Mackinac Financial Corporation Reports Third Quarter and Nine Months 2008 Results

MANISTIQUE, MI--(Marketwire - October 30, 2008) - Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the "Bank"), today announced third quarter 2008 income of $215,000 or $.06 per share compared to net income of $8.055 million, or $2.35 per share for the third quarter of 2007. Net income for the first nine months of 2008 totaled $2.124 million, or $.62 per share, compared to $9.636 million, or $2.81 per share, for the same period in 2007.

The nine months ended results for 2008 include the positive effect, $3.475 million, of a lawsuit settlement, the negative effect, $.425 million, of a severance agreement and a $1.2 million loan loss provision. The results of operations for the first nine months of 2007 include the recognition of a deferred tax benefit in the amount of $7.500 million, $.470 million of proceeds from the settlement of a lawsuit against the Corporation's former accountants, and a loan loss provision of $400,000.

Weighted average shares totaled 3,422,777 year to date and 3,419,736 for the third quarter of 2008, compared to 3,428,695 for both periods in 2007.

Paul Tobias, Chairman and Chief Executive Officer, commented, "We are in a challenging environment. Falling interest rates have compressed our margins, but with a focus on enhancing loan pricing and improving our funding mix, we have mitigated margin erosion. Our asset quality is good, given the current economic conditions and compared to our peers. We have addressed the liquidity concerns facing the entire financial industry by increasing our investment assets, a primary liquidity source. We intend to stay focused on our strengths in loan underwriting, controlling our cost structure and increasing shareholder value through core deposit growth."

The net interest margin in the third quarter was 3.39%, an improvement of 20 basis points from 3.19% in the second quarter of 2008. This margin improvement reflects improved loan pricing and a more favorable funding mix due to increased balances of low cost transactional accounts.

Total assets of the Corporation at September 30, 2008 were $440.953 million, up 9.90% from the $401.213 million in total assets reported at September 30, 2007. Third quarter-end total assets were up 7.84% from the $408.880 million of total assets at year-end 2007. Asset balances as of September 30, 2008 reflect an increase of $21.184 million in investment assets for added liquidity.

Loans at September 30, 2008 totaled $361.521 million, a 5.05% increase from the $344.149 million reported at September 30, 2007, and an increase of $6.442 million, or 1.81% from year-end loans of $355.079 million. Tobias stated, "We are satisfied with our ability to grow loans in an increasingly difficult and trying economic downturn. Our loan portfolio has grown in spite of large paydowns of $24.320 million and normal principal reductions of $18.680 million. New loan production totaled $46.5 million, of which $24.9 million originated in the Upper Peninsula. We continue to see solid, well priced loan growth opportunities in that region, where the economy has been more stable than other parts of Michigan."

Total deposits of $360.694 million at September 30, 2008 were up 12.24% from deposits of $321.371 million on September 30, 2007. Deposits were up $39.867 million, or 12.43% from year-end 2007 deposits of $320.827 million. Total 2008 deposit growth reflects increases in noncore funding of $30.736 million and increases in core deposits of $9.131 million, or 4.57%. Tobias added, "Core deposit growth continues to be our primary objective. We are pleased with increases in our low cost transactional accounts, which totaled $13.9 million. This increase was partially offset by reductions in our CD money due to our unwillingness to match competitive pricing which was priced higher than wholesale deposits."

The Corporation increased wholesale deposits late in the third quarter in order to increase liquidity by increasing investment assets. Increased balances of investment securities provide the Corporation with the added liquidity to fund unforeseen short term funding gaps.

Nonperforming assets at the end of the third quarter of 2008 totaled $6.400 million, 1.45% of total assets, compared to $8.008 million, 1.83%, at June 30, 2008 and $5.234 million, 1.28%, at December 31, 2007. Included with the nonperforming assets at September 30, 2008 was one Southeast Michigan nonaccrual loan totaling $2.8 million. We are, as with all of our problem assets, seeking a timely resolution of this relationship to mitigate our loss exposure. The third quarter reductions reflect decreases in other real estate owned of $1.644 million, while nonperforming loans were relatively unchanged.

Shareholders' equity at September 30, 2008 totaled $41.427 million, or $12.11 per share, compared to $38.697 million, or $11.29 per share on September 30, 2007.

