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, 2009 2008 2008 ----------- ----------- ----------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 466,375 $ 451,431 $ 417,175 Loans 370,776 370,280 360,056 Investment securities 51,071 47,490 24,581 Deposits 385,757 371,097 326,047 Borrowings 36,210 36,210 48,849 Shareholders' Equity 41,864 41,552 39,633 Selected Statements of Income Data: Net interest income $ 3,495 $ 12,864 $ 3,045 Income before taxes 97 2,659 164 Net income 90 1,872 139 Income per common share - Basic .03 .55 .04 Income per common share - Diluted .03 .55 .04 Weighted average shares outstanding 3,419,736 3,422,012 3,428,695 Selected Financial Ratios and Other Data: Performance Ratios: Net interest margin 3.35% 3.23% 3.13% Efficiency ratio 82.36 85.51 95.34 Return on average assets .08 .44 .13 Return on average equity .87 4.61 1.42 Average total assets $ 454,741 $ 425,343 $ 417,682 Average total shareholders' equity 41,813 40,630 39,491 Average loans to average deposits ratio 99.54% 105.61% 106.48% Common Share Data (at end of period): Market price per common share $ 4.00 $ 4.40 $ 8.50 Book value per common share $ 12.24 $ 12.15 $ 11.56 Common shares outstanding 3,419,736 3,419,736 3,428,695 Other Data (at end of period): Allowance for loan losses $ 4,793 $ 4,277 $ 3,924 Non-performing assets $ 15,252 $ 7,076 $ 4,518 Allowance for loan losses to total loans 1.29% 1.16% 1.09% Non-performing assets to total assets 3.27% 1.57% 1.08% Number of: Branch locations 13 12 12 FTE Employees 101 100 103 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, March 31, (Dollars in thousands) 2009 2008 2008 ----------- ----------- ----------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 21,394 $ 10,112 $ 6,849 Federal funds sold - - 1,568 ----------- ----------- ----------- Cash and cash equivalents 21,394 10,112 8,417 Interest-bearing deposits in other financial institutions 569 582 382 Securities available for sale 51,071 47,490 24,581 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 295,595 296,088 291,980 Mortgage 71,554 70,447 64,624 Installment 3,627 3,745 3,452 ----------- ----------- ----------- Total Loans 370,776 370,280 360,056 Allowance for loan losses (4,793) (4,277) (3,924) ----------- ----------- ----------- Net loans 365,983 366,003 356,132 Premises and equipment 11,134 11,189 11,511 Other real estate held for sale 2,199 2,189 1,137 Other assets 10,231 10,072 11,221 ----------- ----------- ----------- TOTAL ASSETS $ 466,375 $ 451,431 $ 417,175 =========== =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Noninterest bearing deposits $ 31,541 $ 30,099 $ 26,876 NOW, money market, checking 75,026 70,584 81,952 Savings 19,585 20,730 11,530 CDs < $100,000 70,708 73,752 83,087 CDs > $100,000 26,886 25,044 22,010 Brokered 162,011 150,888 100,592 ----------- ----------- ----------- Total deposits 385,757 371,097 326,047 Borrowings: Federal funds purchased - - 10,410 Short-term - - 2,159 Long-term 36,210 36,210 36,280 ----------- ----------- ----------- Total borrowings 36,210 36,210 48,849 Other liabilities 2,544 2,572 2,646 ----------- ----------- ----------- Total liabilities 424,511 409,879 377,542 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; 3,419,736, and 3,428,695 respectively 42,833 42,815 42,862 Accumulated deficit (1,619) (1,708) (3,441) Accumulated other comprehensive income (loss) 650 445 212 ----------- ----------- ----------- Total shareholders' equity 41,864 41,552 39,633 ----------- ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 466,375 $ 451,431 $ 417,175 =========== =========== =========== MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, -------------------------- (Dollars in thousands except per share data) 2009 2008 ------------ ------------ (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,002 $ 6,100 Tax-exempt 90 108 Interest on securities: Taxable 459 266 Tax-exempt 1 1 Other interest income 2 89 ------------ ------------ Total interest income 5,554 6,564 ------------ ------------ INTEREST EXPENSE: Deposits 1,778 3,065 Borrowings 281 454 ------------ ------------ Total interest expense 2,059 3,519 ------------ ------------ Net interest income 3,495 3,045 Provision for loan losses 550 - ------------ ------------ Net interest income after provision for loan losses 2,945 3,045 ------------ ------------ NONINTEREST INCOME: Service fees 243 174 Net security gains - 65 Net gains on sale of secondary market loans 58 48 Other 90 23 ------------ ------------ Total noninterest income 391 310 ------------ ------------ NONINTEREST EXPENSE: Salaries and employee benefits 1,597 1,807 Occupancy 378 355 Furniture and equipment 189 178 Data processing 220 221 Professional service fees 153 153 Loan and deposit 261 110 Telephone 43 45 Advertising 78 60 Other 320 262 ------------ ------------ Total noninterest expense 3,239 3,191 ------------ ------------ Income before provision for income taxes 97 164 Provision for income taxes 7 25 ------------ ------------ NET INCOME $ 90 $ 139 ============ ============ INCOME PER COMMON