Macatawa Bank Corporation Reports Second Quarter Earnings
HOLLAND, Mich., July 16, 2007 (PRIME NEWSWIRE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced net income for the second quarter of 2007. Net income for the quarter was $4.59 million, or $0.26 per diluted share, compared to net income of $5.76 million, or $0.33 per diluted share, for the second quarter of 2006. Net income for the first six months of 2007 totaled $9.43 million, or $0.54 per diluted share, compared to net income of $10.98 million, or $0.63 per diluted share, for the six months ended June 30, 2006.
"We are disappointed with the decline in our earnings. The weak economic conditions in our markets continue to affect our operating performance," commented Ben Smith, Chairman and CEO. In particular, a noticeable deterioration in residential land development has had a profound affect on many banks throughout Michigan. "We knew these factors would challenge our earnings and asset growth, but the extent of weakness in this sector and its impact on our performance is greater than expected. While we are seeing signs of increased residential real estate activity, we recognize a sustained improvement will take time to fully benefit the businesses involved with land development," added Mr. Smith.
Non-performing loans are up $12 million since the end of the first quarter and $24 million since June of last year. Most of these increases were in loans to residential land developers. At June 30, 2007, non-performing loans were approximately $29 million and represented about 1.71% of total loans. "We have instituted additional controls over our credit administration process and have been focused on reviewing our entire commercial portfolio. We continue to work diligently on addressing these loan difficulties to put them behind us," stated Mr. Smith. Other than residential land development, the Company's loan portfolios continue to perform well.
The Company opened its 26th branch during the quarter in Cascade on the east side of the greater Grand Rapids metropolitan market. "We are very pleased with the progress of our branch network and other retail delivery systems. We continue to see strong levels of new customers as we expand our market share," added Mr. Smith. Deposits within the Company's markets grew $31 million during the quarter, or 9% on an annualized basis, allowing the Company to reduce balances of higher costing deposits from outside its market.
Second quarter net interest income totaled $16.3 million, a decrease of $640,000 compared to the second 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 8% or $151.2 million from the second quarter of 2006 to the second quarter of 2007. The net interest margin was 3.32% for the quarter, down only three basis points from 3.35% for the first quarter of 2007 and 42 basis points from 3.74% for the second quarter of 2006. On a consecutive quarter basis, the decline was primarily from a decrease in the yield on loans related to reduced loan interest associated with non-accrual loans. The cost of funds remained flat on a consecutive quarter basis. The decline in net interest margin from the prior year quarter is primarily because the cost of funds has risen more than the yield on assets.
Non-interest income was $4.0 million for the second quarter of 2007, an increase of $391,000 or 11% compared to the second quarter of 2006. The increase was largely from higher trust fees, partially offset by lower gains on sales of loans. The increase in trust fees primarily relates to customer relationships added from the acquisition of Asset Management Services from Smith & Associates on January 1. Other types of non-interest income grew as well, reflecting continued momentum in various service delivery areas.
Non-interest expense was $12.6 million for the quarter as compared to $11.3 million for the second quarter of 2006. The slight 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 $876,000 increase in other expense also includes operating costs associated with these new service and facility additions, as well as increases in legal and other carrying costs associated with non-performing assets and an increase of $228,000 in FDIC assessments. The additional FDIC assessments relate to a change by the FDIC in the rate for all banks effective January 1.
The provision for loan losses was $965,000 for the quarter compared to $800,000 for the second quarter of 2006. Annualized net charge-offs were 0.16% of average loans for the quarter compared to 0.01% for the second quarter of 2006. Non-performing assets to total assets were 1.69% at June 30, 2007 compared to 0.98% at March 31, 2007 and 0.38% at June 30, 2006. Of the $35.8 million of non-performing assets at June 30, approximately $6.3 million is other real estate or repossessed assets in which collateral held is considered collectible. The remaining $29.5 million are non-performing loans of which approximately two-thirds are associated with residential land development. The allowance for loan losses was 1.39% of total loans at June 30, 2007 compared to 1.36% at December 31, 2006.
Total assets increased $135.0 million or 7% from June 30, 2006 to $2.12 billion at June 30, 2007. Over the same twelve month period, total loans increased $71.7 million and total deposits increased $88.9 million. Since December 31, 2006, total loans increased $13.3 million and total deposits declined by $6 million. However, deposits within the Company's market increased $31 million during the quarter and $43 million since December 31, 2006. The Company remained well-capitalized at June 30, 2007 with a total risk-based capital ratio of 10.9%.
"Despite the challenging operating environment, we are gaining market share, continuing to invest in people and technology and constantly improving our operations to become an even stronger bank," concluded Mr. Smith.