Although the Bank and the Corporation are currently characterized as "well capitalized" within regulatory guidelines, the Corporation does intend to participate in the capital purchase program contained in the recently announced Troubled Asset Relief Program ("TARP"). The extent of the Corporation's participation is not yet known. Paul Tobias concluded, "We recognize this program as an opportunity to increase capital at a time when other options are limited. This additional capital will be used to support future loan growth in our existing markets. This program will also enable us to explore other growth opportunities, such as regulatory assisted branch and deposit acquisitions."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $400 million and whose common stock is traded on the NASDAQ stock market as "MFNC." The principal subsidiary of the Corporation is mBank. Headquartered in Manistique, Michigan, mBank has 12 branch locations; eight in the Upper Peninsula, three in the Northern Lower Peninsula and one in Oakland County, Michigan. The Company's banking services include commercial lending and treasury management products and services geared toward small to mid-sized businesses, as well as a full array of personal and business deposit products and consumer loans.

Forward-Looking Statements

This release contains certain forward-looking statements. Words such as "anticipates," "believes," "estimates," "expects," "intends," "should," "will," and variations of such words and similar expressions are intended to identify forward-looking statements: as defined by the Private Securities Litigation Reform Act of 1995. These statements reflect management's current beliefs as to expected outcomes of future events and are not guarantees of future performance. These statements involve certain risks, uncertainties and assumptions that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. Factors that could cause a difference include among others: changes in the national and local economies or market conditions; changes in interest rates and banking regulations; the impact of competition from traditional or new sources; and the possibility that anticipated cost savings and revenue enhancements from mergers and acquisitions, bank consolidations, branch closings and other sources may not be fully realized at all or within specified time frames as well as other risks and uncertainties including but not limited to those detailed from time to time in filings of the Company with the Securities and Exchange Commission. These and other factors may cause decisions and actual results to differ materially from current expectations. Mackinac Financial Corporation undertakes no obligation to revise, update, or clarify forward-looking statements to reflect events or conditions after the date of this release.

              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                       SELECTED FINANCIAL HIGHLIGHTS


(Dollars in thousands, except per
 share data)                                 For The Period Ended
                                     -------------------------------------
                                   September 30, December 31, September 30,
                                        2008         2007         2007
                                     -----------  -----------  -----------
                                     (unaudited)               (unaudited)
Selected Financial Condition Data
 (at end of period):
Total assets                         $   440,953  $   408,880  $   401,213
Total loans                              361,521      355,079      344,149
Total deposits                           360,694      320,827      321,371
Borrowings and subordinated
 debentures                               36,210       45,949       38,239
Total shareholders' equity                41,427       39,321       38,697

Selected Statements of Income Data
 (nine months and year ended):
Net interest income                  $     9,534  $    13,417  $    10,007
Income before taxes                        3,082        2,923        2,136
Net income                                 2,124       10,163        9,636
Income per common share - Basic              .62         2.96         2.81
Income per common share - Diluted            .62         2.96         2.81
Weighted average shares outstanding    3,422,777    3,428,695    3,428,695

Three Months Ended:
Net interest income                  $     3,371  $     3,410  $     3,560
Income before taxes                          273          787          555
Net income                                   215          527        8,055
Income per common share - Basic              .06          .15         2.35
Income per common share - Diluted            .06          .15         2.35
Weighted average shares outstanding    3,419,736    3,428,695    3,428,695

Selected Financial Ratios and Other
 Data (nine months and year ended):
Performance Ratios:
Net interest margin                         3.24%        3.60%        3.62%
Efficiency ratio                           87.36        79.46        79.94
Return on average assets                     .68         2.59         3.32
Return on average equity                    7.03        31.05        42.07

Average total assets                 $   419,891  $   392,313  $   387,597
Average total shareholders' equity   $    40,332  $    32,731  $    30,627
Average loans to average deposits
 ratio                                    106.83%      104.94%      103.89%

Common Share Data (at end of
 period):
Market price per common share        $      5.26  $      8.98  $      8.75
Book value per common share          $     12.11  $     11.47  $     11.29
Common shares outstanding              3,419,736    3,428,695    3,428,695

