Macatawa Bank Corporation Reports 2007 Annual and 4th Quarter Results
HOLLAND, Mich., Jan. 14, 2008 (PRIME NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced its results for the fourth quarter of 2007 and for the full year.
In December, the Company announced that its 4th quarter earnings would be impacted by the need for additional loan loss provisions of $9.5 million because of a growing weakness in residential development loans. This brought the Company's total 4th quarter provisions to $10.3 million and led to a net loss of $2.80 million, or a $0.16 loss per share, for the fourth quarter of 2007. This compares to net income of $2.85 million, or $0.16 earnings per diluted share, for the same period in 2006.
For all of 2007, net income was $9.08 million, or $0.53 per diluted share, compared to net income of $19.83 million, or $1.14 per diluted share, for 2006.
"As we told the investment community in December, we considered these extra provisions both necessary and prudent in light of West Michigan's soft economic conditions, as reflected in declining property values throughout our community," commented Ben Smith, Chairman and CEO. "Many financial institutions across the state and around the country have found themselves in a similar position because of issues related to residential real estate."
The Company's credit exposure is primarily isolated in residential development loans, a narrow and declining slice of its total portfolio. The Company does not have any exposure to subprime mortgage loans.
The Company's non-performing loans increased $25.2 million during the quarter to $73.9 million and represent about 4.22% of total loans at December 31, 2007. Loans to residential developers comprised most of the increase in non-performing loans. With the additional provisions provided in the fourth quarter, management believes non-performing loans are either well collateralized or adequately reserved.
"Despite a disappointing quarter, we are nevertheless very proud of the franchise we have built," Mr. Smith said. "This past November the Company celebrated its 10th anniversary as a community bank. From a single branch with 10 employees, the Company has grown to become one of the top banks in Michigan. More importantly, Macatawa holds the largest market share in Ottawa County -- and we remain focused on becoming the market leader in Kent and Allegan counties."
During 2007, the Company opened more than 25,000 new accounts. Smith attributed the increase to Macatawa's combination of highly personalized service and broad product offerings, which continues to resonate with both individual and business customers.
"As we begin 2008, we have made every effort to identify our credit exposure based on the current environment," Mr. Smith stated. "While we do not have a crystal ball, we have confidence in the West Michigan economy and its ability to recover. We remain well-capitalized. Our loan loss reserve is a healthy 1.91% of total loans, we have a strong balance sheet and we remain profitable."
A breakdown of non-performing assets is shown in the table below:
Dollars in 000s December 31, September 30,
------------ -------------
2007 2007
---- ----
Commercial Real Estate $68,634 $44,153
Commercial and Industrial 4,116 3,424
----- -----
Total Commercial Loans 72,750 47,577
Residential Mortgage Loans 641 487
Consumer Loans 518 639
--- ---
Total Non-Performing Loans $73,909 $48,703
Other Repossessed Assets 172 158
Other Real Estate Owned 5,704 6,095
----- -----
Total Non-Performing Assets $79,785 $54,956
======= =======
Loans for the development or sale of 1-4 family residential properties that were in a non-performing status were approximately $57.4 million or 78% of total non-performing loans at December 31, 2007.
Fourth quarter net interest income totaled $14.7 million, a decrease of $2.4 million compared to the fourth quarter of 2006. 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 3% or $50.7 million from the fourth quarter of 2006 to the fourth quarter of 2007. The net interest margin was 3.00% for the quarter, down 20 basis points from 3.20% for the third quarter of 2007 and 55 basis points from 3.55% for the fourth quarter of 2006.
On a consecutive quarter basis, 16 of the 20 basis points decline in the net interest margin was related to rising balances of non-performing loans. Only 3 basis points of the net interest margin decline can be attributed to the 100 basis point cuts in the Federal funds and prime rates since late September. Despite the Company's significant variable rate loan portfolio, it has been able to minimize the impact of the recent decline in short-term rates by the Federal Reserve Bank. Future rate cuts will have a slight negative impact on net interest income in the near term, although over a full twelve month period the overall impact on earnings is expected to be neutral. The Company's variable rate loan portfolio exceeds the level of variable rate funding, but the fixed rate funding portfolio that reprices over the next twelve months will offset this excess.
