Mackinac Financial Corporation Reports Second Quarter and Six Months 2008 Results

SOURCE:

Mackinac Financial Corporation

2008-07-30 14:18:00

MANISTIQUE, MI–(EMWNews – July 30, 2008) – Mackinac Financial Corporation (NASDAQ: MFNC), the bank holding company for mBank (the “Bank”) today announced

second quarter 2008 income of $1.769 million or $.52 per share compared to

net income of $.546 million, or $.16 per share for the second quarter of

2007. Net income for the first six months of 2008 totaled $1.908 million,

or $.56 per share, compared to $1.581 million, or $.46 per share, for the

same period in 2007. Book value as of June 30, 2008 is $11.98 per share, an

increase of $2.23 per share since the recapitalization, which was priced at

$9.75 per share in December of 2004.

The quarter and six month results for 2008 include the positive effect,

$3.475 million, of a lawsuit settlement, the negative effects, $.425

million, of a severance agreement and a $.750 million loan loss provision.

The results of operations for the first six months of 2007 include $470,000

of proceeds from the settlement of a lawsuit against the Corporation’s

former accountants.

Weighted average shares totaled 3,424,314 year to date and 3,419,933 for

the second quarter in 2008 compared to 3,428,695 for both periods in 2007.

Paul Tobias, Chairman and Chief Executive Officer, commented, “Our business

model has been to leverage our Upper Peninsula loan and deposit base while

building a franchise in Southeast Michigan. In the past two years, our

ability to make loans has outpaced our ability to raise deposits in Oakland

County. This imbalance has caused us to use wholesale deposits as a

funding source. Changes in interest rates in late 2007 and early 2008

caused our net interest margin to shrink. We are making progress in

growing our base of demand accounts, but this effort will take time. Along

with progress in this area, we are pleased to report the following:

— With two exceptions in Southeast Michigan, our asset quality remains

good

— We have been successful repricing and increasing our loan spreads when

loans renew

— A large majority of our loans and deposits remain in the Upper Peninsula

of Michigan, which continues to grow and present relationship

opportunities.

— We are fortunate that the proceeds of the above mentioned lawsuit will

substantially offset the negative impact of falling interest rates on our

net interest margin, but this is a onetime benefit.

While we continue to work on growing our base of deposit customers, we are

also focused on lowering our cost of doing business. To date in 2008,

management has acted to lower the annual run rate of personnel and other

operating expenses by approximately $.750 million.”

The net interest margin in the second quarter was 3.19%, a modest

improvement of 6 basis points from the first quarter of 2008. The net

interest margin, due to our asset sensitive position, was significantly

impacted by lower rates in the first six months of 2008, as reflected in a

36 basis point decline from the fourth quarter of 2007 interest margin of

3.55%.

Total assets of the Corporation at June 30, 2008 were $437.327 million, up

$44.008 million, or 11.19% from the $393.319 million in total assets

reported at June 30, 2007 and up $28.447 million, or 6.96%, from total

assets of $408.880 million at year-end 2007. Asset balances as of June 30,

2008 reflect increased balances of short term investments of $19.318

million for added liquidity.

Loans at June 30, 2008 totaled $362.122 million, a 6.85% increase from the

$338.896 million at June 30, 2007, and an increase of $7.043 million, or

1.98%, from year-end loans of $355.079 million. Tobias 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. Also worth noting is the number of

new loan opportunities, approximately 50% of total production, we have seen

in the Upper Peninsula. We are especially pleased with the economic

development in and around Marquette County, where we currently have two

branch office locations. In general, the Upper Peninsula has not

experienced the economic downturn and collateral deterioration that has

occurred elsewhere in Michigan. In Marquette and the western Upper

Peninsula, we are experiencing growth opportunities.”

Total deposits of $356.976 million at June 30, 2008 were up 11.12% from

deposits of $321.246 million on June 30, 2007. Deposits were up $36.149

million, or 11.27% from year-end 2007 deposits of $320.827 million. Total

2008 deposit growth reflects increases in noncore funding of $35.665

million and increases in core deposits of $.484 million, or 2.42%.

