Mackinac Financial Corporation Reports Second Quarter and Six Months 2009 Results

MANISTIQUE, MI, Jul 30 (MARKET WIRE) --
Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company
for mBank (the "Bank") today announced second quarter 2009 income of
$.461 million or $.13 per share compared to net income of $1.769 million,
or $.52 per share for the second quarter of 2008. Net income for the
first six months of 2009 totaled $.551 million, or $.16 per share,
compared to $1.908 million, or $.56 per share, for the same period in
2008.

The quarter and six month results for 2009 includes the FDIC special
assessment which was charged to all banking organizations based upon asset
size, and amounted to $.215 million for mBank. The quarter and six month
results for 2008 include the positive effect, $3.475 million, of a lawsuit
settlement and the negative effects, $.425 million, of a severance
agreement. Operating results for the six month period in 2009 include the
$.700 million provision compared to $.750 million in the same period in
2008. Excluding the FDIC special assessment for 2009 and the lawsuit
settlement and severance payment in 2008, our adjusted six month net
income in 2009 would be $.691 million, or $.20 income per share compared
to a loss of $.213 million, or a loss of $.06 per share in the 2008 six
month period.

Weighted average shares totaled 3,419,736 year to date and for the second
quarter in 2009 compared to 3,424,314 for the six month period and
3,419,935 at the second quarter of 2008.

Net interest margin in the second quarter of 2009 increased to $4.051
million, or 3.58% compared to $3.118 million, or 3.19% in the second
quarter of 2008. For the six month period the net interest margin totaled
$7.546 million, or 3.47% compared to $6.163 million or 3.16% for the same
period in 2008. This increased margin was due to a combination of a
significant reduction in funding costs partially offset by decreased rates
on earning assets. Paul Tobias, Chairman and Chief Executive officer,
commented, "We are pleased with the continued improvement in our net
interest margin, which reflects pricing discipline on new and renewed
loans in addition to the lower rates on wholesale deposits. We expect
this trend to continue."

Noninterest income totaled $.439 million in the second quarter of 2009,
compared to $3.747 million the first quarter 2008. Included in noninterest
income for the second quarter and six months ended periods of 2008 was the
$3.475 million lawsuit settlement. Excluding this settlement, 2009 six
month noninterest income exceeded 2008 by $.258 million, or 44.33%.
Noninterest expense in the second quarter and for the six month period of
2009 was relatively unchanged from 2008 levels when excluding the increase
in FDIC insurance premiums of $.331 million in 2009 and the severance
payment of $.425 million incurred in 2008.

Total assets of the Corporation at June 30, 2009 were $506.304 million, up
$68.977 million, or 15.77% from the $437.327 million in total assets
reported at June 30, 2008 and up $54.873 million, or 12.16%, from total
assets of $451.431 million at year-end 2008. Asset totals at June 30, 2009
reflect increased balances of investment securities of approximately $48
million.

Loans at June 30, 2009 totaled $372.004 million, a 2.73% increase from the
$362.122 million at June 30, 2008, and a slight increase from year-end
loans of $370.280 million. Kelly George, President and Chief Executive
Officer of mBank, stated, "Loan growth in the first half was retarded by
large paydowns amounting to $9.2 million, along with normal loan principal
reductions of $15.3 million. Given the current economic environment, and
tough requirements for loan pricing and credit quality, we are pleased
with current year to date production which totaled $34.2 million with
approximately 67% originating in the Upper Peninsula. In general, the
Upper Peninsula has not experienced the economic downturn and collateral
deterioration that has occurred elsewhere in Michigan. We continue to see
loan opportunities, not only in the Upper Peninsula, but also in lower
Michigan, as competitive banks withdraw from Michigan opportunities. Our
current pipeline is extremely promising with more than $50 million of what
we believe are good bankable loans, some already approved and others in
the review process. A part of our success in loan production is
attributed to our expertise with the SBA 504 and 7A programs. These
programs benefit us with new loan opportunities along with a secondary
source of balance sheet liquidity and the potential for significant fee
income when the guaranteed portion is sold."

Total deposits of $413.152 million at June 30, 2009 were up 15.74% from
deposits of $356.976 million on June 30, 2008. Deposits were up $42.055
million, or 11.33% from year-end 2008 deposits of $371.097 million. Total
2009 deposit growth reflects increases in noncore funding of $33.917
million and increases in core deposits of $8.138 million, or 3.67%. The
increased brokered deposits were utilized to fund increased investment
balances.

Nonperforming assets at the end of the second quarter of 2009 totaled
$14.825 million, 2.93% of total assets, an increase of $7.749 million from
2008 year end balances, and down from first quarter 2009 balances of
$15.252 million. Mr. George commented, "Our current level of nonperforming
assets is not indicative of overall portfolio deterioration and while
these balances are higher than we'd like, they are manageable considering
the risk profile of our bank and Michigan's economic environment. The
majority of our nonperforming assets stem from several larger credit
relationships in Southeastern Michigan which we believe were impacted by
the market and the regional economy. We are also on top of our overall
loan delinquencies (loans past due greater than 30 days), which stands at
1.80% of total loans. While we feel comfortable with overall credit
quality, the rapid deterioration in borrower collateral values that we
witnessed in the credits mentioned above has caused us to take a very
cautious stance in the Southeast Michigan market place and to increase
our monitoring efforts. We intend to manage our nonperforming assets in
order to limit carrying costs and further collateral deterioration by
aggressive disposition."

Total shareholders' equity at June 30, 2009 totaled $53.939 million,
compared to $40.975 million on June 30, 2008. The increase of $12.964
million includes $11 million of preferred stock which was issued in April
2009. Book value of common shareholders' equity was $12.55 per share at
June 30, 2009, an increase of $2.80 per share since the recapitalization,
priced at $9.75 in December 2004.

Mr. George, commenting on upcoming events, added, "Earlier this year we
announced the sale of two of our Upper Peninsula branch offices, these
sales will be completed in August and will result in an approximate 4%
deposit premium. The sale of these branch offices will tighten up the
footprint of our franchise, further reduce operating costs, and allow us
to deploy capital to higher growth markets."

Tobias concluded, "We are excited about our opportunities in these
troubled economic times. We have the current asset base to support
profitability with a strong capital position for future growth. We will
explore opportunities for FDIC assisted deposit and loan transactions to
expand our markets, while staying the course with solid organic growth
opportunities within our current markets. As always, our initiatives will
be governed by the ultimate strategy of preserving and increasing value
for our shareholders."

Mackinac Financial Corporation is a registered bank holding company formed
under the Bank Holding Company Act of 1956 with assets in excess of $500
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 12 branch locations;
eight in the Upper Peninsula, three in the Northern Lower Peninsula and
one in Oakland County, Michigan. 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
-----------------------------------------------
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

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

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