Mackinac Financial (MFNC) 8-K Mackinac Financial Corporation Announces Annual Results for 2006

EXHIBIT 99

PRESS RELEASE

For Release January 30, 2007
Contact: Investor Relations
               (888) 343-8147
Website: www.bankmbank.com

Mackinac Financial Corporation Announces
Annual Results for 2006

(Manistique, Michigan) – Mackinac Financial Corporation (Nasdaq: MFNC), the holding company for mBank, has reported net income of $1.716 million, or $.50 per share, for the year ended December 31, 2006, compared to a net loss of $7.364 million, or $2.15 per share, for 2005. Weighted average shares outstanding amounted to 3,428,695 in both years.

The 2006 operations include a $600,000 negative provision recorded in the first quarter, in recognition of improved credit quality, a $261,000 negative provision recorded in the fourth quarter to recognize a specific reserve reduction on a loan payoff, and a $500,000 deferred tax benefit recorded in the third quarter. The deferred tax benefit was recorded in accordance with generally accepted accounting principles for recognition of a portion of the benefits to be derived from NOL carry-forwards. The 2006 results also include $310,000 of stock option expense required under the new accounting rules for stock compensation plans, as well as $550,000 of expenses incurred to pursue legal action against the Corporation’s former accountants. The costs associated with the pursuit of this legal action have surpassed our earlier estimates but management and the Corporation’s Board of Directors believe the case has merit and pursuing it is in the best interests of our shareholders.

The 2005 loss of $7.364 million includes a number of significant one-time charges. Included are $4.320 million of penalties incurred to prepay $48.555 million of FHLB borrowings, $.815 million of costs associated with conversion of the Corporation’s data processing system, approximately $500,000 of marketing expense to launch the new “mBank” name along with a new line of products and services, and lastly a $200,000 write-down of other real estate property.

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Paul Tobias, Chairman and Chief Executive Officer commented, “In 2006, the Corporation was extremely successful in generating new loans and deposits which enabled us to attain core profitability. This balance sheet growth provides the foundation in which to increase profits in future periods; however, in order to bring profitability in line with our peers and meet shareholder expectations we will need to improve our funding mix and constrain noninterest expenses.”

Total assets of the Corporation at December 31, 2006 were $382.791 million, an increase of 28.1% from total assets of $298.722 million reported at December 31, 2005.

During 2006 the Corporation’s loans stood at $322.581 million, an increase of $82.810 million from 2005 year-end balances of $239.771 million, a 34.5% increase. Total loan originations in 2006 amounted to $135.2 million.

Tobias stated, “We are extremely pleased with our team’s ability to originate high quality loan relationships. This loan growth in 2006 along with our 2005 growth of $35.939 million demonstrates the effectiveness of our strategy in staffing our organization with experienced, highly skilled commercial lenders. In 2007 and beyond our ability to fund continued loan growth with a higher portion of in-market lower cost transactional deposits is another key variable for increased profitability.”

Asset quality remains strong. Nonperforming loans, as a percent of loans, was .91% at December 31, 2006. Nonperforming assets at December 31, 2006 were $2.965 million, .77% of total assets, compared to $1.059 million or .35% of total assets at December 31, 2005. Tobias added, “During our rapid loan portfolio expansion, we have been diligent in our credit administration and have continued to focus on credit quality. Our process, which is administrated under a committee system, and anchored by strong underwriting, has proved effective in maintaining our strong credit quality. The increase in nonperforming assets reflects the impact of two large credits moving into the nonaccrual category. These credits were originated before our team arrived and in both instances, we are well reserved and have a strategy for adequate recovery.”

Total deposits grew from $232.632 million at December 31, 2005 to $312.421 million at December 31, 2006, an increase of 34.3%. The increase includes a growth in core deposits of the Bank in the amount of $25.079 million, a 14.4% increase from 2005 year end balances of $174.530 million, and increases in non-core deposits of $54.710 million, which include bank CDs greater than $100,000 and brokered deposits.

Net interest income for the year ended December 31, 2006 was $11.593 million compared to $9.780 million for the year ended December 31, 2005, an increase of $1.813 million. The margin percentage for 2006 was 3.51% compared to 3.64% in 2005. This decrease in the net interest margin is attributable to a number of factors. During 2006 the prime rate increased from 7.25% to 8.25%, which was beneficial to the Corporation since a majority of the commercial loan portfolio repriced upwards with each prime rate change. A factor which negatively impacted the margin in 2006 was the increased

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reliance on brokered deposits to fund loan growth. The Corporation also experienced a migration of deposits from low cost transactional accounts to higher cost money market accounts. Tobias commented, “We realize the importance of obtaining lower cost transactional deposits to maintain our interest margin. We have directed our efforts towards this need by staffing our branches with sales oriented branch managers supported by the right systems and products. We will be implementing appropriate incentives in 2007 to help reward the individuals that grow low cost deposits.”

