EXHIBIT 99.1
[MACKINAC FINANCIAL COMPANY LOGO]
PRESS RELEASE
For Release January 27, 2006
Contact: Investor Relations
(800) 200-7032
Website: www.bankmbank.com
MACKINAC FINANCIAL CORPORATION ANNOUNCES
ANNUAL RESULTS FOR 2005
(Manistique, Michigan) - Mackinac Financial Corporation (Nasdaq: MFNC), the
holding company for mBank, has reported a net loss of $7.364 million, or $2.15
per share, for the year ended December 31, 2005, compared to a net loss of
$1.595 million, or $3.23 per share, for 2004. Weighted average shares
outstanding amounted to 3,248,695 in 2005 and 494,305 in 2004.
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.
Paul Tobias, Chairman and Chief Executive Officer commented, "The significant
one- time charges we recognized in 2005 were incurred to implement our long term
strategic plan which will better position the Corporation for growth and
profitability in future periods. These front end costs were high but we believe
the benefits will accrue in the form of increased revenues as a result of
increased market share, better operating efficiencies from improved technology,
and the immediate benefits we received from the reduction in high cost funding."
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Total assets of the Corporation at December 31, 2005 were $298.722 million, a
decrease of 12.01% from total assets of $339.497 million reported at December
31, 2004. The balance sheet totals at December 31, 2005 reflect the liquidation
of short term investments to fund the prepayment of the FHLB borrowings.
During 2005 the Corporation increased loans by $35.939 million from 2004
year-end balances of $203.832 million, a 17.6% increase. This growth in loans
occurred despite unusually high payoffs of existing portfolio loans, which
totaled $46.8 million, along with normal principal reductions or amortization of
$23.3 million. Total loan production in 2005 amounted to $116.7 million.
Tobias stated, "We are pleased with loan production in 2005. As the year
progressed we built momentum, and we enter 2006 optimistic that we can continue
to build the commercial loan portfolio. In 2006 and beyond, funding loan growth
with increased in-market core deposits will be very important for our
profitability."
The Bank's asset quality continued to improve in 2005. Nonperforming loans, as a
percent of loans, was .05% at December 31, 2005 compared to 2.11% at December
31, 2004 and 15.47% at 2003 year end. Nonperforming assets at December 31, 2005
were $1.059 million, .35% of total assets, compared to $6.037 million or 1.78%
of total assets at December 31, 2004. Tobias added, "A strong credit culture is
pervasive throughout our lending function and provides the foundation to
maintain our low levels of nonperforming assets. Our process, which is
administrated under a committee system, emphasizes high quality loan production
and is anchored by a very strong underwriting process."
Total deposits grew from $215.650 million at December 31, 2004 to $232.632
million at December 31, 2005, an increase of 7.87%. The increase represents a
growth in core deposits of the Bank in the amount of $23.046 million, a 12.9%
increase from 2004 year end balances of $167.173 million, and the addition of
$9.956 million in brokered deposits in December 2005. Tobias said, "We are
pleased that our branches are starting to grow again. From our low point in
April, core deposits have grown every month and grew $24.4 million between May
and December." This internal core deposit growth was partially offset by
maturities in out-of-market Internet deposits.
Net interest income for the year ended December 31, 2005 was $9.780 million
compared to $8.238 million for the year ended December 31, 2004, an increase of
$1.542 million. The margin percentage for 2005 was 3.64% compared to 2.57% in
2004. This net interest margin improvement in 2005 was attributable to a number
of factors. During 2005 the prime rate increased from 5.25% to 7.25%, which was
beneficial to the Corporation, since a majority of the commercial loan portfolio
repriced upwards with each prime rate change. The reduction in nonperforming
assets was also a factor along with the prepayment of the higher cost funding of
the FHLB borrowings.
Shareholders' equity totaled $26.588 million at December 31, 2005 compared to
$34.730 at the end of 2004, a decrease of $8.142 million. This decrease reflects
the consolidated
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loss of $7.364 million and also the reduction in equity due to the decrease in
the market value of held-for-sale investments, which amounted to $.855 million.
