Macatawa Bank Corporation Reports 3rd Quarter Results
HOLLAND, Mich., Oct. 30, 2009 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced its results for the third quarter of 2009.
* Net loss available to common shares of $20.9 million impacted by
-- Provision for loan losses of $21.6 million.
-- $3.1 million in costs associated with the administration and
disposition of problem assets.
-- FDIC insurance assessments of $1.0 million.
-- These items total $25.7 million or $1.46 per diluted common
share.
* Allowance for loan loss coverage increased to 3.09% of total loans.
* Second consecutive quarterly decline in non-performing loans.
* Second consecutive quarterly increase in net interest margin.
* Improved liquidity as evidenced by $148 million of liquid
investments and over a $100 million reduction in out of market
deposits.
* Capital preservation and capital raising efforts continue.
Net loss available to common shares was $20.9 million, or $1.18 per share, for the third quarter of 2009 compared to net income of $1.9 million, or $0.11 per diluted share, for the third quarter of 2008. The net loss available to common shares for the first nine months of 2009 totaled $57.3 million, or $3.30 per share, compared to a net loss of $3.8 million, or $0.22 per share for the first nine months of 2008.
"The depth and persistency of the economic downturn in Michigan continues to have a significant impact on our loan customers, which in turn has impacted our operating results," commented Ronald L. Haan, Chief Executive Officer of Macatawa Bank Corporation. During the quarter, the Company proactively set aside additional reserves for the potential losses on these loans.
"Significant write-downs in the valuation of our problem assets and modest improvement in the real estate markets have given us the opportunity to accelerate the disposition of these assets. In addition, we continue to strengthen our team of professionals experienced in loan workouts and real estate sales," added Mr. Haan.
Operating results
Third quarter net interest income totaled $13.2 million, a decrease of $1.6 million from the third quarter of 2008. The net interest margin was 2.83 percent for the quarter, up 4 basis points from 2.79 percent for the second quarter of 2009 and down 15 basis points from 2.98 percent for the third quarter of 2008. The improvement in margin over the last quarter was primarily from a decrease in the Company's costs of funds from downward repricing of certificates of deposit and borrowings. The improvement was achieved despite a large increase in lower yielding short-term investments to enhance liquidity during the current economic downturn. The entire decline in margin from the prior year was from higher balances of non-performing assets.
Average earning assets declined by $69.4 million from the second quarter of 2009 and by $113.6 million from the third quarter of 2008. The decline reflects a continued focus on liquidity improvement, capital preservation and a reduction in credit exposure within certain loan segments.
Declines in revenue from deposit, trust and brokerage services during the third quarter of 2009 were the primary reasons for the $504,000 decline in noninterest income compared to the third quarter of 2008. The decline in revenue from deposit services is related to a decrease in NSF fee revenue, consistent with a decline across the entire banking industry. This decrease was partially offset by an increase in other deposit revenue sources, growth in core checking accounts, and expansion of services to business customers. The decline in trust and brokerage service revenue is related to both a challenging market for account growth, and volatility in equity market valuations.
Non-interest expense was $15.7 million for the quarter compared to $14.0 million for the third quarter of 2008. Costs associated with the administration and disposition of problem loans and non-performing assets amounted to approximately $3.1 million in the current quarter compared to $1.6 million in the third quarter of 2008. FDIC insurance assessments amounted to $1.0 million compared to $359,000 from higher assessment rates implemented by the FDIC in late 2008. When excluding the nonperforming asset costs and FDIC assessments, non-interest expense would have been approximately $11.6 million for the quarter, down 5 percent from $12.1 million for the third quarter of 2008. The decline continues to reflect the success of expense reduction initiatives that began in early 2008.
Asset Quality
The provision for loan losses was $21.6 million for the third quarter of 2009 compared to $20.6 million for the prior quarter and $2.4 million for the third quarter of 2008. Net charge-offs were $11.2 million compared to $22.1 million for the prior quarter and $1.5 million for the third quarter of 2008. The provision for loan losses and charge-offs remained elevated in response to prolonged weakness in the economy and its impact on valuations of real estate collateral.
"There have been signs of price stabilization in the real estate markets. Although valuations have declined, the rate of decline in such valuations has slowed," commented Mr. Haan.
The amount of provision for loan losses in excess of net charge-offs increased the coverage of the allowance as a percent of total loans as the Company remained focused on prudently setting aside reserves for future losses. The loan loss reserve was 3.09 percent of total loans at September 30, 2009 compared to 2.16 percent at December 31, 2008 and 1.73 percent at September 30, 2008.
