EXHIBIT 99
[MACKINAC FINANCIAL LOGO]
CORRECTED PRESS RELEASE
For Release: October 31, 2005
NASDAQ: MFNC
Contact: Investor Relations at (800) 200-7032
Website: www.bankmbank.com
MACKINAC FINANCIAL CORPORATION
REPORTS THIRD QUARTER 2005 AND NINE MONTHS RESULTS OF OPERATIONS
(Manistique, Michigan) - Mackinac Financial Corporation (Nasdaq: MFNC), the bank
holding company for mBank (the "Bank") today announced a third quarter 2005 loss
of $.518 million, or $.15 per share, compared to a loss of $761 thousand, or
$2.17 per share for the third quarter of 2004. The loss for the nine months
amounted to $6.336 million, or $1.85 per share, compared to a loss of $4.028
million, or $11.48 per share, in the nine months ended September 30, 2004. The
results of operations for the first nine months of 2005 include a penalty of
$4.320 million on the prepayment of $48.555 million of the FHLB borrowings.
Excluding this prepayment penalty, the net loss in the first nine months of 2005
amounted to $2.016 million. Weighted average shares in the three months and nine
months ended September 30, 2005 totaled 3,428,695 compared to 350,958 weighted
average shares outstanding for the same periods in 2004.
Paul Tobias, Chairman and Chief Executive Officer commented, "In the third
quarter of 2005 we continued to show steady progress in the execution of our
business plan. Loan demand remained strong which has resulted in growth of our
loan portfolio by $14.630 million since year-end despite experiencing an unusual
level of payouts and refinancing of approximately $36.9 million. Net loan growth
in the third quarter amounted to $13.959 million, after net growth of $9.672
million in the second quarter and a net decline of $9.001 million in the first
quarter. We have a good pipeline of diversified loans that we expect to close in
the near term and look forward to continued strong loan demand. In the third
quarter, we launched a bank-wide advertising campaign designed to reintroduce
mBank to the banking community. The results of the campaign were encouraging
with 612 new accounts and $8.1 million in deposits."
Total assets of the Corporation at September 30, 2005 were $280.590 million,
down 17.35 percent from the $332.2 million in total assets reported at September
30, 2004. Third quarter-end total assets were down 4.4 percent from the $339.497
million of total assets at year-end 2004. The balance sheet totals at September
30, 2005 reflect the reduction in assets from the planned reduction in short
term investments to pay down FHLB borrowings which occurred in the first quarter
of 2005.
Total loans at the end of the third quarter of 2005 increased $14.630 million,
or 7.17 percent from year-end 2004 total loans of $203.832 million. During the
first nine months of 2005, mBank generated $71.9 million in new loans. This
growth was partially offset by the unusual level, $36.9 million, of loan payoffs
mentioned previously along with normal loan amortization of $20.4 million.
Total deposits of $213.268 million at September 30, 2005 were down
$2.382 million, or 1.10 percent from year-end 2004 deposits of $215.650 million.
The Bank experienced decreases in deposits during the first nine months of
4
2005 largely due to maturing internet deposits which amounted to $13.165 million
Mr. Tobias added, "We have made good progress thus far this year re-branding the
bank and developing a marketing campaign to help our talented branch team
introduce our revised product line to our customers. We are pleased with the
momentum following our rollout and are experiencing growth in our customer base.
As we continue to build core deposits, we will continue reducing internet
sourced deposit balances." Another step in the execution of our strategic plan
is the opening or our new full service banking office in Birmingham, Michigan,
which we anticipate later in the month of October.
The Bank's credit quality has improved dramatically in the past twelve months
with nonperforming loans, as a percent of loans, at 1.79% compared to 3.16% at
September 30, 2004. Nonperforming assets, which amounted to $6.037 million, or
1.78% of assets at December 31, 2004, were reduced to $3.905 million, 1.39% of
assets at September 30, 2005. Tobias, commenting on credit quality stated, "We
have a strong credit culture that has allowed mBank to identify and remove the
old problem loans and book new loans with confidence. This credit culture,
anchored by a committee system, encourages our lending staff to concentrate on
high quality loan production and is expected to reduce operating expense in
future periods."
Shareholders' equity at September 30, 2005 totaled $27.9 million, or $8.14 per
share. The Corporation is well capitalized with Tier 1 capital in excess of
9.83% and total risk-based capital in excess of 13.28%.
Tobias concluded, "We are pleased with our progress and look forward to the
opening of our new full service branch in Birmingham in the very near future. We
will also complete a full data processing conversion in the fourth quarter,
which will provide the system capabilities of a large banking organization and
will give us a competitive advantage in securing new relationships for mBank. We
welcome the many challenges ahead and look forward to returning the Corporation
to profitability."
Mackinac Financial Corporation is a registered bank holding company which owns
mBank. The Bank has 12 branches in Northern Michigan and a commercial banking
office in Bloomfield Hills, 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.
