Mackinac Financial (MFNC) 8-K Mackinac Financial Corporation Reports First Quarter 2006 Results

EXHIBIT 99

PRESS RELEASE

For Release:	April 20, 2006
Nasdaq:	MFNC
Contact:	Investor Relations at (888) 343-8147
Website:	www.bankmbank.com

MACKINAC FINANCIAL CORPORATION
REPORTS FIRST QUARTER 2006 RESULTS

(Manistique, Michigan) — Mackinac Financial Corporation (Nasdaq: MFNC), the bank holding company for mBank (the “Bank”) today announced first quarter 2006 income of $498,000 or $.15 per share compared to a loss of $5.241 million, or $1.53 per share for the first quarter of 2005. The results of operations for the first quarter of 2006 include a $600,000 negative loan loss provision, which reduced the Corporation’s allowance for loan loss reserve in recognition of improved credit quality. The first quarter 2005 results include a penalty of $4.320 million on the prepayment of $50.039 million of the FHLB borrowings. Excluding the provision adjustment and the prepayment penalty, the net loss in the first quarter of 2006 amounted to $.102 million, compared to an adjusted loss of $.921 million for the same period in 2005. The first quarter 2006 results also include $79,000 of stock option expense, required under the new accounting rules for stock compensation plans, as well as $85,000 of expenses incurred to pursue legal action against the Corporation’s former accountants.

Paul Tobias, Chairman and Chief Executive Officer commented, “The first quarter of 2006 reflects the continuing progress the Corporation is making towards profitability. The growth in the first quarter allowed mBank, our principal subsidiary, to achieve profitability for each month in the first quarter of 2006. This balance sheet growth was due to excellent commercial loan production. We also maintained our strong credit profile, evidenced by our need to reduce the allowance for loan loss reserve by $600,000. We are currently ahead of our 2006 Plan in growth and profitability.

Total assets of the Corporation at March 31, 2006 were $334.591 million, up 21.57 percent from the $275.216 million in total assets reported at March 31, 2005. First quarter-end total assets were up 12.01 percent from the $298.722 million of total assets at year-end 2005.

Total loans at March 31, 2006 were $264.471 million, up from $194.831 million at March 31, 2005 or a 35.74 percent increase. Total loans at the end of the first quarter of 2006 increased $24.700 million, or 10.30 percent from year-end 2005 total loans of $239.771 million. Tobias stated, “Our marketing strategy centered on highly qualified commercial lenders is working as evidenced by first quarter loan production in excess of $30.1 million.”

Total deposits of $267.954 million at March 31, 2006 were up 30.56 percent from deposits of $205.239 million on March 31, 2005. Deposits were up $35.322 million, or 15.18 percent from year-end 2005 deposits of $232.632 million. Deposit growth in the 2006 first quarter includes increases in out of market brokerage deposits totaling $23.5 million

with the remaining $11.5 million representing core deposit growth of 6.8%. Mr. Tobias added, “Our strong balance sheet growth places a critical need on funding in order to maintain adequate interest margins. We continue to offer highly competitive rates and products in our efforts to increase core deposits.”

The Bank’s credit quality is excellent, with total nonperforming assets less than $1 million. Tobias commenting on credit quality stated, “We have focused on credit quality as a critical factor when growing loans. The strength of credit in our portfolio allows our lending staff to concentrate on new loan production. Our loan committee process focuses on the “C’s” of credit and on making loans that get repaid.”

Shareholders’ equity at March 31, 2006 totaled $27.173 million, or $7.93 per share. The Corporation is well capitalized with Tier 1 capital in excess of 8% and total risk-based capital in excess of 10%.

Tobias concluded, “We are pleased with our first quarter results, which are better than expectation, despite the new costs associated with stock options and pursuit of legal action against former accountants of the Corporation. Our 2006 Strategic Plan was aggressive, yet our expectations are to exceed plan profitability.”

Mackinac Financial Corporation is a registered bank holding company which owns mBank. The Bank has 13 offices; nine in the Upper Peninsula and four in Lower 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 checking and savings accounts, time deposits, interest bearing transaction accounts, safe deposit facilities, real estate mortgage lending, and direct and indirect consumer financing.

