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, 2010 2009 2009 ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 502,427 $ 515,377 $ 466,375 Loans 377,311 384,310 370,776 Investment securities 36,841 46,513 51,071 Deposits 405,212 421,389 385,757 Borrowings 36,140 36,140 36,210 Shareholders' Equity 58,722 55,299 41,864 Selected Statements of Income Data: Net interest income $ 4,022 $ 16,287 $ 3,495 Income before taxes and preferred dividend 300 3,536 97 Net income 3,526 1,907 90 Income per common share - Basic 1.03 .56 .03 Income per common share - Diluted 1.03 .56 .03 Weighted average shares outstanding 3,419,736 3,419,736 3,419,736 Selected Financial Ratios and Other Data: Performance Ratios: Net interest margin 3.51% 3.59% 3.35% Efficiency ratio 78.12 73.37 82.36 Return on average assets 2.81 .39 .08 Return on average equity 25.95 3.77 .87 Average total assets $ 508,495 $ 493,652 $ 454,741 Average total shareholders' equity 55,109 50,531 41,813 Average loans to average deposits ratio 92.93% 92.99% 99.54% Common Share Data (at end of period): Market price per common share $ 4.72 $ 4.64 $ 4.00 Book value per common share $ 14.08 $ 13.10 $ 12.24 Common shares outstanding 3,419,736 3,419,736 3,419,736 Other Data (at end of period): Allowance for loan losses $ 4,737 $ 5,225 $ 4,793 Non-performing assets $ 17,619 $ 21,041 $ 15,252 Allowance for loan losses to total loans 1.26% 1.36% 1.29% Non-performing assets to total assets 3.51% 4.08% 3.27% Number of: Branch locations 10 10 13 FTE Employees 103 100 101 MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, December 31, March 31, (Dollars in thousands) 2010 2009 2009 ------------ ------------ ------------ (unaudited) (unaudited) ASSETS Cash and due from banks $ 19,359 $ 18,433 $ 21,394 Federal funds sold 36,000 27,000 - ------------ ------------ ------------ Cash and cash equivalents 55,359 45,433 21,394 Interest-bearing deposits in other financial institutions 700 678 569 Securities available for sale 36,841 46,513 51,071 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 296,271 305,670 295,595 Mortgage 76,996 74,350 71,554 Installment 4,044 4,290 3,627 ------------ ------------ ------------ Total Loans 377,311 384,310 370,776 Allowance for loan losses (4,737) (5,225) (4,793) ------------ ------------ ------------ Net loans 372,574 379,085 365,983 Premises and equipment 10,060 10,165 11,134 Other real estate held for sale 7,723 5,804 2,199 Other assets 15,376 23,905 10,231 ------------ ------------ ------------ TOTAL ASSETS $ 502,427 $ 515,377 $ 466,375 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Noninterest bearing deposits $ 30,356 $ 35,878 $ 31,541 NOW, money market, checking 109,374 95,790 75,026 Savings 20,675 18,207 19,585 CDs < $100,000 75,822 59,953 70,708 CDs > $100,000 30,173 36,385 26,886 Brokered 138,812 175,176 162,011 ------------ ------------ ------------ Total deposits 405,212 421,389 385,757 Borrowings: Federal Home Loan Bank 35,000 35,000 - Other 1,140 1,140 36,210 ------------ ------------ ------------ Total borrowings 36,140 36,140 36,210 Other liabilities 2,353 2,549 2,544 ------------ ------------ ------------ Total liabilities 443,705 460,078 424,511 Shareholders' equity: Preferred stock - No par value: Authorized 500,000 shares, 11,000 shares issued and outstanding 10,562 10,514 - Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 3,419,736 shares 43,502 43,493 42,833 Accumulated earnings (deficit) 3,724 199 (1,618) Accumulated other comprehensive income 934 1,093 649 ------------ ------------ ------------ Total shareholders' equity 58,722 55,299 41,864 ------------ ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 502,427 $ 515,377 $ 466,375 ============ ============ ============ MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, --------------------------- (Dollars in thousands except per share data) 2010 2009 ------------ ------------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,191 $ 5,002 Tax-exempt 52 90 Interest on securities: Taxable 397 459 Tax-exempt 7 1 Other interest income 40 2 ------------ ------------- Total interest income 5,687 5,554 ------------ ------------- INTEREST EXPENSE: Deposits 1,457 1,778 Borrowings 208 281 ------------ ------------- Total interest expense 1,665 2,059 ------------ ------------- Net interest income 4,022 3,495 Provision for loan losses 900 550 ------------ ------------- Net interest income after provision for loan losses 3,122 2,945 ------------ ------------- OTHER INCOME: Service fees 223 243 Net security gains 215 - Net gains on sale of secondary market loans 316 58 Other 53 90 ------------ ------------- Total noninterest income 807 391 ------------ ------------- OTHER EXPENSE: Salaries and employee benefits 1,720 1,597 Occupancy 345 378 Furniture and equipment 194 189 Data processing 189 220 Professional service fees 173 153 Loan and deposit 395 136 FDIC insurance assessment 222 125 Telephone 47 43 Advertising 72 78 Other 272 320 ------------ ------------- Total noninterest expense 3,629 3,239 ------------ ------------- Income before provision for income taxes 300 97 Provision for income taxes (3,411) 7 ------------ ------------- NET INCOME 3,711 90 ------------ ------------- Preferred dividend and accretion of discount 185 - ------------ ------------- NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 3,526 90 ============ ============= INCOME PER COMMON SHARE: Basic $ 1.03 $ .03 ============ ============= Diluted $ 1.03 $ .03 ============ ============= 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, 2010 2009 2009 ------------- ------------- ------------- Commercial Loans Real estate - operators of nonresidential buildings $ 49,753 $ 48,689 $ 40,457 Hospitality and tourism 44,820 45,315 35,224 Real estate agents and managers 21,529 24,242 28,012 Operators of nonresidential buildings 13,170 12,619 13,512 Other 138,964 150,214 151,732 ------------- ------------- ------------- Total Commercial Loans 268,236 281,079 268,937 1-4 family residential real estate 70,087 67,232 65,792 Consumer 4,044 4,290 3,627 Construction Commercial 28,035 24,591 26,658 Consumer 6,909 7,118 5,762 ------------- ------------- ------------- Total Loans $ 377,311 $ 384,310 $ 370,776 ============= ============= ============= Credit Quality (at end of period): March 31, December 31, March 31, 2010 2009 2009 ------------ ------------ ------------ Nonperforming Assets: Nonaccrual loans $ 9,027 $ 14,368 $ 12,461 Loans past due 90 days or more - - - Restructured loans 869 869 592 ------------ ------------ ------------ Total nonperforming loans 9,896 15,237 13,053 Other real estate owned 7,723 5,804 2,199 ------------ ------------ ------------ Total nonperforming assets $ 17,619 $ 21,041 $ 15,252 ============ ============ ============ Nonperforming loans as a % of loans 2.62% 3.96% 3.52% ------------ ------------ ------------ Nonperforming assets as a % of assets 3.51% 4.08% 3.27% ------------ ------------ ------------ Reserve for Loan Losses: At period end $ 4,737 $ 5,225 $ 4,793 ------------ ------------ ------------ As a % of loans 1.26% 1.39% 1.29% ------------ ------------ ------------ As a % of nonperforming loans 47.87% 34.29% 36.72% ------------ ------------ ------------ As a % of nonaccrual loans 52.48% 36.37% 38.46% ============ ============ ============ Charge-off Information (year to date): Average loans 384,640 374,796 370,943 ------------ ------------ ------------ Net charge-offs 1,389 2,752 34 ------------ ------------ ------------ Charge-offs as a % of average loans .36% .73% .01% ------------ ------------ ------------ MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED ------------------------------------------------------------- (Unaudited) ------------------------------------------------------------- March 31, December 31, September 30, June 30, March 31, 2010 2009 2009 2009 2009 --------- ------------ ------------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 377,311 $ 384,310 $ 384,100 $ 372,004 $ 370,776 Allowance for loan losses (4,737) (5,225) (4,081) (4,119) (4,793) --------- ------------ ------------- --------- --------- Total loans, net 372,574 379,085 380,019 367,885 365,983 Intangible assets - - - 6 26 Total assets 502,427 515,377 513,180 506,304 466,375 Core deposits 236,227 209,828 200,541 202,892 196,860 Noncore deposits (1) 168,985 211,561 218,040 210,260 188,897 --------- ------------ ------------- --------- --------- Total deposits 405,212 421,389 418,581 413,152 385,757 Total borrowings 36,140 36,140 36,140 36,210 36,210 Total shareholders' equity 58,722 55,299 55,766 53,939 41,864 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,419,736 AVERAGE BALANCES (Dollars in thousands) Assets $ 508,495 $ 514,102 $ 513,687 $ 491,205 $ 454,740 Loans 384,640 386,203 370,310 371,609 370,943 Deposits 413,897 418,280 419,102 401,510 372,669 Equity 55,109 55,665 54,594 49,855 41,813 INCOME STATEMENT (Dollars in thousands) Net interest income $ 4,022 $ 4,431 $ 4,310 $ 4,051 $ 3,495 Provision for loan losses 900 2,300 700 150 550 --------- ------------ ------------- --------- --------- Net interest income after pro- vision 3,122 2,131 3,610 3,901 2,945 Total noninterest income 807 1,503 2,418 439 391 Total noninterest expense 3,629 3,650 3,443 3,470 3,239 --------- ------------ ------------- --------- --------- Income before taxes 300 (16) 2,585 870 97 Provision for income taxes (3,411) (22) 864 271 7 --------- ------------ ------------- --------- --------- Net income 3,711 6 1,721 599 90 --------- ------------ ------------- --------- --------- Preferred dividend expense 185 186 185 138 - --------- ------------ ------------- --------- --------- Net income available to common share- holders $ 3,526 $ (180) $ 1,536 $ 461 $ 90 ========= ============ ============= ========= ========= PER SHARE DATA Earnings $ 1.03 $ (.05) $ .45 $ .13 $ .03 Book value per common share 14.08 13.10 13.25 12.73 12.24 Market value, closing price 4.72 4.64 4.10 4.50 4.00 ASSET QUALITY RATIOS Nonperforming loans/total loans 2.62% 3.96 % 3.00% 2.66% 3.52% Nonperforming assets/total assets 3.51 4.08 3.38 2.93 3.27 Allowance for loan losses/ total loans 1.26 1.36 1.06 1.11 1.29 Allowance for loan losses/non- performing loans 47.87 34.29 35.40 41.71 36.72 PROFITABILITY RATIOS Return on average assets 2.81% (.14)% 1.19% .38% .08% Return on average equity 25.95 (1.28) 11.16 3.71 .87 Net interest margin 3.51 3.74 3.66 3.58 3.35 Efficiency ratio 78.12 71.03 70.09 76.55 82.36 Average loans/average deposits 92.93 92.33 88.36 92.55 99.54 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 9.85% 9.75 % 9.74% 9.65% 7.86% Tier 1 capital to risk weighted assets 12.48 11.92 12.18 11.94 9.31 Total capital to risk weighted assets 13.69 13.17 13.19 13.00 10.56 Average equity/ average assets 10.84 10.83 10.63 10.15 9.19 Tangible equity/ tangible assets 10.84 10.83 10.87 10.65 8.97 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000
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