5
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
================================================================================
<Table>
<Caption>
(Dollars in thousands, except per share data) * For The Period Ended
-------------------------------------------------------
September 30, December 31, September 30,
2005 2004 2004
-------------------------------------------------------
(Unaudited) (Unaudited)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 280,590 $ 339,497 $ 332,152
Total loans 218,462 203,832 221,595
Total deposits 213,268 215,650 223,110
Borrowings and subordinated debentures 36,417 85,039 98,045
Total shareholders' equity 27,900 34,730 6,471
SELECTED STATEMENTS OF INCOME DATA (NINE MONTHS AND YEAR ENDED):
Net interest income $ 7,100 $ 8,238 $ 6,338
Loss before taxes (6,306) (1,448) (4,028)
Net loss (6,336) (1,595) (4,028)
Loss per common share - Basic (1.85) (3.23) (11.48)
Loss per common share - Diluted (1.85) (3.23) (11.48)
THREE MONTHS ENDED
Net interest income $ 2,507 $ 1,900 $ 1,860
Income (loss) before taxes (488) 2,580 (761)
Net income (loss) (518) 2,433 (761)
Income (loss) per common share - Basic (.15) 8.25 (1.85)
Income (loss) per common share - Diluted (.15) 8.25 (1.85)
SELECTED FINANCIAL RATIOS AND OTHER DATA (NINE MONTHS AND YEAR ENDED):
PERFORMANCE RATIOS:
Net interest margin 3.79% 2.57% 2.25%
Efficiency ratio 112.11 103.05 120.66
Return on average assets (.73) (.44) (.87)
Return on average equity (7.31) (18.64) (49.53)
Average total assets $ 280,506 $ 365,024 $ 346,978
Average total shareholders' equity $ 28,112 $ 8,555 $ 6,096
Average loans to average deposits ratio 99.33% 97.40% 96.00%
COMMON SHARE DATA (AT END OF PERIOD):
Market price per common share $ 10.99 $ 17.97 $ 21.00
Book value per common share $ 8.14 $ 10.13 $ 18.44
Common shares outstanding 3,428,695 3,428,695 350,958
OTHER DATA (AT END OF PERIOD):
Allowance for loan losses $ 6,589 $ 6,966 $ 10,720
Non-performing assets $ 3,905 $ 6,037 $ 11,655
Allowance for loan losses to total loans 3.02% 3.42% 4.84%
Non-performing assets to total assets 1.39% 1.78% 3.51%
Number of:
Branch locations 12 12 15
* Historical per share data has been adjusted for the 20:1 reverse stock split
distributed in December 2004.
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<Table>
<Caption>
(Dollars in thousands, except per share data) September 30, December 31, September 30,
2005 2004 2004
------------- ------------ -------------
(Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 5,333 $ 4,230 $ 8,210
Federal funds sold 4,849 39,848 12,318
------------- ------------ -------------
Cash and cash equivalents 10,182 44,078 20,528
Interest-bearing deposits in other financial
institutions 1,282 18,535 6,126
Securities available for sale 35,506 57,075 67,502
Federal Home Loan Bank stock 4,855 4,754 4,704
------------- ------------ -------------
Total loans 218,462 203,832 221,595
Allowance for loan losses (6,589) (6,966) (10,720)
------------- ------------ -------------
Net loans 211,873 196,866 210,875
Premises and equipment 11,268 10,739 10,927
Other real estate held for sale 1,948 1,730 4,650
Other assets 3,676 5,720 6,840
------------- ------------ -------------
Total assets $ 280,590 $ 339,497 $ 332,152
============= ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest-bearing deposits $ 19,690 $ 20,956 $ 23,036
Interest-bearing deposits 193,578 194,694 200,074
------------- ------------ -------------
Total deposits 213,268 215,650 223,110
Borrowings 36,417 85,039 85,595
Subordinated debentures -- -- 12,450
Other liabilities 3,005 4,078 4,526
------------- ------------ -------------
Total liabilities 252,690 304,767 325,681
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,
3,428,695 and 350,958 respectively 42,335 42,335 16,175
Accumulated deficit (14,357) (8,097) (10,530)
Accumulated other comprehensive income (78) 492 826
------------- ------------ -------------
Total shareholders' equity 27,900 34,730 6,471
------------- ------------ -------------
Total liabilities and shareholders' equity $ 280,590 $ 339,497 $ 332,152
============= ============ =============
</Table>
7
MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
================================================================================
<Table>
<Caption>
(Dollars in thousands, except per share data) Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, September 30, September 30, September 30,
2005 2004 2005 2004
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Interest income:
Interest and fees on loans:
Taxable $ 3,547 $ 3,341 $ 9,807 $ 11,206
Tax-exempt 222 276 694 919
Interest on securities:
Taxable 282 612 1,178 1,884
Tax-exempt 42 42 126 128
Other interest income 324 137 470 400
----------- ----------- ----------- -----------
Total interest income 4,270 4,408 12,275 14,537
