Courtesy: Mackinac Financial Corporation (mBank)
The Directors of Mackinac Financial Corporation [Nasdaq: MFNC] (Mackinac), the holding company for mBank, and the Directors of Peninsula Financial Corporation (Peninsula), the holding company for Peninsula Bank Friday announced the execution of a definitive agreement for Mackinac to acquire Peninsula in a cash & stock transaction for a fixed $13.285 million purchase of $10.50 million of equity. Shareholders of Peninsula will also receive a special dividend immediately prior to close of any equity greater than $10.50 million as specified in the merger agreement.
The transaction will increase mBank’s asset position as the largest bank headquartered in the Upper Peninsula of Michigan with post-transaction assets estimated at approximately $710 million and gross balance sheet loans of roughly $561 million. With the inclusion of the secondary market service retained sold loans of $260 million, total loans under management will be approximately $861 million. Combined core deposits are expected to total approximately $581 million.
It is also anticipated that mBank will rank as the 16th largest financial institution headquartered in Michigan, out of 123 banks.
“We are extremely pleased and excited to be able to partner with a long standing community-focused institution like Peninsula Bank,” said Kelly W. George, mBank President and CEO. “mBank is a ‘well capitalized’, safe and sound community bank, and we believe the customer-centric cultures and community bank oriented traditions of our two organizations are very complementary. In addition, with the increased Marquette County footprint, we will be able to offer an even more convenient and comprehensive banking experience with a strong line of products and services for all our clients and drive further market procurement of loans and deposits. In turn, we expect to expand and deepen our valued client relationships. From the entire mBank staff, management, and Board of Directors, we all look forward to working with you in the future. We want to assure the Peninsula Bank customers, shareholders and employees as we move through to the closing of the transaction that we will work transparently in making the transaction as smooth as possible.
More details of the transaction will be forth coming in the next several months, please look to our website, additional mailings, or stop into one of the company’s branches to personally discuss the transaction with one of our friendly bankers.”
Peninsula Financial Corporation is a bank holding company with Peninsula Bank as its wholly-owned subsidiary. Peninsula Bank currently operates 6 full-service banking centers spanning from Marquette to Ishpeming, with nearly $132 million in total assets and $112 million in deposits. Combined with mBank’s 7 current Upper Peninsula branches, the acquisition will nearly double mBank’s Upper Peninsula presence to 13 total branches and increase the number of total branches in Michigan from 11 to 17.
“Strategically, this transaction makes sense for us on all fronts” commented Paul D.Tobias, Chairman of Mackinac and mBank. “Our approach over the past couple of years has been to grow organically through core banking activities with good loans and deposits and remain opportunistic with regard to acquisitions. We believe our patience and diligence has been rewarded with this opportunity. We are very happy about the Peninsula partnership as we believe the acquisition fits all the strategic and accretive financial requirements we target to ensure we create additional shareholder value and continue to deliver our clients a best in class personalized banking experience.
Peninsula Board Chair John Jilbert commented, “Given mBank’s presence and commitment to our Upper Peninsula 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 the UP. The Peninsula Board and Management Team also believe the partnership with mBank will deliver significant value for current Peninsula shareholders and give them the opportunity to realize additional value in the future as shareholders of Mackinac Financial Corporation.”
Mackinac anticipates the transaction to be immediately accretive to earnings per share for 2014 with increasing accretion estimated for 2015 of $.24 and 2016 of $.35. Operating savings resulting from economies of scale and increased efficiencies are initially projected to be approximately 35% and are expected to be fully realized in the 2015 fiscal year. The Tangible Book Value earn back for Mackinac is currently expected to be approximately 3 years or less.
Under the terms of the merger agreement, shareholders of Peninsula will receive a mix of shares of Mackinac common stock and cash for each share of Peninsula common stock, with the mix depending on cash/stock elections made by each Peninsula shareholder, provided that the aggregate cash consideration will not exceed 35% of the total merger consideration.
The transaction is expected to close late in the 3rd Quarter or early 4th Quarter of 2014. Total transaction expenses are estimated to be about $2.0million on an after -tax basis. The transaction remains subject to approval by Peninsula’s 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 Peninsula Bank will be consolidated into mBank.