MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Dollars in thousands, except per share data) For The Period Ended ----------------------------------------------- June 30, December 31, June 30, 2009 2008 2008 ------------- ------------ ------------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 506,304 $ 451,431 $ 437,327 Loans 372,004 370,280 362,122 Investment securities 95,620 47,490 23,230 Deposits 413,152 371,097 356,976 Borrowings 36,210 36,210 36,280 Shareholders' Equity 53,939 41,552 40,975 Selected Statements of Income Data (six months and year ended): Net interest income $ 7,546 $ 12,864 $ 6,163 Income before taxes and preferred dividend 967 2,659 2,808 Net income 551 1,872 1,908 Income per common share - Basic .16 .55 .56 Income per common share - Diluted .16 .55 .56 Three Months Ended: Net interest income $ 4,051 $ 3,330 $ 3,118 Income before taxes and preferred dividend 870 (423) 2,644 Net income 461 (252) 1,769 Income per common share - Basic .13 (.07) .52 Income per common share - Diluted .13 (.07) .52 Selected Financial Ratios and Other Data (six months and year ended): Performance Ratios: Net interest margin 3.47 % 3.23 % 3.16 % Efficiency ratio 79.25 85.51 91.85 Return on average assets .23 .44 .92 Return on average common equity 2.42 4.61 9.61 Average total assets $ 473,074 $ 425,343 $ 417,964 Average total common shareholders' equity $ 45,856 $ 40,630 $ 39,945 Average loans to average deposits ratio 95.90 % 105.61 % 107.72 % Common Share Data (at end of period): Market price per common share $ 4.50 $ 4.40 $ 7.00 Book value per common share $ 12.55 $ 12.15 $ 11.98 Common shares outstanding 3,419,736 3,419,736 3,419,736 Weighted average shares outstanding 3,419,736 3,422,012 3,424,314 Other Data (at end of period): Allowance for loan losses $ 4,119 $ 4,277 $ 3,585 Non-performing assets $ 14,825 $ 7,076 $ 8,008 Allowance for loan losses to total loans 1.11 % 1.16 % .99 % Non-performing assets to total assets 2.93 % 1.57 % 1.83 % Number of: Branch locations 11 12 12 FTE Employees 102 100 96 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, June 30, (Dollars in thousands) 2008 2008 2008 ------------ ------------ ------------ (unaudited) (unaudited) ASSETS Cash and due from banks $ 12,189 $ 10,112 $ 7,115 Federal funds sold - - 19,274 ------------ ------------ ------------ Cash and cash equivalents 12,189 10,112 26,389 Interest-bearing deposits in other financial institutions 618 582 387 Securities available for sale 95,620 47,490 23,230 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 296,392 296,088 292,645 Mortgage 71,777 70,447 65,869 Installment 3,835 3,745 3,608 ------------ ------------ ------------ Total Loans 372,004 370,280 362,122 Allowance for loan losses (4,119) (4,277) (3,585) ------------ ------------ ------------ Net loans 367,885 366,003 358,537 Premises and equipment 11,064 11,189 11,377 Other real estate held for sale 4,950 2,189 3,395 Other assets 10,184 10,072 10,218 ------------ ------------ ------------ TOTAL ASSETS $ 506,304 $ 451,431 $ 437,327 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Noninterest bearing deposits $ 33,368 $ 30,099 $ 27,741 NOW, money market, checking 75,974 70,584 78,703 Savings 21,411 20,730 15,171 CDs < $100,000 72,139 73,752 78,678 CDs > $100,000 25,455 25,044 28,252 Brokered 184,805 150,888 128,431 ------------ ------------ ------------ Total deposits 413,152 371,097 356,976 Borrowings: Federal funds purchased - - - Short-term - - - Long-term 36,210 36,210 36,280 ------------ ------------ ------------ Total borrowings 36,210 36,210 36,280 Other liabilities 3,003 2,572 3,096 ------------ ------------ ------------ Total liabilities 452,365 409,879 396,352 TOTAL SHAREHOLDERS' EQUITY 53,939 41,552 40,975 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 