The Company's non-performing loans were $88.2 million or 5.66 percent of total loans, down from $103.1 million at June 30, 2009 and $92.3 million at December 31, 2008. Loans for the development or sale of 1-4 family residential properties that were in a non-performing status were approximately $48.0 million or 54 percent of total non-performing loans at September 30, 2009 compared to $59.8 million or 62% at June 30, 2009 and $59.9 million or 65 percent at December 31, 2008.
"We are encouraged with the decline in non-performing loan levels since December 31, 2008, but clearly need to see further improvement," added Mr. Haan.
Total non-performing assets were $121.8 million or 6.15 percent of total assets at September 30, 2009. A breakdown of non-performing assets is shown in the table below:
Dollars in 000s Sept. 30, June 30, Dec. 31, Sept. 30,
2009 2009 2008 2008
--------- --------- --------- ---------
Total Commercial
Real Estate $ 77,461 $ 94,237 $ 80,466 $ 77,888
Commercial and Industrial 8,477 5,657 9,005 7,360
--------- --------- --------- ---------
Total Commercial Loans 85,938 99,894 89,471 85,248
Residential Mortgage Loans 917 1,702 1,906 906
Consumer Loans 1,305 1,468 893 292
--------- --------- --------- ---------
Total Non-Performing Loans 88,160 103,064 92,270 86,446
Other Repossessed Assets 224 339 306 272
Other Real Estate Owned 33,419 23,516 19,516 9,354
--------- --------- --------- ---------
Total Non-
Performing Assets $ 121,803 $ 126,919 $ 112,092 $ 96,072
========= ========= ========= =========
Balance Sheet, Liquidity and Capital
Total assets were $1.98 billion at September 30, 2009, a decrease of $167.6 million compared to $2.15 billion at December 31, 2008 and a decrease of $212.9 million compared to $2.19 billion at September 30, 2008. Total loans were $1.56 billion at September 30, 2009, down $217.2 million from December 31, 2008 and down $204.5 million from September 30, 2008.
Commercial loans declined by $169.2 million representing the majority of the decline since December 31. The commercial real estate portfolio declined by $93.0 million, including $38.8 million in loans tied to residential development. Commercial and industrial loans declined by $76.2 million from a general decline in business activity.
The reduction in loans since the beginning of the year was primarily redeployed to build short-term investments. Federal funds sold and other short-term investments were $147.5 million at September 30, 2009, up $108.4 million from December 31, 2008.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s Sept. 30, June 30, Dec. 31,
2009 2009 2008
---------- ---------- ----------
Construction and development $ 195,712 $ 213,831 $ 237,108
Commercial real estate 638,952 657,373 690,525
---------- ---------- ----------
Total Commercial Real Estate 834,664 871,204 927,633
Commercial and Industrial 375,636 404,660 451,826
Total Commercial Loans $1,210,300 $1,275,864 $1,379,459
========== ========== ==========
Commercial real estate consists primarily of loans to business owners and developers of owner and non-owner occupied properties, secured by single and multi-family residential as well as non-residential real estate. Loans for the development or sale of residential properties were approximately $164.9 million at September 30, 2009 compared to $182.2 million at June 30, 2009 and $203.7 million at December 31, 2008. Of the total at September 30, approximately $24.2 million was secured by vacant land, $96.8 million was secured by developed residential land and $43.9 million was secured by properties held for speculative purposes.
The Company continues to explore alternatives to increase its capital, including efforts to obtain either private capital in the form of common stock, preferred stock and subordinated debt or to obtain capital through public markets. The Company raised capital, including obtaining $31 million in the fourth quarter of 2008 and an additional $6 million in the second and third quarters of 2009. The Company's total risk based capital ratio was 9.46 percent at September 30, 2009.
"While challenges remain, we are 100% focused on improving our financial performance for the long-term," concluded Mr. Haan.
The Company has also filed on this date its Report on Form 10-Q for the quarter ended September 30, 2009 with the Securities and Exchange Commission.
About Macatawa Bank
Headquartered in Holland, Michigan, Macatawa Bank Corporation is the parent company for Macatawa Bank. Through its banking subsidiary, the Corporation offers a full range of banking, investment and trust services to individuals, businesses, and governmental entities from a network of 26 full service branches located in communities in Kent County, Ottawa County, and northern Allegan County. Services include commercial, consumer and real estate financing; business and personal deposit services, ATM's and Internet banking services, trust and employee benefit plan services, and various investment services. The Corporation emphasizes its local management team and decision making, along with providing customers excellent service and superior financial products.