The book value per share at December 31, 2005 amounted to $7.76 compared to
$10.13 at the end of 2004. Tobias concluded, "After a year of necessary clean
up, we believe that we are well positioned to return the franchise to
profitability and begin to rebuild our capital in 2006."
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 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.
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended December 31,
2005 2004
----------------------------------
(UNAUDITED) (Audited)
SELECTED FINANCIAL CONDITION DATA (AT END OF PERIOD):
Total assets $ 298,722 $ 339,497
Total loans 239,771 203,832
Total deposits 232,632 215,650
Borrowings and subordinated debentures 36,417 85,039
Total shareholders' equity 26,588 34,730
SELECTED STATEMENTS OF INCOME DATA:
Net interest income $ 9,780 $ 8,238
Loss before taxes (7,364) (1,448)
Net loss (7,364) (1,595)
Loss per common share - Basic (2.15) (3.23)
Loss per common share - Diluted (2.15) (3.23)
SELECTED FINANCIAL RATIOS AND OTHER DATA:
PERFORMANCE RATIOS:
Net interest margin 3.64% 2.57%
Efficiency ratio 160.43 103.05
Return on average assets (2.58) (.44)
Return on average equity (25.63) (18.64)
Average total assets $ 285,896 $ 365,024
Average total shareholders' equity 28,732 8,555
Average loans to average deposits ratio 98.17% 97.40%
COMMON SHARE DATA AT END OF PERIOD:
Market price per common share $ 9.10 $ 17.97
Book value per common share $ 7.76 $ 10.13
Common shares outstanding 3,428,695 3,428,695
Weighted average shares outstanding 3,428,695 494,305
OTHER DATA AT END OF PERIOD:
Allowance for loan losses $ 6,108 $ 6,966
Non-performing assets $ 1,059 $ 6,037
Allowance for loan losses to total loans 2.55% 3.42%
Non-performing assets to total assets .35% 1.78%
Number of:
Branch locations 12 12
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
ASSETS
2005 2004
--------- ---------
Dollars in thousands, except per share data) (UNAUDITED) (Audited)
Cash and due from banks $ 4,833 $ 4,230
Federal funds sold 3,110 39,848
--------- ---------
Cash and cash equivalents 7,943 44,078
Interest-bearing deposits in other financial institutions 1,025 18,535
Securities available for sale 34,210 57,075
Federal Home Loan Bank stock 4,855 4,754
239,771
Total loans 203,832
Allowance for loan losses (6,108) (6,966)
--------- ---------
Net loans 233,663 196,866
Premises and equipment 11,987 10,739
Other real estate held for sale 945 1,730
Other assets 4,094 5,720
--------- ---------
TOTAL ASSETS $ 298,722 $ 339,497
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Non-interest-bearing deposits $ 19,684 $ 20,956
Interest-bearing deposits 212,948 194,694
--------- ---------
Total deposits 232,632 215,650
Borrowings 36,417 85,039
Other liabilities 3,085 4,078
--------- ---------
Total liabilities 272,134 304,767
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 42,412 42,335
Retained earnings (8,097) (15,461)
Accumulated other comprehensive income (363) 492
--------- ---------
Total shareholders' equity 26,588 34,730
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 298,722 $ 339,497
========= =========
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
For The Years Ended December 31,
2005 2004 2003
----------- --------- ---------
(UNAUDITED) (Audited) (Audited)
Interest income:
Interest and fees on loans:
Taxable $ 13,862 $ 14,517 $ 18,999
Tax-exempt 928 1,180 1,534
Interest on securities:
Taxable 1,455 2,401 2,277
Tax-exempt 167 171 230
Other interest income 564 584 601
-------- -------- --------
Total interest income 16,976 18,853 23,641
-------- -------- --------
Interest expense:
