2012-04-05 / Front Page

Wall Street to Cedar Street

New York based firm invests in U.P. bank holding company

Mackinac Financial Corporation (MFNC), the holding corporation for mBank, recently announced it has entered into an agreement with Steinhardt Capital Investors LLP (SCI), to acquire up to 19.9 percent of Mackinac Financial Corporation common shares through transactions that include a rights offering to its shareholders and a securities purchase agreement with SCI.

According to the company, MFNC is planning a $7 million rights offering of common shares to its shareholders. In conjunction with the rights offering, they have also entered into a securities purchase agreement with SCI.

Upon completion of the rights offering, SCI will buy between $5 million and $11 million of the company’s securities, comprised of varying types and amounts, depending on the outcome of the rights offering and SCI receiving approval from the board of the Federal Reserve to hold more than 9.9 percent of the total number of MFNC common shares then issued and outstanding.

The proceeds from the sale of securities derived from the SCI investment and the rights offering will be used to repurchase the company’s outstanding TARP securities that were issued by the U.S. Treasury Department under the Troubled Asset Relief Capital Purchase Program.

“The decision to participate in the TARP program was initially made late in 2008,” said Kelly George, president and chief executive officer of mBank. “Safe and sound banks, under the advice of industry professionals, viewed the program as an important factor in augmenting capital levels given the highly troubled economic uncertainty the industry and the country as a whole was entering into. Over this time period, remaining publicly-traded bank participants that still carry TARP, such as ours, continue to trade at a much deeper discount to book value than those that have exited TARP”.

MFNC Chairman and CEO Paul Tobias said, “We are excited to have earned the confidence of the Steinhardt family, who have earned significant credibility in the marketplace and share our vision for the future growth of mBank. The ability to repay the TARP funds and the investment of the Steinhardts will position us to expand our franchise through organic growth and accretive acquisition opportunities for continued earnings momentum that will lead to increased shareholder value.”

Over the past year, MFNC has evaluated several strategic options to facilitate future growth, and its management team worked to bring new investment to the company. Those efforts culminated in the SCI investment, which the company says is an important turning point in the future growth of the business.

“During the course of our negotiations, I became familiar with Mackinac Financial Corporation,” said David Steinhardt of SCI. “I have high regard for Mackinac’s chairman and CEO, Paul Tobias, management and the board of directors. I appreciate the quality of the people at Mackinac and the potential of the franchise. I believe that this transaction would be a first step in value realization that would benefit Mackinac’s shareholders.”

George said the relationship with SCI that was spearheaded by their chairman dates back nine months, when the company looked to partner with a firm that had access to capital markets necessary to achieve their primary objective of enhancing shareholder value through building a strong banking franchise.

“Our goal was to find an avenue to repay TARP funds, and this relationship allows us to do that,” George said. “Additionally, it provides access to capital necessary to grow the organization through accretive mergers or acquisition here in the U.P. and throughout Michigan and parts of Wisconsin, should the opportunity present itself in the future. Through our contact in southeast Michigan, they put us in touch with the Steinhardts; from there we cultivated a relationship which led them here, making an investment in a company with headquarters in Manistique.”

A copy of the prospectus and additional material relating to the rights offering are expected to be mailed mid May to all common shareholders of record, as of April 6, 2012.

Subject to review of the registration statement by the Securities and Exchange Commission, the company intends to start the rights offering during the second quarter of 2012.

Shareholders may also obtain a copy of the prospectus and additional materials, when available by contacting Mackinac Financial Corporation, 130 South Cedar Street, Manistique, MI 49854 or by calling 341-8401 or (888) 343- 8147.

Mackinac Financial Corporation is a registered bank holding company formed under the Bank Holding Corporation Act of 1956 with assets in excess of $495 million and whose common stock is traded on the NASDAQ stock market as MFNC. The principal subsidiary of the corporation is mBank. Headquarter in Manistique, mBank has 11 branch locations: seven in the Upper Peninsula, three in the northern Lower Peninsula and one in Oakland County.

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