQUENT EVENT | 3 Months Ended |
Mar. 31, 2021 | |
SUBSEQUENT EVENT. | |
SUBSEQUENT EVENT | NOTE 15 SUBSEQUENT EVENT On April 12, 2021, the Corporation announced that it entered into an Agreement and Plan of Merger (“the Merger Agreement”) with Nicolet Bankshares, Inc (“Nicolet”). Pursuant to the terms of the agreement, the Corporation’s shareholders will receive cash. Further pursuant to the Agreement, the Corporation’s wholly owned subsidiary, mBank, will merge with and into Nicolet National Bank, which will be the surviving bank, with all bank branches operating under the Nicolet National Bank brand. Consummation of the merger is subject to the approval of the shareholders of the Corporation and Nicolet, regulatory agency approvals, and customary closing conditions contained in the Merger Agreement. |
SUMMARY OF SIGNIFICANT ACCOUN_2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 3 Months Ended |
Mar. 31, 2021 | |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | |
Basis of Presentation | Basis of Presentation The unaudited condensed consolidated financial statements of Mackinac Financial Corporation (the “Corporation”) have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. The unaudited consolidated financial statements and footnotes thereto should be read in conjunction with the audited consolidated financial statements and footnotes thereto included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2020. In order to properly reflect some categories of other income and other expenses, reclassifications of expense and income items have been made to prior period numbers. The “net” other income and other expenses were unchanged by these reclassifications. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, the valuation of investment securities, the valuation of foreclosed real estate, deferred tax assets, mortgage servicing rights, the assessment of goodwill for impairment, and the fair value of assets and liabilities acquired in business combinations. |
Acquired Loans | Acquired Loans Loans acquired with evidence of credit deterioration since inception and for which it is probable that all contractual payments will not be received are accounted for under ASC Topic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality (“ASC 310-30”). These loans are recorded at fair value at the time of acquisition, with no carryover of the related allowance for loan losses. Fair value of acquired loans is determined using a discounted cash flow methodology based on assumptions about the amount and timing of principal and interest payments, principal prepayments and principal defaults and losses, and current market rates. In recording the fair values of acquired impaired loans at acquisition date, management calculates a non-accretable difference (the credit component of the purchased loans) and an accretable difference (the yield component of the purchased loans). Over the life of the acquired loans, management continues to estimate cash flows expected to be collected. We evaluate at each balance sheet date whether it is probable that we will be unable to collect all cash flows expected at acquisition and if so, recognize a provision for loan loss in our consolidated statement of operations. For any significant increases in cash flows expected to be collected, we adjust the amount of the accretable yield recognized on a prospective basis over the pool’s remaining life. Performing acquired loans are accounted for under Financial Accounting Standards Board (“FASB”) Topic 310-20, Receivables – Nonrefundable Fees and Other Costs. Performance of certain loans may be monitored and based on management’s assessment of the cash flows and other facts available, portions of the accretable difference may be delayed or suspended if management deems appropriate. The Corporation’s policy for determining when to discontinue accruing interest on performing acquired loans and the subsequent accounting for such loans is essentially the same as the policy for originated loans. |
Allowance for Loan Losses | Allowance for Loan Losses The allowance for loan losses includes specific allowances related to loans, when they have been judged to be impaired. A loan is impaired when, based on current information, it is probable that the Corporation will not collect all amounts due in accordance with the contractual terms of the loan agreement. These specific allowances are based on discounted cash flows of expected future payments using the loan’s initial effective interest rate or the fair value of the collateral if the loan is collateral dependent. The Corporation also has an unallocated allowance for loan losses for loans not considered impaired. The allowance for loan losses is maintained at a level which management believes is adequate to provide for probable loan losses. Management periodically evaluates the adequacy of the allowance using the Corporation’s past loan loss experience, known and inherent risks in the portfolio, composition of the portfolio, current economic conditions, and other factors. The allowance does not include the effects of expected losses related to future events or future changes in economic conditions. This evaluation is inherently subjective since it requires material estimates that may be susceptible to significant change. Loans are charged against the allowance for loan losses when management believes the collectability of the principal is unlikely. In addition, various regulatory agencies periodically review the allowance for loan losses. These agencies may require additions to the allowance for loan losses based on their judgments of collectability. In management’s opinion, the allowance for loan losses is adequate to cover probable losses relating to specifically identified loans, as well as probable losses inherent in the balance of the loan portfolio as of the balance sheet date. |
Stock Compensation Plans | Stock Compensation Plans On May 22, 2012, the Corporation’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock awards (“RSAs”), stock grants, or stock appreciation rights. The aggregate number of shares of the Corporation’s common stock issuable under the plan is 575,000. At March 31, 2021 there were 6,560 shares available for issuance under this plan. Awards are made to executive officers at the discretion of the compensation committee of the board of directors. Awards are made to certain other senior officers at the discretion of the Corporation’s management. Compensation cost equal to the fair value of the award is recognized over the vesting period. |
EARNINGS PER SHARE (Tables)
EARNINGS PER SHARE (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
EARNINGS PER SHARE | |
Schedule showing the computation of basic and diluted earnings per share | The following shows the computation of basic and diluted earnings per share for the three months ended March 31, 2021 and 2020 (dollars in thousands, except per share data): Three Months Ended March 31, 2021 2020 (Numerator): Net income $ 3,880 $ 3,051 (Denominator): Weighted average shares outstanding 10,522,899 10,717,967 Effect of restricted stock awards — 96,824 Diluted weighted average shares outstanding 10,522,899 10,814,791 Income per common share: Basic $ 0.37 $ 0.28 Diluted $ 0.37 $ 0.28 |
INVESTMENT SECURITIES (Tables)
INVESTMENT SECURITIES (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
SECURITIES AVAILABLE FOR SALE | |
Schedule of carrying value and estimated fair value of securities available for sale | The amortized cost and estimated fair value of investment securities available for sale as of March 31, 2021 and December 31, 2020 are as follows (dollars in thousands): Gross Gross Amortized Unrealized Unrealized Estimated Cost Gains Losses Fair Value March 31, 2021 US Treasury $ 1,067 $ 3 $ — $ 1,070 Corporate 29,042 304 (222) 29,124 US Agencies 6,486 78 — 6,564 US Agencies - MBS 30,389 906 (3) 31,292 Obligations of states and political subdivisions 40,353 1,061 (50) 41,364 Total securities available for sale $ 107,337 $ 2,352 $ (275) $ 109,414 December 31, 2020 US Treasury $ — $ — $ — $ — Corporate 27,815 247 (19) 28,043 US Agencies 6,480 109 — 6,589 US Agencies - MBS 33,372 914 (6) 34,280 Obligations of states and political subdivisions 41,682 1,242 — 42,924 Total securities available for sale $ 109,349 $ 2,512 $ (25) $ 111,836 |
Schedule of amortized cost and estimated fair value sore investment securities by contractual maturity | The following table presents the amortized cost and estimated fair value of investment securities by contractual maturity as of March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, December 31, 2021 2020 Amortized Estimated Amortized Estimated Cost Fair Value Cost Fair Value Available -for-sale securities Under 1 year $ 14,366 $ 14,518 $ 15,645 $ 15,820 After 1 year through 5 years 21,202 21,754 22,554 23,201 After 5 years through 10 years 27,548 27,724 24,965 25,261 After 10 years 13,832 14,126 12,813 13,274 Subtotal 76,948 78,122 75,977 77,556 US Agencies - MBS 30,389 31,292 33,372 34,280 Total available -for-sale securities $ 107,337 $ 109,414 $ 109,349 $ 111,836 |