----------- ----------- ----------- -----------
Interest expense:
Deposits 1,338 1,246 3,666 4,289
Borrowings 425 1,302 1,509 3,554
Subordinated debentures -- -- -- 356
----------- ----------- ----------- -----------
Total interest expense 1,763 2,548 5,175 8,199
----------- ----------- ----------- -----------
Net interest income 2,507 1,860 7,100 6,338
Provision for loan losses -- -- -- --
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 2,507 1,860 7,100 6,338
----------- ----------- ----------- -----------
Other income:
Service fees 137 225 470 805
Loan and lease fees 5 4 13
Net security gains (losses) (1) -- 96 --
Net gains on sale of loans 17 11 37 31
(Loss) on sale of branches -- (132) -- --
Other 96 116 194 744
----------- ----------- ----------- -----------
Total other income 254 224 808 1,593
----------- ----------- ----------- -----------
Other expenses:
Salaries and employee benefits 1,555 1,302 4,665 4,155
Furniture and equipment 133 247 430 819
Occupancy 275 193 748 740
Data processing 234 282 726 985
Accounting, legal, and consulting fees 204 419 750 1,397
Loan and deposit 153 296 696 1,389
Telephone 66 83 203 315
Advertising 314 9 696 52
Penalty on prepayment of FHLB borrowings -- -- 4,320 --
Other 315 14 980 2,107
----------- ----------- ----------- -----------
Total other expenses 3,249 2,875 14,214 11,959
----------- ----------- ----------- -----------
Loss before provision for income taxes (488) (761) (6,306) (4,028)
Provision for income taxes 30 -- 30 --
----------- ----------- ----------- -----------
Net loss $ (518) $ (761) $ (6,336) $ (4,028)
=========== =========== =========== ===========
Loss per common share:
Basic $ (.15) $ (2.17) $ (1.85) $ (11.48)
=========== =========== =========== ===========
Diluted $ (.15) $ (2.17) $ (1.85) $ (11.48)
=========== =========== =========== ===========
</Table>
8
MACKINAC FIANCIAL CORPORATION AND SUBSIDIARIES
LOAN PORTFOLIO AND CREDIT QUALITY
================================================================================
(Dollars in thousands)
LOAN PORTFOLIO BALANCES (AT END OF PERIOD):
September 30, December 31, September 30,
2005 2004 2004
------------- ------------- -------------
COMMERCIAL LOANS
Hospitality and tourism $ 40,424 $ 52,659 $ 54,780
Gaming 9,331 14,310 14,932
Petroleum 6,971 7,718
Forestry 5,564 2,245
Other 97,436 76,133 104,423
------------- ------------- -------------
Total Commercial Loans 159,726 153,065 174,135
1-4 family residential real estate 42,490 45,292 44,365
Consumer 2,108 2,379 2,646
Construction 14,138 3,096 449
------------- ------------- -------------
Total Loans $ 218,462 $ 203,832 $ 221,595
============= ============= =============
CREDIT QUALITY (AT END OF PERIOD):
September 30, December 31, September 30,
2005 2004 2004
------------- ------------- -------------
NONPERFORMING ASSETS
Nonaccrual loans $ 1,957 $ 4,307 $ 6,862
Loans past due 90 days or more - - 143
Restructured loans - - -
------------- ------------- -------------
Total nonperforming loans 1,957 4,307 7,005
Other real estate owned 1,948 1,730 4,650
------------- ------------- -------------
Total nonperforming assets $ 3,905 $ 6,037 $ 11,655
============= ============= =============
Nonperforming loans as a % of loans 1.79% 2.11% 3.16%
------------- ------------- -------------
Nonperforming assets as a % of assets 1.39% 1.78% 3.51%
------------- ------------- -------------
RESERVE FOR LOAN LOSSES:
At period end $ 6,589 $ 6,966 $ 10,720
------------- ------------- -------------
As a % of loans 3.02% 3.42% 4.84%
------------- ------------- -------------
As a % of nonperforming loans 336.69% 161.74% 153.03%
------------- ------------- -------------
As a % of nonaccrual loans 336.69% 161.74% 156.22%
============= ============= =============
CHARGE-OFF INFORMATION:
Average loans $ 202,381 $ 244,730 $ 253,414
------------- ------------- -------------
Net charge-offs $ 377 $ 15,039 11,285
------------- ------------- -------------
Charge-offs as a % of average loans .19% 6.15% 4.45%
------------- ------------- -------------
MACKINAC FINANCIAL CORPORATION
QUARTERLY FINANCIAL SUMMARY
(Dollars in thousands, except per share data) *
Average Return on Average
Average Average Average Shareholders' ----------------- Net Interest Efficiency Net Income Book Value
Quarter Ended Assets Loans Deposits Equity Assets Equity Margin Ratio Per Share Per Share
- ------------- ------ ----- -------- ------ ------ ------ ------------ ---------- ----------- ---------
September 30, 2005 $280,506 $209,795 $211,197 $ 28,112 (.73)% (7.39)% 3.79% 112.11% $(.15) $ 8.14
June 30, 2005 277,754 197,545 206,875 28,879 (.83) (8.01) 3.67 119.07 (.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 (.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
* Historical per share data has been adjusted for the 20:1 reverse stock split
distributed in December 2004.