MARQUETTE — Mackinac Financial Corporation, the holding company for mBank, is merging with First Federal of Northern Michigan Bancorp Inc., according to a press release issued Tuesday by the companies’ directors.

The transaction, which is expected to close in the second quarter of 2018, will increase mBank’s market position as the largest bank headquartered in Michigan’s Upper Peninsula, with post-transaction assets estimated at $1.3 billion and gross balance sheet loans of around $1 billion, the release states. Combined deposits are expected to total roughly $1.1 billion.

Upon the closing of the transaction, Michael Mahler, CEO of First Federal, will remain with mBank at its Alpena location as executive vice president of community banking and administration, and will oversee company-wide retail lending and branch banking platforms, among other duties.

“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,” mBank President and CEO Kelly George said in the release. “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. … We want to assure the (First Federal) customers, shareholders and employees that as we move through 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.”

Under the “all-stock merger,” First Federal shareholders will receive .576 shares of Mackinac common stock for each share of First Federal common stock, the press release states.

The aggregate value of the stock consideration, based on an assumed price of Mackinac shares of $15.75, is $33.8 million, and Mackinac expects to issue around 2.15 million shares to First Federal shareholders in connection with the transaction, according to the release.

Under terms of the agreement, First Federal shareholders will also receive a cash dividend immediately prior to close of $8 million subject to maintenance of a minimum equity requirement.

Officials said total consideration to First Federal 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.

This latest transaction is the fourth strategic expansion by Mackinac since late 2014, according to the press release.

“We believe this merger is an excellent opportunity to create long-term value for (First Federal) shareholders and continue a strong community-focused banking presence in Alpena and the other communities we serve,” Mahler said in the release. “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.”

Mackinac Financial Corporation is headquartered in Manistique, with mBank its principal subsidiary.