Deposits 5,259 5,443 8,695
Borrowings 1,937 4,730 4,832
Subordinated debentures -- 442 488
Total interest expense 7,196 10,615 14,015
-------- -------- --------
Net interest income 9,780 8,238 9,626
-------- -------- --------
Provision for loan losses -- -- --
Net interest income after provision for loan losses 9,780 8,238 9,626
Other income:
Service fees 586 982 1,529
Loan and lease fees 21 17 58
Net security gains 95 -- 427
Net gains on sale of loans 49 39 136
Gain on sale of branches -- 205 --
Gain on settlement of subordinated debentures -- 6,617 --
Other 360 682 1,081
-------- -------- --------
Total other income 1,111 8,542 3,231
-------- -------- --------
Other expenses:
Salaries and employee benefits 6,090 8,032 5,973
Occupancy 1,053 994 1,387
Furniture and equipment 560 887 1,367
Data processing 1,720 1,220 1,517
Accounting, legal and consulting fees 886 1,836 3,145
Loan and deposit 852 1,718 1,992
Telephone 271 382 1,382
Advertising 814 115 182
Penalty on prepayment of FHLB borrowings 4,320 -- --
Other 1,689 3,044 3,171
-------- -------- --------
Total other expenses 18,255 18,228 20,116
-------- -------- --------
Loss before provision for income taxes (7,364) (1,448) (7,259)
Provision for income taxes -- 147 2,329
-------- -------- --------
Net loss $ (7,364) $ (1,595) $ (9,588)
-------- -------- --------
Loss per common share:
Basic $ (2.15) $ (3.23) $ (27.32)
======== ======== ========
Diluted $ (2.15) $ (3.23) $ (27.32)
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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
PORTFOLIO AND CREDIT QUALITY
(Dollars in thousands)
LOAN PORTFOLIO BALANCES (AT END OF PERIOD):
DECEMBER 31, December 31,
2005 2004
----------- -----------
(UNAUDITED) (Audited)
COMMERCIAL LOANS
Hospitality and tourism $ 37,681 $ 52,659
Gaming 7,553 14,310
Petroleum 6,508 7,718
Forestry 5,370 2,245
Other 118,211 76,133
-------- --------
Total Commercial Loans 175,323 153,065
1-4 family residential real estate 44,660 45,292
Consumer 2,285 2,379
Construction 17,503 3,096
-------- --------
Total Loans $239,771 $203,832
======== ========
CREDIT QUALITY (AT END OF PERIOD):
NONPERFORMING ASSETS
Nonaccrual loans $ 15 $ 4,307
Loans past due 90 days or more 99 --
Restructured loans -- --
-------- --------
Total nonperforming loans 114 4,307
Other real estate owned 945 1,730
-------- --------
Total nonperforming assets $ 1,059 $ 6,037
======== ========
Nonperforming loans as a % of loans .05% 2.11%
-------- --------
Nonperforming assets as a % of assets .35% 1.78%
-------- --------
RESERVE FOR LOAN LOSSES:
At period end $ 6,108 $ 6,966
-------- --------
As a % of loans 2.55% 3.42%
-------- --------
As a % of nonperforming loans 5,357.89% 161.74%
======== ========
CHARGE-OFF INFORMATION:
Average loans $207,928 $244,730
-------- --------
Net charge-off $ 858 $ 15,039
-------- --------
Charge-offs as a % of average loans .41% 6.15%
-------- --------
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MACKINAC FINANCIAL CORPORATION
QUARTERLY FINANCIAL SUMMARY
(Dollars in thousands, except per share data)*
Average Net
Average Average Average Shareholders' Return on Average Interest Efficiency Net Income Book Value
-------------------
Quarter Ended Assets Loans Deposits Equity Assets Equity Margin Ratio Per Share Per Share
- ----------------- -------- -------- -------- ------------- ------- -------- -------- --------- ---------- ---------
December 31, 2005 $288,619 $224,386 $219,967 $27,288 (1.41)% (14.95)% 3.96% 128.37% $ (.30) $7.76
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.
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