SHARE: Basic $ .03 $ .04 ============ ============ Diluted $ .03 $ .04 ============ ============ 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, 2009 2008 2008 ----------- ----------- ----------- Commercial Loans Real estate - operators of nonresidential buildings $ 40,457 $ 41,299 $ 43,167 Hospitality and tourism 35,224 35,086 35,760 Real estate agents and managers 28,012 29,292 30,235 Operators of nonresidential buildings 13,512 13,467 9,039 Other 151,732 145,831 146,226 ----------- ----------- ----------- Total Commercial Loans 268,937 264,975 264,427 1-4 family residential real estate 65,792 65,595 59,532 Consumer 3,627 3,745 3,452 Construction Commercial 26,658 31,113 27,553 Consumer 5,762 4,852 5,092 ----------- ----------- ----------- Total Loans $ 370,776 $ 370,280 $ 360,056 =========== =========== =========== Credit Quality (at end of period): March 31, December 31, March 31, 2009 2008 2008 ---------- ---------- ---------- Nonperforming Assets: Nonaccrual loans $ 12,461 $ 4,887 $ 3,381 Loans past due 90 days or more - - - Restructured loans 592 - - ---------- ---------- ---------- Total nonperforming loans 13,053 4,887 3,381 Other real estate owned 2,199 2,189 1,137 ---------- ---------- ---------- Total nonperforming assets $ 15,252 $ 7,076 $ 4,518 ========== ========== ========== Nonperforming loans as a % of loans 3.52% 1.32% .94% ---------- ---------- ---------- Nonperforming assets as a % of assets 3.27% 1.57% 1.08% ---------- ---------- ---------- Reserve for Loan Losses: At period end $ 4,793 $ 4,277 $ 3,924 ---------- ---------- ---------- As a % of loans 1.29% 1.16% 1.09% ---------- ---------- ---------- As a % of nonperforming loans 36.72% 87.52% 116.06% ---------- ---------- ---------- As a % of nonaccrual loans 38.46% 87.52% 116.06% ========== ========== ========== Charge-off Information (year to date): Average loans 370,943 361,324 357,778 ---------- ---------- ---------- Net charge-offs 34 2,169 222 ---------- ---------- ---------- Charge-offs as a % of average loans .01% .60% .06% ---------- ---------- ---------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS December September March 31, 31, 30, June 30, March 31, 2009 2008 2008 2008 2008 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 370,776 $ 370,280 $ 361,521 $ 362,122 $ 360,056 Allowance for loan losses (4,793) (4,277) (3,385) (3,585) (3,924) --------- --------- --------- --------- --------- Total loans, net 365,983 366,003 358,136 358,537 356,132 Intangible assets 26 46 65 85 104 Total assets 466,375 451,431 440,953 437,327 417,175 Core deposits 196,860 195,165 208,940 200,293 203,445 Noncore deposits (1) 188,897 175,932 151,754 156,683 122,602 --------- --------- --------- --------- --------- Total deposits 385,757 371,097 360,694 356,976 326,047 Total borrowings 36,210 36,210 36,210 36,280 48,849 Total shareholders' equity 41,864 41,552 41,427 40,975 39,633 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,428,695 AVERAGE BALANCES (Dollars in thousands) Assets $ 454,741 $ 441,583 $ 423,702 $ 418,246 $ 417,682 Loans 370,943 366,077 358,844 362,574 357,778 Deposits 372,670 358,213 341,377 332,725 336,016 Equity 41,813 41,516 41,097 40,399 39,491 INCOME STATEMENT (Dollars in thousands) Net interest income $ 3,495 $ 3,330 $ 3,371 $ 3,118 $ 3,045 Provision for loan losses 550 1,100 450 750 - --------- --------- --------- --------- --------- Net interest income after provision 2,945 2,230 2,921 2,368 3,045 Total noninterest income 391 308 288 3,747 310 Total noninterest expense 3,239 2,961 2,935 3,471 3,191 --------- --------- --------- --------- --------- Income before taxes 97 (423) 274 2,644 164 Provision for income taxes 7 (171) 58 875 25 --------- --------- --------- --------- --------- Net income $ 90 $ (252) $ 216 $ 1,769 $ 139 ========= ========= ========= ========= ========= PER SHARE DATA Earnings - basic $ .03 $ (.07) $ .06 $ .52 $ .04 Earnings - diluted .03 (.07) .06 .52 .04 Book value 12.24 12.15 12.11 11.98 11.56 Market value, closing price 4.00 4.40 5.26 7.00 8.50 ASSET QUALITY RATIOS Nonperforming loans/total loans 3.52% 1.32 % 1.29% 1.27% .94% Nonperforming assets/total assets 3.27 1.57 1.45 1.83 1.08 Allowance for loan losses/total loans 1.29 1.16 .94 .99 1.09 Allowance for loan losses/nonperform- ing loans 36.72 87.52 72.81 77.22 116.06 PROFITABILITY RATIOS Return on average assets .08% (.23)% .20% 1.70% .13% Return on average equity .87 (2.42) 2.08 17.62 1.42 Net interest margin 3.35 3.20 3.39 3.19 3.13 Efficiency ratio 82.36 80.30 79.12 88.45 95.34 Average loans/average deposits 99.54 102.20 105.12 108.97 106.48 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 7.86% 8.01 % 8.31% 8.56% 7.85% Tier 1 capital to risk weighted assets 9.31 9.25 9.40 9.48 8.84 Total capital to risk weighted assets 10.56 10.38 10.31 10.45 9.92 Average equity/average assets 9.20 9.40 9.70 9.66 9.45 Tangible equity/tangible assets 8.97 9.20 9.38 9.35 9.48 (1) Noncore deposits includesInternet CDs, brokered deposits and CDs greater than $100,000
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