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, 2010 2009 2009 ---------- ---------- ---------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 500,774 $ 515,377 $ 506,304 Loans 384,839 384,310 372,004 Investment securities 34,942 46,513 95,620 Deposits 405,784 421,389 413,152 Borrowings 36,140 36,140 36,210 Shareholders' Equity 56,231 55,299 53,939 Selected Statements of Income Data (six months and year ended): Net interest income $ 8,045 $ 16,287 $ 7,546 Provision for loan losses 3,700 3,700 700 Income (Loss) before taxes and preferred dividend (3,214) 3,536 967 Net income 1,038 1,907 551 Income per common share - Basic .30 .56 .16 Income per common share - Diluted .30 .56 .16 Three Months Ended: Net interest income $ 4,023 $ 4,431 $ 4,051 Income (Loss) before taxes and preferred dividend (3,514) (16) 870 Net income (Loss) (2,488) (180) 461 Income (Loss) per common share - Basic (0.73) (.05) .13 Income (Loss) per common share - Diluted (0.73) (.05) .13 Weighted average shares outstanding 3,419,736 3,419,736 3,419,736 Selected Financial Ratios and Other Data (six months and year ended): Performance Ratios: Net interest margin 3.53% 3.59% 3.47% Efficiency ratio 77.08 73.37 79.25 Return on average assets .41 .39 .23 Return on average common equity 3.70 3.77 2.42 Average total assets $ 505,703 $ 493,652 $ 473,074 Average total common shareholders' equity $ 56,506 $ 50,531 $ 45,856 Average loans to average deposits ratio 93.59% 92.99% 95.90% Common Share Data (at end of period): Market price per common share $ 6.50 $ 4.64 $ 4.50 Book value per common share $ 13.34 $ 13.10 $ 12.55 Common shares outstanding 3,419,736 3,419,736 3,419,736 Other Data (at end of period): Allowance for loan losses $ 6,371 $ 5,225 $ 4,119 Non-performing assets $ 16,719 $ 21,041 $ 14,825 Allowance for loan losses to total loans 1.66% 1.36% 1.11% Non-performing assets to total assets 3.34% 4.08% 2.93% Texas Ratio* 26.71% 34.77% 25.54% Number of: Branch locations 11 10 11 FTE Employees 105 100 102 * Texas Ratio: Non-performing Assets divided by Total Equity plus Allowance for Loan Losses MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS June 30, December 31, June 30, (Dollars in thousands) 2010 2009 2009 ---------- ---------- ---------- (unaudited) (unaudited) ASSETS Cash and due from banks $ 39,165 $ 18,433 $ 12,189 Federal funds sold 12,000 27,000 - ---------- ---------- ---------- Cash and cash equivalents 51,165 45,433 12,189 Interest-bearing deposits in other financial institutions 678 678 618 Securities available for sale 34,942 46,513 95,620 Federal Home Loan Bank stock 3,794 3,794 3,794 Loans: Commercial 302,228 305,670 296,392 Mortgage 78,428 74,350 71,777 Installment 4,183 4,290 3,835 ---------- ---------- ---------- Total Loans 384,839 384,310 372,004 Allowance for loan losses (6,371) (5,225) (4,119) ---------- ---------- ---------- Net loans 378,468 379,085 367,885 Premises and equipment 10,085 10,165 11,064 Other real estate held for sale 5,676 5,804 4,950 Other assets 15,966 23,905 10,184 ---------- ---------- ---------- TOTAL ASSETS $ 500,774 $ 515,377 $ 506,304 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES: Deposits: Noninterest bearing deposits $ 41,434 $ 35,878 $ 33,368 NOW, money market, checking 118,909 95,790 75,974 Savings 20,110 18,207 21,411 CDs < $100,000 90,573 59,953 72,139 CDs > $100,000 23,652 36,385 25,455 Brokered 111,106 175,176 184,805 ---------- ---------- ---------- Total deposits 405,784 421,389 413,152 Borrowings: Federal Home Loan Bank 35,000 35,000 35,000 Other 1,140 1,140 1,210 ---------- ---------- ---------- Total borrowings 36,140 36,140 36,210 Other liabilities 2,619 2,549 3,003 ---------- ---------- ---------- Total liabilities 444,543 460,078 452,365 TOTAL SHAREHOLDERS' EQUITY 56,231 55,299 53,939 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 500,774 $ 515,377 $ 506,304 ========== ========== ========== 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, ------------------- ------------------- 2010 2009 2010 2009 -------- --------- -------- --------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 5,227 $ 5,104 $ 10,418 $ 10,106 Tax-exempt 47 84 99 174 Interest on securities: Taxable 356 673 753 1,132 Tax-exempt 7 3 14 4 Other interest income 37 14 77 16 -------- --------- -------- --------- Total interest income 5,674 5,878 11,361 11,432 -------- --------- -------- --------- INTEREST EXPENSE: Deposits 1,439 1,566 2,896 3,344 Borrowings 212 261 420 542 -------- --------- -------- --------- Total interest expense 1,651 1,827 3,316 3,886 -------- --------- -------- --------- Net interest income 4,023 4,051 8,045 7,546 Provision for loan losses 2,800 150 3,700 700 -------- --------- -------- --------- Net interest income after provision for loan losses 1,223 3,901 4,345 6,846 -------- --------- -------- --------- OTHER INCOME: Service fees 252 271 474 514 Net security gains - - 215 - Net gains on sale of secondary market loans 276 84 575 142 Other 65 84 136 174 -------- --------- -------- --------- Total other income 593 439 1,400 830 -------- --------- -------- --------- OTHER EXPENSES: Salaries and employee benefits 1,781 1,561 3,501 3,158 Occupancy 345 355 690 733 Furniture and equipment 197 222 391 411 Data processing 205 224 394 444 Professional service fees 161 144 334 297 Loan and deposit 2,239 512 2,856 773 Telephone 45 46 92 89 Advertising 72 80 144 158 Other 285 326 557 646 -------- --------- -------- --------- Total other expenses 5,330 3,470 8,959 6,709 -------- --------- -------- --------- Income (Loss) before provision for income taxes (3,514) 870 (3,214) 967 Provision for (benefit of) income taxes (1,212) 271 (4,623) 278 -------- --------- -------- --------- NET INCOME (LOSS) (2,302) 599 1,409 689 -------- --------- -------- --------- Preferred dividend expense 186 138 371 138 -------- --------- -------- --------- NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ (2,488) $ 461 $ 1,038 $ 551 ======== ========= ======== ========= INCOME (LOSS) PER COMMON SHARE: Basic $ (0.73) $ .13 $ .30 $ .16 ======== ========= ======== ========= Diluted $ (0.73) $ .13 $ .30 $ .16 ======== ========= ======== ========= 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, 2010 2009 2009 ----------- ----------- ----------- Commercial Loans Real estate - operators of nonresidential buildings $ 50,000 $ 48,689 $ 44,087 Hospitality and tourism 43,883 45,315 35,033 Commercial construction 27,219 24,591 26,125 Real estate agents and managers 20,727 24,242 24,614 Other 160,399 162,833 166,533 ----------- ----------- ----------- Total Commercial Loans 302,228 305,670 296,392 1-4 family residential real estate and construction 78,428 74,350 71,777 Consumer 4,183 4,290 3,835 ----------- ----------- ----------- Total Loans $ 384,839 $ 384,310 $ 372,004 =========== =========== =========== Credit Quality (at end of period): June 30, December 31, June 30, 2010 2009 2009 ---------- ---------- ---------- Nonperforming Assets : Nonaccrual loans $ 10,174 $ 14,368 $ 9,283 Loans past due 90 days or more - - - Restructured loans 869 869 592 ---------- ---------- ---------- Total nonperforming loans 11,043 15,237 9,875 Other real estate owned 5,676 5,804 4,950 ---------- ---------- ---------- Total nonperforming assets $ 16,719 $ 21,041 $ 14,825 ========== ========== ========== Nonperforming loans as a % of loans 2.87% 3.96% 2.65% ---------- ---------- ---------- Nonperforming assets as a % of assets 3.34% 4.08% 2.93% ---------- ---------- ---------- Reserve for Loan Losses: At period end $ 6,371 $ 5,225 $ 4,119 ---------- ---------- ---------- As a % of average loans 1.66% 1.39% 1.11% ---------- ---------- ---------- As a % of nonperforming loans 57.69% 34.29% 41.71% ---------- ---------- ---------- As a % of