Nonperforming assets at the end of the second quarter of 2008 totaled

$8.008 million, 1.83% of total assets, an increase of $2.774 million from

2007 year end balances. This 2008 increase in nonperforming assets is not

indicative of significant deterioration in portfolio credit quality and is

still relatively low by comparative peer standards. Tobias, commenting on

credit quality, stated, “The increase in our nonperforming assets is the

result of two large credit relationships from Southeastern Michigan which

we believe were impacted by the market and the regional economy. While we

feel comfortable with our loan loss reserve, 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 market place and to

increase our monitoring efforts. To that end, we reorganized our credit

staffing in Southeastern Michigan and increased our loan committee

oversight of the credit decision making process. Our quarter end numbers

are a reflection of this process, and we intend to manage our nonperforming

assets in order to limit carrying costs and further collateral

deterioration by aggressive disposition.”

Shareholders’ equity at June 30, 2008 totaled $40.975 million, or $11.98

per share, compared to $30.485 million, or $8.89 per share on June 30,

2007. Tobias commented, “Since the recapitalization in December 2004, the

Corporation has increased book value from $9.75 to $11.98 per share, or

22.9%. We cannot control the market value of our shares but we believe

that we can continue to grow the book value of your company, and as we

execute our plan, the market will correctly value the company based upon

both book value and core earnings multiples.”

Tobias concluded, “We are proud of our performance in these troubled times.

While we have had some credit deterioration, we believe it is controlled

and reserved for and that the aggregate levels of nonperformers and the

potential future provision risk is small when compared to peers and the

banking industry in general. While our business model is currently overly

reliant on purchased CDs, we are focused on core deposit growth, and we

expect the mix to change.”

Mackinac Financial Corporation is a registered bank holding company formed

under the Bank Holding Company Act of 1956 with assets in excess of $400

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,

                                       2008         2007           2007

                                   ------------  -----------   -----------

                                   (Unaudited)                 (Unaudited)



Selected Financial Condition Data

 (at end of period):

Total assets                       $    437,327  $   408,880   $   393,319

Total loans                             362,122      355,079       338,896

Total deposits                          356,976      320,827       321,246

Borrowings and subordinated

 debentures                              36,280       45,949        38,307

Total shareholders' equity               40,975       39,321        30,485



Selected Statements of Income Data

 (six months and year ended):

Net interest income                $      6,163  $    13,417   $     6,447

Income before taxes                       2,808        2,923         1,581

Net income                                1,908       10,163         1,581

Income per common share - Basic             .56         2.96           .46

Income per common share - Diluted           .56         2.96           .46



Three Months Ended:

Net interest income                $      3,118  $     3,410   $     3,269

Income before taxes                       2,644          787           546

Net income                                1,769          527           546

Income per common share - Basic             .52          .15           .16

Income per common share - Diluted           .52          .15           .16



Selected Financial Ratios and

 Other Data (six months and year

 ended):

Performance Ratios:

Net interest margin                        3.16%        3.60%         3.57%

Efficiency ratio                          91.85        79.46         82.79

Return on average assets                    .92         2.59           .84

Return on average equity                   9.61        31.05         10.68



Average total assets               $    417,964  $   392,313   $   381,238

Average total shareholders' equity $     39,945  $    32,731   $    29,836

Average loans to average deposits

 ratio                                   107.72%      104.94%       103.84%



Common Share Data (at end of

 period):

Market price per common share      $       7.00  $      8.98   $      9.45

Book value per common share        $      11.98  $     11.47   $      8.89

Common shares outstanding             3,419,736    3,428,695     3,428,695

Weighted average shares

 outstanding                          3,424,314    3,428,695     3,428,695



Other Data (at end of period):

Allowance for loan losses          $      3,585  $     4,146   $     4,920

Non-performing assets              $      8,008  $     5,234   $     5,126

Allowance for loan losses to total

 loans                                      .99%        1.17%         1.45%

Non-performing assets to total

 assets                                    1.83%        1.28%         1.30%

Number of:

   Branch locations                          12           12            13

   FTE Employees                             96          100           106







              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS





                                     June 30,    December 31,    June 30,

(Dollars in thousands)                 2008          2007          2007

                                   -----------   -----------   -----------

                                   (unaudited)                 (unaudited)

