Macatawa Bank Corporation Reports 4th Quarter Results
HOLLAND, Mich., Jan. 26, 2009 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced its results for the fourth quarter of 2008.
The Company's fourth quarter results included a non-cash, after-tax impairment charge for goodwill and intangible assets of $27 million to reflect the impact of current market conditions. This impairment charge does not impact the Company's tangible equity or regulatory capital ratios, and does not affect the Company's liquidity position.
This impairment charge led to a net loss of $35.1 million, or $2.11 loss per share, for the fourth quarter of 2008 compared with a net loss of $2.6 million, or $0.15 loss per share, for the same period in 2007. For the full year of 2008, the Company incurred a net loss of $38.9 million, or $2.34 loss per share, compared with net income of $9.3 million for 2007. Excluding the impact of the goodwill and intangible asset impairment charge, the net loss would have been $8.0 million for the quarter and $11.8 million for the full year.
The quarterly results were also impacted by additional loan loss provisions of $14 million and expenses and lost interest associated with non-performing assets of approximately $4.9 million.
"We have found ourselves in a situation shared by many other financial institutions across the country," said Ben Smith, Chairman and CEO. "Continued deterioration in the economy and stock market, especially among financial institutions' stocks, have necessitated that we take these cash and non-cash charges during the quarter.
"While these numbers are disappointing, our management team has worked hard to strengthen our capital position, improve asset quality and liquidity, reduce core expenses and improve operating efficiencies."
Initiatives to improve the Company's financial condition during 2008 included: * Completed a preferred stock offering totaling $31.3 million. * Temporarily suspended the cash dividend on common stock. * Improved liquidity in the fourth quarter by growing the investment security portfolio, building short-term investments and increasing borrowing capacity. * Increased the allowance for loan losses $5 million during the quarter to 2.16 percent of total loans. * Executed expense reduction initiatives estimated to save over $6 million annually.
"Despite market challenges, we continued to grow during 2008," Smith said. "We added new accounts, made new loans and built our brand within Ottawa, Kent and Allegan counties. Both the Company's loan and deposit portfolios showed good growth since the prior year during these volatile market conditions."
The injection of additional capital from the preferred stock offering further improved the Company's liquidity and capital ratios, which were already above regulatory requirements for well-capitalized banks.
"Perhaps just as importantly, the success of the offering underscored the continued optimism that people have in the future of Macatawa and their willingness to invest in the community and community banking," Smith said. "We are deeply gratified by the confidence demonstrated by our shareholders during such challenging financial times."
The Company's total risk based capital ratio increased to 11.26 percent from 10.20 percent in the prior quarter.
Fourth quarter net interest income totaled $13.5 million, a decrease of $1.2 million compared to the fourth quarter of 2007. The decrease in net interest income was primarily from a decline in the net interest margin partially offset by an increase in average earning assets. Average earning assets grew by $19.8 million from the fourth quarter of 2007 to the fourth quarter of 2008. The net interest margin was 2.74 percent for the quarter, down 24 basis points from 2.98 percent for the third quarter and 26 basis points from 3.00 percent for the fourth quarter of 2007. Approximately half of the decline for each period was from higher balances of non-performing assets with the remainder largely from the Federal funds rate cuts that began in late-2007 and pressure on the Company's cost of deposits from intense competition within its markets.
Non-interest income was $3.9 million for the fourth quarter of 2008 compared to $4.3 million for the fourth quarter of 2007. The fourth quarter of 2007 included a $288,000 unrealized gain associated with the Company's interest rate swaps which were terminated in the first quarter of 2008. Increases in gains on mortgage loans sold and growth in revenue from deposit services and ATM and debit card processing offset a decline in trust income. The significant decline in the stock market throughout 2008 was the primary reason for the decrease in trust income.
Non-interest expense was $43.9 million for the quarter compared to $14.0 million for the third quarter and $13.1 million for the fourth quarter of 2007. Non-interest expense for the current quarter included non-recurring charges of $27.6 million associated with the goodwill and intangible asset impairment charge. It also includes $1.4 million of legal expenses associated with the Trade Partners litigation discussed in previous announcements. This amount includes legal invoices received over the time of the litigation, which were expected to be paid by the Company's insurance carrier, but have since been deemed non-reimbursable.
In addition, costs associated with the administration and disposition of problem loans and non-performing assets amounted to approximately $3.2 million in the current quarter, $1.6 million in the third quarter and $500,000 for the fourth quarter of 2007. When excluding these costs, non-interest expense would have been approximately $11.8 million for the quarter, down from $12.5 million for the third quarter of 2008 and $12.6 million for the fourth quarter of 2007.