nonaccrual loans 62.62% 36.37% 44.37% ========== ========== ========== Charge-off Information (year to date): Average loans 383,398 374,796 371,278 ---------- ---------- ---------- Net charge-offs 2,554 2,752 858 ---------- ---------- ---------- Charge-offs as a % of average loans .67% .73% .23% ---------- ---------- ---------- MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES QUARTERLY FINANCIAL HIGHLIGHTS QUARTER ENDED ------------------------------------------------------- (Unaudited) ------------------------------------------------------- December September June 30, March 31, 31, 30, June 30, 2010 2010 2009 2009 2009 --------- --------- --------- --------- --------- BALANCE SHEET (Dollars in thousands) Total loans $ 384,839 $ 377,311 $ 384,310 $ 384,100 $ 372,004 Allowance for loan losses (6,371) (4,737) (5,225) (4,081) (4,119) --------- --------- --------- --------- --------- Total loans, net 378,468 372,574 379,085 380,019 367,885 Intangible assets - - - - 6 Total assets 500,774 502,427 515,377 513,180 506,304 Core deposits 271,026 236,227 209,828 200,541 202,892 Noncore deposits(1) 134,758 168,985 211,561 218,040 210,260 --------- --------- --------- --------- --------- Total deposits 405,784 405,212 421,389 418,581 413,152 Total borrowings 36,140 36,140 36,140 36,140 36,210 Total shareholders' equity 56,231 58,722 55,299 55,766 53,939 Total shares outstanding 3,419,736 3,419,736 3,419,736 3,419,736 3,419,736 AVERAGE BALANCES (Dollars in thousands) Assets $ 502,942 $ 508,495 $ 514,102 $ 513,687 $ 491,205 Loans 382,169 384,640 386,203 370,310 371,609 Deposits 405,449 413,897 418,280 419,102 401,510 Equity 57,889 55,109 55,665 54,594 49,855 INCOME STATEMENT (Dollars in thousands) Net interest income $ 4,023 $ 4,022 $ 4,431 $ 4,310 $ 4,051 Provision for loan losses 2,800 900 2,300 700 150 --------- --------- --------- --------- --------- Net interest income after provision 1,223 3,122 2,131 3,610 3,901 Total noninterest income 593 807 1,503 2,418 439 Total noninterest expense 5,330 3,629 3,650 3,443 3,470 --------- --------- --------- --------- --------- Income (Loss) before taxes (3,514) 300 (16) 2,585 870 Provision for (benefit of) income taxes (1,212) (3,411) (22) 864 271 Preferred dividend expense 186 185 186 185 138 --------- --------- --------- --------- --------- Net income (loss) available to common shareholders $ (2,488) $ 3,526 $ (180) $ 1,536 $ 461 ========= ========= ========= ========= ========= PER SHARE DATA Earnings (Losses) - basic $ (.73) $ 1.03 $ (.05) $ .45 $ .13 Earnings (Losses)- diluted (.73) 1.03 (.05) .45 .13 Book value per common share 13.34 14.08 13.10 13.25 12.55 Market value, closing price 6.50 4.72 4.64 4.10 4.50 ASSET QUALITY RATIOS Nonperforming loans/total loans 2.87% 2.62% 3.96% 3.00% 2.65% Nonperforming assets/total assets 3.34 3.51 4.08 3.38 2.93 Allowance for loan losses/total loans 1.66 1.26 1.36 1.06 1.11 Allowance for loan losses/ nonperforming loans 57.69 47.87 34.29 35.40 41.71 Texas Ratio(2) 26.71 27.76 34.77 28.99 25.54 PROFITABILITY RATIOS Return on average assets (1.98)% 2.81% (.14)% 1.19% .38% Return on average equity (17.24) 25.95 (1.28) 11.16 3.71 Net interest margin 3.56 3.51 3.74 3.66 3.58 Efficiency ratio 76.04 78.12 71.03 70.09 76.55 Average loans/average deposits 94.26 92.93 92.33 88.36 92.55 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 9.38% 9.85% 9.75% 9.74% 9.65% Tier 1 capital to risk weighted assets 11.65 12.48 11.92 12.18 11.94 Total capital to risk weighted assets 12.91 13.69 13.17 13.19 13.00 Average equity/average assets 11.51 10.84 10.83 10.63 10.15 Tangible equity/tangible assets 11.51 10.84 10.83 10.87 10.65 (1) Noncore deposits includes Internet CDs, brokered deposits and CDs greater than $100,000 (2) Texas Ratio: Nonperforming Assets divided by Total Equity plus Allowance for Loan Losses
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