MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) For The Period Ended ------------------------------------- March 31, December 31, March 31, 2007 2006 2006 ----------- ----------- ----------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Total assets $ 375,644 $ 382,791 $ 334,591 Total loans 318,421 322,581 264,471 Total deposits 304,412 312,421 267,954 Borrowings and subordinated debentures 38,307 38,307 36,417 Total shareholders' equity 29,932 28,790 27,173 Selected Statements of Income Data: Net interest income $ 3,178 $ 11,593 $ 3,279 Income (loss) before taxes 1,035 1,216 498 Net income (loss) 1,035 1,716 498 Income (loss) per common share - Basic .30 .50 .15 Income (loss) per common share - Diluted .30 .50 .15 Selected Financial Ratios and Other Data: Performance Ratios: Net interest margin 3.55% 3.51% 3.62% Efficiency ratio 82.40 93.95 82.88 Return on average assets 1.10 .49 .63 Return on average equity 14.35 6.19 7.47 Average total assets $ 380,403 $ 347,927 $ 319,007 Average total shareholders' equity 29,254 27,744 27,055 Average loans to average deposits ratio 102.73% 99.77% 126.73% Common Share Data (at end of period): Market price per common share $ 9.26 $ 11.50 $ 9.81 Book value per common share $ 8.73 $ 8.40 $ 7.93 Common shares outstanding 3,428,695 3,428,695 3,428,695 Weighted average shares outstanding 3,428,695 3,428,695 3,428,695 Other Data (at end of period): Allowance for loan losses $ 4,975 $ 5,006 $ 5,415 Non-performing assets $ 4,989 $ 2,965 $ 952 Allowance for loan losses to total loans 1.56% 1.55% 2.05% Non-performing assets to total assets 1.33% .77% .28% Number of: Branch locations 13 13 13 FTE Employees 104 99 105 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, March 31, (Dollars in thousands) 2007 2006 2006 ----------- ----------- ----------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 5,647 $ 4,865 $ 6,220 Federal funds sold 6,330 5,841 12,000 ----------- ----------- ----------- Cash and cash equivalents 11,977 10,706 18,220 Interest-bearing deposits in other financial institutions 856 856 853 Securities available for sale 28,511 32,769 34,140 Federal Home Loan Bank stock 3,794 3,794 4,855 Loans: Commercial 261,246 261,726 212,052 Mortgage 54,204 58,014 50,119 Installment 2,971 2,841 2,300 ----------- ----------- ----------- Total Loans 318,421 322,581 264,471 Allowance for loan losses (4,975) (5,006) (5,415) ----------- ----------- ----------- Net loans 313,446 317,575 259,056 Premises and equipment 12,252 12,453 12,318 Other real estate held for sale 127 26 952 Other assets 4,681 4,612 4,197 ----------- ----------- ----------- TOTAL ASSETS $ 375,644 $ 382,791 $ 334,591 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest-bearing deposits $ 23,416 $ 23,471 $ 20,463 Interest-bearing deposits NOW and Money Market 70,558 73,188 67,467 Savings 13,488 13,365 15,304 CDs < $100,000 94,067 89,585 80,204 CDs > $100,000 24,475 23,645 15,246 Brokered 78,408 89,167 69,270 ----------- ----------- ----------- Total deposits 304,412 312,421 267,954 Borrowings 38,307 38,307 36,417 Other liabilities 2,993 3,273 3,047 ----------- ----------- ----------- Total liabilities 345,712 354,001 307,418 Shareholders' equity: Preferred stock - No par value: Authorized 500,000 shares, no shares outstanding Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 3,428,695 shares 42,750 42,722 42,489 Accumulated deficit (12,709) (13,745) (14,961) Accumulated other comprehensive (loss) (109) (187) (355) ----------- ----------- ----------- Total shareholders' equity 29,932 28,790 27,173 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 375,644 $ 382,791 $ 334,591 =========== =========== =========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share data) Three Months Ended March 31, ------------------------- 2007 2006 ------------ ------------ (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 6,233 $ 4,499 Tax-exempt 171 194 Interest on securities: Taxable 301 273 Tax-exempt - 41 Other interest income 200 168 ------------ ----------- Total interest income 6,905 5,175 ------------ ----------- INTEREST EXPENSE: Deposits 3,222 2,080 Borrowings 505 416 ------------ ----------- Total interest expense 3,727 2,496 ------------ ----------- Net interest income 3,178 2,679 Provision for loan losses - (600) ------------ ----------- Net interest income after provision for loan losses 3,178 3,279 ------------ ----------- OTHER INCOME: Service fees 161 111 Net security gains - - Net gains on sale of secondary market loans 108 40 Other 644 65 ------------ ----------- Total other income 913 216 ------------ ----------- OTHER EXPENSES: Salaries and employee benefits 1,738 1,594 Occupancy 334 317 Furniture and equipment 157 156 Data processing 171 154 Professional service fees 151 200 Loan and deposit 72 129 Telephone 58 