Non-interest income was $4.0 million for the fourth quarter of 2007, an increase of $173,000 compared to the fourth quarter of 2006. The Company continues to grow its non-interest revenue across the majority of its service delivery channels. Growth in revenue from deposit, trust and card services more than offset lower gains on sales of loans.
Non-interest expense was $13.1 million for the quarter as compared to $11.2 million for the fourth quarter of 2006. The increases in salaries and benefits, occupancy and furniture and equipment primarily relate to operating costs associated with the new Asset Management Services group and the opening of four new facilities since the beginning of the year. Despite these significant investments for the future, the Company has been able to successfully manage these overhead components within a tight range. The $1,188,000 increase in other expense is primarily related to increases in legal and other carrying costs associated with non-performing assets and an increase of $235,000 in FDIC assessments. The additional FDIC assessments relate to a change by the FDIC in their charges for all banks effective January 1.
Total assets increased $55.2 million during the year to $2.13 billion at December 31, 2007. Total loans increased $39.2 million, primarily in consumer mortgages, to $1.75 billion at December 31, 2007. Within the commercial loan portfolio, there was a shift between commercial real estate and commercial and industrial loans.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s December 31, September 30, December 31,
------------ ------------- -----------
2007 2007 2006
---- ---- ----
Construction and land
development $335,366 $354,897 $360,372
Farmland & agricultural 30,371 25,438 37,426
Non-farm, non-residential 454,764 454,220 439,436
Multi-family 35,381 37,618 38,483
------ ------ ------
Total Commercial Real
Estate 855,882 872,173 875,717
Commercial and Industrial 438,743 427,508 416,135
------- ------- -------
Total Commercial Loans $1,294,625 $1,299,681 $1,291,852
========== ========== ==========
Commercial real estate loans declined $19.8 million while commercial and industrial loans grew by $22.6 million since December 31, 2006. Loans for the development or sale of 1-4 family residential properties declined $24.3 million since September 30 to $235.8 million at December 31, 2007. Of this total, approximately $29.5 million is secured by vacant land, $125.6 million is secured by developed residential land and $80.7 million is secured by 1-4 family properties held for speculative purposes.
Total deposits decreased $144.0 million since December 31, 2006. This was attributed primarily to one of the Company's institutional depositors, which withdrew approximately $147 million in the latter half of the year. The withdrawals were associated with planned distributions and the depositor remains an excellent customer for the Company.
The Company has also reduced its holdings of deposits generated from out-of-market brokers during the year. Brokered deposits have declined $70.1 million since December 31, 2006. Accordingly, growth from deposits within the Company's markets has been approximately $73 million since the beginning of the year. The Company remained well-capitalized at December 31, 2007 with a total risk-based capital ratio of 10.7%.
"We continue to focus on what we can control through our commitment to excellence -- seize opportunities to diversify and expand our franchise, exceed our customer and community needs and provide the highest quality service. Macatawa is well positioned to capitalize on the recovery of West Michigan. We have strong roots in this community, and understand and believe in its potential. The Macatawa team is excited and enthusiastic, poised better than ever for long-term success," concluded Mr. Smith.
