MBT Financial Corp. :MBTF-US: Earnings Analysis: 2016 By the Numbers : February 9, 2017

MBT Financial Corp. reports financial results for the year ended December 31, 2016.

We analyze the earnings along side the following peers of MBT Financial Corp. – Macatawa Bank Corporation, Mackinac Financial Corporation, Mercantile Bank Corporation, Chemical Financial Corporation, Independent Bank Corporation and Huntington Bancshares Incorporated (MCBC-US, MFNC-US, MBWM-US, CHFC-US, IBCP-US and HBAN-US) that have also reported for this period.

Highlights

  • Net interest income margins narrowed from 70.70% to 68.24% compared to the same period last year.
  • Net loan assets changed 6.18% compared to same period last year and 6.18% from previous period, total deposits changed 2.95% compared to same period last year and 2.95% from previous period.
  • Earnings decline largely a result of non-operational activity, pretax margins improved from 32.70% to 37.61%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income (See complete table at the end of this report):

2016 2015 2014 2013 2012
Relevant Numbers (Annual)
Revenues 55.14 52.3 48.05 47.69 50.01
Revenue Growth (YOY) N/A N/A N/A N/A N/A
Earnings 14.5 12.08 7.32 25.54 8.55
Earnings Growth (YOY) 20.02 65.17 -71.36 198.85 327.14
Net Margin 26.3 23.1 15.22 53.55 17.09
EPS 0.63 0.53 0.33 1.41 0.49
Return on Equity 10.05 8.57 5.97 26.3 10.73
Return on Assets 1.07 0.92 0.58 2.05 0.68

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Earnings Growth Analysis

MBTF-US‘s earnings rose year-on-year. But this growth has not come as a result of improvement in net interest income margins or any loan loss improvement activities in its operations. Net interest income margins were 68.24% compared to 70.70% in the immediate last period. Net interest income after provisions margins were 72.23% this period compared to 76.43% in the previous period. In addition, loan loss provisions as a percentage of net interest income were -5.85% this period and -8.11% a year ago.

Net Interest Income Margin Versus Loan Loss Provisions Margin

Quadrant label definitions. Hover to know more

High Risk; High Reward Loans, Risky Loan Portfolio, Conservative Loan Portfolio, Safer Loan Portfolio
Net Interest Income Margin History
Loan Loss Provisions Margin History

Net Loans and Total Deposits

A financial institution’s core operations represented by Net Interest Income and Net Interest Income after Provisions are dependent on both the growth and quality of its deposits as well as the growth and quality of its loans. A firm could boost its interest income in the short-term by just increasing its loan assets with less concern about their quality – but this would eventually lead to greater loan loss provisions. Similarly a drive to increase deposits could result in higher interest expenses and eventually effect the firm’s equity. It is thus important to understand net interest income performance in context to loan loss provisions, loan assets and deposits.

Loan Assets Growth Rate History (HY YOY)
Total Deposits Growth Rate History (HY YOY)

The firm’s decline in net interest income margins came despite the relative increase in the levels of net loan assets. In addition, total deposits as a percentage of equity went from 7.91% to 8.50%. On an absolute basis, net loan assets changed 6.18% compared to the same period last year and 6.18% from the previous period. Total deposits changed 2.95% compared to the same period last year and 2.95% from the previous period.

Margins

Non-operational activities are the primary cause of the company’s fall in earnings. As a matter of fact, both operating margins and pretax margins increased. Operating margins went from 32.70% to 37.61% and pretax margins improved from 32.70% to 37.61%>

EBIT Margin History
PreTax Margin History
EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables

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Company Profile

MBT Financial Corp. is a bank holding company, which operates through its subsidiary Monroe Bank & Trust. It offers various deposit products which include checking and savings accounts, time deposits, safe deposit facilities, commercial loans, personal loans, real estate mortgage loans, installment loans, IRAs, ATM and night depository facilities, treasury management services, telephone and internet banking, personal trust, employee benefit and investment management services. The company was founded in January 2000 and is headquartered in Monroe, MI.

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