Mackinac Financial Corporation Reports Third Quarter and Nine Months 2010 Results

MANISTIQUE, MI--(Marketwire - November 5, 2010) - Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the "Bank") today announced a third quarter 2010 loss of $.104 million or $(.03) per share compared to net income of $1.536 million, or $.45 per share for the third quarter of 2009. Net income for the first nine months of 2010 totaled $.934 million, or $.27 per share, compared to $2.087 million, or $.61 per share, for the same period in 2009.

The third quarter results include a provision for loan losses of $1.000 million compared to $.700 million for the three month period in 2009. Operating results for the nine month period in 2010 include a $4.700 million provision, $1.948 million in OREO write-downs, $.215 million in security gains and a $3.500 million deferred tax benefit. The nine month and three month results for 2009 include a $1.208 million gain from the sale of two branch offices and $.644 million in security gains.

Income before tax and loan loss provision for the third quarter of 2010 amounted to $1.111 million compared to $1.433 million in 2009 before tax, loan loss provision and also excluding the branch sale and security gains noted above. The 2010 nine month income before provision, taxes and nonrecurring items noted above, would total $3.330 million in compared to $3.100 million in 2009. Outside of the continuing impact of higher provisions and other costs associated with remediation of problem credits, the company continued its momentum in terms of strong core deposit growth and noninterest income generation from loan sales. Core deposits have increased by $77 million in 2010 and income from SBA and secondary mortgage loans totaled $.958 million thus far in 2010 compared to $.472 million in 2009, more than a 100% increase.

Nonperforming assets at the end of the third quarter of 2010 totaled $17.005 million, 3.41% of total assets, a reduction of $4.036 million from 2009 year end balances of $21.041 million. Nonaccrual loans represent 1.16% of total loans and loan delinquencies greater than 30 days have remained stable and continue to reside below peer levels and manageable. The company's Texas Ratio remained satisfactory at 27.68%. Kelly George, President and Chief Executive Officer of mBank, commented, "We are pleased to record lower levels of nonperforming assets and we will continue our timely and aggressive efforts in the identification and resolution of nonperforming assets which should result in more normalized loan loss provisions and lowered credit related costs in future periods. However, we continue to be hindered from the impacts of reappraising problem assets due to the slow disposition process from an accommodating Michigan legal system for borrowers, but are encouraged that we are facing few new problem situations."

Loans at September 30, 2010 totaled $382.727 million down slightly from the $384.100 million at September 30, 2009 and from 2009 year end balances of $384.310 million. Loan balances have been impacted by normal principal runoff of $38.0 million along with pay-offs of $17.8 million and SBA sales. Mr. George stated, "Although our outstanding loan balances have not increased, we are pleased with current year to date production which totaled $58.0 million, with 72% originating in the Upper Peninsula. Our fourth quarter pipeline is strong with continued success with the SBA and USDA loan guarantee programs. Thus far in 2010 we have sold $8.9 million of these loan balances and recognized $.647 million in gains."

Total assets of the Corporation at September 30, 2010 were $499.066 million, down $14.174 million, or 2.76% from the $513.180 million in total assets reported at September 30, 2009 and down $16.371 million, or 3.18%, from total assets of $515.377 million at year-end 2009. Asset totals at September 30, 2010 reflect the decrease of $9.063 million in securities.

Total shareholders' equity at September 30, 2010 totaled $55.987 million, compared to $55.766 million on September 30, 2009, an increase of $.221 million, or .40%. The capital levels at the bank and on a consolidated basis are strong with Tier 1 above 8% and total risk based capital above 11%. Book value of common shareholders' equity was $13.26 per share at September 30, 2010 compared to $13.25 per share at September 30, 2009.

Total deposits of $404.524 were lower than deposit totals reported at September 30, 2009 of $418.581 million and 2009 year-end deposits of $421.389 million. The decreased deposit level was due entirely to lower levels of brokered deposits, a very positive initiative given the current regulatory climate for this type of funding source, which totaled $94.660 million at September 30, 2010 compared to $175.176 million at 2009 year end and $192.631 million at September 30, 2009.