Conference Call
Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, January 15, 2008, 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 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 2007 2006 2007 2006
-------- -------- ---------- ----------
Total interest income $ 33,368 $ 35,589 $ 139,372 $ 133,506
Total interest expense 18,681 18,544 76,456 66,089
-------- -------- ---------- ----------
Net interest income 14,687 17,045 62,916 67,417
Provision for loan loss 10,270 5,725 15,750 7,715
-------- -------- ---------- ----------
Net interest income after
provision for loan loss 4,417 11,320 47,166 59,702
NON-INTEREST INCOME
Deposit service charges 1,331 1,231 5,087 4,874
Gain on sale of loans 221 433 1,290 1,721
Trust fees 1,237 1,096 4,906 3,589
Other 1,235 1,091 4,527 3,993
-------- -------- ---------- ----------
Total non-interest income 4,024 3,851 15,810 14,177
NON-INTEREST EXPENSE
Salaries and benefits 6,562 6,268 25,499 24,791
Occupancy 1,054 928 4,185 3,558
Furniture and equipment 1,149 859 3,956 3,221
Other 4,370 3,182 16,619 13,343
-------- -------- ---------- ----------
Total non-interest expense 13,135 11,237 50,259 44,913
-------- -------- ---------- ----------
Income before income tax (4,694) 3,934 12,717 28,966
Federal income tax expense (1,895) 1,089 3,635 9,135
-------- -------- ---------- ----------
Net income $ (2,799) $ 2,845 $ 9,082 $ 19,831
======== ======== ========== ==========
Basic earnings per share $ (0.16) $ 0.17 $ 0.53 $ 1.17
Diluted earnings per share $ (0.16) $ 0.16 $ 0.53 $ 1.14
Return on average assets -0.53% 0.56% 0.43% 1.01%
Return on average equity -6.72% 7.17% 5.51% 13.09%
Net interest margin 3.00% 3.55% 3.21% 3.67%
Efficiency ratio 70.20% 53.78% 63.84% 55.04%
BALANCE SHEET DATA December 31 December 31
2007 2006
Assets ---------- ----------
Cash and due from banks $ 49,816 $ 39,882
Securities available for
sale 201,498 198,546
Securities held to
maturity 1,917 2,711
Federal Home Loan Bank
Stock 12,275 12,275
Loans held for sale 3,127 1,547
Total loans 1,750,632 1,711,450
Less allowance for loan
loss 33,422 23,259
---------- ----------
Net loans 1,717,210 1,688,191
---------- ----------
Premises and equipment,
net 64,564 60,731
Acquisition intangibles 28,942 25,478
Bank-owned life insurance 22,703 21,843
Other assets 27,914 23,612
---------- ----------
Total Assets $2,129,966 $2,074,816
========== ==========
Liabilities and
Shareholders' Equity
Noninterest-bearing
deposits $ 185,681 $ 180,032
Interest-bearing deposits 1,337,872 1,487,525
---------- ----------
Total deposits 1,523,553 1,667,557
Federal funds purchased 46,467 11,990
Other borrowed funds 354,052 192,018
Long-term debt 41,238 41,238
Other liabilities 4,031 5,164
---------- ----------
Total Liabilities 1,969,341 1,917,967
Shareholders' equity 160,625 156,849
---------- ----------
Total Liabilities and
Shareholders' Equity $2,129,966 $2,074,816
========== ==========
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
2007 2007 2007 2007 2006
---------- ---------- ---------- ---------- ----------
EARNINGS
SUMMARY
Net
interest
income $ 14,687 $ 15,835 $ 16,335 $ 16,059 $ 17,045
Provision
for loan
loss 10,270 3,640 965 875 5,725
Total non-
interest
income 4,024 4,031 4,020 3,735 3,851
Total non-
interest
expense 13,135 12,732 12,605 11,787 11,237
Income
taxes (1,895) 1,037 2,195 2,297 1,089
Net income $ (2,799) $ 2,457 $ 4,590 $ 4,835 $ 2,845
Basic
earnings
per share $ (0.16) $ 0.14 $ 0.27 $ 0.28 $ 0.17
Diluted
earnings
per share $ (0.16) $ 0.14 $ 0.26 $ 0.28 $ 0.16
MARKET DATA
Book value
per share $ 9.47 $ 9.64 $ 9.52 $ 9.49 $ 9.19
Market
value per
share $ 8.59 $ 13.53 $ 15.91 $ 17.52 $ 20.25
Average
basic
common
shares 16,969,316 17,082,023 17,191,063 17,221,595 17,038,967