The common stock, preferred stock and subordinated debt sold and any future securities that may be sold in the private offering have not been and will not be registered under the Securities Act of 1933 or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements. This news release shall not constitute an offer to sell or a solicitation of an offer to buy, nor shall there be any sales of these securities in any state or jurisdiction in which such an offer, solicitation or sale would be unlawful prior to registration or qualification under the securities law of any such state or jurisdiction.
"CAUTIONARY STATEMENT: This press release contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, economic, competitive, and governmental factors affecting our operations, markets, products, services, and pricing. These statements include, among others, statements related to real estate valuation, future levels of non-performing loans, the rate of asset dispositions, capital raising activities, dividends, future growth and funding sources, future profitability levels, the effects on earnings of changes in interest rates and the future level of other revenue sources. Annualized growth rates are not intended to imply future growth at those rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Macatawa Bank Corporation does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements. Further information concerning our business, including additional factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission."
MACATAWA BANK CORPORATION
CONSOLIDATED FINANCIAL SUMMARY
(Unaudited)
(Dollars in thousands except per share information)
Three Months Nine Months
Ended Sept. 30 Ended Sept. 30
---------------------- ----------------------
EARNINGS SUMMARY 2009 2008 2009 2008
---------- ---------- ---------- ----------
Total interest income $ 23,534 $ 28,614 $ 73,189 $ 89,130
Total interest expense 10,340 13,778 33,801 44,509
---------- ---------- ---------- ----------
Net interest income 13,194 14,836 39,388 44,621
Provision for loan
loss 21,580 2,425 52,740 23,585
---------- ---------- ---------- ----------
Net interest income
after provision for
loan loss (8,386) 12,411 (13,352) 21,036
NON-INTEREST INCOME
Deposit service
charges 1,205 1,383 3,644 3,946
Net gains on mortgage
loans 153 168 2,276 987
Trust fees 948 1,113 2,865 3,447
Other 1,328 1,474 4,396 5,815
---------- ---------- ---------- ----------
Total non-interest
income 3,634 4,138 13,181 14,195
ON-INTEREST EXPENSE
Salaries and benefits 6,162 6,526 18,537 20,302
Occupancy 1,078 1,111 3,290 3,451
Furniture and
equipment 1,010 1,041 3,056 3,026
FDIC assessment 1,030 359 3,509 1,080
Administration and
disposition of
problem assets 3,128 1,566 7,726 3,428
Trade Partners
litigation settlement -- -- 5,533 --
Other 3,323 3,436 9,825 10,834
---------- ---------- ---------- ----------
Total non-interest
expense 15,731 14,039 51,476 42,121
---------- ---------- ---------- ----------
Income (loss) before
income tax (20,483) 2,510 (51,647) (6,890)
Income tax expense
(benefit) (600) 639 2,786 (3,093)
---------- ---------- ---------- ----------
Net income (loss) $ (19,883) $ 1,871 $ (54,433) $ (3,797)
---------- ---------- ---------- ----------
Dividends declared on
preferred shares 991 -- 2,869 --
---------- ---------- ---------- ----------
Net income (loss)
available to common
shares $ (20,874) $ 1,871 $ (57,302) $ (3,797)
========== ========== ========== ==========
Basic earnings per
common share $ (1.18) $ 0.11 $ (3.30) $ (0.22)
Diluted earnings per
common share $ (1.18) $ 0.11 $ (3.30) $ (0.22)