Noninterest income, totaled $.648 million in the third quarter of 2010, compared to $2.418 million in the same period in 2009. Noninterest income for the 2010 nine month period totaled $2.048 million compared to $3.248 million in 2009. Noninterest income for the third quarter and nine month periods of 2009 included $1.208 million of branch sale gains and $.644 million of security gains. The Corporation also recognized $.215 million in gains from the sale of securities which was recorded in the first quarter of 2010.

Noninterest expense totaled $3.601 million in the third quarter, an increase of $.158 million from the third quarter of 2009. On a year to date basis 2010 noninterest expense totaled $12.560 million, an increase of $2.408 million when compared to the nine months ended September 30, 2009. The increase in expenses is primarily attributed to costs associated with nonperforming assets which were $2.2 million higher in 2010 and included OREO write-downs of $1.948 million. Noninterest expenses, excluding the extraordinary costs incurred for remediation of nonperforming assets, are well managed and below peer averages.

MFNC Chairman and CEO Paul Tobias concluded, "Thus far in 2010, we have focused our efforts on preserving shareholders' equity with extensive efforts in nonperforming asset remediation. Our results through the first nine months reflect the costs associated with this effort. We are confident that the worst is behind us and pleased to report that our core earnings are increasing. We will continue to look for opportunities that will enhance the franchise value while improving our current platform to increase core earnings."

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $450 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 11 branch locations in Michigan; seven in the Upper Peninsula, three in the Northern Lower Peninsula and one in Oakland County. 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,
                                         2010         2009         2009
                                     -----------  -----------  -----------
                                     (Unaudited)               (Unaudited)
Selected Financial Condition Data
 (at end of period):
Assets                               $   499,006  $   515,377  $   513,180
Loans                                    382,727      384,310      384,100
Investment securities                     37,450       46,513       80,203
Deposits                                 404,524      421,389      418,581
Borrowings                                36,069       36,140       36,140
Shareholders' Equity                      55,987       55,299       55,766

Selected Statements of Income Data
 (nine months and year ended):
Net interest income                  $    12,109  $    16,287  $    11,856
Provision for loan losses                  4,700        3,700        1,400
Income (Loss) before taxes and
 preferred dividend                       (3,103)       3,536        3,552
Net income                                   934        1,907        2,087
Income per common share - Basic              .27          .56          .61
Income per common share - Diluted            .27          .56          .61

Three Months Ended:
Net interest income                  $     4,064  $     4,431  $     4,310
Income (Loss) before taxes and
 preferred dividend                          111          (16)       2,585
Net income (Loss)                           (104)        (180)       1,536
Income (Loss) per common share -
 Basic                                      (.03)        (.05)         .45
Income (Loss) per common share -
 Diluted                                    (.03)        (.05)         .45
Weighted average shares outstanding    3,419,736    3,419,736    3,419,736

Selected Financial Ratios and Other
 Data (nine months and year ended):
Performance Ratios:
Net interest margin                         3.59%        3.59%        3.54%
Efficiency ratio                           74.12        73.37        77.71
Return on average assets                     .25          .39          .57
Return on average equity                    2.21         3.77         5.72

Average total assets                 $   507,938  $   493,652  $   486,760
Average total shareholders' equity   $    56,561  $    50,531  $    48,801
Average loans to average deposits
 ratio                                     93.19%       92.99%       93.22%

Common Share Data (at end of
 period):
Market price per common share        $      5.10  $      4.64  $      4.10
Book value per common share          $     13.26  $     13.10  $     13.25
Common shares outstanding              3,419,736    3,419,736    3,419,736

Other Data (at end of period):
Allowance for loan losses            $     5,437  $     5,225  $     4,081
Non-performing assets                $    17,005  $    21,041  $    17,349
Allowance for loan losses to total
 loans                                      1.42%        1.36%        1.06%
Non-performing assets to total
 assets                                     3.41%        4.08%        3.38%
Texas Ratio*                               27.68%       34.77%       28.99%
Number of:
   Branch locations                           11           10           10
   FTE Employees                              98          100           97


* Texas Ratio: Non-performing Assets divided by Total Equity plus
  Allowance for Loan Losses




             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                       CONSOLIDATED BALANCE SHEETS