Schedule of securities with gross unrealized losses aggregated by investment category and length of time these individual securities have been in a loss position | The following is information pertaining to securities with gross unrealized losses at March 31, 2021 and December 31, 2020 (dollars in thousands): Less Than Twelve Months Over Twelve Months Total Number Gross Number Gross Number Gross of Fair Unrealized of Fair Unrealized of Fair Unrealized March 31, 2021 Securities Value Loss Securities Value Loss Securities Value Loss Corporate 8 14,753 $ (222) — — $ — 8 $ 14,753 $ (222) US Agencies — — — — — — — — — US Agencies - MBS — — — 4 150 (3) 4 150 (3) Obligations of states and political subdivisions 2 1,373 (50) — — — 2 1,373 (50) Total 10 $ 16,126 $ (272) 4 $ 150 $ (3) 14 $ 16,276 $ (275) Less Than Twelve Months Over Twelve Months Total Number Gross Number Gross Number Gross of Fair Unrealized of Fair Unrealized of Fair Unrealized December 31, 2020 Securities Value Loss Securities Value Loss Securities Value Loss Corporate 4 $ 9,293 $ (19) — $ — $ — 4 $ 9,293 $ (19) US Agencies — — — — — — — — — US Agencies - MBS 4 83 (2) 2 123 (4) 6 206 (6) Obligations of states and political subdivisions — — — — — — — — — Total 8 $ 9,376 $ (21) 2 $ 123 $ (4) 10 $ 9,499 $ (25) |
LOANS (Tables)
LOANS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
Schedule of composition of loans | The composition of loans is as follows (dollars in thousands): March 31, December 31, 2021 2020 Commercial real estate $ 496,257 $ 498,450 Commercial, financial, and agricultural 273,087 273,759 Commercial construction 49,240 47,698 One to four family residential real estate 214,034 227,044 Consumer 18,392 18,980 Consumer construction 12,746 11,661 Total loans $ 1,063,756 $ 1,077,592 |
Schedule of the accretable yield by acquisition | The table below presents a rollforward of the accretable yield on acquired loans for the three months ended March 31, 2021 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 53 $ — $ 53 $ 183 $ — $ 183 Accretion (2) — (2) — — — Reclassification from nonaccretable difference 2 — 2 — — — Balance, March 31, 2021 $ 53 $ — $ 53 $ 183 $ — $ 183 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 12 $ — $ 12 $ 292 $ 869 $ 1,161 Accretion — — — (3) (205) (208) Reclassification from nonaccretable difference — — — 2 (1) 1 Balance, March 31, 2021 $ 12 $ — $ 12 $ 291 $ 663 $ 954 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2020 $ 85 $ 130 $ 215 $ 625 $ 999 $ 1,624 Accretion (1) (26) (27) (6) (231) (237) Reclassification from nonaccretable difference 1 — 1 5 (1) 4 Balance, March 31, 2021 $ 85 $ 104 $ 189 $ 624 $ 767 $ 1,391 The table below presents a rollforward of the accretable yield on acquired loans for the three months ended March 31, 2020 (dollars in thousands): PFC Eagle River Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 105 $ — $ 105 $ 209 $ — $ 209 Accretion (90) — (90) (77) — (77) Reclassification from nonaccretable difference 52 — 52 58 — 58 Balance, March 31, 2020 $ 67 $ — $ 67 $ 190 $ — $ 190 Niagara First Federal Northern Michigan Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 19 $ — $ 19 $ 518 $ 1,953 $ 2,471 Accretion (4) — (4) (237) (310) (547) Reclassification from nonaccretable difference 3 — 3 177 — 177 Balance, March 31, 2020 $ 18 $ — $ 18 $ 458 $ 1,643 $ 2,101 Lincoln Community Bank Total Acquired Acquired Acquired Acquired Acquired Acquired Impaired Non-impaired Total Impaired Non-impaired Total Balance, December 31, 2019 $ 108 $ 264 $ 372 $ 959 $ 2,217 $ 3,176 Accretion (3) (38) (41) (411) (348) (759) Reclassification from nonaccretable difference 3 — 3 293 — 293 Balance, March 31, 2020 $ 108 $ 226 $ 334 $ 841 $ 1,869 $ 2,710 |
Schedule of the allowance for loan losses | An analysis of the allowance for loan losses for the three months ended March 31, 2021 and March 30, 2020 is as follows (dollars in thousands): March 31, March 31, 2021 2020 Balance, January 1 $ 5,816 $ 5,308 Recoveries on loans previously charged off 31 29 Loans charged off (55) (145) Provision 50 100 Balance at end of period $ 5,842 $ 5,292 |
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 March 31, 2021 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 $ 2,983 $ 1,734 $ 209 $ 605 $ 8 $ 5 $ 272 $ 5,816 Charge-offs (8) — — (18) (29) — — (55) Recoveries 3 11 — 5 12 — — 31 Provision (240) 331 — (32) 17 1 (27) 50 Ending balance ALLR $ 2,738 $ 2,076 $ 209 $ 560 $ 8 $ 6 $ 245 $ 5,842 Loans: Ending balance $ 496,257 $ 273,087 $ 49,240 $ 214,034 $ 12,746 $ 18,392 $ — $ 1,063,756 Ending balance ALLR (2,738) (2,076) (209) (560) (8) (6) (245) (5,842) Net loans $ 493,519 $ 271,011 $ 49,031 $ 213,474 $ 12,738 $ 18,386 $ (245) $ 1,057,914 Ending balance ALLR: Individually evaluated $ 277 $ 594 $ — $ — $ — $ — $ — $ 871 Collectively evaluated 2,461 1,482 209 560 8 6 245 4,971 Total $ 2,738 $ 2,076 $ 209 $ 560 $ 8 $ 6 $ 245 $ 5,842 Ending balance Loans: Individually evaluated $ 1,975 $ 3,887 $ 261 $ — $ — $ — $ — $ 6,123 Collectively evaluated 493,125 268,972 48,890 213,231 12,730 18,392 — 1,055,340 Acquired with deteriorated credit quality 1,157 228 89 803 16 — — 2,293 Total $ 496,257 $ 273,087 $ 49,240 $ 214,034 $ 12,746 $ 18,392 $ — $ 1,063,756 Impaired loans, by definition, are individually evaluated. A breakdown of the allowance for loan losses and recorded balances in loans at March 31, 2020 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 $ 1,189 $ 1,197 $ 71 $ 148 $ 11 $ 13 $ 2,679 $ 5,308 Charge-offs — (66) — (22) (8) (49) — (145) Recoveries 6 — — 10 — 13 — 29 Provision 623 502 27 291 7 33 (1,383) 100 Ending balance ALLR $ 1,818 $ 1,633 $ 98 $ 427 $ 10 $ 10 $ 1,296 $ 5,292 Loans: Ending balance $ 522,659 $ 207,727 $ 29,971 $ 244,059 $ 19,386 $ 20,375 $ — $ 1,044,177 Ending balance ALLR (1,818) (1,633) (98) (427) (10) (10) (1,296) (5,292) Net loans $ 520,841 $ 206,094 $ 29,873 $ 243,632 $ 19,376 $ 20,365 $ (1,296) $ 1,038,885 Ending balance ALLR: Individually evaluated $ 913 $ 476 $ — $ — $ — $ — $ — $ 1,389 Collectively evaluated 905 1,157 98 427 10 10 1,296 3,903 Total $ 1,818 $ 1,633 $ 98 $ 427 $ 10 $ 10 $ 1,296 $ 5,292 Ending balance Loans: Individually evaluated $ 2,278 $ 1,454 $ — $ — $ — $ — $ — $ 3,732 Collectively evaluated 518,642 203,857 29,604 243,251 19,386 20,374 — 1,035,114 Acquired with deteriorated credit quality 1,739 2,416 367 808 — 1 — 5,331 Total $ 522,659 $ 207,727 $ 29,971 $ 244,059 $ 19,386 $ 20,375 $ — $ 1,044,177 |
Schedule of breakdown of loans by risk category | Below is a breakdown of loans by risk category as of March 31, 2021 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 7,621 $ 10,114 $ 225,610 $ 246,287 $ 2,632 $ 3,993 $ — $ — $ 496,257 Commercial, financial and agricultural 120,509 12,715 48,855 86,331 597 4,080 — — 273,087 Commercial construction — 37 20,465 16,530 488 381 — 11,339 49,240 One-to-four family residential real estate — 2,120 4,698 16,766 365 1,605 — 188,480 214,034 Consumer construction — — — — — — — 12,746 12,746 Consumer — 60 114 1,234 — 51 — 16,933 18,392 Total loans $ 128,130 $ 25,046 $ 299,742 $ 367,148 $ 4,082 $ 10,110 $ — $ 229,498 $ 1,063,756 At March 31, 2021, $109.733 million of Paycheck Protection Program (“PPP”) loans are included with a risk rating of “1” in the Commercial, financial and agricultural category. Below is a breakdown of loans by risk category as of December 31, 2020 (dollars in thousands): (1) (2) (3) (4) (44) (6) (7) Rating Strong Good Average Acceptable Acceptable Watch Substandard Doubtful Unassigned Total Commercial real estate $ 7,425 $ 10,521 $ 223,875 $ 249,159 $ 3,352 $ 4,118 $ — $ — $ 498,450 Commercial, financial and agricultural 116,107 6,760 51,150 94,743 656 4,343 — — 273,759 Commercial construction — 40 19,063 16,671 600 385 — 10,939 47,698 One-to-four family residential real estate — 3,139 5,614 18,864 369 1,814 — 197,244 227,044 Consumer construction — — — — — — — 11,661 11,661 Consumer — 79 128 1,141 — 67 — 17,565 18,980 Total loans $ 123,532 $ 20,539 $ 299,830 $ 380,578 $ 4,977 $ 10,727 $ — $ 237,409 $ 1,077,592 |
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 March 31, 2021 Commercial real estate $ 1,587 $ 1,545 $ 3,132 $ 5,343 $ 277 Commercial, financial and agricultural 2,885 1,230 4,115 4,247 594 Commercial construction 350 — 350 480 — One to four family residential real estate 803 — 803 2,057 — Consumer construction — — — — — Consumer 16 — 16 17 — Total $ 5,641 $ 2,775 $ 8,416 $ 12,144 $ 871 December 31, 2020 Commercial real estate $ 1,251 $ 2,309 $ 3,560 $ 5,786 $ 476 Commercial, financial and agricultural 2,423 1,445 3,868 3,946 679 Commercial construction 537 — 537 678 — One to four family residential real estate 869 — 869 1,993 — Consumer construction — — — — — Consumer 16 — 16 19 — Total $ 5,096 $ 3,754 $ 8,850 $ 12,422 $ 1,155 Individually Evaluated Impaired Loans March 31, 2021 December 31, 2020 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 $ 5,671 $ 62 $ 6,860 $ 270 Commercial, financial and agricultural 883 4 1,204 13 Commercial construction 117 6 541 27 One to four family residential real estate 2,571 31 3,064 135 Consumer construction — — — — Consumer 28 — 37 1 Total $ 9,270 $ 103 $ 11,706 $ 446 |
Summary of past due loans | A summary of past due loans at March 31, 2021 and December 31, 2020 is as follows (dollars in thousands): March 31, December 31, 2021 2020 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 $ — $ — $ 1,446 $ 1,446 $ 24 $ — $ 1,481 $ 1,505 Commercial, financial and agricultural — — 384 384 42 — 478 520 Commercial construction — — 61 61 — — 79 79 One to four family residential real estate 1,230 — 3,100 4,330 1,925 3,371 5,296 Consumer construction — — — — — — — — Consumer 51 — 33 84 78 — 49 127 Total past due loans $ 1,281 $ — $ 5,024 $ 6,305 $ 2,069 $ — $ 5,458 $ 7,527 |
Schedule of activity in insider loans granted to the entity's executive officers and directors, including their families and firms | The Bank, in the ordinary course of business, grants loans to the Corporation’s executive officers and directors, including their families and firms in which they are principal owners. Activity in such loans is summarized below (dollars in thousands): Three Months Ended Three Months Ended March 31, March 31, 2021 2020 Loans outstanding, January 1 $ 11,778 $ 12,196 New loans 500 — Net activity on revolving lines of credit (18) (354) Repayment (69) (100) Loans outstanding at end of period $ 12,191 $ 11,742 |
PFC | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the PFC acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 13,290 $ 53,849 $ 67,139 Nonaccretable difference (2,234) — (2,234) Expected cash flows 11,056 53,849 64,905 Accretable yield (744) (2,100) (2,844) Carrying balance at acquisition date $ 10,312 $ 51,749 $ 62,061 |
Eagle River | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the Eagle River acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 3,401 $ 80,737 $ 84,138 Nonaccretable difference (1,172) — (1,172) Expected cash flows 2,229 80,737 82,966 Accretable yield (391) (1,700) (2,091) Carrying balance at acquisition date $ 1,838 $ 79,037 $ 80,875 |
Niagara Bancorporation | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the Niagara acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 2,105 $ 30,555 $ 32,660 Nonaccretable difference (265) — (265) Expected cash flows 1,840 30,555 32,395 Accretable yield (88) (600) (688) Carrying balance at acquisition date $ 1,752 $ 29,955 $ 31,707 |
FFNM | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the FFNM acquired portfolio and the fair value adjustments at acquisition date (dollars in thousands): Acquired Acquired Acquired Impaired Non-impaired Total Loans acquired - contractual payments $ 5,440 $ 187,302 $ 192,742 Nonaccretable difference (2,100) — (2,100) Expected cash flows 3,340 187,302 190,642 Accretable yield (700) (4,498) (5,198) Carrying balance at acquisition date $ 2,640 $ 182,804 $ 185,444 |
Lincoln Community Bank | |
Schedule of acquired portfolio at acquisition date | The table below details the outstanding balances of the Lincoln acquired portfolio and the 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 (421) — (421) Expected cash flows 1,480 37,700 39,180 Accretable yield (140) (493) (633) Carrying balance at acquisition date $ 1,340 $ 37,207 $ 38,547 |
GOODWILL AND OTHER INTANGIBLE_2
GOODWILL AND OTHER INTANGIBLE ASSETS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
GOODWILL AND OTHER INTANGIBLE ASSETS | |
Schedule of deposit based intangible asset amortization | Deposit Based Amortization Expense Intangible for the Future Annual March 31, 2021 period end Amortization Balance March 31, 2021 Expense Peninsula $ 443 $ 30 $ 121 Eagle River 505 25 99 Niagara 163 8 30 FFNM 2,074 72 290 Lincoln 1,015 34 135 Total $ 4,200 $ 169 $ 675 Deposit Based Intangible 2020 December 31, 2020 Amortization Balance Expense Peninsula $ 473 $ 121 Eagle River 529 99 Niagara 170 30 FFNM 2,147 290 Lincoln 1,049 135 Total $ 4,368 $ 675 |
SERVICING RIGHTS (Tables)
SERVICING RIGHTS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
SERVICING RIGHTS | |
Summary of mortgage servicing rights capitalized and amortized | The following table summarizes MSRs capitalized and amortized (dollars in thousands) for the three month periods ending March 31, 2021 and March 31, 2020: March 31, March 31, 2021 2020 Balance at beginning of period $ 1,359 $ 1,499 Additions from loans sold with servicing retained 75 — Amortization (38) (35) Balance at end of period $ 1,396 $ 1,464 Balance of loan servicing portfolio $ 191,363 $ 246,370 Mortgage servicing rights as % of portfolio .73% .59% Fair value of servicing rights 1,436 2,159 |
BORROWINGS (Tables)
BORROWINGS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
BORROWINGS | |
Schedule of borrowings | Borrowings consist of the following at March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, December 31, 2021 2020 Federal Home Loan Bank fixed rate advances $ 53,135 $ 63,155 USDA Rural Development note 324 324 $ 53,459 $ 63,479 |
DEFINED BENEFIT PENSION PLAN (T
DEFINED BENEFIT PENSION PLAN (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
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, 2030 are detailed in the table below (dollars in thousands): 2021 $ 133 2022 140 2023 144 2024 142 2025 157 2026-2030 901 Total $ 1,617 |
Schedule of assumptions in the actuarial valuation | 2021 2020 Weighted average discount rate 2.45% 2.45% Rate of increase in future compensation levels N/A N/A Expected long-term rate of return on plan assets 2.00% 2.00% |
Schedule of asset allocation | Target Actual Allocation Allocation Equity securities 50% to 70% 36% Fixed income securities 30% to 50% 64% |
STOCK COMPENSATION PLANS (Table
STOCK COMPENSATION PLANS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
STOCK COMPENSATION PLANS | |
Summary of restricted stock units awards granted | Market Value at Date of Award Units Granted grant date Vesting Term February, 2017 28,427 13.39 4 years February, 2018 18,643 16.30 4 years April, 2018 8,000 16.00 Immediate February, 2019 27,790 15.70 4 years October, 2019 8,000 15.40 Immediate February, 2020 132,000 15.46 4 years October, 2020 8,000 9.46 Immediate January, 2021 64,000 13.43 4 years |
Summary of changes in nonvested shares | Weighted Average Number Grant Date Outstanding Fair Value Nonvested balance at January 1, 2021 $ Granted during the period 170,153 14.90 Forfeited during the period 64,000 13.43 Vested during the period (49,635) 12.91 Nonvested balance at March 31, 2021 184,518 $ 14.94 |
FAIR VALUE MEASUREMENTS (Tables
FAIR VALUE MEASUREMENTS (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
FAIR VALUE | |
Schedule presenting information for financial instruments | The following table presents information for financial instruments at March 31, 2021 and December 31, 2020 (dollars in thousands): March 31, 2021 December 31, 2020 Level in Fair Carrying Estimated Carrying Estimated Value Hierarchy Amount Fair Value Amount Fair Value Financial assets: Cash and cash equivalents Level 1 $ 243,492 $ 243,492 $ 218,977 $ 218,977 Interest-bearing deposits Level 2 2,427 2,427 2,917 2,917 Securities available for sale Level 2 108,083 108,083 110,505 110,505 Securities available for sale Level 3 1,331 1,331 1,331 1,331 Federal Home Loan Bank stock Level 2 4,924 4,924 4,924 4,924 Net loans Level 3 1,057,914 1,061,119 1,071,776 1,072,770 Accrued interest receivable Level 3 4,176 4,176 4,310 4,310 Total financial assets $ 1,422,347 $ 1,425,552 $ 1,414,740 $ 1,415,734 Financial liabilities: Deposits Level 2 $ 1,273,279 $ 1,288,686 $ 1,258,776 $ 1,262,930 Borrowings Level 2 53,459 52,427 63,479 61,975 Accrued interest payable Level 3 211 211 453 453 Total financial liabilities $ 1,326,949 $ 1,341,324 $ 1,322,708 $ 1,325,358 |
Schedule of investment securities measured at fair value on a recurring basis | The table below shows investment securities measured at fair value on a recurring basis (dollars in thousands): Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended (dollars in thousands) March 31, 2021 (Level 1) (Level 2) (Level 3) March 31, 2021 Assets Corporate $ 29,124 $ — $ 28,624 $ 500 $ — US Treasury 1,070 — 1,070 — — US Agencies 6,564 — 6,564 — — US Agencies - MBS 31,292 — 31,292 — — Obligations of state and political subdivisions 41,364 — 40,533 831 2 $ 109,414 $ 2 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Twelve Months Ended (dollars in thousands) December 31, 2020 (Level 1) (Level 2) (Level 3) December 31, 2020 Assets Corporate $ 28,043 $ — $ 27,543 $ 500 $ — US Agencies 6,589 — 6,589 — — US Agencies - MBS 34,280 — 34,280 — — Obligations of state and political subdivisions 42,924 — 42,093 831 2 $ 111,836 $ 2 |
Schedule of assets measured at fair value on a non-recurring basis | Assets Measured at Fair Value on a Nonrecurring Basis at March 31, 2021 Quoted Prices Significant Significant Total (Gains) in Active Markets Other Observable Unobservable Losses for Balance at for Identical Assets Inputs Inputs Three Months Ended (dollars in thousands) March 31, 2021 (Level 1) (Level 2) (Level 3) March 31, 2021 Assets Impaired loans $ 8,416 $ — $ — $ 8,416 $ — Other real estate owned 1,692 — — 1,692 (52) $ (52) Assets Measured at Fair Value on a Nonrecurring Basis at December 31, 2020 Quoted Prices Significant Significant in Active Markets Other Observable Unobservable Total (Gains) Losses for Balance at for Identical Assets Inputs Inputs Year Ended (dollars in thousands) December 31, 2020 (Level 1) (Level 2) (Level 3) December 31, 2020 Assets Impaired loans $ 8,850 $ — $ — $ 8,850 $ 186 Other real estate held for sale 1,752 — — 1,752 (22) $ 164 |
COMMITMENTS, CONTINGENCIES, AND
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Tables) | 3 Months Ended |
Mar. 31, 2021 | |
COMMITMENTS, CONTINGENCIES AND CREDIT RISK | |
Schedule of commitments | March 31, December 31, 2021 2020 Commitments to extend credit: Variable rate $ 121,102 $ 114,458 Fixed rate 53,659 58,175 Standby letters of credit - Variable rate 8,003 8,781 Credit card commitments - Fixed rate 7,569 7,136 $ 190,333 $ 188,550 |
SUMMARY OF SIGNIFICANT ACCOUN_3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details). - 2012 Incentive Compensation Plan - shares | Mar. 31, 2021 | May 22, 2012 |
Stock Compensation Plans | ||
Total authorized share balance | 575,000 | |