Shareholders’ equity totaled $28.790 million at December 31, 2006 compared to $26.588 million at the end of 2005, an increase of $2.202 million. This increase reflects consolidated net income of $1.716 million, the capital contribution impact of stock options and also the increase in equity due to the increase in the market value of held-for-sale investments, which amounted to $.176 million. The book value per share at December 31, 2006 amounted to $8.40 compared to $7.75 at the end of 2005. Tobias concluded, “The increase in equity during 2006 reflects the return to profitability which is an important step towards our goal to generate top tier returns for our shareholders.”

Mackinac Financial Corporation is a registered bank holding company which owns mBank. The Bank has 13 branch offices; nine in the Upper Peninsula of Michigan 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.

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.

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS

	For The Years Ended December 31,
(Dollars in thousands, except per share data)	2006			2005
	(Unaudited)			(Audited)
Selected Financial Condition Data (at end of period):
Total assets	$	382,791		$	298,722
Total loans		322,581			239,771
Total deposits		312,421			232,632
Borrowings and subordinated debentures		38,307			36,417
Total shareholders’ equity		28,790			26,588
Selected Statements of Income Data:
Net interest income	$	11,593		$	9,780
Income (loss) before taxes		1,216			(7,364	)
Net income (loss)		1,716			(7,364	)
Income (loss) per common share — Basic		.50			(2.15	)
Income (loss) per common share — Diluted		.50			(2.15	)
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		3.51	%		3.64	%
Efficiency ratio		93.95			160.43
Return on average assets		.49			(2.58	)
Return on average equity		6.19			(25.63	)
Average total assets	$	347,927		$	285,896
Average total shareholders’ equity		27,744			28,732
Average loans to average deposits ratio		99.77	%		98.17	%
Common Share Data at end of period:
Market price per common share	$	11.50		$	9.10
Book value per common share	$	8.40		$	7.75
Common shares outstanding		3,428,695			3,428,695
Weighted average shares outstanding		3,428,695			3,428,695
Other Data at end of period:
Allowance for loan losses	$	5,006		$	6,108
Non-performing assets	$	2,965		$	1,059
Allowance for loan losses to total loans		1.55	%		2.55	%
Non-performing assets to total assets		.77	%		.35	%
Number of:
Branch locations		13			12

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	December 31,
(Dollars in thousands, except per share data)	2006			2005
	(Unaudited)			(Audited)
ASSETS
Cash and due from banks	$	4,865		$	4,833
Federal funds sold		5,841			3,110
Cash and cash equivalents		10,706			7,943
Interest-bearing deposits in other financial institutions		856			1,025
Securities available for sale		32,769			34,210
Federal Home Loan Bank stock		3,794			4,855
Loans:
Commercial		261,726			192,826
Mortgage		58,014			44,660
Installment		2,841			2,285
Total loans		322,581			239,771
Allowance for loan losses		(5,006	)		(6,108	)
Net loans		317,575			233,663
Premises and equipment		12,453			11,987
Other real estate held for sale		26			945
Other assets		4,612			4,094
TOTAL ASSETS	$	382,791		$	298,722
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Non-interest-bearing deposits	$	23,471		$	19,684
Interest-bearing deposits
Money market		42,340			31,198
NOW, Savings, and IRA		53,079			55,923
CDs <$100,000		80,719			67,725
CDs >$100,000		23,645			12,335
Brokered		89,167			45,767
Total deposits		312,421			232,632
Borrowings		38,307			36,417
Other liabilities		3,273			3,085
Total liabilities		354,001			272,134
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 — 3,428,695 shares		42,720			42,412
Retained earnings		(13,743	)		(15,461	)
Accumulated other comprehensive income (loss)		(187	)		(363	)
Total shareholders’ equity		28,790			26,588
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	382,791		$	298,722

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

	For The Years Ended December 31,
(Dollars in thousands, except per share data)	2006			2005			2004
	(Unaudited)			(Audited)			(Audited)
Interest income:
Interest and fees on loans:
Taxable	$	21,239		$	13,862		$	14,517
Tax-exempt		753			928			1,180
Interest on securities:
Taxable		1,186			1,455			2,401
Tax-exempt		87			167			171
Other interest income		787			564			584
Total interest income		24,052			16,976			18,853
Interest expense:
Deposits		10,575			5,259			5,443
Borrowings		1,884			1,937			4,730
Subordinated debentures		—			—			442
Total interest expense		12,459			7,196			10,615
Net interest income		11,593			9,780			8,238
Provision for loan losses		(861	)		—			—
Net interest income after provision for loan losses		12,454			9,780			8,238
Other income
Service fees		547			586			982
Net gains on sale of loans		197			49			39
Loan and lease fees		79			21			17
Net security gains (losses)		(1	)		95			—
Gain on sale of branches		—			—			205
Gain on settlement of subordinated debentures		—			—			6,617
Other		161			360			682
Total other income		983			1,111			8,542
Other expenses:
Salaries and employee benefits		6,132			6,090			8,032
Occupancy		1,264			1,053			994
Furniture and equipment		631			560			887
Data processing		691			1,720			1,220
Accounting, legal and consulting fees		1,425			886			1,836
Loan and deposit		392			852			1,718
Telephone		210			271			382
Advertising		346			814			115
Penalty on prepayment of FHLB borrowings		—			4,320			—
Other		1,130			1,689			3,044
Total other expenses		12,221			18,255			18,228
Income (loss) before provision for income taxes		1,216			(7,364	)		(1,448	)
Provision for (benefit of) income taxes		(500	)		—			147
Net income (loss)	$	1,716		$	(7,364	)	$	(1,595	)
Income (loss) per common share:
Basic	$	.50		$	(2.15	)	$	(3.23	)
Diluted	$	.50		$	(2.15	)	$	(3.23	)