"We have been working hard on expense reduction initiatives throughout the year," Smith said. "The Company has restructured third party contracts, eliminated or outsourced certain backroom functions, accelerated electronic delivery for certain customers and significantly trimmed controllable costs. We also made the difficult decision to selectively reduce staff by approximately 10 percent," added Smith, "and management will again forego bonuses in 2008 and all employees will forego annual merit increases in 2009."
Total assets were $2.15 billion at December 31, 2008, an increase of $21.7 million compared to $2.13 billion at December 31, 2007. Total loans increased $23.4 million since December 31, 2007, primarily in consumer mortgages, to $1.77 billion at December 31, 2008. Within the commercial loan portfolio, there continues to be a shift in mix from commercial real estate loans to commercial and industrial loans.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s December 31, December 31,
2008 2007
----------- -----------
Construction and land development $ 307,933 $ 335,366
Farmland & agricultural 27,950 30,371
Non-farm, non-residential 477,775 454,764
Multi-family 29,701 35,381
----------- -----------
Total Commercial Real Estate 843,359 855,882
Commercial and Industrial 447,352 438,743
----------- -----------
Total Commercial Loans $ 1,290,711 $ 1,294,625
=========== ===========
Commercial real estate loans declined $12.5 million while commercial and industrial loans grew by $8.6 million since December 31, 2007. Loans for the development or sale of 1-4 family residential properties were $203.7 million at December 31, 2008. Of the total, approximately $27.1 million was secured by vacant land, $117.4 million was secured by developed residential land and $59.2 million was secured by 1-4 family properties held for speculative purposes.
The Company's non-performing assets increased $16.0 million to $112.1 million since the prior quarter and represent 5.21 percent of total assets at December 31, 2008. The majority of the non-performing asset portfolio is secured by real estate, primarily residential land development. Despite the difficulty in valuing this type of collateral in the current market, management believes non-performing assets are either well collateralized or have been appropriately discounted with adequate reserves.
A breakdown of non-performing assets is shown in the table below:
Dollars in 000s Dec 31, Sept 30, Dec 31,
2008 2008 2007
--------- --------- ---------
Commercial Real Estate $ 80,466 $ 77,888 $ 68,634
Commercial and Industrial 9,005 7,360 4,116
--------- --------- ---------
Total Commercial Loans 89,471 85,248 72,750
Residential Mortgage Loans 1,906 906 641
Consumer Loans 893 292 518
--------- --------- ---------
Total Non-Performing Loans 92,270 86,446 73,909
Other Repossessed Assets 306 272 172
Other Real Estate Owned 19,516 9,354 5,704
--------- --------- ---------
Total Non-Performing Assets $ 112,092 $ 96,072 $ 79,785
========= ========= =========
Within commercial real estate, loans for the development or sale of 1-4 family residential properties that were in a non-performing status were approximately $59.9 million or 65 percent of total non-performing loans at December 31, 2008 compared to $63.5 million or 72 percent at September 30, 2008 and $57.4 million or 78 percent at December 31, 2007.
"The past several quarters have been trying, and we would all like to see better results. While it will take additional time to work through our credit challenges, we have the right people, firm resolve and a strong regulatory capital position to do so. We believe in the long-term future of Macatawa and that we will emerge from these difficult times a stronger financial institution," concluded Mr. Smith.
Conference Call
Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, January 27, at 10:00 A.M. Persons who wish to access the call may do so via the Internet by visiting www.macatawabank.com and clicking on the webcast link in the Investor Information section. It may also be accessed by logging on to www.streetevents.com. A replay of the call will be available for 30 days following the call.
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.
"CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, and pricing. These statements include, among others, statements related to 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. 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 Ended Twelve Months Ended
December 31 December 31
-------------------- ---------------------
EARNINGS SUMMARY 2008 2007 2008 2007
--------- --------- --------- ----------
Total interest income $ 26,945 $ 33,368 $116,075 $ 139,372
Total interest expense 13,435 18,681 57,944 76,456
--------- --------- --------- ----------
Net interest income 13,510 14,687 58,131 62,916
Provision for loan loss 13,850 10,270 37,435 15,750
--------- --------- --------- ----------
Net interest income
after provision for
loan loss (340) 4,417 20,696 47,166
NON-INTEREST INCOME
Deposit service charges 1,396 1,331 5,342 5,087
Gain on sale of loans 263 221 1,250 1,290
Trust fees 1,001 1,237 4,448 4,906
Other 1,289 1,523 7,104 4,815
--------- --------- --------- ----------
Total non-interest
income 3,949 4,312 18,144 16,098
NON-INTEREST EXPENSE
Salaries and benefits 6,246 6,562 26,547 25,499
Occupancy 951 1,054 4,402 4,185
Furniture and equipment 1,053 1,149 4,079 3,956
Other 35,696 4,370 51,039 16,619
--------- --------- --------- ----------
Total non-interest
expense 43,946 13,135 86,067 50,259
--------- --------- --------- ----------
Income (loss) before
income tax (40,337) (4,406) (47,227) 13,005
Federal income tax
expense (benefit) (5,280) (1,794) (8,373) 3,736
--------- --------- --------- ----------
Net income (loss) (35,057) (2,612) (38,854) 9,269
--------- --------- --------- ----------
Dividends declared on
preferred shares 817 -- 817 --
--------- --------- --------- ----------
Net income (loss)
available to
common shares $(35,874) $ (2,612) $(39,671) $ 9,269
========= ========= -======== ==========
Basic earnings per
common share $ (2.11) $ (0.15) $ (2.34) $ 0.54
Diluted earnings per
common share $ (2.11) $ (0.15) $ (2.34) $ 0.54
Return on average assets -6.59% -0.50% -1.82% 0.44%
Return on average equity -84.90% -6.27% -24.06% 5.63%
Net interest margin 2.74% 3.00% 2.95% 3.21%
Efficiency ratio 251.71% 69.14% 112.84% 63.61%
BALANCE SHEET DATA December 31 December 31
Assets 2008 2007
----------- -----------
Cash and due from banks $ 29,188 $ 49,816
Federal funds sold and other
short-term investments 39,096 --
Securities available for sale 184,681 201,498
Securities held to maturity 1,835 1,917
Federal Home Loan Bank Stock 12,275 12,275
Loans held for sale 2,261 3,127
Total loans 1,774,063 1,750,632
Less allowance for loan loss 38,262 33,422
----------- -----------
Net loans 1,735,801 1,717,210
----------- -----------
Premises and equipment, net 63,482 64,564
Acquisition intangibles 874 28,942
Bank-owned life insurance 23,645 22,703
Other assets 58,502 27,914
----------- -----------
Total Assets $ 2,151,640 $ 2,129,966
=========== ===========
Liabilities and Shareholders' Equity
Noninterest-bearing deposits $ 192,842 $ 185,681
Interest-bearing deposits 1,472,919 1,337,872
----------- -----------
Total deposits 1,665,761 1,523,553
Federal funds purchased -- 46,467
Other borrowed funds 284,790 354,052
Long-term debt 41,238 41,238
Other liabilities 10,638 4,031
----------- -----------
Total Liabilities 2,002,427 1,969,341
Shareholders' equity 149,213 160,625
----------- -----------
Total Liabilities and Shareholders' Equity $ 2,151,640 $ 2,129,966
=========== ===========
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except
per share information)
Quarterly
----------------------------------------------------------
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
2008 2008 2008 2008 2007
---------- ---------- ---------- ---------- ----------
EARNINGS
SUMMARY
Net
interest
income $ 13,510 $ 14,836 $ 15,087 $ 14,697 $ 14,687
Provision
for loan
loss 13,850 2,425 18,460 2,700 10,270
Total
non-
interest
income 3,949 4,138 5,055 5,003 4,312
Total
non-
interest
expense 43,946 14,039 14,491 13,591 13,135
Income
taxes (5,280) 639 (4,703) 971 (1,794)
Net income
(loss) (35,057) 1,871 (8,106) 2,438 (2,612)
Dividends
declared
on
preferred
shares 817 -- -- -- --
Net income
(loss)
available
to common
shares $ (35,874) $ 1,871 $ (8,106) $ 2,438 $ (2,612)
Basic
earnings
per common
share $ (2.11) $ 0.11 $ (0.48) $ 0.14 $ (0.15)
Diluted
earnings
per common