Shares available for grant | 6,560 |
EARNINGS PER SHARE (Details)
EARNINGS PER SHARE (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
(Numerator): | ||
Net income | $ 3,880 | $ 3,051 |
(Denominator): | ||
Weighted average shares outstanding | 10,522,899 | 10,717,967 |
Effect of restricted stock awards | 96,824 | |
Diluted weighted average shares outstanding | 10,522,899 | 10,814,791 |
Income per common share: | ||
Basic (in dollars per share) | $ 0.37 | $ 0.28 |
Diluted (in dollars per share) | $ 0.37 | $ 0.28 |
INVESTMENT SECURITIES (Details)
INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
SECURITIES AVAILABLE FOR SALE | ||
Increase (Decrease) In Fair Value Of Marketable Securities | $ 2,422 | |
Amortized cost | 107,337 | $ 109,349 |
Estimated Fair Value | 109,414 | 111,836 |
Available-for-sale Securities | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 107,337 | 109,349 |
Gross Unrealized Gains | 2,352 | 2,512 |
Gross Unrealized Losses | (275) | (25) |
Estimated Fair Value | 109,414 | 111,836 |
US Treasury | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 1,067 | |
Gross Unrealized Gains | 3 | |
Estimated Fair Value | 1,070 | |
Corporate | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 29,042 | 27,815 |
Gross Unrealized Gains | 304 | 247 |
Gross Unrealized Losses | (222) | (19) |
Estimated Fair Value | 29,124 | 28,043 |
US Agencies | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 6,486 | 6,480 |
Gross Unrealized Gains | 78 | 109 |
Estimated Fair Value | 6,564 | 6,589 |
US Agencies - MBS | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 30,389 | 33,372 |
Gross Unrealized Gains | 906 | 914 |
Gross Unrealized Losses | (3) | (6) |
Estimated Fair Value | 31,292 | 34,280 |
Obligations of states and political subdivisions | ||
SECURITIES AVAILABLE FOR SALE | ||
Amortized cost | 40,353 | 41,682 |
Gross Unrealized Gains | 1,061 | 1,242 |
Gross Unrealized Losses | (50) | |
Estimated Fair Value | $ 41,364 | $ 42,924 |
INVESTMENT SECURITIES - BY CONT
INVESTMENT SECURITIES - BY CONTRACTUAL MATURITY (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Amortized Cost | ||
Due in one year or less | $ 14,366 | $ 15,645 |
Due after one year through five years | 21,202 | 22,554 |
Due after five years through ten years | 27,548 | 24,965 |
Due after ten years | 13,832 | 12,813 |
Subtotal | 76,948 | 75,977 |
US Agencies - MBS | 30,389 | 33,372 |
Amortized cost | 107,337 | 109,349 |
Estimated Fair Value | ||
Due in one year or less | 14,518 | 15,820 |
Due after one year through five years | 21,754 | 23,201 |
Due after five years through ten years | 27,724 | 25,261 |
Due after ten years | 14,126 | 13,274 |
Subtotal | 78,122 | 77,556 |
US Agencies - MBS | 31,292 | 34,280 |
Estimated Fair Value | 109,414 | $ 111,836 |
Collateral Pledged | ||
Estimated Fair Value | ||
Investment securities at cost | 20,887 | |
Securities held as collateral at fair value | $ 2,285 |
INVESTMENT SECURITIES - GROSS U
INVESTMENT SECURITIES - GROSS UNREALIZED LOSSES AND LENGTH OF TIME IN LOSS POSITION (Details) $ in Thousands | Mar. 31, 2021USD ($)security | Dec. 31, 2020USD ($)security |
Number of Securities | ||
Number of Securities, Less Than Twelve Months | security | 10 | 8 |
Number of Securities, Over Twelve Months | security | 4 | 2 |
Total Number of Securities | security | 14 | 10 |
Fair Value | ||
Fair Value, Less Than Twelve Months | $ 16,126 | $ 9,376 |
Fair Value, Over Twelve Months | 150 | 123 |
Total Fair Value | 16,276 | 9,499 |
Gross Unrealized Loss | ||
Gross Unrealized Loss, Less Than Twelve Months | (272) | (21) |
Gross Unrealized Loss, Over Twelve Months | (3) | (4) |
Total Gross Unrealized Loss | $ (275) | $ (25) |
Corporate | ||
Number of Securities | ||
Number of Securities, Less Than Twelve Months | security | 8 | 4 |
Total Number of Securities | security | 8 | 4 |
Fair Value | ||
Fair Value, Less Than Twelve Months | $ 14,753 | $ 9,293 |
Total Fair Value | 14,753 | 9,293 |
Gross Unrealized Loss | ||
Gross Unrealized Loss, Less Than Twelve Months | (222) | (19) |
Total Gross Unrealized Loss | $ (222) | $ (19) |
US Agencies - MBS | ||
Number of Securities | ||
Number of Securities, Less Than Twelve Months | security | 4 | |
Number of Securities, Over Twelve Months | security | 4 | 2 |
Total Number of Securities | security | 4 | 6 |
Fair Value | ||
Fair Value, Less Than Twelve Months | $ 83 | |
Fair Value, Over Twelve Months | $ 150 | 123 |
Total Fair Value | 150 | 206 |
Gross Unrealized Loss | ||
Gross Unrealized Loss, Less Than Twelve Months | (2) | |
Gross Unrealized Loss, Over Twelve Months | (3) | (4) |
Total Gross Unrealized Loss | $ (3) | $ (6) |
Obligations of states and political subdivisions | ||
Number of Securities | ||
Number of Securities, Less Than Twelve Months | security | 2 | |
Total Number of Securities | security | 2 | |
Fair Value | ||
Fair Value, Less Than Twelve Months | $ 1,373 | |
Total Fair Value | 1,373 | |
Gross Unrealized Loss | ||
Gross Unrealized Loss, Less Than Twelve Months | (50) | |
Total Gross Unrealized Loss | $ (50) |
LOANS (Details)
LOANS (Details) - USD ($) | 3 Months Ended | |||||||
Mar. 31, 2021 | Mar. 31, 2020 | Dec. 31, 2020 | Oct. 01, 2018 | May 18, 2018 | Aug. 31, 2016 | Apr. 29, 2016 | Dec. 05, 2014 | |
Loans | ||||||||
Total loans | $ 1,063,756,000 | $ 1,044,177,000 | $ 1,077,592,000 | |||||
Acquired portfolio | ||||||||
Balance at the beginning of period | 1,624,000 | 3,176,000 | ||||||
Accretion | (237,000) | (759,000) | ||||||
Reclassification from nonaccretable difference | 4,000 | 293,000 | ||||||
Balance at the end of period | 1,391,000 | 2,710,000 | ||||||
Changes in the allowance for loan losses | ||||||||
Net charge off activity | 24,000 | 116,000 | ||||||
Provision for loan losses | 50,000 | 100,000 | ||||||
PFC | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 67,139,000 | |||||||
Nonaccretable difference | (2,234,000) | |||||||
Expected cash flows | 64,905,000 | |||||||
Accretable yield | (2,844,000) | |||||||
Carrying balance at acquisition date | 62,061,000 | |||||||
Balance at the beginning of period | 53,000 | 105,000 | ||||||
Accretion | (2,000) | (90,000) | ||||||
Reclassification from nonaccretable difference | 2,000 | 52,000 | ||||||
Balance at the end of period | 53,000 | 67,000 | ||||||
Eagle River | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 84,138,000 | |||||||
Nonaccretable difference | (1,172,000) | |||||||
Expected cash flows | 82,966,000 | |||||||
Accretable yield | (2,091,000) | |||||||
Carrying balance at acquisition date | 80,875,000 | |||||||
Balance at the beginning of period | 183,000 | 209,000 | ||||||
Accretion | (77,000) | |||||||
Reclassification from nonaccretable difference | 58,000 | |||||||
Balance at the end of period | 183,000 | 190,000 | ||||||
Niagara Bancorporation | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 32,660,000 | |||||||
Nonaccretable difference | (265,000) | |||||||
Expected cash flows | 32,395,000 | |||||||
Accretable yield | (688,000) | |||||||
Carrying balance at acquisition date | 31,707,000 | |||||||
Balance at the beginning of period | 12,000 | 19,000 | ||||||
Accretion | (4,000) | |||||||
Reclassification from nonaccretable difference | 3,000 | |||||||
Balance at the end of period | 12,000 | 18,000 | ||||||
FFNM | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 192,742,000 | |||||||
Nonaccretable difference | (2,100,000) | |||||||
Expected cash flows | 190,642,000 | |||||||
Accretable yield | (5,198,000) | |||||||
Carrying balance at acquisition date | 185,444,000 | |||||||
Balance at the beginning of period | 1,161,000 | 2,471,000 | ||||||
Accretion | (208,000) | (547,000) | ||||||
Reclassification from nonaccretable difference | 1,000 | 177,000 | ||||||
Balance at the end of period | 954,000 | 2,101,000 | ||||||
Lincoln Community Bank | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 39,601,000 | |||||||
Nonaccretable difference | (421,000) | |||||||
Expected cash flows | 39,180,000 | |||||||
Accretable yield | (633,000) | |||||||
Carrying balance at acquisition date | 38,547,000 | |||||||
Balance at the beginning of period | 215,000 | 372,000 | ||||||
Accretion | (27,000) | (41,000) | ||||||
Reclassification from nonaccretable difference | 1,000 | 3,000 | ||||||
Balance at the end of period | 189,000 | 334,000 | ||||||
Commercial real estate | Commercial Real Estate Portfolio Segment [Member] | ||||||||
Loans | ||||||||
Total loans | 496,257,000 | 522,659,000 | 498,450,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | (240,000) | 623,000 | ||||||
Commercial, financial, and agricultural | Commercial loan portfolio | ||||||||
Loans | ||||||||
Total loans | 273,087,000 | 207,727,000 | 273,759,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | 331,000 | 502,000 | ||||||
Commercial construction loan receivables [Member] | Commercial construction loan receivables [Member] | ||||||||
Loans | ||||||||
Total loans | 49,240,000 | 29,971,000 | 47,698,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | 27,000 | |||||||
One to four family residential real estate | Residential Portfolio Segment [Member] | ||||||||
Loans | ||||||||
Total loans | 214,034,000 | 244,059,000 | 227,044,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | (32,000) | 291,000 | ||||||
Consumer | Consumer Portfolio Segment [Member] | ||||||||
Loans | ||||||||
Total loans | 18,392,000 | 20,375,000 | 18,980,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | 1,000 | 33,000 | ||||||
