AP NEWS

Mackinac Financial Corporation Reports Second Quarter 2018 Results Including Impact of Acquisition Activity and Capital Raise

August 2, 2018

MANISTIQUE, Mich., Aug. 02, 2018 (GLOBE NEWSWIRE) -- Mackinac Financial Corporation (Nasdaq: MFNC) (the “Corporation”), the bank holding company for mBank, today announced second quarter 2018 income of $396 thousand, or $.05 per share, compared to net income of $1.68 million, or $.27 per share, for the second quarter of 2017. As expected, the 2018 second quarter results were impacted by expenses related to the acquisition of First Federal of Northern Michigan (FFNM) and pre-announcement diligence activity related to the pending Lincoln Community Bank (Lincoln) transaction. Weighted average share count was increased by a common stock offering by the Corporation in June 2018 and the issuance of shares in the FFNM acquisition.

On May 18, 2018 the Corporation completed the acquisition of FFNM. The Corporation issued 2,146,378 new shares as consideration for the purchase. On June 15, 2018, the Corporation closed a common stock offering resulting in gross proceeds of roughly $34.50 million and net proceeds of roughly $32.40 million. The Corporation issued 2,225,807 shares in connection with the stock offering. As a result of the activities noted above, weighted average shares outstanding for the second quarter of 2018 were 7,041,010 compared to 6,294,930 for the same period of 2017 and 6,304,203 shares for the first quarter of 2018.

The Corporation still expects cost efficiencies from the FFNM acquisition and the pending Lincoln acquisition to be fully phased in by the end of 2018, however, the savings relating to FFNM were only partially integrated and realized in the second quarter of 2018. The Corporation completed a successful data processing conversion of FFNM over the weekend of July 13th. The Corporation expects the pending Lincoln acquisition to close end of third quarter or early in the fourth quarter subject to final regulatory approvals with a data conversion scheduled for mid-fourth quarter.

In connection with the acquisition, the Corporation had second quarter GAAP pre-tax transaction related expenses totaling $1.98 million. These one-time costs reduced the reported net income for the quarter by $1.56 million on an after-tax basis. The adjusted net income for the second quarter of 2018 (exclusive of the transaction related expenses) would equate to $1.96 million. The majority of the expenses associated with the common stock offering were capitalized in accordance with GAAP.

Total assets of the Corporation at June 30, 2018 were $1.27 billion compared to $1.03 billion at June 30, 2017. Shareholders’ equity at June 30, 2018 totaled $148.87 million, compared to $81.31 million on June 30, 2017. The tangible book value per share equated to $11.57 on June 30, 2018 compared to $11.72 per share a year ago. Subsequent to receiving the proceeds from the stock offering, the Corporation paid down approximately $19.45 million in senior holding company debt in the second quarter.

The Corporation’s primary asset, mBank, recorded net income of $1.20 million in the second quarter of 2018, compared to $2.05 million for the same period in 2017. Combined acquisition-related expenses totaled $1.45 million at the bank level, with an after-tax impact of $1.15 million. Adjusted core net income (exclusive of the expenses) for second quarter 2018 was $2.35 million.

Revenue

Total revenue of the corporation for the three months ended June 30, 2018 equated to $13.80 million compared to $11.66 million for the same period of 2017. Total interest income was $12.94 million for the second quarter of 2018 and $10.87 for the same period in 2017. The 2018 second quarter interest income included accretive yield of $284 thousand from combined credit mark accretion associated with acquisitions compared to 2017 same period of $351 thousand. The non-interest income portion of total revenue increased slightly year-over-year from $795 thousand in 2017 to $863 thousand in 2018, partially due to the positive impact of the FFNM acquisition.

Loan Production / Credit Risk

Total balance sheet loans at June 30, 2018 were $1.00 billion compared to June 30, 2017 balances of $811.08 million. Total loans under management now reside at $1.34 billion which includes $334 million of service retained loans. New loan production for the first half of 2018 was slightly behind previous year at $103 million with origination activity increasing in the second quarter, as expected. Commercial originations accounted for $62 million, retail, predominantly mortgage, equated to $41 million. Commenting on new loan production and overall lending activities, Kelly W. George, President and CEO of mBank, stated, “Commercial loan production remains consistent with prior year with a continued competitive environment for the high-quality earning assets we originate. Based on steady deal flow since the FFNM acquisition date, we expect that the addition of the FFNM markets will have a positive impact on all types of originations for the second half of 2018 as the operational and cultural integration of this transaction has gone very well. Likewise, in-house mortgage production has ramped up in our more active summer months and is consistent with 2017 first half activity. As we alluded to in our first quarter communications, we have seen the change in interest rates impact our secondary market origination, which is at about 70% of previous year levels.”