                                   September 30, December 31, September 30,
(Dollars in thousands)                   2010         2009         2009
                                     -----------  -----------  -----------
                                     (Unaudited)               (Unaudited)
ASSETS

Cash and due from banks              $    36,561  $    18,433  $    23,249
Federal funds sold                        12,000       27,000            -
                                     -----------  -----------  -----------
   Cash and cash equivalents              48,561       45,433       23,249

Interest-bearing deposits in other
 financial institutions                      692          678          662
Securities available for sale             37,450       46,513       80,203
Federal Home Loan Bank stock               3,794        3,794        3,794

Loans:
   Commercial                            295,262      305,670      306,590
   Mortgage                               82,312       74,350       73,116
   Installment                             5,153        4,290        4,394
                                     -----------  -----------  -----------
     Total Loans                         382,727      384,310      384,100
       Allowance for loan losses          (5,437)      (5,225)      (4,081)
                                     -----------  -----------  -----------
   Net loans                             377,290      379,085      380,019

Premises and equipment                     9,843       10,165       10,281
Other real estate held for sale            5,758        5,804        5,821
Other assets                              15,618       23,905        9,151
                                     -----------  -----------  -----------

TOTAL ASSETS                         $   499,006  $   515,377  $   513,180
                                     ===========  ===========  ===========

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
   Deposits:
     Noninterest bearing deposits    $    44,402  $    35,878  $    33,254
     NOW, money market, checking         127,828       95,790       88,843
     Savings                              20,265       18,207       18,807
     CDs < $100,000                       94,560       59,953       59,637
     CDs > $100,000                       22,809       36,385       25,409
     Brokered                             94,660      175,176      192,631
                                     -----------  -----------  -----------
       Total deposits                    404,524      421,389      418,581

   Borrowings:
     Federal Home Loan Bank               35,000       35,000       35,000
     Other                                 1,069        1,140        1,140
                                     -----------  -----------  -----------
       Total borrowings                   36,069       36,140       36,140
   Other liabilities                       2,426        2,549        2,693
                                     -----------  -----------  -----------
       Total liabilities                 443,019      460,078      457,414

TOTAL SHAREHOLDERS' EQUITY                55,987       55,299       55,766
                                     -----------  -----------  -----------

TOTAL LIABILITIES AND SHAREHOLDERS'
 EQUITY                              $   499,006  $   515,377  $   513,180
                                     ===========  ===========  ===========





             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per
 share data)                        Three Months Ended  Nine Months Ended
                                      September 30,       September 30,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------  --------- --------  ---------
                                        (Unaudited)         (Unaudited)
INTEREST INCOME:
     Interest and fees on loans:
          Taxable                   $  5,300  $   5,106 $ 15,718  $  15,212
          Tax-exempt                      46         63      145        237
     Interest on securities:
          Taxable                        324        888    1,077      2,020
          Tax-exempt                       7          7       21         11
     Other interest income                23         28      100         44
                                    --------  --------- --------  ---------
          Total interest income        5,700      6,092   17,061     17,524
                                    --------  --------- --------  ---------

INTEREST EXPENSE:
     Deposits                          1,414      1,550    4,309      4,894
     Borrowings                          222        232      643        774
                                    --------  --------- --------  ---------
          Total interest expense       1,636      1,782    4,952      5,668
                                    --------  --------- --------  ---------

Net interest income                    4,064      4,310   12,109     11,856
Provision for loan losses              1,000        700    4,700      1,400
                                    --------  --------- --------  ---------
Net interest income after provision
 for loan losses                       3,064      3,610    7,409     10,456
                                    --------  --------- --------  ---------

OTHER INCOME:
     Service fees                        264        235      737        750
     Net security gains                   (1)       644      215        644
     Net gains on sale of secondary
      market loans                       322        247      897        389
     Other                                63      1,292      199      1,465
                                    --------  --------- --------  ---------
          Total other income             648      2,418    2,048      3,248
                                    --------  --------- --------  ---------