Average
diluted
common
shares 16,969,316 17,232,709 17,405,018 17,499,098 17,380,901
Period end
common
shares 16,968,398 16,982,794 17,170,235 17,226,564 17,067,350
PERFORMANCE
RATIOS
Return on
average
assets -0.53% 0.46% 0.87% 0.93% 0.56%
Return on
average
equity -6.72% 5.91% 11.08% 12.06% 7.17%
Net
interest
margin
(FTE) 3.00% 3.20% 3.32% 3.35% 3.55%
Efficiency
ratio 70.20% 64.09% 61.93% 59.55% 53.78%
ASSET
QUALITY
Net charge-
offs $ 2,764 $ 1,667 $ 711 $ 445 $ 4,894
Non-perfor-
ming
loans $ 73,909 $ 48,703 $ 29,470 $ 16,985 $ 22,290
Other real
estate and
reposs-
essed
assets $ 5,876 $ 6,253 $ 6,302 $ 3,891 $ 3,293
Nonperfor-
ming loans
to total
loans 4.22% 2.80% 1.71% 0.99% 1.30%
Nonperfo-
rming
assets to
total
assets 3.75% 2.61% 1.69% 0.98% 1.23%
Net charge-
offs to
average
loans
(annua-
lized) 0.64% 0.39% 0.16% 0.10% 1.16%
Allowance
for loan
loss to
total
loans 1.91% 1.49% 1.39% 1.38% 1.36%
CAPITAL &
LIQUIDITY
Average
equity to
average
assets 7.93% 7.85% 7.83% 7.71% 7.77%
Tier 1
capital to
risk-
weighted
assets 9.42% 9.66% 9.57% 9.53% 9.49%
Total
capital to
risk-
weighted
assets 10.67% 10.91% 10.93% 10.89% 10.85%
Loans to
deposits +
other
borrowings 93.24% 95.35% 90.47% 90.26% 92.03%
END OF
PERIOD
BALANCES
Total
portfolio
loans $1,750,632 $1,736,370 $1,724,773 $1,721,192 $1,711,450
Earning
assets 1,966,732 1,949,608 1,966,563 1,972,111 1,921,735
Total
assets 2,129,966 2,102,733 2,116,295 2,120,043 2,074,816
Deposits 1,523,553 1,522,003 1,661,686 1,639,332 1,667,557
Total
share-
holders'
equity 160,625 163,731 163,524 163,406 156,849
AVERAGE
BALANCES
Total
portfolio
loans $1,734,325 $1,721,543 $1,732,553 $1,713,204 $1,686,139
Earning
assets 1,949,756 1,966,155 1,967,055 1,937,392 1,903,566
Total
assets 2,099,826 2,116,474 2,114,974 2,078,501 2,042,005
Deposits 1,485,232 1,654,354 1,645,849 1,645,806 1,616,606
Total
share-
holders'
equity 166,591 166,196 165,702 160,348 158,716
Year to Date
-------------------------
2007 2006
----------- -----------
EARNINGS SUMMARY
Net interest income $ 62,916 $ 67,417
Provision for loan loss 15,750 7,715
Total non-interest income 15,810 14,177
Total non-interest expense 50,259 44,913
Income taxes 3,635 9,135
Net income $ 9,082 $ 19,831
Basic earnings per share $ 0.53 $ 1.17
Diluted earnings per share $ 0.53 $ 1.14
MARKET DATA
Book value per share $ 9.47 $ 9.19
Market value per share $ 8.59 $ 20.25
Average basic common shares 17,109,664 17,011,590
Average diluted common shares 17,283,344 17,379,473
Period end common shares 16,968,398 17,067,350
PERFORMANCE RATIOS
Return on average assets 0.43% 1.01%
Return on average equity 5.51% 13.09%
Net interest margin (FTE) 3.21% 3.67%
Efficiency ratio 63.84% 55.04%
ASSET QUALITY
Net charge-offs $ 5,587 $ 5,448
Nonperforming loans $ 73,909 $ 22,290
Other real estate and repossessed assets $ 5,876 $ 3,293
Nonperforming loans to total loans 4.22% 1.30%
Nonperforming assets to total assets 3.75% 1.23%
Net charge-offs to average loans
(annualized) 0.32% 0.33%
Allowance for loan loss to total loans 1.91% 1.36%
CAPITAL & LIQUIDITY
Average equity to average assets 7.83% 7.69%
Tier 1 capital to risk-weighted assets 9.42% 9.49%
Total capital to risk-weighted assets 10.67% 10.85%
Loans to deposits + other borrowings 93.24% 92.03%
END OF PERIOD BALANCES
Total portfolio loans $ 1,750,632 $ 1,711,450
Earning assets 1,966,732 1,921,735
Total assets 2,129,966 2,074,816
Deposits 1,523,553 1,667,557
Total shareholders' equity 160,625 156,849
AVERAGE BALANCES
Total portfolio loans $ 1,725,453 $ 1,635,391
Earning assets 1,955,154 1,834,673
Total assets 2,102,541 1,970,305
Deposits 1,607,498 1,574,444
Total shareholders' equity 164,730 151,479
CONTACT: Macatawa Bank Corporation
Jon Swets, CFO
616.494.7645
Released January 14, 2008