Consumer construction | Consumer construction | ||||||||
Loans | ||||||||
Total loans | 12,746,000 | 19,386,000 | $ 11,661,000 | |||||
Changes in the allowance for loan losses | ||||||||
Provision for loan losses | 17,000 | 7,000 | ||||||
Acquired Impaired | ||||||||
Acquired portfolio | ||||||||
Balance at the beginning of period | 625,000 | 959,000 | ||||||
Accretion | (6,000) | (411,000) | ||||||
Reclassification from nonaccretable difference | 5,000 | 293,000 | ||||||
Balance at the end of period | 624,000 | 841,000 | ||||||
Acquired Impaired | PFC | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 13,290,000 | $ 13,290,000 | ||||||
Nonaccretable difference | (2,234,000) | |||||||
Expected cash flows | 11,056,000 | |||||||
Accretable yield | (744,000) | |||||||
Carrying balance at acquisition date | 10,312,000 | |||||||
Balance at the beginning of period | 53,000 | 105,000 | ||||||
Accretion | (2,000) | (90,000) | ||||||
Reclassification from nonaccretable difference | 2,000 | 52,000 | ||||||
Balance at the end of period | 53,000 | 67,000 | ||||||
Acquired Impaired | Eagle River | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 3,401,000 | $ 3,401,000 | ||||||
Nonaccretable difference | (1,172,000) | |||||||
Expected cash flows | 2,229,000 | |||||||
Accretable yield | (391,000) | |||||||
Carrying balance at acquisition date | 1,838,000 | |||||||
Balance at the beginning of period | 183,000 | 209,000 | ||||||
Accretion | (77,000) | |||||||
Reclassification from nonaccretable difference | 58,000 | |||||||
Balance at the end of period | 183,000 | 190,000 | ||||||
Acquired Impaired | Niagara Bancorporation | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 2,105,000 | $ 2,105,000 | ||||||
Nonaccretable difference | (265,000) | |||||||
Expected cash flows | 1,840,000 | |||||||
Accretable yield | (88,000) | |||||||
Carrying balance at acquisition date | 1,752,000 | |||||||
Balance at the beginning of period | 12,000 | 19,000 | ||||||
Accretion | (4,000) | |||||||
Reclassification from nonaccretable difference | 3,000 | |||||||
Balance at the end of period | 12,000 | 18,000 | ||||||
Acquired Impaired | FFNM | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 5,440,000 | $ 5,440,000 | ||||||
Nonaccretable difference | (2,100,000) | |||||||
Expected cash flows | 3,340,000 | |||||||
Accretable yield | (700,000) | |||||||
Carrying balance at acquisition date | 2,640,000 | |||||||
Balance at the beginning of period | 292,000 | 518,000 | ||||||
Accretion | (3,000) | (237,000) | ||||||
Reclassification from nonaccretable difference | 2,000 | 177,000 | ||||||
Balance at the end of period | 291,000 | 458,000 | ||||||
Acquired Impaired | Lincoln Community Bank | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 1,901,000 | $ 1,901,000 | ||||||
Nonaccretable difference | (421,000) | |||||||
Expected cash flows | 1,480,000 | |||||||
Accretable yield | (140,000) | |||||||
Carrying balance at acquisition date | 1,340,000 | |||||||
Balance at the beginning of period | 85,000 | 108,000 | ||||||
Accretion | (1,000) | (3,000) | ||||||
Reclassification from nonaccretable difference | 1,000 | 3,000 | ||||||
Balance at the end of period | 85,000 | 108,000 | ||||||
Acquired Non-impaired | ||||||||
Acquired portfolio | ||||||||
Balance at the beginning of period | 999,000 | 2,217,000 | ||||||
Accretion | (231,000) | (348,000) | ||||||
Reclassification from nonaccretable difference | (1,000) | |||||||
Balance at the end of period | 767,000 | 1,869,000 | ||||||
Acquired Non-impaired | PFC | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 53,849,000 | |||||||
Expected cash flows | 53,849,000 | |||||||
Accretable yield | (2,100,000) | |||||||
Carrying balance at acquisition date | 51,749,000 | |||||||
Acquired Non-impaired | Eagle River | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 80,737,000 | |||||||
Expected cash flows | 80,737,000 | |||||||
Accretable yield | (1,700,000) | |||||||
Carrying balance at acquisition date | 79,037,000 | |||||||
Acquired Non-impaired | Niagara Bancorporation | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 30,555,000 | |||||||
Expected cash flows | 30,555,000 | |||||||
Accretable yield | (600,000) | |||||||
Carrying balance at acquisition date | 29,955,000 | |||||||
Acquired Non-impaired | FFNM | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 187,302,000 | |||||||
Expected cash flows | 187,302,000 | |||||||
Accretable yield | (4,498,000) | |||||||
Carrying balance at acquisition date | 182,804,000 | |||||||
Balance at the beginning of period | 869,000 | 1,953,000 | ||||||
Accretion | (205,000) | (310,000) | ||||||
Reclassification from nonaccretable difference | (1,000) | |||||||
Balance at the end of period | 663,000 | 1,643,000 | ||||||
Acquired Non-impaired | Lincoln Community Bank | ||||||||
Acquired portfolio | ||||||||
Loans acquired - contractual payments | 37,700,000 | |||||||
Expected cash flows | 37,700,000 | |||||||
Accretable yield | (493,000) | |||||||
Carrying balance at acquisition date | 37,207,000 | |||||||
Balance at the beginning of period | 130,000 | 264,000 | ||||||
Accretion | (26,000) | (38,000) | ||||||
Balance at the end of period | $ 104,000 | $ 226,000 |
LOANS - ALLOWANCE (Details)
LOANS - ALLOWANCE (Details) - USD ($) $ in Thousands | 3 Months Ended | ||||
Mar. 31, 2021 | Mar. 31, 2020 | Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | |
Allowance for loan loss reserve: | |||||
Balance at beginning of period | $ 5,816 | $ 5,308 | |||
Charge-offs | (55) | (145) | |||
Recoveries | 31 | 29 | |||
Provision | 50 | 100 | |||
Balance at end of period | 5,842 | 5,292 | |||
Loans: | |||||
Ending balance | $ 1,063,756 | $ 1,077,592 | $ 1,044,177 | ||
Ending balance ALLR | (5,816) | (5,292) | (5,842) | (5,816) | (5,292) |
Net loans | 1,057,914 | 1,071,776 | 1,038,885 | ||
Ending balance ALLR: | |||||
Individually evaluated | 871 | 1,389 | |||
Collectively evaluated | 4,971 | 3,903 | |||
Total | 5,816 | 5,292 | 5,842 | 5,816 | 5,292 |
Ending balance Loans: | |||||
Individually evaluated | 6,123 | 3,732 | |||
Collectively evaluated | 1,055,340 | 1,035,114 | |||
Acquired with deteriorated credit quality | 2,293 | 5,331 | |||
Total Loans | 1,063,756 | 1,077,592 | 1,044,177 | ||
Unallocated | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 272 | 2,679 | |||
Provision | (27) | (1,383) | |||
Balance at end of period | 245 | 1,296 | |||
Loans: | |||||
Ending balance ALLR | (245) | (1,296) | (245) | (272) | (1,296) |
Net loans | (245) | (1,296) | |||
Ending balance ALLR: | |||||
Collectively evaluated | 245 | 1,296 | |||
Total | 245 | 1,296 | 245 | 272 | 1,296 |
Commercial Real Estate Portfolio Segment [Member] | Commercial real estate | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 2,983 | 1,189 | |||
Charge-offs | (8) | ||||
Recoveries | 3 | 6 | |||
Provision | (240) | 623 | |||
Balance at end of period | 2,738 | 1,818 | |||
Loans: | |||||
Ending balance | 496,257 | 498,450 | 522,659 | ||
Ending balance ALLR | (2,738) | (1,818) | (2,738) | (2,983) | (1,818) |
Net loans | 493,519 | 520,841 | |||
Ending balance ALLR: | |||||
Individually evaluated | 277 | 913 | |||
Collectively evaluated | 2,461 | 905 | |||
Total | 2,738 | 1,818 | 2,738 | 2,983 | 1,818 |
Ending balance Loans: | |||||
Individually evaluated | 1,975 | 2,278 | |||
Collectively evaluated | 493,125 | 518,642 | |||
Acquired with deteriorated credit quality | 1,157 | 1,739 | |||
Total Loans | 496,257 | 498,450 | 522,659 | ||
Commercial loan portfolio | Commercial, financial, and agricultural | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 1,734 | 1,197 | |||
Charge-offs | (66) | ||||
Recoveries | 11 | ||||
Provision | 331 | 502 | |||
Balance at end of period | 2,076 | 1,633 | |||
Loans: | |||||
Ending balance | 273,087 | 273,759 | 207,727 | ||
Ending balance ALLR | (2,076) | (1,633) | (2,076) | (1,734) | (1,633) |
Net loans | 271,011 | 206,094 | |||
Ending balance ALLR: | |||||
Individually evaluated | 594 | 476 | |||
Collectively evaluated | 1,482 | 1,157 | |||
Total | 2,076 | 1,633 | 2,076 | 1,734 | 1,633 |
Ending balance Loans: | |||||
Individually evaluated | 3,887 | 1,454 | |||
Collectively evaluated | 268,972 | 203,857 | |||
Acquired with deteriorated credit quality | 228 | 2,416 | |||
Total Loans | 273,087 | 273,759 | 207,727 | ||
Commercial construction loan receivables [Member] | Commercial construction loan receivables [Member] | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 209 | 71 | |||
Provision | 27 | ||||
Balance at end of period | 209 | 98 | |||
Loans: | |||||
Ending balance | 49,240 | 47,698 | 29,971 | ||
Ending balance ALLR | (209) | (98) | (209) | (209) | (98) |
Net loans | 49,031 | 29,873 | |||
Ending balance ALLR: | |||||
Collectively evaluated | 209 | 98 | |||
Total | 209 | 98 | 209 | 209 | 98 |
Ending balance Loans: | |||||
Individually evaluated | 261 | ||||
Collectively evaluated | 48,890 | 29,604 | |||
Acquired with deteriorated credit quality | 89 | 367 | |||
Total Loans | 49,240 | 47,698 | 29,971 | ||
Residential Portfolio Segment [Member] | One to four family residential real estate | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 605 | 148 | |||
Charge-offs | (18) | (22) | |||
Recoveries | 5 | 10 | |||
Provision | (32) | 291 | |||
Balance at end of period | 560 | 427 | |||
Loans: | |||||
Ending balance | 214,034 | 227,044 | 244,059 | ||
Ending balance ALLR | (560) | (427) | (560) | (605) | (427) |
Net loans | 213,474 | 243,632 | |||
Ending balance ALLR: | |||||