Other Data (at end of period):
Allowance for loan losses            $     3,385  $     4,146  $     5,022
Non-performing assets                $     6,400  $     5,234  $     3,623
Allowance for loan losses to total
 loans                                       .94%        1.17%        1.46%
Non-performing assets to total assets       1.45%        1.28%         .90%
Number of:
   Branch locations                           12           12           13
   FTE Employees                              96          100          105






            MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS


                                  September 30,  December 31, September 30,
(Dollars in thousands)                 2008          2007         2007
                                   ------------  -----------  ------------
                                   (unaudited)                (unaudited)
ASSETS

Cash and due from banks            $      8,217  $     6,196  $      7,364
Federal funds sold                        4,422          166           947
                                   ------------  -----------  ------------
   Cash and cash equivalents             12,639        6,362         8,311

Interest-bearing deposits in other
 financial institutions                     382        1,810         6,995
Securities available for sale            42,781       21,597        17,973
Federal Home Loan Bank stock              3,794        3,794         3,794

Loans:
   Commercial                           290,406      288,839       279,670
   Mortgage                              67,576       62,703        60,972
   Installment                            3,539        3,537         3,507
                                   ------------  -----------  ------------
     Total Loans                        361,521      355,079       344,149
       Allowance for loan losses         (3,385)      (4,146)       (5,022)
                                   ------------  -----------  ------------
   Net loans                            358,136      350,933       339,127

Premises and equipment                   11,360       11,609        12,733
Other real estate held for sale           1,751        1,226           451
Other assets                             10,110       11,549        11,829
                                   ------------  -----------  ------------

TOTAL ASSETS                       $    440,953  $   408,880  $    401,213
                                   ============  ===========  ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Non-interest-bearing deposits   $     34,858  $    25,557  $     28,325
   Interest-bearing deposits:
     NOW, Money Market, Checking         80,185       81,160        87,262
     Savings                             18,957       12,485        12,831
     CDs < $100,000                      74,940       80,607        90,220
     CDs > $100,000                      30,220       22,355        24,432
     Brokered                           121,534       98,663        78,301
                                   ------------  -----------  ------------
       Total deposits                   360,694      320,827       321,371

   Borrowings:
     Federal funds purchased                  -        7,710             -
     Short-term                               -        1,959             -
     Long-term                           36,210       36,280        38,239
                                   ------------  -----------  ------------
       Total borrowings                  36,210       45,949        38,239
   Other liabilities                      2,622        2,783         2,906
                                   ------------  -----------  ------------
     Total liabilities                  399,526      369,559       362,516

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 -
      3,419,736; 3,428,695; and
      3,428,695 shares, respectively     42,794       42,843        42,810
     Accumulated deficit                 (1,456)      (3,582)       (4,107)
     Accumulated other
      comprehensive income (loss)            89           60            (6)
                                   ------------  -----------  ------------

       Total shareholders' equity        41,427       39,321        38,697
                                   ------------  -----------  ------------

TOTAL LIABILITIES AND SHAREHOLDERS'
 EQUITY                            $    440,953  $   408,880  $    401,213
                                   ============  ===========  ============






             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS


                                    Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------  -------------------
                                      2008      2007      2008      2007
                                    --------  --------  --------- --------
                                        (unaudited)         (unaudited)
INTEREST INCOME:
   Interest and fees on loans:
     Taxable                        $  5,538  $  6,929  $  17,241 $ 19,610
     Tax-exempt                           99       118        310      432
   Interest on securities:
     Taxable                             303       263        840      857
     Tax-exempt                            1         -          4        -
   Other interest income                  88       209        257      575
                                    --------  --------  --------- --------
     Total interest income             6,029     7,519     18,652   21,474
                                    --------  --------  --------- --------

INTEREST EXPENSE:
   Deposits                            2,309     3,443      7,924    9,932
   Borrowings                            349       516      1,194    1,535
                                    --------  --------  --------- --------
     Total interest expense            2,658     3,959      9,118   11,467
                                    --------  --------  --------- --------

Net interest income                    3,371     3,560      9,534   10,007
Provision for loan losses                450       400      1,200      400
                                    --------  --------  --------- --------
Net interest income after provision
 for loan losses                       2,921     3,160      8,334    9,607
                                    --------  --------  --------- --------

