The Directors of Mackinac Financial Corporation (Nasdaq:MFNC)
(Mackinac), the holding company for mBank, and the Directors of
First Federal of Northern Michigan Bancorp, Inc. (OTC:FFNM) (FFNM),
the holding company for First Federal of Northern Michigan today
announced the execution of a definitive agreement for Mackinac to
acquire FFNM through an all-stock merger of FFNM with and into a
subsidiary of Mackinac. FFNM shareholders will receive .576
shares of Mackinac common stock for each share of FFNM common
stock. The aggregate value of the stock consideration, based on an
assumed price of Mackinac shares of $15.75, is $33.8 million.
MFNC expects to issue approximately 2.15 million shares to
FFNM shareholders in connection with the transaction. Under
the terms of the agreement, shareholders of FFNM will also receive
a special cash dividend immediately prior to close of $8.0 million
subject to maintenance of a minimum equity requirement. Total
consideration to FFNM shareholders in connection with the
transaction would equate to $41.8 million, or $11.22 per share,
based upon the assumed value of Mackinac common shares.
The transaction will increase mBank’s market
position as the largest bank headquartered in the Upper Peninsula
of Michigan with post-transaction assets estimated at approximately
$1.3 billion and gross balance sheet loans of approximately $1
billion. Combined deposits are expected to total approximately $1.1
billion. It is also anticipated that mBank will rank as the 10th
largest bank headquartered in Michigan, out of 97 (ranked by total
assets of such institutions as of September 30, 2017, after giving
effect to the acquisition.) Upon the closing of the
transaction, Michael W. Mahler, First Federal of Northern Michigan
CEO, will remain with mBank (at its Alpena, MI location) as EVP of
Community Banking and Administration. In this position Mr.
Mahler will oversee company-wide retail lending and branch banking
platforms, as well as human resources, professional development,
and marketing. In addition, one mutually agreeable director from
FFNM will join the Mackinac and mBank boards.
“We are extremely pleased and excited to be able
to partner with another long-standing community-focused institution
in First Federal and have Mike join our Executive Leadership Team
as Alpena becomes another key commerce and operational hub of the
organization.” said Kelly W. George, mBank President and CEO.
“mBank remains a safe and sound community bank, and we believe the
customer-centric cultures and community bank oriented traditions of
our two organizations are very complementary and were the driving
impetus for the combination of the two banks. The combined
organization will have a strong capital position and
well-structured balance sheet to further actively compete and grow
within our expanding geographic footprint along with providing
accretive financial returns to our shareholders. From the entire
mBank staff, management, and Board of Directors, we all look
forward to working with First Federal. We want to assure the
FFNM customers, shareholders and employees that as we move through
to the closing of the transaction, we will work transparently in
making the transaction as smooth as possible. More details of
the transaction will be forthcoming in the next several weeks and
then ongoing.”
FFNM CEO, Michael W. Mahler commented on the
transaction, “We believe this merger is an excellent opportunity to
create long term value for FFNM shareholders and continue a strong
community focused banking presence in Alpena and the other
communities we serve. Further, the scale and lending limits
of the commercial banking platform that Mackinac brings will
combine with our robust mortgage platform to offer our valued
clients an even more complete banking experience. More
importantly, we have spent significant time with mBank’s leadership
to ensure their culture, customer service approach, commitment to
their employees and community focus is consistent with First
Federal’s. We have determined that our business approaches
are very similar. In my new role based in Alpena, I am
excited to remain heavily involved in the bank, our community and
with our clients.”
Mackinac anticipates the transaction to be
accretive to earnings per share, exclusive of transaction related
costs, for 2018 of 8.0% with increasing accretion estimated of
16.0% for 2019 and 18.0% for 2020. Operating economies of
scale and other combined efficiencies are initially projected to be
approximately 35% and are targeted to be fully phased in by the end
of 2018. The Tangible Book Value earn back for Mackinac is
currently expected to be approximately 3 years or less.
“Strategically, this transaction makes sense for
us on all fronts” commented Paul D. Tobias, Chairman of Mackinac
and mBank. “Our strategy has been to deliver loan centric
banking services to communities that have both commercial and
consumer opportunities and low-cost core deposits. We build
our annual plan on organic growth but have been and will continue
to seek out acquisitions that create scale and support our
strategy. FFNM in Alpena and surrounding markets adds low
cost deposits and a very strong mortgage business. More
importantly we are adding quality team members to help us execute
our strategy. We look forward to working with FFNM Board members
and employees to continue FFNM’s traditional support of the
community.”
In closing, FFNM Board Chairman Martin Thomson
commented, "Given mBank’s presence and commitment to many Northern
Michigan communities, businesses and residents, they are an
excellent fit for our organization and customer base. We
believe our similar business philosophies will result in the
preeminent bank in Northern Michigan. The FFNM Board and
Management team also believe the partnership with mBank will
deliver significant value for current FFNM shareholders and give
them the opportunity to realize additional value in the future as
shareholders of Mackinac Financial Corporation."
