STOCK COMPENSATION PLANS

3 Months Ended

Mar. 31, 2015

9.STOCK COMPENSATION PLANS

On May 22, 2012, the Company’s shareholders approved the Mackinac Financial Corporation 2012 Incentive Compensation Plan, under which current and prospective employees, non-employee directors and consultants may be awarded incentive stock options, non-statutory stock options, shares of restricted stock units (“RSUs”), or stock appreciation rights. The aggregate number of shares of the Company’s common stock issuable under the plan is 575,000, which included 392,152 option shares outstanding at that time. Awards are made at the discretion of management. Compensation cost equal to the fair value of the award is recognized over the vesting period.

Restricted Stock Awards

The Corporation’s restricted stock awards require certain service-based or performance requirements and have a vesting period of four years. Compensation expense is recognized on a straight-line basis over the vesting period. Shares are subject to certain restrictions and risk of forfeiture by the participants.

The Corporation, in August 2012 and March 2014, granted Restricted Stock Units (“RSUs”) to members of the Board of Directors and Management. In August 2012, 148,500 RSUs were granted at a market value of $7.91 and will vest equally over a four year term. In exchange for the grant of these RSUs various previously issued stock option awards were surrendered. In March 2014, 52,774 RSUs were granted at a market value of $12.95, also vesting equally over a four year term. In March 2015, 37,730 RSUs were granted at a market value of $11.15, also vesting over a four year term. The RSUs were awarded at no cost to the employee. Compensation cost to be recognized over the four year vesting periods, is $1.175 million, $.683 million and $.421 million, respectively. On August 31, 2013 and 2014, the Corporation issued 37,125 shares and 37,125 shares of its common stock for vested RSUs, respectively. In March 2015, the Corporation issued 13,194 shares of its common stock for vested RSUs.

A summary of changes in our nonvested shares for the year follows:

			Weighted Average
	Number		Grant Date
	Outstanding		Fair Value

Nonvested balance at January 1, 2015	127,024		$	10.07
Granted during the period	37,730		11.15
Vested during the period	(13,194	)	12.95
Nonvested balance at March 31, 2015	151,560		$	10.09

A summary of stock option transactions for the three months ended March 31, 2015 and 2014, and the year ended December 31, 2014, is as follows:

	March 31,		December 31,			March 31,
	2015		2014			2014

Outstanding shares at beginning of year	20,000		237,152			237,152
Granted during the period	—		—			—
Exercised during the period	—		(70,502		)	—
Expired / forfeited during the period	—		(146,650		)	—

Outstanding shares at end of period	20,000		20,000			237,152

Exercisable shares at end of period	4,000		4,000			124,861

Weighted average exercise price per share at end of period	$	11.33	$	11.33		$	9.88

Shares available for grant at end of period	—		—			—

Following is a summary of the options outstanding and exercisable at March 31, 2015:

					Weighted Average
Exercise		Number			Remaining
Price		Outstanding	Exercisable	Unvested Options	Contractual Life-Years

$	10.65	10,000	2,000	8,000	.29
$	12.00	10,000	2,000	8,000	.71
		20,000	4,000	16,000	.50

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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