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 form 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
	March 31,			December 31,			March 31,
	2006			2005			2005
	(Unaudited)						(Unaudited)
Selected Financial Condition Data (at end of period):
Total assets	$	334,591		$	298,722		$	275,216
Total loans		264,471			239,771			194,831
Total deposits		267,954			232,632			205,239
Borrowings and subordinated debentures		36,417			36,417			38,135
Total shareholders’ equity		27,173			26,588			28,854
Selected Statements of Income Data:
Net interest income	$	3,279		$	9,780		$	2,205
Income (loss) before taxes		498			(7,364	)		(5,241	)
Net income (loss)		498			(7,364	)		(5,241	)
Income (loss) per common share — Basic		.15			(2.15	)		(1.53	)
Income (loss) per common share — Diluted		.15			(2.15	)		(1.53	)
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		3.62	%		3.64	%		3.21	%
Efficiency ratio		82.88	%		160.43			300.96
Return on average assets		.63			(2.58	)		(7.16	)
Return on average equity		7.47			(25.63	)		(69.25	)
Average total assets	$	319,007		$	285,896		$	296,856
Average total shareholders’ equity	$	27,055		$	28,732		$	30,692
Average loans to average deposits ratio		126.73	%		98.17	%		95.54	%
Common Share Data (at end of period):
Market price per common share	$	9.81		$	9.10		$	18.13
Book value per common share	$	7.93		$	7.76		$	8.42
Common shares outstanding		3,428,695			3,428,695			3,428,695
Other Data (at end of period):
Allowance for loan losses	$	5,415		$	6,108		$	6,836
Non-performing assets	$	952		$	1,059		$	3,787
Allowance for loan losses to total loans		2.05	%		2.55	%		3.51	%
Non-performing assets to total assets		.28	%		.35	%		1.38	%
Number of:
Branch locations		13			12			12

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except per share data)

	March 31,			December 31,			March 31,
	2006			2005			2005
	(Unaudited)						(Unaudited)
ASSETS
Cash and due from banks	$	6,220		$	4,833		$	3,656
Federal funds sold		12,000			3,110			10,207
Cash and cash equivalents		18,220			7,943			13,863
Interest-bearing deposits in other financial institutions		853			1,025			14
Securities available for sale		34,140			34,210			52,298
Federal Home Loan Bank stock		4,855			4,855			4,805
Total loans		264,471			239,771			194,831
Allowance for loan losses		(5,415	)		(6,108	)		(6,836	)
Net loans		259,056			233,663			187,995
Premises and equipment		12,318			11,987			10,588
Other real estate held for sale		952			945			1,515
Other assets		4,197			4,094			4,138
Total assets	$	334,591		$	298,722		$	275,216
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Non-interest-bearing deposits	$	20,463		$	19,684		$	19,722
Interest-bearing deposits		247,491			212,948			185,517
Total deposits		267,954			232,632			205,239
Borrowings		36,417			36,417			38,135
Other liabilities		3,047			3,085			2,988
Total liabilities		307,418			272,134			246,362
Shareholders’ equity:
Preferred stock — No par value:
Authorized 500,000 shares, no shares outstanding		—			—			—
Common stock — No par value:
Authorized 18,000,000 shares
Issued and outstanding — 3,428,695		42,489			42,412			42,335
Accumulated deficit		(14,961	)		(15,461	)		(13,338	)
Accumulated other comprehensive income		(355	)		(363	)		(143	)
Total shareholders’ equity		27,173			26,588			28,854
Total liabilities and shareholders’ equity	$	334,591		$	298,722		$	275,216

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands except per share data)