Nonperforming loans totaled $5.03 million, .50% of total loans at June 30, 2018 compared to $3.75 million, or .47%, of total loans at June 30, 2017. The dollar amount increase in non-performing loans is the result of credits acquired in the FFNM transaction which were marked to market as part of the credit due diligence process. Total loan delinquencies greater than 30 days resided at a nominal .89%, compared to .59% in the second quarter of 2017. Commenting on overall credit risk, Mr. George stated, “As expected, we saw a slight increase in our non-performing credit ratios following the FFNM acquisition. Similar to previous transactions, we anticipate this will normalize over the coming quarters as we work to quickly resolve some of these acquired credits. Overall, loan portfolio performance, both legacy mBank and acquired FFNM, remains strong with no material credit issues within any of the business segments. Purchase accounting marks from the previously acquired banks have continued to prove accurate, attaining expected accretion levels. The acquired loan portfolio from FFNM should provide accretive results to our bottom line and support in overall granularity and concentration levels from a macro perspective.”

Margin Analysis / Funding

Net interest income in the second quarter of 2018 resided at $10.81 million, or 4.26%, compared to $9.32 million, or 4.24%, in the second quarter of 2017. Second quarter 2018 total interest expense was $2.13 million versus $1.55 million for the same period of 2017. Of the $578 thousand interest expense increase from previous year, $333 thousand was attributable to interest on brokered CDs due to repricing experienced from normal maturities and renewals at market rates. An additional $167 thousand of the total was a result of increased expense on our CD & IRA products due to some slightly higher rates offered for competitive reasons. Total brokered deposits were $152 million at the end of June 2018, down from $217 million at June 30, 2017. FHLB borrowings were up from $71 million to $92 million year-over-year as a result of liabilities acquired from FFNM. The Corporation expects to opportunistically reduce these borrowings as they mature. The collective $44 million net improvement in these combined wholesale funding categories was partially made possible by the complementary balance sheet and deposit base of FFNM. Following the close of the FFNM acquisition, the Corporation sold roughly $46 million of the acquired investment portfolio to decrease its wholesale funding.

Mr. George stated, “We have been successful in maintaining our strong net interest margin in the rising rate environment, and each rate increase should have positive impact on the income generated from our loan portfolio. With the lower cost core deposit base we acquired from FFNM, we have begun to reposition the balance sheet and remove some of the more volatile and higher cost wholesale funding sources that we have utilized in the past. This repositioning should further stabilize our funding and position us very well on the liability side for the remainder of 2018 and decrease our relative funding costs. We will also continue to proactively monitor as to when a need could occur to move pricing up on our core transactional accounts due to expected market pressures, a challenge all banks will face this year. We have pivoted to a more offensive posture in terms of overall core deposit gathering initiatives within our branch network. At this time, our deposit beta remains strong at .08 when comparing the movement in the federal funds rate to the movement on our blended interest-bearing deposit rate.”

Noninterest Expense

Noninterest expense, at $11.08 million in the second quarter of 2018, increased $3.56 million from the second quarter 2017 total of $7.52 million. The expense variance from the second quarter of 2017 was heavily impacted by the $1.98 million in pre-tax transaction related expenses as well as the additional expense related to the larger bank platform following the FFNM closing, including additional salary, benefits and occupancy costs. The Corporation still expects to realize the 40% cost efficiencies from the FFNM acquisition as originally projected and believes they will be fully phased in by the end of 2018.

Assets and Capital

Total assets of the Corporation at June 30, 2018 were $1.27 billion compared to $1.03 billion at June 30, 2017. Shareholders’ equity at June 30, 2018 totaled $148.87 million, compared to $81.31 million on June 30, 2017. The tangible book value per share equated to $11.57 on June 30, 2018 compared to $11.72 per share a year ago. Both the common stock offering and the FFNM acquisition had positive impacts on the Corporation’s overall capitalization and regulatory capital ratios. Of the $32.4 net proceeds from the June 2018 common stock offering, the corporation utilized $19.45 million to retire senior holding company debt. The Corporation is “well-capitalized” and the Bank is “well-capitalized” with total risk-based capital to risk weighted assets of 11.06% and 12.39%, respectively.

Paul D. Tobias, Chairman and Chief Executive Officer of the Corporation concluded, “We had a very busy and productive quarter with the closing of the FFNM transaction, the announcement of the Lincoln Community Bank acquisition and the successful common stock offering. All three of these events are representative of our consistent strategy of asset growth and balance sheet strength while driving continually improving earnings metrics. Both FFNM and Lincoln are accretive transactions that add strategic and complementary markets where we can grow organically. The stock offering was completed at a minimal market price discount, strengthening our balance sheet and providing the capital we need to continue to execute our growth plans. Further, the ability to put a considerable portion of the new capital to work through the reduction of senior holding company debt and the purchase of Lincoln allows us to quickly hurdle our cost of capital with the expected yield and savings from the activities.”

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $1.25 billion 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 29 branch locations; eleven in the Upper Peninsula, ten in the Northern Lower Peninsula, one in Oakland County, Michigan, and seven in Northern Wisconsin. The Corporation’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,” “view,” 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 SUBSIDIARIESSELECTED FINANCIAL HIGHLIGHTS

As of and As of and For As of and For the the For the Period Year Ending Period Ending Ending June 30, December 31, June 30, (Dollars in thousands, except per share data) 2018 2017 2017 ------------ - ------------- ----------- (Unaudited) (Unaudited) Selected Financial Condition Data (at end of period): Assets $ 1,274,095 $ 985,367 $ 1,027,450 Loans 1,003,377 811,078 790,753 Investment securities 114,682 75,897 82,212 Deposits 1,015,501 817,998 848,245 Borrowings 91,747 79,552 92,024 Shareholders’ equity 148,866 81,400 81,313 Selected Statements of Income Data six months and year ended): Net interest income $ 20,122 $ 37,938 $ 18,485 Income before taxes 2,444 11,018 5,162 Net income 1,933 5,479 3,406 Income per common share - Basic .27 .87 .54 Income per common share - Diluted .27 .87 .54 Weighted average shares outstanding 7,041,010 6,288,791 6,282,551 Weighted average shares outstanding- Diluted 7,073,764 6,322,413 6,298,515 Three Months Ended: Net interest income $ 10,813 $ 9,664 $ 9,319 Income before taxes 499 2,838 2,547 Net income 396 (20 ) 1,680 Income per common share - Basic .05 - .27 Income per common share - Diluted .05 - .27 Weighted average shares outstanding 7,769,720 6,294,930 6,294,930 Weighted average shares outstanding- Diluted 7,809,018 6,294,930 6,307,883 Selected Financial Ratios and Other Data: Performance Ratios: Net interest margin 4.23 % 4.20 % 4.21 Efficiency ratio 87.27 71.39 71.61 Return on average assets .37 .55 .70 Return on average equity 4.27 6.74 8.57 Average total assets $ 1,050,305 $ 995,826 $ 982,374 Average total shareholders’ equity 91,258 81,349 80,158 Average loans to average deposits ratio 99.89 % 96.29 % 95.38 Common Share Data at end of period: Market price per common share $ 16.58 $ 15.90 $ 13.99 Book value per common share 13.90 12.93 12.92 Tangible book value per share 11.57 11.72 11.69 Dividends paid per share, annualized .480 .480 .480 Common shares outstanding 10,712,745 6,294,930 6,294,930 Other Data at end of period: Allowance for loan losses $ 5,141 $ 5,079 $ 5,133 Non-performing assets $ 7,486 $ 6,126 $ 7,798 Allowance for loan losses to total loans .51 % .63 % .65 Non-performing assets to total assets .59 % .62 % .76 Texas ratio 5.80 % 7.77 % 9.91 Number of: Branch locations 29 23 24 FTE Employees 233 233 235

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS

June 30, December June 30, 31, 2018 2017 2017 ------------- ----------- ------------- (Unaudited) (Unaudited) ASSETS Cash and due from banks $ 64,874 $ 37,420 $ 78,972 Federal funds sold 15 6 10,006 - --------- - - ------- - - --------- - Cash and cash equivalents 64,889 37,426 88,978 Interest-bearing deposits in other financial institutions 10,873 13,374 14,312 Securities available for sale 114,182 75,397 81,712 Other securities 500 500 500 Federal Home Loan Bank stock 4,860 3,112 3,250 Loans: Commercial 684,725 572,936 559,388 Mortgage 299,450 220,708 212,306 Consumer 19,202 17,434 19,059 - --------- - - ------- - - --------- - Total Loans 1,003,377 811,078 790,753 Allowance for loan losses (5,141 ) (5,079 ) (5,133 ) - --------- - - ------- - - --------- - Net loans 998,236 805,999 785,620 Premises and equipment 21,790 16,290 16,654 Other real estate held for sale 2,461 3,558 4,050 Deferred tax asset 8,000 4,970 7,139 Deposit based intangibles 4,504 1,922 2,047 Goodwill 20,389 5,694 5,694 Other assets 23,411 17,125 17,494 - --------- - - ------- - - --------- - TOTAL ASSETS $ 1,274,095 $ 985,367 $ 1,027,450 - --------- - - ------- - - --------- - LIABILITIES AND SHAREHOLDERS’ EQUITY LIABILITIES: Deposits: Noninterest bearing deposits $ 220,176 $ 148,079 $ 156,970 NOW, money market, interest checking 337,344 280,309 259,423 Savings 106,022 61,097 61,741 CDs<$250,000 181,352 142,159 142,649 CDs>$250,000 18,930 11,055 10,597 Brokered 151,677 175,299 216,865 - --------- - - ------- - - --------- - Total deposits 1,015,501 817,998 848,245 Federal funds purchased 10,000 - - Borrowings 91,747 79,552 92,024 Other liabilities 7,980 6,417 5,868 - --------- - - ------- - - --------- - Total liabilities 1,125,228 903,967 946,137 SHAREHOLDERS’ EQUITY: Common stock and additional paid in capital - No par value Authorized - 18,000,000 shares Issued and outstanding - 10,712,745; 6,294,930; and 6,294,930 shares 128,880 61,981 61,782 respectively Retained earnings 19,602 19,711 19,101 Accumulated other comprehensive income Unrealized gains (losses) on available for sale securities 606 (71 ) 508 Minimum pension liability (221 ) (221 ) (78 ) - --------- - - ------- - - --------- - Total shareholders’ equity 148,867 81,400 81,313 - --------- - - ------- - - --------- - TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $ 1,274,095 $ 985,367 $ 1,027,450 - --------- - - ------- - - --------- -

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2018 2017 2018 2017 ---------- ---------- ---------- ---------- (Unaudited) (Unaudited) INTEREST INCOME: Interest and fees on loans: Taxable $ 12,071 $ 10,260 $ 22,461 $ 20,217 Tax-exempt 31 19 56 52 Interest on securities: Taxable 560 396 932 795 Tax-exempt 79 75 148 154 Other interest income 197 116 396 244 - ------ - - ------ - Total interest income 12,938 10,866 23,993 21,462 - ------ - - ------ - - ------ - - ------ - INTEREST EXPENSE: Deposits 1,602 1,054 2,838 2,013 Borrowings 523 493 1,033 964 Total interest expense 2,125 1,547 3,871 2,977 - ------ - - ------ - - ------ - - ------ - Net interest income 10,813 9,319 20,122 18,485 Provision for loan losses 100 50 150 200 - ------ - - ------ - - ------ - - ------ - Net interest income after provision for loan losses 10,713 9,269 19,972 18,285 - ------ - - ------ - - ------ - - ------ - OTHER INCOME: Deposit service fees 323 268 592 540 Income from loans sold on the secondary market 277 316 454 614 SBA/USDA loan sale gains 83 89 134 149 Mortgage servicing income (2 ) (9 ) (10 ) (17 ) Other 182 131 307 285 - ------ - - ------ - - ------ - - ------ - Total other income 863 795 1,477 1,571 - ------ - - ------ - - ------ - - ------ - OTHER EXPENSE: Salaries and employee benefits 4,923 3,658 9,077 7,455 Occupancy 928 776 1,739 1,561 Furniture and equipment 644 544 1,175 1,025 Data processing 586 489 1,090 950 Advertising 192 174 387 297 Professional service fees 397 405 701 726 Loan and deposit 148 155 274 334 Writedowns and losses on other real estate held for sale 40 243 66 255 FDIC insurance assessment 187 189 343 346 Telephone 152 134 307 291 Transaction related expenses 1,976 - 2,165 - Other 904 750 1,681 1,454 - ------ - - ------ - - ------ - - ------ - Total other expenses 11,077 7,517 19,005 14,694 - ------ - - ------ - - ------ - - ------ - Income before provision for income taxes 499 2,547 2,444 5,162 Provision for income taxes 103 867 511 1,756 NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 396 1,680 1,933 3,406 - ------ - - ------ - - ------ - - ------ - INCOME PER COMMON SHARE: Basic $ .05 $ .27 $ .27 $ .54 - ------ - - ------ - - ------ - - ------ - Diluted $ .05 $ .27 $ .27 $ .54 - ------ - - ------ - - ------ - - ------ -

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIESLOAN PORTFOLIO AND CREDIT QUALITY

(Dollars in thousands)

Loan Portfolio Balances (at end of period):

June 30, December June 30, 31, 2018 2017 2017 ----------- --------- --------- (Unaudited) (Unaudited (Unaudited ) ) Commercial Loans: Real estate - operators of nonresidential buildings $ 117,285 $ 119,025 $ 114,129 Hospitality and tourism 78,122 75,228 73,109 Lessors of residential buildings 37,866 33,032 30,719 Gasoline stations and convenience stores 22,207 21,176 19,903 Logging 17,368 17,554 18,143 Commercial construction 20,895 9,243 10,145 Other 390,982 297,678 293,240 - --------- - ------- - ------- Total Commercial Loans 684,725 572,936 559,388 1-4 family residential real estate 284,041 209,890 200,771 Consumer 19,202 17,434 19,059 Consumer construction 15,409 10,818 11,535 - --------- - ------- - ------- Total Loans $ 1,003,377 $ 811,078 $ 790,753 - --------- - ------- - -------

Credit Quality (at end of period):

June 30, December June 30, 31, 2018 2017 2017 --------- --------- --------- (Unaudited (Unaudited (Unaudited ) ) ) Nonperforming Assets : Nonaccrual loans $ 3,825 $ 2,388 $ 3,644 Loans past due 90 days or more - - - Restructured loans 1,200 180 104 Total nonperforming loans 5,025 2,568 3,748 Other real estate owned 2,461 3,558 4,050 - ------- - ------- - ------- Total nonperforming assets $ 7,486 $ 6,126 $ 7,798 - ------- - ------- - ------- Nonperforming loans as a % of loans .50 % .32 % .47 % --------- --------- --------- Nonperforming assets as a % of assets .59 % .62 % .76 % --------- --------- --------- Reserve for Loan Losses: At period end $ 5,141 $ 5,079 $ 5,133 - ------- - ------- - ------- As a % of average loans .51 % .64 % .65 % --------- --------- --------- As a % of nonperforming loans 102.31 % 197.78 % 136.95 % - ------- - ------- - ------- As a % of nonaccrual loans 215.28 % 212.69 % 140.86 % - ------- - ------- - ------- Texas Ratio 5.80 % 7.77 % 9.91 % - ------- - ------- - ------- Charge-off Information (year to date): Average loans $ 858,508 $ 795,532 $ 784,823 - ------- - ------- - ------- Net charge-offs (recoveries) $ 88 $ 566 $ 87 - ------- - ------- - ------- Charge-offs as a % of average loans, annualized .02 % .07 % .02 % --------- --------- ---------

MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIESQUARTERLY FINANCIAL HIGHLIGHTS

QUARTER ENDED --------------------------------------------------------------------------- (Unaudited) --------------------------------------------------------------------------- June 30, March 31, December 31 September 30, June 30 2018 2018 2017 2017 2017 -------------- ------------- -------------- ------------- ------------- BALANCE SHEET (Dollars in thousands) Total loans $ 1,003,377 $ 812,441 $ 811,078 $ 808,149 $ 790,753 Allowance for loan losses (5,141 ) (5,101 ) (5,079 ) (5,130 ) (5,133 ) - ---------- - - --------- - - --------- -- - --------- - - --------- - Total loans, net 998,236 807,340 805,999 803,019 785,620 Total assets 1,274,095 983,929 985,367 1,015,070 1,027,450 Core deposits 844,894 602,601 631,644 643,859 621,303 Noncore deposits 170,607 204,196 186,354 191,344 226,942 Total deposits 1,015,501 806,797 817,998 835,203 848,245 Total borrowings 91,747 80,002 79,552 91,397 92,024 Total shareholders’ equity 148,867 81,857 81,400 82,649 81,313 Total tangible equity 123,974 74,303 73,784 74,970 73,572 Total shares outstanding 10,712,745 6,332,560 6,294,930 6,294,930 6,294,930 Weighted average shares 7,041,010 6,304,203 6,294,930 6,294,930 6,294,930 outstanding AVERAGE BALANCES (Dollars in thousands) Assets $ 1,117,188 $ 982,679 $ 996,966 $ 1,021,152 $ 984,236 Loans 905,802 810,688 808,306 803,825 787,143 Deposits 913,220 805,092 817,338 841,699 820,375 Equity 100,518 81,894 82,879 82,162 81,013 INCOME STATEMENT (Dollars in thousands) Net interest income $ 10,813 $ 9,309 $ 9,664 $ 9,789 $ 9,319 Provision for loan losses 100 50 225 200 50 - ---------- - - --------- - - --------- -- - --------- - - --------- - Net interest income after 10,713 9,259 9,439 9,589 9,269 provision Total noninterest income 863 614 1,317 1,153 795 Total noninterest expense 11,077 7,928 7,918 7,724 7,517 Income before taxes 499 1,945 2,838 3,018 2,547 Provision for income taxes 103 408 2,858 925 867 Net income available to common $ 396 $ 1,537 $ (20 ) $ 2,093 $ 1,680 shareholders - ---------- - - --------- - - --------- -- - --------- - - --------- - Income pre-tax, pre-provision $ 599 $ 1,995 $ 3,062 $ 3,218 $ 2,597 - ---------- - - --------- - - --------- -- - --------- - - --------- - PER SHARE DATA Earnings $ .05 $ .24 $ (.01 ) $ .33 $ .27 Book value per common share 13.90 12.96 12.93 13.13 12.92 Tangible book value per share 11.57 11.73 11.72 11.91 11.69 Market value, closing price 16.58 16.25 15.90 15.50 13.99 Dividends per share .120 .120 .120 .120 .120 ASSET QUALITY RATIOS Nonperforming loans/total loans .50 % .53 % .32 % .38 % .47 % Nonperforming assets/total assets .59 .70 .62 .74 .76 Allowance for loan losses/total .51 .63 .63 .63 .65 loans Allowance for loan 102.31 117.48 197.78 167.37 136.95 losses/nonperforming loans Texas ratio 5.80 6.87 7.77 9.34 9.91 PROFITABILITY RATIOS Return on average assets .14 % .63 % (.01 )% .81 % .68 % Return on average equity 1.58 7.61 (.10 ) 10.11 8.32 Net interest margin 4.26 4.19 4.18 4.23 4.24 Average loans/average deposits 99.19 100.70 98.89 95.50 95.95 CAPITAL ADEQUACY RATIOS Tier 1 leverage ratio 9.39 % 7.25 % 7.06 % 6.82 % 7.02 % Tier 1 capital to risk weighted 11.87 8.79 8.66 8.47 8.57 assets Total capital to risk weighted 12.39 9.43 9.29 9.10 9.21 assets Average equity/average assets 9.00 8.33 8.31 8.05 8.23 (for the quarter) Tangible equity/tangible assets 9.92 7.62 7.55 7.44 7.22 (at quarter end)

Contact: Jesse A. Deering, (248) 290-5906 / jdeering@bankmbank.com Paul D. Tobias, (248) 290-5900 / ptobias@bankmbank.com Website: www.bankmbank.com

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