OTHER INCOME:
   Service fees                          229       169        597      515
   Net security gains                     (1)        -         64        -
   Net gains on sale of secondary
    market loans                          15       165        113      364
   Proceeds from settlement of
    lawsuit                                -         -      3,475      470
   Other                                  45        62         96      302
                                    --------  --------  --------- --------
     Total other income                  288       396      4,345    1,651
                                    --------  --------  --------- --------

OTHER EXPENSE:
   Salaries and employee benefits      1,533     1,695      5,416    5,106
   Occupancy                             336       322      1,039      983
   Furniture and equipment               202       178        570      501
   Data processing                       212       196        649      577
   Professional service fees             120        78        352      403
   Loan and deposit                      175        63        430      214
   Telephone                              41        68        125      185
   Advertising                            93        97        213      280
   Other                                 224       304        803      873
                                    --------  --------  --------- --------
     Total other expenses              2,936     3,001      9,597    9,122
                                    --------  --------  --------- --------

Income before income taxes               273       555      3,082    2,136
Provision for (benefit of) income
 taxes                                    58    (7,500)       958   (7,500)
                                    --------  --------  --------- --------
NET INCOME                          $    215  $  8,055  $   2,124 $  9,636
                                    ========  ========  ========= ========
INCOME PER COMMON SHARE:
   Basic                            $    .06  $   2.35  $     .62 $   2.81
                                    ========  ========  ========= ========
   Diluted                          $    .06  $   2.35  $     .62 $   2.81
                                    ========  ========  ========= ========





               MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                       LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

                                   September 30, December 31, September 30,
                                       2008          2007         2007
                                   ------------- ------------ -------------
                                    (unaudited)                (unaudited)
Commercial Loans:
Real estate - operators of
 nonresidential buildings          $      41,486 $     41,597 $      43,422
Hospitality and tourism                   35,287       37,604        37,479
Real estate agents and managers           29,277       29,571        25,662
Operators of nonresidential
 buildings                                13,352       10,569         6,471
Other                                    140,631      130,546       126,820
                                   ------------- ------------ -------------
   Total Commercial Loans                260,033      249,887       239,854

1-4 family residential real estate        62,895       57,613        54,962
Consumer                                   3,539        3,537         3,507
Construction
   Commercial                             30,373       38,952        39,816
   Consumer                                4,681        5,090         6,010
                                   ------------- ------------ -------------

   Total Loans                     $     361,521 $    355,079 $     344,149
                                   ============= ============ =============



Credit Quality (at end of period):

                                   September 30, December 31, September 30,
                                       2008          2007         2007
                                   ------------  -----------  ------------
                                   (unaudited)                (unaudited)
Nonperforming Asset:
Nonaccrual loans                   $      4,649  $     3,298  $      3,136
Loans past due 90 days or more                -          710            36
                                   ------------  -----------  ------------
   Total nonperforming loans              4,649        4,008         3,172
Other real estate owned                   1,751        1,226           451
                                   ------------  -----------  ------------
   Total nonperforming assets      $      6,400  $     5,234  $      3,623
                                   ============  ===========  ============
Nonperforming loans as a % of loans        1.29%        1.13%          .92%
                                   ------------  -----------  ------------
Nonperforming assets as a % of
 assets                                    1.45%        1.28%          .90%
                                   ------------  -----------  ------------
Reserve for Loan Losses:
At period end                      $      3,385  $     4,146  $      5,022
                                   ------------  -----------  ------------
As a % of average loans                     .94%        1.24%         1.46%
                                   ------------  -----------  ------------
As a % of nonperforming loans             72.81%      103.44%       158.32%
                                   ------------  -----------  ------------
As a % of nonaccrual loans                72.81%      125.71%       160.14%
                                   ============  ===========  ============

Charge-off Information (year to
 date):
   Average loans                        359,729      333,415       327,810
                                   ------------  -----------  ------------
   Net charge-offs                        1,961        1,260           384
                                   ------------  -----------  ------------
   Charge-offs as a % of average
    loans                                   .55%         .38%          .12%
                                   ------------  -----------  ------------






              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                       QUARTERLY FINANCIAL HIGHLIGHTS