ASSETS



Cash and due from banks            $     7,115   $     6,196   $     7,518

Federal funds sold                      19,274           166         3,489

                                   -----------   -----------   -----------

   Cash and cash equivalents            26,389         6,362        11,007



Interest-bearing deposits in other

 financial institutions                    387         1,810         3,687

Securities available for sale           23,230        21,597        24,086

Federal Home Loan Bank stock             3,794         3,794         3,794



Loans:

   Commercial                          292,645       288,839       274,783

   Mortgage                             65,869        62,703        60,575

   Installment                           3,608         3,537         3,538

                                   -----------   -----------   -----------

     Total Loans                       362,122       355,079       338,896

       Allowance for loan losses        (3,585)       (4,146)       (4,920)

                                   -----------   -----------   -----------

   Net loans                           358,537       350,933       333,976



Premises and equipment                  11,377        11,609        12,471

Other real estate held for sale          3,395         1,226            77

Other assets                            10,218        11,549         4,221

                                   -----------   -----------   -----------



TOTAL ASSETS                       $   437,327   $   408,880   $   393,319

                                   ===========   ===========   ===========



LIABILITIES AND SHAREHOLDERS' EQUITY



Liabilities:

   Non-interest-bearing deposits   $    27,741   $    25,557   $    28,811

   Interest-bearing deposits:

     NOW, Money Market, Checking        78,703        81,160        73,994

     Savings                            15,171        12,485        12,422

     CDs < $100,000                     78,678        80,607        96,546

     CDs > $100,000                     28,252        22,355        24,879

     Brokered                          128,431        98,663        84,594

                                   -----------   -----------   -----------

       Total deposits                  356,976       320,827       321,246



   Borrowings:

     Federal funds purchased                 -         7,710             -

     Short-term                              -         1,959             -

     Long-term                          36,280        36,280        38,307

                                   -----------   -----------   -----------

       Total borrowings                 36,280        45,949        38,307

   Other liabilities                     3,096         2,783         3,281

                                   -----------   -----------   -----------

     Total liabilities                 396,352       369,559       362,834



Shareholders' equity:

   Preferred stock - No par value:

     Authorized 500,000 shares,

      no shares outstanding

   Common stock and additional

    paid-in capital - No par value

     Authorized - 18,000,000 shares

     Issued and outstanding -

      3,419,736; 3,428,695;

      and 3,428,695 shares,

      respectively                      42,773        42,843        42,780

     Accumulated deficit                (1,672)       (3,582)      (12,162)

     Accumulated other

      comprehensive income (loss)         (126)           60          (133)

                                   -----------   -----------   -----------



       Total shareholders' equity       40,975        39,321        30,485

                                   -----------   -----------   -----------



TOTAL LIABILITIES AND

 SHAREHOLDERS' EQUITY              $   437,327   $   408,880   $   393,319

                                   ===========   ===========   ===========









              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF OPERATIONS







(Dollars in thousands except per share    Three Months      Six Months

 data)                                       Ended             Ended

                                            June 30,          June 30,

                                        ----------------- -----------------

                                          2008     2007     2008     2007

                                        -------- -------- -------- --------

                                           (Unaudited)       (Unaudited)

INTEREST INCOME:

   Interest and fees on loans:

      Taxable                           $  5,604 $  6,448 $ 11,704 $ 12,681

      Tax-exempt                             102      143      210      314

   Interest on securities:

      Taxable                                271      293      537      594

      Tax-exempt                               2        -        3        -

   Other interest income                      81      166      170      366

                                        -------- -------- -------- --------

      Total interest income                6,060    7,050   12,624   13,955

                                        -------- -------- -------- --------



INTEREST EXPENSE:

   Deposits                                2,551    3,267    5,616    6,489

   Borrowings                                391      514      845    1,019

                                        -------- -------- -------- --------

      Total interest expense               2,942    3,781    6,461    7,508

                                        -------- -------- -------- --------



Net interest income                        3,118    3,269    6,163    6,447

Provision for loan losses                    750        -      750        -

                                        -------- -------- -------- --------

Net interest income after provision

 for loan losses                           2,368    3,269    5,413    6,447

                                        -------- -------- -------- --------



OTHER INCOME:

   Service fees                              194      185      368      346

   Net security gains                          -        -       65        -

   Net gains on sale of secondary

    market loans                              49       91       97      199

   Proceeds from lawsuit settlements       3,475        -    3,475      470

   Other                                      29       66       52      240

                                        -------- -------- -------- --------

      Total other income                   3,747      342    4,057    1,255

                                        -------- -------- -------- --------



OTHER EXPENSES:

   Salaries and employee benefits          2,075    1,672    3,882    3,410

   Occupancy                                 348      327      703      661

   Furniture and equipment                   190      166      368      323

   Data processing                           216      210      437      381

   Professional service fees                  79      174      232      325

   Loan and deposit                          144       79      254      151

   Telephone                                  39       59       84      117

   Advertising                                60       91      120      183

   Other                                     320      287      582      570

                                        -------- -------- -------- --------

      Total other expenses                 3,471    3,065    6,662    6,121

                                        -------- -------- -------- --------



Income before provision for income taxes   2,644      546    2,808    1,581

Provision for (benefit of) income taxes      875        -      900        -

                                        -------- -------- -------- --------



NET INCOME                              $  1,769 $    546 $  1,908 $  1,581

                                        ======== ======== ======== ========

INCOME PER COMMON SHARE:

   Basic                                $    .52 $    .16 $    .56 $    .46

                                        ======== ======== ======== ========

   Diluted                              $    .52 $    .16 $    .56 $    .46

                                        ======== ======== ======== ========









              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,

                                             2008       2007       2007

                                           ---------- ---------- ----------

Commercial Loans

Real estate - operators of nonresidential

 buildings                                 $   41,778 $   41,597 $   41,662

Hospitality and tourism                        35,053     37,604     37,286

Real estate agents and managers                27,495     29,571     31,937

New car dealers                                10,716     10,569     10,270

Other                                         148,539    130,546    117,058

                                           ---------- ---------- ----------

   Total Commercial Loans                     263,581    249,887    238,213



1-4 family residential real estate             60,882     57,613     55,090

Consumer                                        3,608      3,537      3,538

Construction

   Commercial                                  29,064     38,952     36,570

   Consumer                                     4,987      5,090      5,485

                                           ---------- ---------- ----------



   Total Loans                             $  362,122 $  355,079 $  338,896

                                           ========== ========== ==========





Credit Quality (at end of period):





                                           June 30,  December 31, June 30,

                                             2008       2007       2007

                                           ---------  ---------  ---------

Nonperforming Assets:

Nonaccrual loans                           $   4,613  $   3,298  $   4,758

Loans past due 90 days or more                     -        710        291

                                           ---------  ---------  ---------

   Total nonperforming loans                   4,613      4,008      5,049

Other real estate owned                        3,395      1,226         77

                                           ---------  ---------  ---------

   Total nonperforming assets              $   8,008  $   5,234  $   5,126

                                           =========  =========  =========

Nonperforming loans as a % of loans             1.27%      1.13%      1.49%

                                           ---------  ---------  ---------

Nonperforming assets as a % of assets           1.83%      1.28%      1.30%

                                           ---------  ---------  ---------

Reserve for Loan Losses:

At period end                              $   3,585  $   4,146  $   4,920

                                           ---------  ---------  ---------

As a % of average loans                         1.00%      1.24%      1.53%

                                           ---------  ---------  ---------

As a % of nonperforming loans                  77.72%    103.44%     97.45%

                                           ---------  ---------  ---------

As a % of nonaccrual loans                     77.72%    125.71%    103.41%

                                           =========  =========  =========



Charge-off Information (year to date):

   Average loans                             360,176    333,415    321,414

                                           ---------  ---------  ---------

   Net charge-offs                             1,310      1,260         86

                                           ---------  ---------  ---------

   Charge-offs as a % of average loans           .36%       .38%       .03%

                                           ---------  ---------  ---------







              MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES

                      QUARTERLY FINANCIAL HIGHLIGHTS



                                         QUARTER ENDED

                     -----------------------------------------------------

                                          (Unaudited)

                     -----------------------------------------------------

                     June 30,   March 31,  Dec. 31,   Sept. 30,  June 30,

                       2008       2008       2007       2007       2007

                     ---------  ---------  ---------  ---------  ---------

BALANCE SHEET

 (Dollars in

  thousands)