Collectively evaluated | 560 | 427 | |||
Total | 560 | 427 | 560 | 605 | 427 |
Ending balance Loans: | |||||
Collectively evaluated | 213,231 | 243,251 | |||
Acquired with deteriorated credit quality | 803 | 808 | |||
Total Loans | 214,034 | 227,044 | 244,059 | ||
Consumer Portfolio Segment [Member] | Consumer | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 5 | 13 | |||
Charge-offs | (49) | ||||
Recoveries | 13 | ||||
Provision | 1 | 33 | |||
Balance at end of period | 6 | 10 | |||
Loans: | |||||
Ending balance | 18,392 | 18,980 | 20,375 | ||
Ending balance ALLR | (6) | (10) | (6) | (5) | (10) |
Net loans | 18,386 | 20,365 | |||
Ending balance ALLR: | |||||
Collectively evaluated | 6 | 10 | |||
Total | 6 | 10 | 6 | 5 | 10 |
Ending balance Loans: | |||||
Collectively evaluated | 18,392 | 20,374 | |||
Acquired with deteriorated credit quality | 1 | ||||
Total Loans | 18,392 | 18,980 | 20,375 | ||
Consumer construction | Consumer construction | |||||
Allowance for loan loss reserve: | |||||
Balance at beginning of period | 8 | 11 | |||
Charge-offs | (29) | (8) | |||
Recoveries | 12 | ||||
Provision | 17 | 7 | |||
Balance at end of period | 8 | 10 | |||
Loans: | |||||
Ending balance | 12,746 | 11,661 | 19,386 | ||
Ending balance ALLR | (8) | (10) | (8) | (8) | (10) |
Net loans | 12,738 | 19,376 | |||
Ending balance ALLR: | |||||
Collectively evaluated | 8 | 10 | |||
Total | $ 8 | $ 10 | 8 | 8 | 10 |
Ending balance Loans: | |||||
Collectively evaluated | 12,730 | 19,386 | |||
Acquired with deteriorated credit quality | 16 | ||||
Total Loans | $ 12,746 | $ 11,661 | $ 19,386 |
LOANS - LOANS BY RISK CATEGORY
LOANS - LOANS BY RISK CATEGORY (Details) $ in Thousands | Mar. 31, 2021USD ($)item | Dec. 31, 2020USD ($) | Mar. 31, 2020USD ($) |
Breakdown of loans by risk category | |||
Total loans | $ 1,063,756 | $ 1,077,592 | $ 1,044,177 |
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, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Paycheck Protection Program ("PPP") loans | $ 109,733 | ||
Strong (1) | |||
Breakdown of loans by risk category | |||
Total loans | 128,130 | 123,532 | |
Good (2) | |||
Breakdown of loans by risk category | |||
Total loans | 25,046 | 20,539 | |
Average (3) | |||
Breakdown of loans by risk category | |||
Total loans | 299,742 | 299,830 | |
Acceptable | |||
Breakdown of loans by risk category | |||
Total loans | 367,148 | 380,578 | |
Acceptable Watch | |||
Breakdown of loans by risk category | |||
Total loans | 4,082 | 4,977 | |
Substandard (6) | |||
Breakdown of loans by risk category | |||
Total loans | 10,110 | 10,727 | |
Rating Unassigned | |||
Breakdown of loans by risk category | |||
Total loans | 229,498 | 237,409 | |
Commercial Real Estate Portfolio Segment [Member] | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 496,257 | 498,450 | 522,659 |
Commercial Real Estate Portfolio Segment [Member] | Strong (1) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 7,621 | 7,425 | |
Commercial Real Estate Portfolio Segment [Member] | Good (2) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 10,114 | 10,521 | |
Commercial Real Estate Portfolio Segment [Member] | Average (3) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 225,610 | 223,875 | |
Commercial Real Estate Portfolio Segment [Member] | Acceptable | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 246,287 | 249,159 | |
Commercial Real Estate Portfolio Segment [Member] | Acceptable Watch | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 2,632 | 3,352 | |
Commercial Real Estate Portfolio Segment [Member] | Substandard (6) | Commercial real estate | |||
Breakdown of loans by risk category | |||
Total loans | 3,993 | 4,118 | |
Commercial loan portfolio | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 273,087 | 273,759 | 207,727 |
Commercial loan portfolio | Strong (1) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 120,509 | 116,107 | |
Commercial loan portfolio | Good (2) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 12,715 | 6,760 | |
Commercial loan portfolio | Average (3) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 48,855 | 51,150 | |
Commercial loan portfolio | Acceptable | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 86,331 | 94,743 | |
Commercial loan portfolio | Acceptable Watch | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 597 | 656 | |
Commercial loan portfolio | Substandard (6) | Commercial, financial, and agricultural | |||
Breakdown of loans by risk category | |||
Total loans | 4,080 | 4,343 | |
Commercial construction loan receivables [Member] | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 49,240 | 47,698 | 29,971 |
Commercial construction loan receivables [Member] | Good (2) | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 37 | 40 | |
Commercial construction loan receivables [Member] | Average (3) | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 20,465 | 19,063 | |
Commercial construction loan receivables [Member] | Acceptable | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 16,530 | 16,671 | |
Commercial construction loan receivables [Member] | Acceptable Watch | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 488 | 600 | |
Commercial construction loan receivables [Member] | Substandard (6) | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 381 | 385 | |
Commercial construction loan receivables [Member] | Rating Unassigned | Commercial construction loan receivables [Member] | |||
Breakdown of loans by risk category | |||
Total loans | 11,339 | 10,939 | |
Residential Portfolio Segment [Member] | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 214,034 | 227,044 | 244,059 |
Residential Portfolio Segment [Member] | Good (2) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 2,120 | 3,139 | |
Residential Portfolio Segment [Member] | Average (3) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 4,698 | 5,614 | |
Residential Portfolio Segment [Member] | Acceptable | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 16,766 | 18,864 | |
Residential Portfolio Segment [Member] | Acceptable Watch | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 365 | 369 | |
Residential Portfolio Segment [Member] | Substandard (6) | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 1,605 | 1,814 | |
Residential Portfolio Segment [Member] | Rating Unassigned | One to four family residential real estate | |||
Breakdown of loans by risk category | |||
Total loans | 188,480 | 197,244 | |
Consumer construction | Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 12,746 | 11,661 | 19,386 |
Consumer construction | Rating Unassigned | Consumer construction | |||
Breakdown of loans by risk category | |||
Total loans | 12,746 | 11,661 | |
Consumer Portfolio Segment [Member] | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 18,392 | 18,980 | $ 20,375 |
Consumer Portfolio Segment [Member] | Good (2) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 60 | 79 | |
Consumer Portfolio Segment [Member] | Average (3) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 114 | 128 | |
Consumer Portfolio Segment [Member] | Acceptable | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 1,234 | 1,141 | |
Consumer Portfolio Segment [Member] | Substandard (6) | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | 51 | 67 | |
Consumer Portfolio Segment [Member] | Rating Unassigned | Consumer | |||
Breakdown of loans by risk category | |||
Total loans | $ 16,933 | $ 17,565 |
LOANS - IMPAIRED LOANS AND EFFE
LOANS - IMPAIRED LOANS AND EFFECT ON INTEREST INCOME (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Impaired Loans | ||
Number of days past due to be considered as nonperforming loans | 90 days | |
Recorded investment | ||
With no valuation reserve | $ 5,641 | $ 5,096 |
With a valuation reserve | 2,775 | 3,754 |
Total | 8,416 | 8,850 |
Unpaid Principal Balance | 12,144 | 12,422 |
Related Allowance for Loan Losses | 871 | 1,155 |
Average investment | ||
Average Balance for the Period | 9,270 | 11,706 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | 103 | 446 |
Commercial Real Estate Portfolio Segment [Member] | Commercial real estate | ||
Recorded investment | ||
With no valuation reserve | 1,587 | 1,251 |
With a valuation reserve | 1,545 | 2,309 |
Total | 3,132 | 3,560 |
Unpaid Principal Balance | 5,343 | 5,786 |
Related Allowance for Loan Losses | 277 | 476 |
Average investment | ||
Average Balance for the Period | 5,671 | 6,860 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | 62 | 270 |
Commercial loan portfolio | Commercial, financial, and agricultural | ||
Recorded investment | ||
With no valuation reserve | 2,885 | 2,423 |
With a valuation reserve | 1,230 | 1,445 |
Total | 4,115 | 3,868 |
Unpaid Principal Balance | 4,247 | 3,946 |
Related Allowance for Loan Losses | 594 | 679 |
Average investment | ||
Average Balance for the Period | 883 | 1,204 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | 4 | 13 |
Commercial construction loan receivables [Member] | Commercial construction loan receivables [Member] | ||
Recorded investment | ||
With no valuation reserve | 350 | 537 |
Total | 350 | 537 |
Unpaid Principal Balance | 480 | 678 |
Average investment | ||
Average Balance for the Period | 117 | 541 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | 6 | 27 |
Residential Portfolio Segment [Member] | One to four family residential real estate | ||
Recorded investment | ||
With no valuation reserve | 803 | 869 |
Total | 803 | 869 |
Unpaid Principal Balance | 2,057 | 1,993 |