                                         QUARTER ENDED
                     -----------------------------------------------------
                                          (Unaudited)
                     -----------------------------------------------------
                     September   June 30,   March 31,  December  September
                     30, 2008      2008       2008     31, 2007   30, 2007
                     ---------  ---------  ---------  ---------  ---------
BALANCE SHEET
 (Dollars in
 thousands)

Total loans          $ 361,521  $ 362,122  $ 360,056  $ 355,079  $ 344,149
Allowance for loan
 losses                 (3,385)    (3,585)    (3,924)    (4,146)    (5,022)
                     ---------  ---------  ---------  ---------  ---------
   Total loans, net    358,136    358,537    356,132    350,933    339,127
Intangible assets           65         85        104        124        143
Total assets           440,953    437,327    417,175    408,880    401,213
Core deposits          208,940    200,293    203,445    199,809    218,638
Noncore deposits (1)   151,754    156,683    122,602    121,018    102,733
                     ---------  ---------  ---------  ---------  ---------
   Total deposits      360,694    356,976    326,047    320,827    321,371
Total borrowings        36,210     36,280     48,849     45,949     38,239
Total shareholders'
 equity                 41,427     40,975     39,633     39,321     38,697
Total shares
 outstanding         3,419,736  3,419,736  3,428,695  3,428,695  3,428,695

AVERAGE BALANCES
 (Dollars in
 thousands)

Assets               $ 423,702  $ 418,246  $ 417,682  $ 406,308  $ 400,105
Loans                  358,844    362,574    357,778    350,050    340,391
Deposits               341,377    332,725    336,016    324,194    327,293
Equity                  41,097     40,399     39,491     38,973     32,184

INCOME STATEMENT
 (Dollars in
 thousands)

Net interest income  $   3,371  $   3,118  $   3,045  $   3,410  $   3,560
Provision for loan
 losses                    450        750          -          -        400
                     ---------  ---------  ---------  ---------  ---------
   Net interest
    income after
    provision            2,921      2,368      3,045      3,410      3,160
Total noninterest
 income                    288      3,747        310        355        396
Total noninterest
 expense                 2,936      3,471      3,191      2,978      3,001
                     ---------  ---------  ---------  ---------  ---------
Income before taxes        273      2,644        164        787        555
Provision for income
 taxes                      58        875         25        260     (7,500)
                     ---------  ---------  ---------  ---------  ---------
Net income           $     215  $   1,769  $     139  $     527  $   8,055
                     =========  =========  =========  =========  =========

PER SHARE DATA

Earnings - basic     $     .06  $     .52  $     .04  $     .15  $    2.35
Earnings - diluted         .06        .52        .04        .15       2.35
Book value               12.11      11.98      11.56      11.47      11.29
Market value, closing
 price                    5.26       7.00       8.50       8.98       8.75

ASSET QUALITY RATIOS

Nonperforming
 loans/total loans        1.29%      1.27%       .94%      1.13%       .92%
Nonperforming
 assets/total assets      1.45       1.83       1.08       1.28        .90
Allowance for loan
 losses/total loans        .94        .99       1.09       1.17       1.46
Allowance for loan
 losses/nonperforming
 loans                   72.81      77.22     116.06     103.42     158.32

PROFITABILITY RATIOS

Return on average
 assets                    .20%      1.70%       .13%       .51%      7.99%
Return on average
 equity                   2.08      17.62       1.42       5.36      99.30
Net interest margin       3.39       3.19       3.13       3.55       3.71
Efficiency ratio         79.12      88.45      95.34      78.02      74.71
Average loans/average
 deposits               105.12     108.97     106.48     107.98     104.00

CAPITAL ADEQUACY
 RATIOS

Leverage ratio            8.31%      8.56%      7.85%      8.05%      8.03%
Tier 1 capital ratio      9.40       9.48       8.84       8.97       9.03
Total capital ratio      10.31      10.45       9.92      10.13      10.28
Average
 equity/average
 assets                   9.70       9.66       9.45       9.59       8.04
Tangible
 equity/tangible
 assets                   9.38       9.35       9.48       9.59       9.61

(1)  Noncore deposits includes Internet CDs, brokered deposits and CDs
     greater than $100,000

Contact Information: Contact: Investor Relations (888) 343-8147 Website: www.bankmbank.com