Return on average
assets -3.97% 0.35% -3.53% -0.24%
Return on average
equity -67.58% 4.92% -53.28% -3.16%
Net interest margin 2.83% 2.98% 2.75% 3.01%
Efficiency ratio 93.48% 73.99% 97.92% 71.61%
Sept. 30 Dec. 31 Sept. 30
BALANCE SHEET DATA 2009 2008 2008
---------- ---------- ----------
Assets
Cash and due from
banks $ 22,441 $ 29,188 $ 39,252
Federal funds sold
and other short-term
investments 147,527 39,096 88,257
Securities available
for sale 141,825 184,681 163,771
Securities held to
maturity 655 1,835 1,838
Federal Home Loan
Bank Stock 12,275 12,275 12,275
Loans held for sale 2,934 2,261 983
Total loans 1,556,903 1,774,063 1,761,431
Less allowance for
loan loss 48,049 38,262 30,491
---------- ---------- ----------
Net loans 1,508,854 1,735,801 1,730,940
---------- ---------- ----------
Premises and
equipment, net 61,738 63,482 64,149
Acquisition
intangibles 661 874 28,615
Bank-owned life
insurance 24,165 23,645 23,410
Other real estate
owned 33,419 19,516 9,354
Other assets 25,278 36,718 31,784
---------- ---------- ----------
Total Assets $1,981,772 $2,149,372 $2,194,628
========== ========== ==========
Liabilities and
Shareholders' Equity
Noninterest-bearing
deposits $ 221,967 $ 192,842 $ 184,952
Interest-bearing
deposits 1,324,344 1,472,919 1,508,649
---------- ---------- ----------
Total deposits 1,546,311 1,665,761 1,693,601
Other borrowed funds 288,023 284,790 295,109
Surbordinated debt 1,650 -- --
Long-term debt 41,238 41,238 41,238
Other liabilities 6,876 8,370 12,582
---------- ---------- ----------
Total Liabilities 1,884,098 2,000,159 2,042,530
Shareholders' equity 97,674 149,213 152,098
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $1,981,772 $2,149,372 $2,194,628
========== ========== ==========
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except per share information)
Quarterly
-----------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
2009 2009 2009 2008 2008
----------- ----------- ----------- ----------- -----------
EARNINGS
SUMMARY
Net
inter-
est
income $ 13,194 $ 13,398 $ 12,796 $ 13,510 $ 14,836
Provi-
sion
for
loan
loss 21,580 20,630 10,530 13,850 2,425
Total
non-
inte-
rest
income 3,634 4,224 5,323 3,949 4,138
Total
non-
inter-
est
expense 15,731 21,264 14,481 43,946 14,039
Federal
income
tax
expense
(bene-
fit) (600) 6,134 (2,750) (5,280) 639
Net
income
(loss) $ (19,883)$ (30,406)$ (4,142)$ (35,057)$ 1,871
Divid-
ends
dec-
lared
on
pre-
ferred
shares 991 939 939 817 --
Net
income
(loss)
avail-
able
to
common
shares $ (20,874)$ (31,345)$ (5,081)$ (35,874)$ 1,871
Basic
earn-
ings
per
com-
mon
share $ (1.18)$ (1.82)$ (0.30)$ (2.10)$ 0.11
Diluted
earn-
ings
per
com-
mon
share $ (1.18)$ (1.82)$ (0.30)$ (2.10)$ 0.11
MARKET
DATA
Book
value
per
common
share $ 3.64 $4.74 $ 6.64 $ 6.91 $ 8.93
Tangible
book
value
per
common
share $ 3.62 $4.71 $ 6.61 $ 6.88 $ 7.31
Market
value
per
common
share $ 2.60 $ 2.82 $ 3.70 $ 3.47 $ 6.99
Average
basic
common
shares 17,669,440 17,260,269 17,162,237 17,066,897 17,022,393
Average
diluted
common
shares 17,669,440 17,260,269 17,162,237 17,066,897 17,044,979
Period
end
common
shares 17,701,817 17,659,264 17,166,515 17,161,515 17,024,850
PERFORMANCE
RATIOS
Return
on
average
assets -3.97% -5.87% -0.79% -6.59% 0.35%
Return
on
average
equity -67.58% -86.53% -10.99% -84.90% 4.92%
Net
inter-
est
margin
(fully
taxable
equiva-
lent) 2.83% 2.79% 2.66% 2.74% 2.98%
Effi-
ciency
ratio 93.48% 120.67% 79.92% 251.71% 73.99%
ASSET
QUALITY
Net
charge-
offs $ 11,152 $ 22,105 $ 9,696 $ 6,078 $ 1,513
Nonper-
forming
loans $ 88,160 $ 96,164 $ 113,607 $ 92,249 $ 86,446
Other