	Three Months Ended
	March 31,
	2006			2005
	(Unaudited)			(Unaudited)
Interest income:
Interest and fees on loans:
Taxable	$	4,499		$	3,059
Tax-exempt		194			242
Interest on securities:
Taxable		273			462
Tax-exempt		41			42
Other interest income		168			183
Total interest income		5,175			3,988
Interest expense:
Deposits		2,080			1,130
Borrowings		416			653
Total interest expense		2,496			1,783
Net interest income		2,679			2,205
Provision for loan losses		(600	)		—
Net interest income after provision for loan losses		3,279			2,205
Other income:
Service fees		111			161
Gain (loss) on sale of securities		—			(1	)
Other loan and lease income		17			7
Net gains on sale of loans		40			—
Gain on sale of property and equipment		—			2
Other operating income		48			15
Total other income		216			184
Other expenses:
Salaries, commissions, and related benefits		1,594			1,504
Occupancy expense		317			226
Furniture and equipment expense		156			159
Data processing		154			246
Accounting, legal, and consulting fees		200			318
Loan and deposit expense		129			293
Telephone		49			60
Advertising expense		70			139
Penalty on prepayment of FHLB borrowings		—			4,320
Other		328			365
Total other expenses		2,997			7,630
Income (loss) before provision for income taxes		498			(5,241	)
Provision for income taxes		—			—
Net income (loss)	$	498		$	(5,241	)
Income (loss) per common share:
Basic	$	.15		$	(1.53	)
Diluted	$	.15		$	(1.53	)

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

	March 31,		December 31,		March 31,
	2006		2005		2005
Commercial Loans
Hospitality and tourism	$	38,045	$	37,681	$	45,390
Gaming		7,181		7,553		12,618
Petroleum		6,664		6,508		7,939
Forestry		5,332		5,370		5,486
Other		133,825		118,211		73,110
Total Commercial Loans		191,047		175,323		144,543
1-4 family residential real estate		50,119		44,660		45,425
Consumer		2,300		2,285		2,277
Construction		21,005		17,503		2,586
Total Loans	$	264,471	$	239,771	$	194,831

Credit Quality (at end of period):

	March 31,			December 31,			March 31,
	2006			2005			2005
Nonperforming Assets
Nonaccrual loans	$	—		$	15		$	2,272
Loans past due 90 days or more		—			99			—
Restructured loans		—			—			—
Total nonperforming loans		—			114			2,272
Other real estate owned		952			945			1,515
Total nonperforming assets	$	952		$	1,059		$	3,787
Nonperforming loans as a % of loans		—	%		.05	%		1.17	%
Nonperforming assets as a % of assets		.28	%		.35	%		1.38	%
Reserve for Loan Losses:
At period end	$	5,415		$	6,108		$	6,836
As a % of loans		2.05	%		2.55	%		3.51	%
As a % of nonperforming loans		N/A	%		5,357.89	%		300.88	%
As a % of nonaccrual loans		N/A	%		N/M	%		300.88	%

MACKINAC FINANCIAL CORPORATION

QUARTERLY FINANCIAL SUMMARY

     *(Dollars in thousands, except per share data)

							Average
	Average		Average		Average		Shareholders'		Return on Average						Net Interest			Efficiency			Net Income			Book Value
Quarter Ended	Assets		Loans		Deposits		Equity		Assets			Equity			Margin			Ratio			Per Share			Per Share
March 31, 2006	$	319,007	$	250,735	$	254,720	$	27,055		0.63	%		7.47	%		3.62	%		82.88	%	$	0.15		$	7.93
December 31, 2005		288,619		224,386		219,967		27,288		(1.41	)		(14.95	)		3.96			128.37			(0.30	)		7.76
September 30, 2005		280,506		209,795		211,197		28,112		(0.73	)		(7.39	)		3.79			112.11			(0.15	)		8.14
June 30, 2005		277,754		197,545		206,875		28,879		(0.83	)		(8.01	)		3.67			119.07			(0.17	)		8.32
March 31, 2005		296,856		199,703		209,035		30,692		(7.16	)		(69.25	)		3.21			300.96			(1.53	)		8.42
December 31, 2004		327,543		218,962		211,685		8,455		2.95			114.17			2.48			71.83			8.25			10.13
September 30, 2004		346,078		226,951		236,418		6,096		(0.87	)		(49.53	)		2.25			120.66			(2.17	)		18.44
June 30, 2004		372,246		244,515		260,031		7,628		(1.72	)		(84.13	)		2.28			146.88			(4.56	)		16.77
March 31, 2004		412,808		289,027		283,190		9,522		(1.62	)		(70.22	)		2.04			163.37			(4.75	)		26.70
December 31, 2003		439,426		309,851		306,848		11,266		(2.23	)		(86.77	)		1.70			181.17			(7.02	)		30.49

* Historical per share data has been adjusted for the 20:1 reverse stock split distributed in December 2004.