49 Advertising 92 70 Other 283 328 ------------ ----------- Total other expenses 3,056 2,997 ------------ ----------- Income before provision for income taxes 1,035 498 Provision for (benefit of) income taxes - - ------------ ----------- NET INCOME $ 1,035 $ 498 ============ =========== INCOME PER COMMON SHARE: Basic $ .30 $ .15 ============ =========== Diluted $ .30 $ .15 ============ =========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES LOAN PORTFOLIO AND CREDIT QUALITY (Dollars in thousands) Loan Portfolio Balances (at end of period): March 31, December 31, March 31, 2007 2006 2006 ---------- ---------- ---------- Commercial Loans Real estate - operators of nonresidential buildings $ 44,155 $ 44,308 $ 32,440 Hospitality and tourism 33,726 30,826 38,045 Real estate agents and managers 27,313 25,071 12,350 New car dealers 10,139 10,086 9,988 Other 105,937 115,426 98,224 ---------- ---------- ---------- Total Commercial Loans 221,270 225,717 191,047 1-4 family residential real estate 54,204 58,014 50,119 Consumer 2,971 2,841 2,300 Construction 39,976 36,009 21,005 ---------- ---------- ---------- Total Loans $ 318,421 $ 322,581 $ 264,471 ========== ========== ========== Credit Quality (at end of period): March 31, December 31, March 31, 2007 2006 2006 --------- --------- --------- Nonperforming Assets : Nonaccrual loans $ 4,142 $ 2,899 $ - Loans past due 90 days or more 720 40 - Restructured loans - - - --------- --------- --------- Total nonperforming loans 4,862 2,939 - Other real estate owned 127 26 952 --------- --------- --------- Total nonperforming assets $ 4,989 $ 2,965 $ 952 ========= ========= ========= Nonperforming loans as a % of loans 1.53% .91% -% --------- --------- --------- Nonperforming assets as a % of assets 1.33% .77% .28% --------- --------- --------- Reserve for Loan Losses: At period end $ 4,975 $ 5,006 $ 5,415 --------- --------- --------- As a % of loans 1.56% 1.55% 2.05% --------- --------- --------- As a % of nonperforming loans 102.32% 170.33% N/A% --------- --------- --------- As a % of nonaccrual loans 120.11% 172.68% N/A% ========= ========= ========= MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED ----------------------------------------------------- March 31, Dec 31, Sept 30, June 30, March 31, 2007 2006 2006 2006 2006 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 318,421 $ 322,581 $ 292,614 $ 283,110 $ 264,471 Allowance for loan losses (4,975) (5,006) (5,316) (5,415) (5,415) --------- --------- --------- --------- --------- Total loans, net 313,446 317,575 287,298 277,695 259,056 Intangible assets 182 205 237 268 299 Total assets 375,644 382,791 363,191 352,497 334,591 Core deposits 201,529 199,609 195,774 185,784 183,438 Noncore deposits (1) 102,883 112,812 97,720 98,380 84,516 --------- --------- --------- --------- --------- Total deposits 304,412 312,421 293,494 284,164 267,954 Total borrowings 38,307 38,307 38,307 37,617 36,417 Total shareholders' equity 29,932 28,790 28,226 27,179 27,173 Total shares outstanding 3,428,695 3,428,695 3,428,695 3,428,695 3,428,695 INCOME STATEMENT (Dollars in thousands) Net interest income $ 3,178 $ 3,027 $ 2,952 $ 2,935 $ 2,679 Provision for loan losses - (261) - - (600) --------- --------- --------- --------- --------- Net interest Income after provision 3,178 3,288 2,952 2,935 3,279 Total noninterest income 913 276 240 251 216 Total noninterest expense 3,056 3,226 3,002 2,996 2,997 --------- --------- --------- --------- --------- Income before taxes 1,035 338 190 190 498 Provision for income taxes - - (500) - - --------- --------- --------- --------- --------- Net income $ 1,035 $ 338 $ 690 $ 190 $ 498 ========= ========= ========= ========= ========= PER SHARE DATA Earnings per share - basic $ .30 $ .10 $ .20 $ .05 $ .15 Earnings per share - diluted .30 .10 .20 .05 .15 Book value per share 8.73 8.40 8.23 7.93 7.93 ASSET QUALITY RATIOS Nonperforming loans/total loans 1.53% .91% .71% .16% N/M% Nonperforming assets/total assets 1.33 .77 .58 .14 .28 Allowance for loan losses/total loans 1.56 1.55 1.82 1.91 2.05 Allowance for loan losses/nonperforming loans 102.32 170.33 257.43 1,214.13 N/M PROFITABILITY RATIOS Return on average assets 1.10% .37% .75% .22% .63% Return on average equity 14.35 4.68 9.76 2.82 7.47 Net interest margin 3.55 3.44 3.36 3.62 3.62 Efficiency ratio 82.40 94.60 91.17 91.41 99.37 Average loans/average deposits 102.73 102.29 97.51 99.67 98.44 CAPITAL ADEQUACY RATIOS Leverage ratio 7.85% 7.85% 7.81% 8.04% 8.54% Tier 1 capital ratio 9.16 8.77 9.36 9.28 9.74 Total capital ratio 10.41 10.02 10.62 10.54 11.00 Average equity/average assets 7.69 7.81 7.73 7.94 8.48 Tangible equity/tangible assets 7.74 7.47 7.71 7.64 8.04 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000
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