MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Dollars in thousands, except per For The Period Ended share data) ------------------------------------- June 30, December 31, June 30, 2007 2006 2006 ----------- ----------- ----------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Total assets $ 393,319 $ 382,791 $ 352,497 Total loans 338,896 322,581 283,110 Total deposits 321,246 312,421 284,164 Borrowings and subordinated debentures 38,307 38,307 37,617 Total shareholders' equity 30,485 28,790 27,179 Selected Statements of Income Data (six months and year ended): Net interest income $ 6,447 $ 11,593 $ 5,614 Income before taxes 1,581 1,216 688 Net income 1,581 1,716 688 Income per common share - Basic .46 .50 .20 Income per common share - Diluted .46 .50 .20 Three Months Ended: Net interest income $ 3,269 $ 3,027 $ 2,935 Income before taxes 546 338 190 Net income 546 338 190 Income per common share - Basic .16 .10 .05 Income per common share - Diluted .16 .10 .05 Selected Financial Ratios and Other Data (six months and year ended): Performance Ratios: Net interest margin 3.57% 3.51% 3.62% Efficiency ratio 82.79 93.95 95.20 Return on average assets .84 .49 .42 Return on average equity 10.68 6.19 5.11 Average total assets $ 381,238 $ 347,927 $ 330,980 Average total shareholders' equity $ 29,836 $ 27,744 $ 27,135 Average loans to average deposits ratio 103.84% 99.77% 99.64% Common Share Data (at end of period): Market price per common share $ 9.45 $ 11.50 $ 10.27 Book value per common share $ 8.89 $ 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 $ 4,920 $ 5,006 $ 5,415 Non-performing assets $ 5,126 $ 2,965 $ 498 Allowance for loan losses to total loans 1.45% 1.55% 1.91% Non-performing assets to total assets 1.30% .77% .14% Number of: Branch locations 13 13 13 FTE Employees 106 99 99 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, June 30, (Dollars in thousands) 2007 2006 2006 ----------- ----------- ----------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 7,518 $ 4,865 $ 5,529 Federal funds sold 3,489 5,841 12,535 ----------- ----------- ----------- Cash and cash equivalents 11,007 10,706 18,064 Interest-bearing deposits in other financial institutions 3,687 856 893 Securities available for sale 24,086 32,769 33,870 Federal Home Loan Bank stock 3,794 3,794 4,855 Loans: Commercial 292,285 261,726 231,547 Mortgage 42,677 58,014 48,931 Installment 3,934 2,841 2,632 ----------- ----------- ----------- Total Loans 338,896 322,581 283,110 Allowance for loan losses (4,920) (5,006) (5,415) ----------- ----------- ----------- Net loans 333,976 317,575 277,695 Premises and equipment 12,471 12,453 12,748 Other real estate held for sale 77 26 52 Other assets 4,221 4,612 4,320 ----------- ----------- ----------- TOTAL ASSETS $ 393,319 $ 382,791 $ 352,497 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Non-interest-bearing deposits $ 28,811 $ 23,471 $ 21,773 Interest-bearing deposits NOW and Money Market 73,994 73,188 68,107 Savings 12,422 13,365 14,136 CDs < $100,000 96,546 89,585 81,768 CDs > $100,000 24,879 23,645 19,025 Brokered 84,594 89,167 79,355 ----------- ----------- ----------- Total deposits 321,246 312,421 284,164 Borrowings 38,307 38,307 37,617 Other liabilities 3,281 3,273 3,537 ----------- ----------- ----------- Total liabilities 362,834 354,001 325,318 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 42,780 42,722 42,567 Accumulated deficit (12,162) (13,745) (14,772) Accumulated other comprehensive (loss) (133) (187) (616) ----------- ----------- ----------- Total shareholders' equity 30,485 28,790 27,179 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 393,319 $ 382,791 $ 352,497 =========== =========== =========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per Three Months Ended Six Months Ended share data) June 30, June 30, --------- --------- --------- -------- 2007 2006 2007 2006 --------- --------- --------- -------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 6,448 $ 5,182 $ 12,681 $ 9,681 Tax-exempt 143 192 314 385 Interest on securities: Taxable 293 274 594 547 Tax-exempt - 41 - 82 Other interest income 166 194 366 363 --------- --------- --------- -------- Total interest income 7,050 5,883 13,955 11,058 --------- --------- --------- -------- INTEREST EXPENSE: Deposits 3,267 2,509 6,489 4,589 Borrowings 514 439 1,019 855 --------- --------- --------- -------- Total interest expense 3,781 2,948 7,508 5,444 --------- --------- --------- -------- Net interest income 3,269 2,935 6,447 5,614 Provision for loan losses - - - (600) --------- --------- --------- -------- Net interest income after provision for loan losses 3,269 2,935 6,447 6,214 --------- --------- --------- -------- OTHER INCOME: Service fees 185 122 346 232 Net security gains - - - - Net gains on sale of secondary market loans 91 42 199 83 Other 66 87 710 152 --------- --------- --------- -------- Total other income 342 251 1,255 467 --------- --------- --------- -------- OTHER EXPENSES: Salaries and employee benefits 1,672 1,496 3,410 3,090 Occupancy 327 293 661 610 Furniture and equipment 166 155 323 311 Data processing 210 182 381 336 Professional service fees 174 414 325 614 Loan and deposit 79 98 151 228 Telephone 59 51 117 100 Advertising 91 107 183 177 Other 287 200 570 527 --------- --------- --------- -------- Total