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

	December 31,
	2006		2005
Commercial Loans
Real estate — operators of nonresidential buildings	$	44,308	$	28,217
Hospitality and tourism		30,826		37,681
Real estate agents and managers		25,071		10,588
New car dealers		10,086		9,995
Other		115,426		88,842
Total Commercial Loans		225,717		175,323
1-4 family residential real estate		58,014		44,660
Consumer		2,841		2,285
Construction		36,009		17,503
Total Loans	$	322,581	$	239,771

Credit Quality (at end of period):

	December 31,
	2006			2005
Nonperforming Assets
Nonaccrual loans	$	2,899		$	15
Loans past due 90 days or more		40			99
Restructured loans		—			—
Total nonperforming loans		2,939			114
Other real estate owned		26			945
Total nonperforming assets	$	2,965		$	1,059
Nonperforming loans as a % of loans		.91	%		.05	%
Nonperforming assets as a % of assets		.77	%		.35	%
Reserve for Loan Losses:
At period end	$	5,006		$	6,108
As a % of loans		1.55	%		2.55	%
As a % of nonperforming loans		170.33	%		5,357.89	%
As a % of nonaccrual loans		172.68	%		N/M	%
Charge-off Information:
Average loans	$	278,953		$	207,928
Net charge-offs	$	241		$	858
Charge-offs as a % of average loans		.09	%		.41	%

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

	QUARTER ENDED
	December 31,			September 30,			June 30,			March 31,			December 31,
	2006			2006			2006			2006			2005
BALANCE SHEET(Dollars in thousands)
Total loans	$	322,581		$	292,614		$	283,110		$	264,471		$	239,771
Allowance for loan losses		(5,006	)		(5,316	)		(5,415	)		(5,415	)		(6,108	)
Total loans, net		317,575			287,298			277,695			259,056			233,663
Intangible assets		205			237			268			299			330
Total assets		382,791			363,191			352,497			334,591			298,722
Core deposits		199,609			195,774			185,784			183,438			174,530
Noncore deposits(1)		112,812			97,720			98,380			84,516			58,102
Total deposits		312,421			293,494			284,164			267,954			232,632
Total borrowings		38,307			38,307			37,617			36,417			36,417
Total shareholders’ equity		28,790			28,226			27,179			27,173			26,588
Total shares outstanding		3,428,695			3,428,695			3,428,695			3,428,695			3,428,695
INCOME STATEMENT(Dollars in thousands)
Net interest income	$	3,027		$	2,952		$	2,935		$	2,679		$	2,680
Provision for loan losses		(261	)		—			—			(600	)		—
Net interest income after provision		3,288			2,952			2,935			3,279			2,680
Total noninterest income		276			240			251			216			303
Total noninterest expense		3,226			3,002			2,996			2,997			4,011
Income before taxes		338			190			190			498			(1,028	)
Provision for income taxes		—			(500	)		—			—			—
Net income	$	338		$	690		$	190		$	498		$	(1,028	)
PER SHARE DATA
Earnings per share — basic	$	.10		$	.20		$	.05		$	.15		$	(.30	)
Earnings per share — diluted		.10			.20			.05			.15			(.30	)
Book value per share		8.40			8.23			7.93			7.93			7.75
ASSET QUALITY RATIOS
Nonperforming loans/total loans		.91	%		.71	%		.16	%		N/M	%		.05	%
Nonperforming assets/total assets		.77			.58			.14			.28			.35
Allowance for loan losses/total loans		1.55			1.82			1.91			2.05			2.55
Allowance for loan losses/nonperforming loans		170.33			257.43			1,214.13			N/M			5,357.89
PROFITABILITY RATIOS
Return on average assets		.37	%		.75	%		.22	%		.63	%		(1.41	)%
Return on average equity		4.68			9.76			2.82			7.47			(14.95	)
Net interest margin		3.44			3.36			3.62			3.62			3.96
Efficiency ratio		94.60			91.17			91.41			99.37			128.37
Average loans/average deposits		102.29			97.51			99.67			98.44			102.01
CAPITAL ADEQUACY RATIOS
Leverage ratio		7.85			7.81			8.04			8.54			9.23
Tier 1 capital ratio		8.77			9.36			9.28			9.74			10.57
Total capital ratio		10.02			10.62			10.54			11.00			11.84
Average equity/average assets		7.81			7.73			7.94			8.48			9.45
Tangible equity/tangible assets		7.47			7.71			7.64			8.04			8.80

⁽¹⁾ Noncore deposits includes brokered deposits and CDs greater than $100,000

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

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