share $ (2.11) $ 0.11 $ (0.48) $ 0.14 $ (0.15)
MARKET DATA
Market
value per
common
share $ 3.47 $ 6.99 $ 8.00 $ 10.41 $ 8.59
Book value
per common
share $ 6.91 $ 8.96 $ 8.84 $ 9.58 $ 9.47
Tangible
book value
per common
share $ 6.88 $ 7.31 $ 7.21 $ 7.94 $ 7.82
Average
basic
common
shares 16,977,883 17,022,780 16,970,634 16,951,183 16,969,316
Average
diluted
common
shares 16,977,883 17,047,902 16,970,634 16,951,183 16,969,316
Period
end
common
shares 17,161,515 17,024,850 17,021,379 17,017,028 16,968,398
PERFORMANCE
RATIOS
Return on
average
assets -6.59% 0.35% -1.52% 0.46% -0.50%
Return on
average
equity -84.90% 4.92% -19.74% 5.93% -6.27%
Net
interest
margin
(fully
taxable
equivalent) 2.74% 2.98% 3.06% 2.99% 3.00%
Efficiency
ratio 251.71% 73.99% 71.94% 68.99% 69.14%
ASSET
QUALITY
Net
charge-
offs $ 6,078 $ 1,514 $ 20,835 $ 4,168 $ 2,764
Non
performing
loans $ 92,270 $ 86,446 $ 78,895 $ 75,571 $ 73,909
Other
real
estate
and
re-
possessed
assets $ 19,822 $ 9,626 $ 7,443 $ 8,598 $ 5,876
Non
performing
loans to
total
loans 5.20% 4.91% 4.51% 4.28% 4.22%
Non
performing
assets to
total
assets 5.21% 4.38% 4.09% 3.93% 3.75%
Net charge-
offs to
average
loans
(annual-
ized) 1.38% 0.34% 4.71% 0.95% 0.64%
Allowance
for loan
loss to
total
loans 2.16% 1.73% 1.69% 1.81% 1.91%
CAPITAL &
LIQUIDITY
Average
equity to
average
assets 7.76% 7.11% 7.70% 7.77% 7.93%
Tier 1
capital
to
risk-
weighted
assets 10.01% 8.94% 8.93% 9.41% 9.40%
Total
capital
to risk-
weighted
assets 11.26% 10.20% 10.18% 10.67% 10.66%
Loans to
deposits
+ other
borrowings 90.95% 88.57% 92.04% 92.66% 93.24%
END OF
PERIOD
BALANCES
Total
portfolio
loans $1,774,063 $1,761,431 $1,748,629 $1,764,377 $1,750,632
Earning
assets 2,009,859 2,027,350 1,938,098 1,972,355 1,966,732
Total
assets 2,151,640 2,195,760 2,109,637 2,139,213 2,129,966
Deposits 1,665,761 1,693,601 1,604,012 1,570,428 1,523,553
Total
share-
holders'
equity 149,213 152,098 150,549 162,986 160,625
AVERAGE
BALANCES
Total
portfolio
loans $1,764,235 $1,757,583 $1,768,983 $1,757,633 $1,734,325
Earning
assets 1,969,524 1,984,547 1,980,470 1,970,785 1,949,756
Total
assets 2,128,975 2,142,065 2,131,979 2,116,605 2,099,826
Deposits 1,611,709 1,640,986 1,593,452 1,548,402 1,485,232
Total
share-
holders'
equity 165,170 152,219 164,229 164,503 166,591
Year to Date
------------------------
2008 2007
----------- -----------
EARNINGS SUMMARY
Net interest income $ 58,131 $ 62,916
Provision for loan loss 37,435 15,750
Total non-interest income 18,144 16,098
Total non-interest expense 86,067 50,259
Income taxes (8,373) 3,736
Net income (loss) (38,854) 9,269
Dividends declared on preferred shares 817 --
Net income (loss) available to
common shares $ (39,671) $ 9,269
Basic earnings per common share $ (2.34) $ 0.54
Diluted earnings per common share $ (2.34) $ 0.54
MARKET DATA
Market value per common share $ 3.47 $ 8.59
Book value per common share $ 6.91 $ 9.47
Tangible book value per common share $ 6.88 $ 7.82
Average basic common shares 16,968,293 17,109,664
Average diluted common shares 16,968,293 17,283,344
Period end common shares 17,161,515 16,968,398
PERFORMANCE RATIOS
Return on average assets -1.82% 0.44%
Return on average equity -24.06% 5.63%
Net interest margin (fully
taxable equivalent) 2.95% 3.21%
Efficiency ratio 112.84% 63.61%
ASSET QUALITY
Net charge-offs $ 32,595 $ 5,587
Nonperforming loans $ 92,270 $ 73,909
Other real estate and repossessed assets $ 19,822 $ 5,876
Nonperforming loans to total loans 5.20% 4.22%
Nonperforming assets to total assets 5.21% 3.75%
Net charge-offs to average
loans (annualized) 1.85% 0.32%
Allowance for loan loss to total loans 2.16% 1.91%
CAPITAL & LIQUIDITY
Average equity to average assets 7.58% 7.83%
Tier 1 capital to risk-weighted assets 10.01% 9.40%
Total capital to risk-weighted assets 11.26% 10.66%
Loans to deposits + other borrowings 90.95% 93.24%
END OF PERIOD BALANCES
Total portfolio loans $ 1,774,063 $ 1,750,632
Earning assets 2,009,859 1,966,732
Total assets 2,151,640 2,129,966
Deposits 1,665,761 1,523,553
Total shareholders' equity 149,213 160,625
AVERAGE BALANCES
Total portfolio loans $ 1,762,102 $ 1,725,453
Earning assets 1,976,336 1,955,154
Total assets 2,129,937 2,102,541
Deposits 1,598,789 1,607,498
Total shareholders' equity 161,515 164,730
CONTACT: Macatawa Bank Corporation
Jon Swets, CFO
616.494.7645
Released January 26, 2009