other expenses 3,065 2,996 6,121 5,993 --------- --------- --------- -------- Income before provision for income taxes 546 190 1,581 688 Provision for (benefit of) income taxes - - - - --------- --------- --------- -------- NET INCOME $ 546 $ 190 $ 1,581 $ 688 ========= ========= ========= ======== INCOME PER COMMON SHARE: Basic $ .16 $ .05 $ .46 $ .20 ========= ========= ========= ======== Diluted $ .16 $ .05 $ .46 $ .20 ========= ========= ========= ======== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES LOAN PORTFOLIO AND CREDIT QUALITY (Dollars in thousands) Loan Portfolio Balances (at end of period): June 30, December 31, June 30, 2007 2006 2006 ------------ ------------ ------------ Commercial Loans Real estate - operators of nonresidential buildings $ 41,662 $ 44,308 $ 35,478 Hospitality and tourism 37,286 30,826 37,754 Real estate agents and managers 31,937 25,071 15,628 New car dealers 10,270 10,086 10,002 Other 117,058 115,426 101,637 ------------ ------------ ------------ Total Commercial Loans 238,213 225,717 200,499 1-4 family residential real estate 55,090 58,014 48,931 Consumer 3,538 2,841 2,632 Construction 42,055 36,009 31,048 ------------ ------------ ------------ Total Loans $ 338,896 $ 322,581 $ 283,110 ============ ============ ============ Average loans for the period $ 321,414 $ 278,953 $ 262,274 ============ ============ ============ Credit Quality (at end of period): June 30, December 31, June 30, 2007 2006 2006 ---------- ---------- ---------- Nonperforming Assets : Nonaccrual loans $ 4,758 $ 2,899 $ 446 Loans past due 90 days or more 291 40 - Restructured loans - - - ---------- ---------- ---------- Total nonperforming loans 5,049 2,939 446 Other real estate owned 77 26 52 ---------- ---------- ---------- Total nonperforming assets $ 5,126 $ 2,965 $ 498 ========== ========== ========== Nonperforming loans as a % of loans 1.49% .91% .16% ---------- ---------- ---------- Nonperforming assets as a % of assets 1.30% .77% .14% ---------- ---------- ---------- Reserve for Loan Losses: At period end $ 4,920 $ 5,006 $ 5,415 ---------- ---------- ---------- As a % of average loans 1.53% 1.79% 2.06% ---------- ---------- ---------- As a % of nonperforming loans 97.45% 170.33% N/M% ---------- ---------- ---------- As a % of nonaccrual loans 103.41% 172.68% N/M% ========== ========== ========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED ----------------------------------------------------- December September June 30, March 31, 31, 30, June 30, 2007 2007 2006 2006 2006 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 338,896 $ 318,421 $ 322,581 $ 292,614 $ 283,110 Allowance for loan losses (4,920) (4,975) (5,006) (5,316) (5,415) --------- --------- --------- --------- --------- Total loans, net 333,976 313,446 317,575 287,298 277,695 Intangible assets 163 182 205 237 268 Total assets 393,319 375,644 382,791 363,191 352,497 Core deposits 211,773 201,529 199,609 195,774 185,784 Noncore deposits (1) 109,473 102,883 112,812 97,720 98,380 --------- --------- --------- --------- --------- Total deposits 321,246 304,412 312,421 293,494 284,164 Total borrowings 38,307 38,307 38,307 38,307 37,617 Total shareholders' equity 30,485 29,932 28,790 28,226 27,179 Total shares outstanding 3,428,695 3,428,695 3,428,695 3,428,695 3,428,695 AVERAGE BALANCES (Dollars in thousands) Assets $ 382,065 $ 380,403 $ 347,927 $ 362,632 $ 342,820 Loans 324,721 318,072 301,508 289,210 273,686 Deposits 309,469 309,619 294,755 296,608 274,591 Equity 30,412 29,254 27,744 28,041 27,213 INCOME STATEMENT (Dollars in thousands) Net interest income $ 3,269 $ 3,178 $ 3,027 $ 2,952 $ 2,935 Provision for loan losses - - (261) - - --------- --------- --------- --------- --------- Net interest income after provision 3,269 3,178 3,288 2,952 2,935 Total noninterest income 342 913 276 240 251 Total noninterest expense 3,065 3,056 3,226 3,002 2,996 --------- --------- --------- --------- --------- Income before taxes 546 1,035 338 190 190 Provision for income taxes - - - (500) - --------- --------- --------- --------- --------- Net income $ 546 $ 1,035 $ 338 $ 690 $ 190 ========= ========= ========= ========= ========= PER SHARE DATA Earnings - basic $ .46 $ .30 $ .10 $ .20 $ .05 Earnings - diluted .46 .30 .10 .20 .05 Book value 8.89 8.73 8.40 8.23 7.93 Market value, closing price 9.45 9.26 11.50 10.56 10.27 ASSET QUALITY RATIOS Nonperforming loans/total loans 1.49% 1.53% .91% .71% .16 Nonperforming assets/total assets 1.30 1.33 .77 .58 .14 Allowance for loan losses/total loans 1.45 1.56 1.55 1.82 1.91 Allowance for loan losses/nonperforming loans 97.45 102.32 170.33 257.43 1,214.13 PROFITABILITY RATIOS Return on average assets .57% 1.10% .37% .75% .22 Return on average equity 7.20 14.35 4.68 9.76 2.82 Net interest margin 3.60 3.55 3.44 3.36 3.62 Efficiency ratio 83.21 82.40 94.60 91.17 91.41 Averageloans/average deposits 104.93 102.73 102.29 97.51 99.67 CAPITAL ADEQUACY RATIOS Leverage ratio 7.97% 7.85% 7.85% 7.81% 8.04 Tier 1 capital ratio 8.85 9.16 8.77 9.36 9.28 Total capital ratio 10.10 10.41 10.02 10.62 10.54 Averageequity/average assets 7.96 7.69 7.81 7.73 7.94 Tangible equity/tangible assets 7.71 7.92 7.47 7.71 7.64 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000
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