real
estate
and
reposs-
essed
assets $ 33,643 $ 23,855 $ 19,074 $ 19,822 $ 9,626
Non-
perform-
ing
loans
to
total
loans 5.66% 5.93% 6.68% 5.20% 4.91%
Non-
perform-
ing
assets
to total
assets 6.15% 5.97% 6.33% 5.21% 4.38%
Net
charge-
offs to
average
loans
(annual-
ized) 2.79% 5.27% 2.23% 1.38% 0.34%
Allow-
ance
for
loan
loss
to
total
loans 3.09% 2.32% 2.30% 2.16% 1.73%
CAPITAL
& LIQUIDITY
Average
equity
to
average
assets 5.94% 6.79% 7.18% 7.76% 7.11%
Tier 1
capital
to risk-
weighted
assets 7.58% 8.91% 9.91% 10.01% 8.94%
Total
capital
to risk-
weight-
ed
assets 9.46% 10.33% 11.17% 11.26% 10.20%
Loans
to
depos-
its +
other
borrow-
ings 84.88% 87.92% 89.78% 90.95% 88.57%
END OF
PERIOD
BALANCES
Total
port-
folio
loans $ 1,556,903 $ 1,621,895 $ 1,699,945 $ 1,774,063 $ 1,761,431
Earning
assets 1,857,467 1,887,636 1,957,043 2,009,859 2,027,350
Total
assets 1,981,772 2,011,939 2,092,792 2,149,372 2,194,628
Depos-
its 1,546,311 1,576,052 1,624,703 1,665,761 1,693,601
Total
share-
hold-
ers'
equity 97,674 116,634 144,644 149,213 152,098
AVERAGE
BALANCES
Total
port-
folio
loans $ 1,598,743 $ 1,678,648 $ 1,735,738 $ 1,764,235 $ 1,757,583
Earning
assets 1,870,995 1,940,364 1,959,359 1,969,524 1,984,547
Total
assets 2,001,415 2,071,098 2,100,924 2,128,975 2,142,065
Deposits 1,554,127 1,611,922 1,620,159 1,611,709 1,640,986
Total
share-
hold-
ers'
equity 117,687 140,556 150,747 165,170 152,219
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except per share
information)
Year to Date
---------------------------
2009 2008
EARNINGS SUMMARY ----------- -----------
Net interest income $ 39,388 $ 44,621
Provision for loan loss 52,740 23,585
Total non-interest income 13,181 14,195
Total non-interest expense 51,476 42,121
Federal income tax expense (benefit) 2,786 (3,093)
Net income (loss) $ (54,433) $ (3,797)
Dividends declared on preferred shares 2,869 --
Net income (loss) available to common
shares $ (57,302) $ (3,797)
Basic earnings per common share $ (3.30) $ (0.22)
Diluted earnings per common share $ (3.30) $ (0.22)
MARKET DATA
Book value per common share $ 3.64 $ 8.93
Tangible book value per common share $ 3.61 $ 7.31
Market value per common share $ 2.60 $ 6.99
Average basic common shares 17,365,840 17,013,386
Average diluted common shares 17,365,840 17,013,386
Period end common shares 17,701,817 17,024,850
PERFORMANCE RATIOS
Return on average assets -3.53% -0.24%
Return on average equity -53.28% -3.16%
Net interest margin (fully taxable
equivalent) 2.75% 3.01%
Efficiency ratio 97.92% 71.61%
ASSET QUALITY
Net charge-offs $ 42,953 $ 26,516
Nonperforming loans $ 88,160 $ 86,446
Other real estate and repossessed
assets $ 33,643 $ 9,626
Nonperforming loans to total loans 5.66% 4.91%
Nonperforming assets to total assets 6.15% 4.38%
Net charge-offs to average loans
(annualized) 3.43% 2.01%
Allowance for loan loss to total loans 3.09% 1.73%
CAPITAL & LIQUIDITY
Average equity to average assets 6.62% 7.52%
Tier 1 capital to risk-weighted assets 7.58% 8.94%
Total capital to risk-weighted assets 9.46% 10.20%
Loans to deposits + other borrowings 84.88% 88.57%
END OF PERIOD BALANCES
Total portfolio loans $ 1,556,903 $ 1,761,431
Earning assets 1,857,467 2,027,350
Total assets 1,981,772 2,194,628
Deposits 1,546,311 1,693,601
Total shareholders' equity 97,674 152,098
AVERAGE BALANCES
Total portfolio loans $ 1,670,541 $ 1,761,385
Earning assets 1,923,249 1,978,623
Total assets 2,055,703 2,130,259
Deposits 1,595,808 1,594,450
Total shareholders' equity 136,209 160,287
CONTACT: Macatawa Bank Corporation
Jon Swets, CFO
616.494.7645
Released October 30, 2009