506,304 $ 451,431 $ 437,327 ============ ============ ============ MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Dollars in thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ----------------------- 2009 2008 2009 2008 ----------- ----------- ----------- ----------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,104 $ 5,604 $ 10,106 $ 11,704 Tax-exempt 84 102 174 210 Interest on securities: Taxable 673 271 1,132 537 Tax-exempt 3 2 4 3 Other interest income 14 81 16 170 ----------- ----------- ----------- ----------- Total interest income 5,878 6,060 11,432 12,624 ----------- ----------- ----------- ----------- INTEREST EXPENSE: Deposits 1,566 2,551 3,344 5,616 Borrowings 261 391 542 845 ----------- ----------- ----------- ----------- Total interest expense 1,827 2,942 3,886 6,461 ----------- ----------- ----------- ----------- Net interest income 4,051 3,118 7,546 6,163 Provision for loan losses 150 750 700 750 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses 3,901 2,368 6,846 5,413 ----------- ----------- ----------- ----------- OTHER INCOME: Service fees 271 194 514 368 Net security gains - - - 65 Net gains on sale of secondary market loans 84 49 142 97 Proceeds from lawsuit settlements - 3,475 - 3,475 Other 84 29 174 52 ----------- ----------- ----------- ----------- Total other income 439 3,747 830 4,057 ----------- ----------- ----------- ----------- OTHER EXPENSES: Salaries and employee benefits 1,561 2,075 3,158 3,882 Occupancy 355 348 733 703 Furniture and equipment 222 190 411 368 Data processing 224 216 444 437 Professional service fees 144 79 297 232 Loan and deposit 512 144 773 254 Telephone 46 39 89 84 Advertising 80 60 158 120 Other 326 320 646 582 ----------- ----------- ----------- ----------- Total other expenses 3,470 3,471 6,709 6,662 ----------- ----------- ----------- ----------- Income before provision for income taxes 870 2,644 967 2,808 Provision for (benefit of) income taxes 271 875 278 900 ----------- ----------- ----------- ----------- NET INCOME 599 1,769 689 1,908 ----------- ----------- ----------- ----------- Preferred dividend expense 138 - 138 - ----------- ----------- ----------- ----------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS $ 461 $ 1,769 $ 551 $ 1,908 =========== =========== =========== =========== INCOME PER COMMON SHARE: Basic $ .13 $ .52 $ .16 $ .56 =========== =========== =========== =========== Diluted $ .13 $ .52 $ .16 $ .56 =========== =========== =========== =========== 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, 2009 2008 2008 ------------- ------------- ------------- Commercial Loans Real estate - operators of nonresidential buildings $ 44,087 $ 41,299 $ 41,778 Hospitality and tourism 35,033 35,086 35,053 Real estate agents and managers 24,614 29,292 27,495 Operators of nonresidential buildings 13,525 13,467 15,238 Other 153,008 145,831 144,017 ------------- ------------- ------------- Total Commercial Loans 270,267 264,975 263,581 1-4 family residential real estate 65,564 65,595 60,882 Consumer 3,835 3,745 3,608 Construction Commercial 26,125 31,113 29,064 Consumer 6,213 4,852 4,987 ------------- ------------- ------------- Total Loans $ 372,004 $ 370,280 $ 362,122 ============= ============= ============= Credit Quality (at end of period): June 30, December 31, June 30, 2009 2008 2008 ------------- ------------- ------------- Nonperforming Assets: Nonaccrual loans $ 9,283 $ 4,887 $ 4,613 Loans past due 90 days or more - - - Restructured loans 592 - - ------------- ------------- ------------- Total nonperforming loans 9,875 4,887 4,613 Other real estate owned 4,950 2,189 3,395 ------------- ------------- ------------- Total nonperforming assets $ 14,825 $ 7,076 $ 8,008 ============= ============= ============= Nonperforming loans as a % of