Average investment | ||
Average Balance for the Period | 2,571 | 3,064 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | 31 | 135 |
Consumer Portfolio Segment [Member] | Consumer | ||
Recorded investment | ||
With no valuation reserve | 16 | 16 |
Total | 16 | 16 |
Unpaid Principal Balance | 17 | 19 |
Average investment | ||
Average Balance for the Period | $ 28 | 37 |
Interest Income Recognized During Impairment | ||
Interest Income Recognized for the Period | $ 1 |
LOANS - PAST DUE (Details)
LOANS - PAST DUE (Details) - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Past due loans | ||
Nonaccrual | $ 5,024 | $ 5,458 |
Total | 6,305 | 7,527 |
30-89 days Past Due | ||
Past due loans | ||
30-89 days Past Due (accruing) | 1,281 | 2,069 |
Commercial Real Estate Portfolio Segment [Member] | Commercial real estate | ||
Past due loans | ||
Nonaccrual | 1,446 | 1,481 |
Total | 1,446 | 1,505 |
Commercial Real Estate Portfolio Segment [Member] | Commercial real estate | 30-89 days Past Due | ||
Past due loans | ||
30-89 days Past Due (accruing) | 24 | |
Commercial loan portfolio | Commercial, financial, and agricultural | ||
Past due loans | ||
Nonaccrual | 384 | 478 |
Total | 384 | 520 |
Commercial loan portfolio | Commercial, financial, and agricultural | 30-89 days Past Due | ||
Past due loans | ||
30-89 days Past Due (accruing) | 42 | |
Commercial construction loan receivables [Member] | Commercial construction loan receivables [Member] | ||
Past due loans | ||
Nonaccrual | 61 | 79 |
Total | 61 | 79 |
Residential Portfolio Segment [Member] | One to four family residential real estate | ||
Past due loans | ||
Nonaccrual | 3,100 | 3,371 |
Total | 4,330 | 5,296 |
Residential Portfolio Segment [Member] | One to four family residential real estate | 30-89 days Past Due | ||
Past due loans | ||
30-89 days Past Due (accruing) | 1,230 | 1,925 |
Consumer Portfolio Segment [Member] | Consumer | ||
Past due loans | ||
Nonaccrual | 33 | 49 |
Total | 84 | 127 |
Consumer Portfolio Segment [Member] | Consumer | 30-89 days Past Due | ||
Past due loans | ||
30-89 days Past Due (accruing) | $ 51 | $ 78 |
LOANS - TROUBLED DEBT RESTRUCTU
LOANS - TROUBLED DEBT RESTRUCTURING (Details) | 3 Months Ended | |
Mar. 31, 2021loanitem | Mar. 31, 2020loan | |
LOANS | ||
Number of consecutive timely payments before being considered return to accruing status | item | 6 | |
Number of TDR's | loan | 0 | 3 |
LOANS - INSIDER LOANS (Details)
LOANS - INSIDER LOANS (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2021 | Mar. 31, 2020 | Mar. 31, 2021 | |
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Loans outstanding, beginning of period | $ 11,778,000 | $ 12,196,000 | |
New loans | 500,000 | ||
Net activity on revolving lines of credit | (18,000) | (354,000) | |
Repayment | (69,000) | (100,000) | |
Loans outstanding, end of period | 12,191,000 | 11,742,000 | |
Loans outstanding | 12,191,000 | 11,742,000 | $ 12,191,000 |
Bank | |||
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Unfunded commitments | 0 | ||
Bank | Substandard (6) | |||
Activity in insider loans granted to the entity's executive officers and directors, including their families and firms | |||
Loans outstanding, end of period | 0 | 0 | |
Loans outstanding | $ 0 | $ 0 | $ 0 |
GOODWILL AND OTHER INTANGIBLE_3
GOODWILL AND OTHER INTANGIBLE ASSETS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Deposit based intangible assets | $ 4,200 | $ 4,368 |
Amortization expense | 169 | 675 |
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 | ||
Deposit based intangible assets | 443 | 473 |
Amortization expense | 30 | 121 |
Future Amortization Expense | 121 | |
Eagle River | ||
Deposit based intangible assets | 505 | 529 |
Amortization expense | 25 | 99 |
Future Amortization Expense | 99 | |
Niagara Bancorporation | ||
Deposit based intangible assets | 163 | 170 |
Amortization expense | 8 | 30 |
Future Amortization Expense | 30 | |
FFNM | ||
Deposit based intangible assets | 2,074 | 2,147 |
Amortization expense | 72 | 290 |
Future Amortization Expense | 290 | |
Lincoln Community Bank | ||
Deposit based intangible assets | 1,015 | 1,049 |
Amortization expense | 34 | $ 135 |
Future Amortization Expense | $ 135 |
SERVICING RIGHTS (Details)
SERVICING RIGHTS (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
Commercial loans | ||
Commercial Loans | ||
Commercial Loans | $ 53,000,000 | |
Servicing rights | $ 12,000 | $ 42,000 |
Mortgage loans | ||
Mortgage Loans | ||
Annual constant prepayment speed (as a percent) | 19.01% | |
Discount rate (as a percent) | 7.75% | |
Changes in mortgage servicing rights capitalized and amortized, along with the aggregate activity in related valuation allowances | ||
Balance at beginning of period | $ 1,359,000 | 1,499,000 |
Additions from loans sold with servicing retained | 75,000 | |
Amortization | (38,000) | (35,000) |
Balance at end of period | 1,396,000 | 1,464,000 |
Balance of loan servicing portfolio | $ 191,363,000 | $ 246,370,000 |
Mortgage servicing rights as % of portfolio | 0.73% | 0.59% |
Fair value of servicing rights | $ 1,436,000 | $ 2,159,000 |
BORROWINGS (Details)
BORROWINGS (Details) | 3 Months Ended | |
Mar. 31, 2021USD ($)item | Dec. 31, 2020USD ($) | |
BORROWINGS | ||
Borrowings | $ 53,459,000 | $ 63,479,000 |
Collateral Pledged | ||
BORROWINGS | ||
Amortized cost estimated fair value | 2,285,000 | |
Federal Home Loan Bank borrowings | ||
BORROWINGS | ||
Borrowings | $ 53,135,000 | 63,155,000 |
Federal Home Loan Bank Borrowing Weighted Average Interest Rate | 1.64% | |
Federal Home Loan Bank borrowings | Mortgage related and municipal securities | Collateral Pledged | ||
BORROWINGS | ||
Available for sale equity securities | $ 20,318,000 | |
Amortized cost estimated fair value | 20,887,000 | |
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 | $ 66,740,000 | |
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% | |
USDA Rural Development note | ||
BORROWINGS | ||
Borrowings | $ 324,000 | $ 324,000 |
Interest rate on note (as a percent) | 1.00% | |
USDA Rural Development note | First Rural Relending | ||
BORROWINGS | ||
Demand deposit account pledged as collateral | $ 389,000 | |
Revolving Credit Facility | ||
BORROWINGS | ||
Maximum borrowing capacity | 15,000,000 | |
Line of Credit | $ 0 | |
Revolving Credit Facility | LIBOR | ||
BORROWINGS | ||
LIBOR rate at point of time | 0.20% | |
Paycheck Protection Program Lending Facility [Member] | ||
BORROWINGS | ||
Debt Instrument, Interest Rate, Effective Percentage | 0.35% | |
Loans pledged as collateral | $ 0 |
DEFINED BENEFIT PENSION PLAN (D
DEFINED BENEFIT PENSION PLAN (Details) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021USD ($)item | Dec. 31, 2020 | |
Defined Benefit Pension Plan | ||
Number of years over which anticipated pension distributions disclosed | item | 5 | |
Anticipated distributions from the plan | ||
2021 | $ 133 | |
2022 | 140 | |
2023 | 144 | |
2024 | 142 | |
2025 | 157 | |
2026-2030 | 901 | |
Total | 1,617 | |
Peninsula Financial Corporation noncontributory defined benefit pension plan | ||
Defined Benefit Pension Plan | ||
Expected contributions to the plan next fiscal year | 57 | |
Change in plan assets | ||
Fair value of plan assets at end of year | 2,264 | |
Accrued pension expense, included with other assets or liabilities | 1,370 | |
Accumulated benefit obligation | $ 3,634 | |
Assumptions in the actuarial valuation | ||
Weighted average discount rate | 2.45% | 2.45% |
Rate of increase in future compensation levels | ||
Expected long-term rate of return on plan assets | 2.00% | 2.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Minimum | ||
Plan assets | ||
Target Allocation | 50.00% | 50.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Maximum | ||
Plan assets | ||
Target Allocation | 70.00% | 70.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Equity securities | Plan | ||
Plan assets | ||
Actual Allocation | 36.00% | 36.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Minimum | ||
Plan assets | ||
Target Allocation | 30.00% | 30.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Maximum | ||
Plan assets | ||
Target Allocation | 50.00% | 50.00% |
Peninsula Financial Corporation noncontributory defined benefit pension plan | Fixed income securities | Plan | ||
Plan assets | ||
Actual Allocation | 64.00% | 64.00% |
STOCK COMPENSATION PLANS (Detai
STOCK COMPENSATION PLANS (Details) - $ / shares | 1 Months Ended | 3 Months Ended | ||||||||
Jan. 31, 2021 | Oct. 31, 2020 | Feb. 29, 2020 | Oct. 31, 2019 | Feb. 28, 2019 | Apr. 30, 2018 | Feb. 28, 2018 | Feb. 28, 2017 | Mar. 31, 2021 | Mar. 31, 2020 | |
Stock Compensation Plans | ||||||||||
Granted during the period (in shares) | 170,153 | |||||||||
Summary of nonvested shares | ||||||||||
Granted during the period (in shares) | 170,153 | |||||||||
Forfeited during the period (in shares) | 64,000 | |||||||||
Vested during the period (in shares) | (49,635) | |||||||||
Nonvested ending balance (in shares) | 184,518 | |||||||||
Weighted Average Grant Date Fair Value | ||||||||||
Granted during the period (in dollars per share) | $ 14.90 | |||||||||
Forfeited during the period (in dollars per share) | 13.43 | |||||||||
Vested during the period (in dollars per share) | 12.91 | |||||||||
Nonvested ending balance (in dollars per share) | $ 14.94 | |||||||||
RSUs | ||||||||||
Stock Compensation Plans | ||||||||||
Vesting period | 4 years | 4 years | 4 years | 4 years | 4 years | 4 years | ||||