OTHER EXPENSES:
     Salaries and employee benefits    1,779      1,603    5,281      4,761
     Occupancy                           358        336    1,048      1,069
     Furniture and equipment             202        193      593        604
     Data processing                     193        221      587        665
     Professional service fees           168        161      502        458
     Loan and deposit                    441        402    3,297      1,175
     Telephone                            53         50      145        139
     Advertising                          77         80      220        238
     Other                               330        397      887      1,043
                                    --------  --------- --------  ---------
          Total other expenses         3,601      3,443   12,560     10,152
                                    --------  --------- --------  ---------

Income (Loss) before provision for
 income taxes                            111      2,585   (3,103)     3,552
Provision for (benefit of) income
 taxes                                    30        864   (4,593)     1,142
                                    --------  --------- --------  ---------

NET INCOME (LOSS)                         81      1,721    1,490      2,410
                                    --------  --------- --------  ---------

Preferred dividend expense               185        185      556        323

                                    --------  --------- --------  ---------
NET INCOME (LOSS) AVAILABLE TO
 COMMON SHAREHOLDERS                $   (104) $   1,536 $    934  $   2,087
                                    ========  ========= ========  =========

INCOME (LOSS) PER COMMON SHARE:
     Basic                          $  (0.03) $     .45 $    .27  $     .61
                                    ========  ========= ========  =========
     Diluted                        $  (0.03) $     .45 $    .27  $     .61
                                    ========  ========= ========  =========





             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,
                                         2010         2009         2009
                                     ------------ ------------ ------------
Commercial Loans
Real estate - operators of
 nonresidential buildings            $     52,192 $     48,689 $     47,007
Hospitality and tourism                    39,998       45,315       45,867
Commercial construction                    25,718       24,591       24,076
Real estate agents and managers            19,675       24,242       23,996
Other                                     157,679      162,833      165,644
                                     ------------ ------------ ------------
   Total Commercial Loans                 295,262      305,670      306,590

1-4 family residential real estate
 and construction                          82,312       74,350       73,116
Consumer                                    5,153        4,290        4,394
                                     ------------ ------------ ------------

   Total Loans                       $    382,727 $    384,310 $    384,100
                                     ============ ============ ============


Credit Quality (at end of period):

                                   September 30, December 31, September 30,
                                         2010         2009         2009
                                     -----------  -----------  -----------
Nonperforming Assets :
Nonaccrual loans                     $     4,447  $    14,368  $    10,655
Loans past due 90 days or more                 -            -            -
Restructured loans                         6,800          869          873
                                     -----------  -----------  -----------
   Total nonperforming loans              11,247       15,237       11,528
Other real estate owned                    5,758        5,804        5,821
                                     -----------  -----------  -----------
   Total nonperforming assets        $    17,005  $    21,041  $    17,349
                                     ===========  ===========  ===========
Nonperforming loans as a % of loans         2.94%        3.96%        3.00%
                                     -----------  -----------  -----------
Nonperforming assets as a % of
 assets                                     3.41%        4.08%        3.38%
                                     -----------  -----------  -----------
Reserve for Loan Losses:
At period end                        $     5,437  $     5,225  $     4,081
                                     -----------  -----------  -----------
As a % of average loans                     1.42%        1.39%        1.10%
                                     -----------  -----------  -----------
As a % of nonperforming loans              48.34%       34.29%       35.40%
                                     -----------  -----------  -----------
As a % of nonaccrual loans                122.26%       36.37%       38.30%
                                     ===========  ===========  ===========

Charge-off Information (year to
 date):
   Average loans                     $   384,028  $   374,796  $   370,952
                                     -----------  -----------  -----------
   Net charge-offs                   $     4,488  $     2,752  $     1,596
                                     -----------  -----------  -----------
   Charge-offs as a % of average
    loans                                   1.17%         .73%         .43%
                                     -----------  -----------  -----------




             MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
                      QUARTERLY FINANCIAL HIGHLIGHTS

                                      QUARTER ENDED
                ----------------------------------------------------------
                                        (Unaudited)
                ----------------------------------------------------------
                September                           December    September
                    30,      June 30,   March 31,       31,         30,
                   2010        2010        2010        2009        2009
                ---------   ---------   ----------  ---------   ----------
BALANCE SHEET
 (Dollars in
 thousands)