loans 2.65 % 1.32 % 1.27 % ------------- ------------- ------------- Nonperforming assets as a % of assets 2.93 % 1.57 % 1.83 % ------------- ------------- ------------- Reserve for Loan Losses: At period end $ 4,119 $ 4,277 $ 3,585 ------------- ------------- ------------- As a % of average loans 1.11 % 1.16 % 1.00 % ------------- ------------- ------------- As a % of nonperforming loans 41.71 % 87.52 % 77.72 % ------------- ------------- ------------- As a % of nonaccrual loans 44.37 % 87.52 % 77.72 % ============= ============= ============= Charge-off Information (year to date): Average loans 371,278 361,324 360,176 ------------- ------------- ------------- Net charge-offs 858 2,169 1,310 ------------- ------------- ------------- Charge-offs as a % of average loans .23 % .60 % .36 % ------------- ------------- ------------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS December September June 30, March 31, 31, 30, June 30, 2009 2009 2008 2008 2008 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 372,004 $ 370,776 $ 370,280 $ 361,521 $ 362,122 Allowance for loan losses (4,119) (4,793) (4,277) (3,385) (3,585) --------- --------- --------- --------- --------- Total loans, net 367,885 365,983 366,003 358,136 358,537 Intangible assets 6 26 46 65 85 Total assets 506,304 466,375 451,431 440,953 437,327 Core deposits 202,892 196,860 195,165 208,940 200,293 Noncore deposits (1) 210,260 188,897 175,932 151,754 156,683 --------- --------- --------- --------- --------- Total deposits 413,152 385,757 371,097 360,694 356,976 Total borrowings 36,210 36,210 36,210 36,210 36,280 Total shareholders' equity 53,939 41,864 41,552 41,427 40,975 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,419,736 AVERAGE BALANCES (Dollars in thousands) Assets $ 491,205 $ 454,741 $ 441,583 $ 423,702 $ 418,246 Loans 371,609 370,943 366,077 358,844 362,574 Deposits 401,510 372,670 358,213 341,377 332,725 Equity 49,855 41,813 41,516 41,097 40,399 INCOME STATEMENT (Dollars in thousands) Net interest income $ 4,051 $ 3,495 $ 3,330 $ 3,371 $ 3,118 Provision for loan losses 150 550 1,100 450 750 --------- --------- --------- --------- --------- Net interest income after provision 3,901 2,945 2,230 2,921 2,368 Total noninterest income 439 391 308 288 3,747 Total noninterest expense 3,470 3,239 2,961 2,935 3,471 --------- --------- --------- --------- --------- Income before taxes 870 97 (423) 274 2,644 Provision for income taxes 271 7 (171) 58 875 Preferred dividend expense 138 - - - - --------- --------- --------- --------- --------- Net income $ 461 $ 90 $ (252) $ 216 $ 1,769 ========= ========= ========= ========= ========= PER SHARE DATA Earnings - basic $ .13 $ .03 $ (.07) $ .06 $ .52 Earnings - diluted .13 .03 (.07) .06 .52 Book value per common share 12.55 12.24 12.15 12.11 11.98 Market value, closing price 4.50 4.00 4.40 5.26 7.00 ASSET QUALITY RATIOS Nonperforming loans/total loans 2.65% 3.52% 1.32% 1.29% 1.27% Nonperforming assets/total assets 2.93 3.27 1.57 1.45 1.83 Allowance for loan losses/total loans 1.11 1.29 1.16 .94 .99 Allowance for loan losses/nonperformi- ng loans 41.71 36.72 87.52 72.81 77.22 PROFITABILITY RATIOS Return on average assets .38% .08% (.23)% .20% 1.70% Return on average equity 3.71 .87 (2.42) 2.08 17.62 Net interest margin 3.58 3.35 3.20 3.39 3.19 Efficiency ratio 76.55 82.36 80.30 79.12 88.45 Average loans/average deposits 92.55 99.54 102.20 105.12 108.97 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 9.65% 7.86% 8.01% 8.31% 8.56% Tier 1 capital to risk weighted assets 11.94 9.31 9.25 9.40 9.48 Total capital to risk weighted assets 13.00 10.56 10.38 10.31 10.45 Average equity/average assets 10.15 9.20 9.40 9.70 9.66 Tangible equity/tangible assets 10.65 8.97 9.20 9.38 9.35 (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