Mackinac Financial (MFNC) 8-K Mackinac Financial Corporation Reports Second Quarter and Six Months 2008 Results

Exhibit 99

PRESS RELEASE

For Release:	July 30, 2008
Nasdaq:	MFNC
Contact:	Investor Relations at (888) 343-8147
Website:	www.bankmbank.com

MACKINAC FINANCIAL CORPORATION
REPORTS SECOND QUARTER AND SIX MONTHS 2008 RESULTS

(Manistique, Michigan) — 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

	For The Period Ended
	June 30,			December 31,			June 30,
	2008			2007			2007
(Dollars in thousands, except per share data)	(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,
	2008			2007			2007
(Dollars in thousands)	(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

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2008		2007		2008		2007
(Dollars in thousands except per share data)	(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,			December 31,			September 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

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS