8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 4, 2009

MACKINAC FINANCIAL CORPORATION

(previous filings under the name NORTH COUNTRY FINANCIAL CORPORATION)
(Exact name of registrant as specified in its charter)

MICHIGAN	0-20167	38-2062816
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

130 SOUTH CEDAR STREET, MANISTIQUE, MICHIGAN	49854
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (888) 343-8147

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On February 4, 2009, Registrant issued a press release announcing its results of operations for the year ended December 31, 2008, and Statement of Financial Condition as of December 31, 2008. The press release is attached as Exhibit No. 99 and incorporated herein by reference.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(c) Exhibits

The following exhibits are furnished herewith:

EXHIBIT
NUMBER	EXHIBIT DESCRIPTION
99	Press Release of Mackinac Financial Corporation dated February 4, 2009

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: February 4, 2009	MACKINAC FINANCIAL CORPORATION
	By:	/s/ Ernie R. Krueger
		Ernie R. Krueger
		EVP/CFO

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EXHIBIT INDEX

EXHIBIT
NUMBER	EXHIBIT DESCRIPTION
99	Press Release dated February 4, 2009

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EX-99

Exhibit 99.1

PRESS RELEASE

For Release February 4, 2009
Contact: Investor Relations
             (888) 343-8147
Website: www.bankmbank.com

Mackinac Financial Corporation Announces
2008 Results of Operations

((Manistique, Michigan) — Mackinac Financial Corporation (Nasdaq: MFNC), the holding company for mBank, has reported net income of $1.872 million, or $.55 per share, for the year ended December 31, 2008, compared to a net income of $10.163 million, or $2.96 per share, for 2007. Weighted average shares outstanding amounted to 3,422,012 in 2008 and 3,428,695 in 2007.

The 2008 results included the positive effect, $3.475 million of a lawsuit settlement and the negative effect, $.425 million, of a severance agreement. The results for 2007 included the recognition of a $7.500 million deferred tax benefit for NOL and tax credit carryforward and $.470 million of proceeds from the settlement of a lawsuit against the Corporation’s former accountants.

In 2008, we experienced one of the most difficult and trying times in modern banking history. Our results for 2008 were significantly impacted by the current economic environment. The Prime Rate, currently at 3.25% and the overnight investment rates at near zero, provide evidence of the seriousness in which the Federal Reserve Bank views this recession. This historically low interest rate environment made it extremely difficult to maintain adequate interest margins which stymied our ability to generate earnings growth. We are not satisfied with our operating results. In 2008, we focused our efforts on watchful diligence of our current loan portfolio by shoring up potential problem credits, repricing loans to align our returns with both credit and interest rate risks and by pursuing early resolution of nonperforming assets.

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At 2008 year-end, the Corporation’s loans stood at $370.280 million, an increase of $15.201 million, or 4.3%, from 2007 year-end balances of $355.079 million. Total loan originations in 2008 amounted to $61.6 million. Loan amortization and principal payoffs totaled $51.2 million. A good portion of these payoffs pertained to loan relationships that no longer met our pricing or credit standards. Loan growth was primarily from the Upper Peninsula markets where the economy is more stable.

Total assets of the Corporation at December 31, 2008 were $451.431 million, an increase of $42.551 million, or 10.4% from total assets of $408.880 million reported at December 31, 2007.

Asset quality remains relatively strong when compared to our peers, particularly considering the state of the Michigan economy. Nonperforming loans totaled $4.887 million, or 1.32% of total loans at December 31, 2008. Nonperforming assets at December 31, 2008, were $7.076 million, 1.57% of total assets, compared to $5.234 million or 1.28% of total assets at December 31, 2007. However, we are not immune to the current economic crisis and we are seeing rapid change in Southeast Michigan as the auto industry and manufacturing businesses struggle to survive. This economic risk has caused us to take an extremely hard and cautious look at our entire portfolio of loans in this market and we have been aggressive in our early identification of problem credits. We increased our fourth quarter loan loss provision to provide a specific reserve for one large loan in Southeast Michigan.

Total deposits grew from $320.827 million at December 31, 2007, to $371.097 million at December 31, 2008, an increase of $50.270 million, or 15.7%. This increase is composed of an increase in wholesale brokered deposits of $52.225 million and a decline in bank deposits of $1.955 million. During 2008, we significantly increased our balance sheet liquidity which was funded primarily by issuance of brokered deposits since rates on these deposits were priced lower than in-market bank deposits. We continue to focus our efforts on growing transactional accounts. We have had success in this area as demand, money market and NOW accounts grew from $119.2 million at 2007 year-end to $121.4 million at 2008 year-end. However, overall deposit totals have fallen as we have refused to compete for CDs that are overpriced.

Net interest income for the year ended December 31, 2008 was $12.864 million compared to $13.417 million for the year ended December 31, 2007, a decrease of $.553 million. The margin percentage for 2008 was 3.23% compared to 3.60% in 2007 and 3.51% in 2006. We believe that our margin has seen its low point in December when it fell to 3.01%. During 2008, the prime rate decreased from 7.25% to 3.25%, which created significant margin pressure since a majority of the commercial loan portfolio re-priced downward with each prime rate change, which the majority of the bank’s funding sources had significant lag time in re-pricing. We experienced additional margin pressure due to our brokered deposits, which did not re-price in line with prime rate reductions, due to the overall market liquidity crisis.

We recognize the importance of cost control, especially in times of economic slowdown. Excluding extraordinary items, noninterest expense totaled $12.1 million in 2008 compared to $12.1 million in 2007 and $11.6 million in 2006. Salaries and benefits were reduced from $6.8 million in 2007 to $6.5 million in 2008. Assets per employee totaled $4.6 million

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Shareholders’ equity totaled $41.552 million at December 31, 2008, compared to $39.321 million at the end of 2007, an increase of $2.231 million. This increase reflects consolidated net income of $1.872 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 $.385 million and the purchase of odd lot shares for $.110 million. The book value per share at December 31, 2008, amounted to $12.15 compared to $11.47 at the end of 2007.

Late in 2008, the corporation elected to apply for $11 million in equity participation under the Troubled Asset Relief Program (TARP). We have received preliminary approval from the US Treasury Department and are now evaluating the merits of the program. Participation in this program would provide additional capital for future growth during a time when other sources for additional capital are scarce and expensive.

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Company Act of 1956 with assets in excess of $450 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.

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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)	2008			2007
	(Unaudited)			(Unaudited)
Selected Financial Condition Data (at end of period):
Assets	$	451,431		$	408,880
Loans		370,280			355,079
Investment securities		47,490			21,597
Deposits		371,097			320,827
Borrowings		36,210			45,949
Shareholders’ equity		41,552			39,321
Selected Statements of Income Data:
Net interest income	$	12,864		$	13,417
Income before taxes		2,659			2,923
Net income		1,872			10,163
Income per common share — Basic		.55			2.96
Income per common share — Diluted		.55			2.96
Weighted average shares outstanding		3,422,012			3,428,695
Selected Financial Ratios and Other Data:
Performance Ratios:
Net interest margin		3.23	%		3.60	%
Efficiency ratio		85.51			79.46
Return on average assets		.44			2.59
Return on average equity		4.61			31.05
Average total assets	$	425,343		$	392,313
Average total shareholders’ equity		40,630			32,731
Average loans to average deposits ratio		105.61	%		104.94	%
Common Share Data at end of period:
Market price per common share	$	4.40		$	8.98
Book value per common share	$	12.15		$	11.47
Common shares outstanding		3,419,736			3,428,695
Other Data at end of period:
Allowance for loan losses	$	4,277		$	4,146
Non-performing assets	$	7,076		$	5,234
Allowance for loan losses to total loans		1.16	%		1.17	%
Non-performing assets to total assets		1.57	%		1.28	%
Number of:
Branch locations		12			12
FTE Employees		100			100

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	December 31,			December 31,
(Dollars in thousands)	2008			2007
	(unaudited)			(audited)
ASSETS
Cash and due from banks	$	10,112		$	6,196
Federal funds sold		—			166
Cash and cash equivalents		10,112			6,362
Interest-bearing deposits in other financial institutions		582			1,810
Securities available for sale		47,490			21,597
Federal Home Loan Bank stock		3,794			3,794
Loans:
Commercial		296,088			288,839
Mortgage		70,447			62,703
Installment		3,745			3,537
Total Loans		370,280			355,079
Allowance for loan losses		(4,277	)		(4,146	)
Net loans		366,003			350,933
Premises and equipment		11,189			11,609
Other real estate held for sale		2,189			1,226
Other assets		10,072			11,549
TOTAL ASSETS	$	451,431		$	408,880
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Non-interest-bearing deposits	$	30,099		$	25,557
Interest-bearing deposits:
NOW, Money Market, Checking		70,584			81,160
Savings		20,730			12,485
CDs<$100,000		73,752			80,607
CDs>$100,000		25,044			22,355
Brokered		150,888			98,663
Total deposits		371,097			320,827
Borrowings:
Federal funds purchased		—			7,710
Short-term		—			1,959
Long-term		36,210			36,280
Total borrowings		36,210			45,949
Other liabilities		2,572			2,783
Total liabilities		409,879			369,559
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 and 3,428,695, respectively		42,815			42,843
Accumulated deficit		(1,708	)		(3,582	)
Accumulated other comprehensive income (loss)		445			60
Total shareholders’ equity		41,552			39,321
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	451,431		$	408,880

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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)	2008		2007			2006
	(unaudited)		(audited)			(audited)
INTEREST INCOME:
Interest and fees on loans:
Taxable	$	22,555	$	26,340		$	21,239
Tax-exempt		404		533			753
Interest on securities:
Taxable		1,293		1,100			1,186
Tax-exempt		5		—			87
Other interest income		305		722			787
Total interest income		24,562		28,695			24,052
INTEREST EXPENSE:
Deposits		10,115		13,224			10,575
Borrowings		1,583		2,054			1,884
Total interest expense		11,698		15,278			12,459
Net interest income		12,864		13,417			11,593
Provision for loan losses		2,300		400			(861	)
Net interest income after provision for loan losses		10,564		13,017			12,454
OTHER INCOME:
Service fees		838		688			547
Net security gains		64		—			—
Net gains on sale of secondary market loans		120		498			197
Proceeds from settlement of lawsuit		3,475		470			—
Other		156		350			239
Total other income		4,653		2,006			983
OHER EXPENSES:
Salaries and employee benefits		6,886		6,757			6,132
Occupancy		1,374		1,272			1,264
Furniture and equipment		771		678			631
Data processing		844		785			691
Professional service fees		508		532			1,425
Loan and deposit		569		285			392
Telephone		170		228			210
Advertising		305		370			346
Other		1,131		1,193			1,130
Total other expenses		12,558		12,100			12,221
Income (loss) before provision for income taxes		2,659		2,923			1,216
Provision for (benefit of) income taxes		787		(7,240	)		(500	)
NET INCOME (LOSS)	$	1,872	$	10,163		$	1,716
INCOME (LOSS) PER COMMON SHARE
Basic	$	.55	$	2.96		$	.50
Diluted	$	.55	$	2.96		$	.50

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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,			December 31,
	2008			2007
	(unaudited)			(audited)
Commercial Loans:
Real estate — operators of nonresidential buildings	$	41,299		$	41,597
Hospitality and tourism		35,086			37,604
Real estate agents and managers		29,292			29,571
Operators of nonresidential buildings		13,467			10,569
Other		145,831			130,546
Total Commercial Loans		264,975			249,887
1-4 family residential real estate		65,595			57,613
Consumer		3,745			3,537
Construction
Commercial		31,113			38,952
Consumer		4,852			5,090
Total Loans	$	370,280		$	355,079
Credit Quality (at end of period):
	December 31,			December 31,
	2008			2007
	(unaudited)			(audited)
Nonperforming Assets :
Nonaccrual loans	$	4,887		$	3,298
Loans past due 90 days or more		—			710
Total nonperforming loans		4,887			4,008
Other real estate owned		2,189			1,226
Total nonperforming assets	$	7,076		$	5,234
Nonperforming loans as a % of loans		1.32	%		1.13	%
Nonperforming assets as a % of assets		1.57	%		1.28	%
Reserve for Loan Losses:
At period end	$	4,277		$	4,146
As a % of average loans		1.18	%		1.24	%
As a % of nonperforming loans		87.52	%		103.44	%
As a % of nonaccrual loans		87.52	%		125.71	%
Charge-off Information (year to date):
Average loans		361,324			333,415
Net charge-offs		2,168			1,260
Charge-offs as a % of average loans		.60	%		.38	%

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

	QUARTER ENDED
	(Unaudited)
	December 31,			September 30,			June 30,			March 31,			December 31,
	2008			2008			2008			2008			2007
BALANCE SHEET (Dollars in thousands)
Total loans	$	370,280		$	361,521		$	362,122		$	360,056		$	355,079
Allowance for loan losses		(4,277	)		(3,385	)		(3,585	)		(3,924	)		(4,146	)
Total loans, net		366,003			358,136			358,537			356,132			350,933
Intangible assets		46			65			85			104			124
Total assets		451,431			440,953			437,327			417,175			408,880
Core deposits		195,165			208,940			200,293			203,445			199,809
Noncore deposits (1)		175,932			151,754			156,683			122,602			121,018
Total deposits		371,097			360,694			356,976			326,047			320,827
Total borrowings		36,210			36,210			36,280			48,849			45,949
Total shareholders’ equity		41,552			41,427			40,975			39,633			39,321
Total shares outstanding		3,419,736			3,419,736			3,419,736			3,428,695			3,428,695
AVERAGE BALANCES (Dollars in thousands)
Assets	$	441,583		$	423,702		$	418,246		$	417,682		$	406,308
Loans		366,077			358,844			362,574			357,778			350,050
Deposits		358,213			341,377			332,725			336,016			324,194
Equity		41,516			41,097			40,399			39,491			38,973
INCOME STATEMENT (Dollars in thousands)
Net interest income	$	3,330		$	3,371		$	3,118		$	3,045		$	3,410
Provision for loan losses		1,100			450			750			—			—
Net interest income after provision		2,230			2,921			2,368			3,045			3,410
Total noninterest income		308			288			3,747			310			355
Total noninterest expense		2,961			2,935			3,471			3,191			2,978
Income before taxes		(423	)		274			2,644			164			787
Provision for income taxes		(171	)		58			875			25			260
Net income	$	(252	)	$	216		$	1,769		$	139		$	527
PER SHARE DATA
Earnings — basic	$	(.07	)	$	.06		$	.52		$	.04		$	.15
Earnings — diluted		(.07	)		.06			.52			.04			.15
Book value		12.15			12.11			11.98			11.56			11.47
Market value, closing price		4.40			5.26			7.00			8.50			8.98
ASSET QUALITY RATIOS
Nonperforming loans/total loans		1.32	%		1.29	%		1.27	%		.94	%		1.13	%
Nonperforming assets/total assets		1.57			1.45			1.83			1.08			1.28
Allowance for loan losses/total loans		1.16			.94			.99			1.09			1.17
Allowance for loan losses/nonperforming loans		87.52			72.81			77.22			116.06			103.42
PROFITABILITY RATIOS
Return on average assets		(.23	)%		.20	%		1.70	%		.13	%		.51	%
Return on average equity		(2.42	)		2.08			17.62			1.42			5.36
Net interest margin		3.20			3.39			3.19			3.13			3.55
Efficiency ratio		80.30			79.12			88.45			95.34			78.02
Average loans/average deposits		102.20			105.12			108.97			106.48			107.98
CAPITAL ADEQUACY RATIOS
Leverage ratio		8.01	%		8.31	%		8.56	%		7.85	%		8.05	%
Tier 1 capital ratio		9.25			9.40			9.48			8.84			8.97
Total capital ratio		10.38			10.31			10.45			9.92			10.13
Average equity/average assets		9.40			9.70			9.66			9.45			9.59
Tangible equity/tangible assets		9.20			9.38			9.35			9.48			9.59

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

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MACKINAC FINANCIAL CORPORATION AND SUBSIDIARIES
QUARTERLY FINANCIAL HIGHLIGHTS

LOAN PORTFOLIO BALANCES	TRANSACTIONAL ACCOUNT DEPOSITS
NET INTEREST MARGIN	EFFICIENCY RATIO

COMMON SHARE DATA
BOOK VERSUS MARKET VALUE

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