Total loans     $ 382,727   $ 384,839   $  377,311  $ 384,310   $  384,100
Allowance for
 loan losses       (5,437)     (6,371)      (4,737)    (5,225)      (4,081)
                ---------   ---------   ----------  ---------   ----------
   Total loans,
    net           377,290     378,468      372,574    379,085      380,019
Intangible
 assets                 -           -            -          -            -
Total assets      499,006     500,774      502,427    515,377      513,180
Core deposits     287,055     271,026      236,227    209,828      200,541
Noncore
 deposits (1)     117,469     134,758      168,985    211,561      218,040
                ---------   ---------   ----------  ---------   ----------
   Total
    deposits      404,524     405,784      405,212    421,389      418,581
Total borrowings   36,069      36,140       36,140     36,140       36,140
Total
 shareholders'
 equity            55,987      56,231       58,722     55,299       55,766
Total shares
 outstanding    3,419,736   3,419,736    3,419,736  3,419,736    3,419,736

AVERAGE BALANCES
 (Dollars in thousands)

Assets          $ 512,335   $ 502,942   $  508,495  $ 514,102   $  513,687
Loans             385,268     382,169      384,640    386,203      370,310
Deposits          416,847     405,449      413,897    418,280      419,102
Equity             56,668      57,889       55,109     55,665       54,594

INCOME STATEMENT
 (Dollars in
 thousands)

Net interest
 income         $   4,064   $   4,023   $    4,022  $   4,431   $    4,310
Provision for
 loan losses        1,000       2,800          900      2,300          700
                ---------   ---------   ----------  ---------   ----------
   Net interest
    income after
    provision       3,064       1,223        3,122      2,131        3,610
Total noninterest
 income               648         593          807      1,503        2,418
Total noninterest
 expense            3,601       5,330        3,629      3,650        3,443
                ---------   ---------   ----------  ---------   ----------
Income (Loss)
 before taxes         111      (3,514)         300        (16)       2,585
Provision for
 (benefit of)
 income taxes          30      (1,212)      (3,411)       (22)         864
Preferred
 dividend
 expense              185         186          185        186          185
                ---------   ---------   ----------  ---------   ----------
Net income (loss)
 available to
 common
 shareholders   $    (104)  $  (2,488)  $    3,526  $    (180)  $    1,536
                =========   =========   ==========  =========   ==========

PER SHARE DATA

Earnings
 (Losses) -
 basic          $    (.03)  $    (.73)  $     1.03  $    (.05)  $      .45
Earnings
 (Losses)-
 diluted             (.03)       (.73)        1.03       (.05)         .45
Book value per
 common share       13.26       13.34        14.08      13.10        13.25
Market value,
 closing price       5.10        6.50         4.72       4.64         4.10

ASSET QUALITY RATIOS

Nonperforming
 loans/total
 loans               2.94%       2.87%        2.62%      3.96%        3.00%
Nonperforming
 assets/total
 assets              3.41        3.34         3.51       4.08         3.38
Allowance for
 loan
 losses/total
 loans               1.42        1.66         1.26       1.36         1.06
Allowance for
 loan losses/
 nonperforming
 loans              48.34       57.69        47.87      34.29        35.40
Texas Ratio(2)      27.68       26.71        27.76      34.77        28.99

PROFITABILITY RATIOS

Return on
 average assets      (.08)%     (1.98)%       2.81%      (.14)%       1.19%
Return on
 average equity     (0.73)     (17.24)       25.95      (1.28)       11.16
Net interest
 margin              3.69        3.56         3.51       3.74         3.66
Efficiency ratio    75.98       76.04        78.12      71.03        70.09
Average
 loans/average
 deposits           92.42       94.26        92.93      92.33        88.36

CAPITAL ADEQUACY
 RATIOS

Tier 1 leverage
 ratio               9.22%       9.38%        9.85%      9.75%        9.74%
Tier 1 capital
 to risk weighted
 assets             11.73       11.65        12.48      11.92        12.18
Total capital
 to risk weighted
 assets             12.98       12.91        13.69      13.17        13.19
Average equity/
 average assets     11.06       11.51        10.84      10.83        10.63
Tangible equity/
 tangible assets    11.06       11.51        10.84      10.83        10.87

(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

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