Total loans          $ 362,122  $ 360,056  $ 355,079  $ 344,149  $ 338,896

Allowance for loan

 losses                 (3,585)    (3,924)    (4,146)    (5,022)    (4,920)

                     ---------  ---------  ---------  ---------  ---------

   Total loans, net    358,537    356,132    350,933    339,127    333,976

Intangible assets           85        104        124        143        163

Total assets           437,327    417,175  4,088,880    401,213    393,319

Core deposits          200,293    203,445    199,809    218,638    211,773

Noncore deposits (1)   156,683    122,602    121,018    102,733    109,473

                     ---------  ---------  ---------  ---------  ---------

   Total deposits      356,976    326,047    320,827    321,371    321,246

Total borrowings        36,280     48,849     45,949     38,239     38,307

Total shareholders'

 equity                 40,975     39,633     39,321     38,697     30,485

Total shares

 outstanding         3,419,736  3,428,695  3,428,695  3,428,695  3,428,695



AVERAGE BALANCES

 (Dollars in

  thousands)



Assets               $ 418,246  $ 417,682  $ 406,308  $ 400,105  $ 382,065

Loans                  362,574    357,778    350,050    340,391    324,721

Deposits               332,725    336,016    324,194    327,293    309,469

Equity                  40,399     39,491     38,973     32,184     30,412



INCOME STATEMENT

 (Dollars in

  thousands)



Net interest income  $   3,118  $   3,045  $   3,410  $   3,560  $   3,269

Provision for loan

 losses                    750          -          -        400          -

                     ---------  ---------  ---------  ---------  ---------

   Net interest

    income after

    provision            2,368      3,045      3,410      3,160      3,269

Total noninterest

 income                  3,747        310        355        396        342

Total noninterest

 expense                 3,471      3,191      2,978      3,001      3,065

                     ---------  ---------  ---------  ---------  ---------

Income before taxes      2,644        164        787        555        546

Provision for income

 taxes                     875         25        260     (7,500)         -

                     ---------  ---------  ---------  ---------  ---------

Net income           $   1,769  $     139  $     527  $   8,055  $     546

                     =========  =========  =========  =========  =========



PER SHARE DATA



Earnings - basic     $     .52  $     .04  $     .15  $    2.35  $     .46

Earnings - diluted         .52        .04        .15       2.35        .46

Book value               11.98      11.56      11.47      11.29       8.89

Market value,

 closing price            7.00       8.50       8.98       8.75       9.45



ASSET QUALITY RATIOS



Nonperforming

 loans/total loans        1.27%      0.94%      1.13%       .92%      1.49%

Nonperforming

 assets/total assets      1.83       1.08       1.28        .90       1.30

Allowance for loan

 losses/total loans        .99       1.09       1.17       1.46       1.45

Allowance for loan

 losses/nonperforming

 loans                   77.22     116.06     103.42     158.32      97.45



PROFITABILITY RATIOS



Return on average

 assets                   1.70%      0.13%       .51%      7.99%       .57%

Return on average

 equity                  17.62       1.42       5.36      99.30       7.20

Net interest margin       3.19       3.13       3.55       3.71       3.60

Efficiency ratio         88.45      95.34      78.02      74.71      83.21

Average loans/

 average deposits       108.97     106.48     107.98     104.00     104.93



CAPITAL ADEQUACY RATIOS



Leverage ratio            8.56%      7.85%      8.05%      8.03%      7.97%

Tier 1 capital ratio      9.48       8.84       8.97       9.03       8.85

Total capital ratio      10.45       9.92      10.13      10.28      10.10

Average equity/

 average assets           9.66       9.45       9.59       8.04       7.96

Tangible equity/

tangible assets           9.35       9.48       9.59       9.61       7.71



(1) Noncore deposits includes Internet CDs, brokered deposits and CDs

    greater than $100,000

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

free cash grants, free grant money, free money, cash grants, scholarships, business grants, foundation grants, government grants, debt grants, consolidation, college tuition, financial aid, medical grants, personal grants, medical bills, unsecured loans, no interest loans, financing, loans, capital, non profit organizations

Major Newsire & Press Release Distribution with Basic Starting at only $19 and Complete OTCBB / Financial Distribution only $89

Get Unlimited Organic Website Traffic to your Website 
TheNFG.com now offers Organic Lead Generation & Traffic Solutions