The transaction remains subject to approval by
FFNM and MFNC shareholders and approval by federal and state
regulatory authorities as well as the satisfaction of other
customary closing conditions provided in the merger agreement. The
merger agreement also provides that First Federal of Northern
Michigan will be consolidated into mBank. Mackinac was advised by
Piper Jaffray & Co. and the law firm of Honigman Miller
Schwartz and Cohn LLP. FFNM was advised by ProBank Austin and the
law firm of Shumaker, Loop & Kendrick, LLP.
About Mackinac Financial Corporation
Headquartered in Manistique, Michigan, mBank is the principal
subsidiary of Mackinac Financial Corporation whose common stock is
traded on the NASDAQ stock market as “MFNC.” With assets in
excess of $980 million, the community bank empowers individuals and
small- to medium-sized businesses with smart financing and
depository solutions for peace of mind.
About First Federal of Northern Michigan
Bancorp, Inc.First Federal of Northern Michigan Bancorp,
Inc. is a community-based financial services company with assets in
excess of $320 million located in Alpena, Michigan and the parent
company of First Federal of Northern Michigan, its wholly owned
subsidiary bank.
Additional Information for
Shareholders
Communications in this document do not
constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval. In
connection with the proposed merger, Mackinac will file with the
Securities and Exchange Commission (SEC) a Registration Statement
on Form S-4 that will include a joint Proxy Statement of FFNM and
Mackinac and a Prospectus of Mackinac, as well as other relevant
documents concerning the proposed transaction. Shareholders and
investors are urged to read the Registration Statement and the
Proxy Statement/Prospectus regarding the merger when it becomes
available and any other relevant documents filed with the SEC, as
well as any amendments or supplements to those documents, because
they will contain important information. A free copy of the Proxy
Statement/Prospectus (when available), as well as other filings
containing information about Mackinac, may be obtained at the SEC's
Internet site (http://www.sec.gov). The Proxy Statement/Prospectus
(when available) and the other filings may also be obtained free of
charge at mBank’s website at www.bankmbank.com under the tab “MFNC
Investor Relations,” and then under the tab “SEC Filings.”
The directors, executive officers, and certain
other members of management and employees of Mackinac may be deemed
to be participants in the solicitation of proxies in favor of the
merger from the shareholders of FFNM. Information about the
directors and executive officers of Mackinac is included in the
proxy statement for its 2017 annual meeting of shareholders, which
was filed with the SEC on April 25, 2017. The directors,
executive officers, and certain other members of management and
employees of FFNM may also be deemed to be participants in the
solicitation of proxies in favor of the merger from the
shareholders of FFNM. Information about the directors and executive
officers of FFNM and information regarding the interests of such
participants will be included in the proxy statement/prospectus and
the other relevant documents filed with the SEC when they become
available.
Forward-Looking Statements
This release includes forward-looking statements
within the meaning of the “Safe-Harbor” provisions of the Private
Securities Litigation Reform Act of 1995. These statements are
necessarily subject to risk and uncertainty and actual results
could differ materially from those anticipated due to various
factors, including those set forth from time to time in Mackinac’s
filings with the SEC. Risks and uncertainties related to Mackinac
and FFNM include, but are not limited to, (1) the occurrence of any
event, change or other circumstances that could give rise to the
termination of the definitive agreement; (2) the outcome of any
legal proceedings that may be instituted against Mackinac or FFNM;
(3) the inability to complete the transactions contemplated by the
definitive agreement due to the failure to satisfy conditions to
completion, including the receipt of regulatory approval; (4) risks
that the proposed transaction may disrupt current plans and
operations, and the potential difficulties in employee retention as
a result of the transaction; (5) the amount of the costs, fees,
expenses and charges related to the proposed transaction; (6)
deterioration in the financial condition of borrowers resulting in
significant increases in loan losses and provisions for those
losses; (7) continuation of the historically low short-term
interest rate environment; (8) changes in loan underwriting, credit
review or loss reserve policies associated with economic
conditions, examination conclusions, or regulatory developments;
(9) increased levels of non-performing and repossessed assets that
may result in future losses; (10) greater than anticipated
deterioration or lack of sustained growth in the national or local
economies; (11) changes in state and federal legislation,
regulations or policies applicable to banks or other financial
service providers, including regulatory or legislative
developments, like the Dodd-Frank Wall Street Reform and Consumer
Protection Act, arising out of current unsettled conditions in the
economy; (12) the results of regulatory examinations; and (13)
increased competition with other financial institutions. You should
not place undue reliance on forward-looking statements, and
Mackinac undertakes no obligation to update any such statements to
reflect circumstances or events that occur after the date on which
the forward-looking statement is made.
Contacts:
Paul D. Tobias Chairman & CEO Mackinac Financial Corporation
& Chairman mBankBirmingham, MI (248) 290 –
5901ptobias@bankmbank.com
Kelly W. GeorgePresident, Mackinac Financial
Corporation & President & CEO,
mBank Manistique, MI (906)
341-7140kgeorge@bankmbank.com
Michael W. MahlerCEO, First Federal of Northern
MichiganAlpena, MI 49707 (989)
354-7319mmahler@first-federal.com
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