Granted during the period (in shares) | 64,000 | 8,000 | 132,000 | 8,000 | 27,790 | 8,000 | 18,643 | 28,427 | ||
Market value at grant date (in dollars per share) | $ 13.43 | $ 9.46 | $ 15.46 | $ 15.40 | $ 15.70 | $ 16 | $ 16.30 | $ 13.39 | ||
Stock issued for vested restricted stocks | 49,635 | 25,521 | ||||||||
Summary of nonvested shares | ||||||||||
Granted during the period (in shares) | 64,000 | 8,000 | 132,000 | 8,000 | 27,790 | 8,000 | 18,643 | 28,427 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Mar. 31, 2020 | |
INCOME TAXES | ||
Deferred tax assets, net of valuation allowance | $ 2,492 | |
Net operating loss (NOL) carryforwards | 8,000 | |
Annual limitation for usage of NOL | 2,000 | |
Annual limitation for usage of tax credits | 420 | |
Deferred tax expense | $ 398 | $ 811 |
FAIR VALUE MEASUREMENTS (Detail
FAIR VALUE MEASUREMENTS (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
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 | 2,427 | $ 2,917 |
Marketable Securities | 109,414 | 111,836 |
Carrying Amount | ||
Financial assets: | ||
Total financial assets | 1,422,347 | 1,414,740 |
Financial liabilities: | ||
Total financial liabilities | 1,326,949 | 1,322,708 |
Estimated Fair Value | ||
Financial assets: | ||
Total financial assets | 1,425,552 | 1,415,734 |
Financial liabilities: | ||
Total financial liabilities | 1,341,324 | 1,325,358 |
Level 1 | Carrying Amount | ||
Financial assets: | ||
Cash and cash equivalents | 243,492 | 218,977 |
Level 1 | Estimated Fair Value | ||
Financial assets: | ||
Cash and cash equivalents | 243,492 | 218,977 |
Level 2 | Carrying Amount | ||
Financial assets: | ||
Interest-bearing deposits | 2,427 | 2,917 |
Federal Home Loan Bank stock | 4,924 | 4,924 |
Financial liabilities: | ||
Deposits | 1,273,279 | 1,258,776 |
Borrowings | 53,459 | 63,479 |
Level 2 | Estimated Fair Value | ||
Financial assets: | ||
Interest-bearing deposits | 2,427 | 2,917 |
Federal Home Loan Bank stock | 4,924 | 4,924 |
Financial liabilities: | ||
Deposits | 1,288,686 | 1,262,930 |
Borrowings | 52,427 | 61,975 |
Level 3 | Carrying Amount | ||
Financial assets: | ||
Net loans | 1,057,914 | 1,071,776 |
Accrued interest receivable | 4,176 | 4,310 |
Financial liabilities: | ||
Accrued interest payable | 211 | 453 |
Level 3 | Estimated Fair Value | ||
Financial assets: | ||
Net loans | 1,061,119 | 1,072,770 |
Accrued interest receivable | 4,176 | 4,310 |
Financial liabilities: | ||
Accrued interest payable | 211 | 453 |
Available-for-sale Securities | ||
Financial assets: | ||
Marketable Securities | 109,414 | 111,836 |
Available-for-sale Securities | Level 2 | Carrying Amount | ||
Financial assets: | ||
Marketable Securities | 108,083 | 110,505 |
Available-for-sale Securities | Level 2 | Estimated Fair Value | ||
Financial assets: | ||
Marketable Securities | 108,083 | 110,505 |
Available-for-sale Securities | Level 3 | Carrying Amount | ||
Financial assets: | ||
Marketable Securities | 1,331 | 1,331 |
Available-for-sale Securities | Level 3 | Estimated Fair Value | ||
Financial assets: | ||
Marketable Securities | 1,331 | 1,331 |
Corporate | ||
Financial assets: | ||
Marketable Securities | 29,124 | 28,043 |
US Treasury | ||
Financial assets: | ||
Marketable Securities | 1,070 | |
US Agencies | ||
Financial assets: | ||
Marketable Securities | 6,564 | 6,589 |
US Agencies - MBS | ||
Financial assets: | ||
Marketable Securities | 31,292 | 34,280 |
Obligations of states and political subdivisions | ||
Financial assets: | ||
Marketable Securities | $ 41,364 | $ 42,924 |
FAIR VALUE MEASUREMENTS - OTHER
FAIR VALUE MEASUREMENTS - OTHER ASSETS AND OTHER LIABILITIES (Details) - Recurring - USD ($) $ in Thousands | Mar. 31, 2021 | Dec. 31, 2020 |
Fair value measurements | ||
Other liabilities | $ 0 | $ 0 |
Other assets | 0 | 0 |
Level 3 | ||
Fair value measurements | ||
Assets | 0 | 0 |
Liabilities | $ 0 | $ 0 |
FAIR VALUE MEASUREMENTS - RECUR
FAIR VALUE MEASUREMENTS - RECURRING (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Marketable Securities | $ 109,414 | $ 111,836 |
Recurring | ||
Marketable Securities | 109,414 | 111,836 |
Total (Gains) Losses | 2 | 2 |
Available-for-sale Securities | ||
Marketable Securities | 109,414 | 111,836 |
Corporate | ||
Marketable Securities | 29,124 | 28,043 |
Corporate | Recurring | ||
Marketable Securities | 29,124 | 28,043 |
Corporate | Level 2 | Recurring | ||
Marketable Securities | 28,624 | 27,543 |
Corporate | Level 3 | Recurring | ||
Marketable Securities | 500 | 500 |
US Treasury | ||
Marketable Securities | 1,070 | |
US Treasury | Recurring | ||
Marketable Securities | 1,070 | |
US Treasury | Level 2 | Recurring | ||
Marketable Securities | 1,070 | |
US Agencies | ||
Marketable Securities | 6,564 | 6,589 |
US Agencies | Recurring | ||
Marketable Securities | 6,564 | 6,589 |
US Agencies | Level 2 | Recurring | ||
Marketable Securities | 6,564 | 6,589 |
US Agencies - MBS | ||
Marketable Securities | 31,292 | 34,280 |
US Agencies - MBS | Recurring | ||
Marketable Securities | 31,292 | 34,280 |
US Agencies - MBS | Level 2 | Recurring | ||
Marketable Securities | 31,292 | 34,280 |
Obligations of states and political subdivisions | ||
Marketable Securities | 41,364 | 42,924 |
Obligations of states and political subdivisions | Recurring | ||
Marketable Securities | 41,364 | 42,924 |
Total (Gains) Losses | 2 | 2 |
Obligations of states and political subdivisions | Level 2 | Recurring | ||
Marketable Securities | 40,533 | 42,093 |
Obligations of states and political subdivisions | Level 3 | Recurring | ||
Marketable Securities | $ 831 | $ 831 |
FAIR VALUE MEASUREMENTS - NONRE
FAIR VALUE MEASUREMENTS - NONRECURRING BASIS (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2021 | Dec. 31, 2020 | |
Fair value | ||
Impaired loans | $ 8,416 | $ 8,850 |
Other real estate owned | 1,692 | 1,752 |
Nonrecurring | ||
Fair value | ||
Total (Gains) Losses | (52) | 164 |
Nonrecurring | Impaired loans | ||
Fair value | ||
Impaired loans | 8,416 | 8,850 |
Total (Gains) Losses | 186 | |
Nonrecurring | Other real estate owned | ||
Fair value | ||
Other real estate owned | 1,692 | 1,752 |
Total (Gains) Losses | (52) | (22) |
Nonrecurring | Level 3 | Impaired loans | ||
Fair value | ||
Impaired loans | 8,416 | 8,850 |
Nonrecurring | Level 3 | Other real estate owned | ||
Fair value | ||
Other real estate owned | $ 1,692 | $ 1,752 |
SHAREHOLDERS' EQUITY (Details)
SHAREHOLDERS' EQUITY (Details) $ in Thousands | 1 Months Ended | 3 Months Ended | 12 Months Ended | ||||||||
Aug. 28, 2019 | Mar. 31, 2021Programshares | Mar. 31, 2020shares | Dec. 31, 2020shares | Dec. 31, 2016shares | Dec. 31, 2015shares | Dec. 31, 2014shares | Dec. 31, 2013shares | Apr. 28, 2015USD ($) | Dec. 17, 2013USD ($) | Feb. 27, 2013USD ($) | |
Participation in the TARP Capital Purchase Program | |||||||||||
Number of share repurchase programs | Program | 1 | ||||||||||
Number of share repurchase program expired | Program | 1 | ||||||||||
Share Repurchase Program Expired | |||||||||||
Participation in the TARP Capital Purchase Program | |||||||||||
Amount authorized to be repurchased | $ | $ 600 | $ 600 | |||||||||
Additional amount authorized to be repurchased | $ | $ 750 | ||||||||||
Share Repurchase Program Two | Maximum | |||||||||||
Participation in the TARP Capital Purchase Program | |||||||||||
Percentage of outstanding common stock authorized to repurchase | 5.00% | ||||||||||
Shares of Common Stock | |||||||||||
Participation in the TARP Capital Purchase Program | |||||||||||
Number of shares repurchased | (240,644) | ||||||||||
Shares of Common Stock | Share Repurchase Program Expired | |||||||||||
Participation in the TARP Capital Purchase Program | |||||||||||
Number of shares repurchased | 1,661 | 14,000 | 102,455 | 13,700 | 55,594 | ||||||
Shares of Common Stock | Share Repurchase Program Two | |||||||||||
Participation in the TARP Capital Purchase Program | |||||||||||
Number of shares repurchased | 0 | 283,779 |
COMMITMENTS, CONTINGENCIES, A_2
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | |
Financial Instruments with Off-Balance-Sheet Risk | ||
Commitments | $ 190,333 | $ 188,550 |
Commitments to extend credit | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Variable rate | 121,102 | 114,458 |
Fixed rate | 53,659 | 58,175 |
Standby letters of credit | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Variable rate | $ 8,003 | 8,781 |
Percentage collateralization on financial instruments allowed under commitments | 100.00% | |
Credit card commitments | ||
Financial Instruments with Off-Balance-Sheet Risk | ||
Fixed rate | $ 7,569 | $ 7,136 |
COMMITMENTS, CONTINGENCIES, A_3
COMMITMENTS, CONTINGENCIES, AND CREDIT RISK - CREDIT RISK (Details) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2021 | Dec. 31, 2020 | Mar. 31, 2020 | |
Concentration of Credit Risk | |||
Loan portfolio | $ 1,057,914 | $ 1,071,776 | $ 1,038,885 |
Bank | Commercial real estate | Commercial loan portfolio | Credit risk concentration | |||
Concentration of Credit Risk | |||
Loan portfolio | $ 137,356 | $ 138,992 | |
Percentage of concentration risk under a specified benchmark | 16.78% | 16.95% |
SUBSEQUENT EVENT (Details)
SUBSEQUENT EVENT (Details) - Subsequent Event - Merger Agreement With Nicolet Bankshares, Inc. | Apr. 12, 2021$ / shares |
Subsequent Event | |
Share exchange ratio | 0.22 |
Merger agreement cash (in dollars per share) | $ 4.64 |
Stock consideration (as a percent) | 80.00% |
Cash consideration (as a percent) | 20.00% |