Conference Call
Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, July 17, 2007, 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.
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 Six Months Ended
June 30 June 30
------------------ ------------------
EARNINGS SUMMARY 2007 2006 2007 2006
------- ------- ------- -------
Total interest
income $35,683 $32,896 $70,615 $63,137
Total interest
expense 19,348 15,921 38,220 29,848
------- ------- ------- -------
Net interest
income 16,335 16,975 32,395 33,289
Provision for
loan loss 965 800 1,840 1,500
------- ------- ------- -------
Net interest
income after
provision for
loan loss 15,370 16,175 30,555 31,789
NON-INTEREST INCOME
Deposit service charges 1,306 1,300 2,448 2,386
Gain on sale of loans 370 511 813 923
Trust fees 1,209 796 2,406 1,622
Other 1,135 1,022 2,088 1,892
------- ------- ------- -------
Total non-interest
income 4,020 3,629 7,755 6,823
NON-INTEREST EXPENSE
Salaries and benefits 6,345 6,293 12,475 12,330
Occupancy 1,020 835 2,075 1,720
Furniture and equipment 933 774 1,825 1,572
Other 4,307 3,431 8,018 6,796
------- ------- ------- -------
Total non-interest
expense 12,605 11,333 24,393 22,418
------- ------- ------- -------
Income before income
tax 6,785 8,471 13,917 16,194
Federal income tax
expense 2,195 2,715 4,492 5,217
------- ------- ------- -------
Net income $ 4,590 $ 5,756 $ 9,425 $10,977
======= ======= ======= =======
Basic earnings per
share $ 0.27 $ 0.34 $ 0.55 $ 0.65
Diluted earnings per
share $ 0.26 $ 0.33 $ 0.54 $ 0.63
Return on average
assets 0.87% 1.18% 0.90% 1.15%
Return on average
equity 11.08% 15.53% 11.56% 14.94%
Net interest margin 3.32% 3.74% 3.33% 3.76%
Efficiency ratio 61.93% 55.00% 60.75% 55.89%
BALANCE SHEET DATA June 30 June 30 December 31
2007 2006 2006
Assets ---------- ---------- -----------
Cash and due from
banks $ 33,192 $ 43,346 $ 39,882
Federal funds sold 30,123 -- --
Securities available
for sale 194,066 165,964 198,546
Securities held to
maturity 1,921 2,715 2,711
Federal Home Loan Bank
Stock 12,275 13,910 12,275
Loans held for sale 1,597 2,346 1,547
Total loans 1,724,773 1,653,035 1,711,450
Less allowance for
loan loss 23,943 22,145 23,259
---------- ---------- ----------
Net loans 1,700,830 1,630,890 1,688,191
---------- ---------- ----------
Premises and equipment,
net 64,202 56,569 60,731
Acquisition
intangibles 29,166 25,663 25,478
Bank-owned life
insurance 22,258 21,279 21,843
Other assets 26,665 18,636 23,612
---------- ---------- ----------
Total Assets $2,116,295 $1,981,318 $2,074,816
========== ========== ==========
Liabilities and
Shareholders' Equity
Noninterest-bearing
deposits $ 170,308 $ 174,516 $ 180,032
Interest-bearing
deposits 1,491,378 1,398,585 1,487,525
---------- ---------- ----------
Total deposits 1,661,686 1,573,101 1,667,557
Federal funds
purchased -- 25,701 11,990
FHLB advances 244,760 187,722 192,018
Other borrowings 41,238 41,238 41,238
Other liabilities 5,087 5,657 5,164
---------- ---------- ----------
Total Liabilities 1,952,771 1,833,419 1,917,967
Shareholders' equity 163,524 147,899 156,849
---------- ---------- ----------
Total Liabilities
and Shareholders'
Equity $2,116,295 $1,981,318 $2,074,816
========== ========== ==========
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except per share information)
Quarterly
-----------------------------------------------------------
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
2007 2007 2006 2006 2006
----------- ----------- ----------- ----------- -----------
EARNINGS
SUMMARY
Net
interest
income $ 16,335 $ 16,059 $ 17,045 $ 17,083 $ 16,975
Provision
for loan
loss 965 875 5,725 490 800
Total
non-
interest
income 4,020 3,735 3,851 3,503 3,629
Total
non-
interest
expense 12,605 11,787 11,237 11,257 11,333
Income
taxes 2,195 2,297 1,089 2,830 2,715
Net
income $ 4,590 $ 4,835 $ 2,845 $ 6,009 $ 5,756
Basic
earnings
per
share $ 0.27 $ 0.28 $ 0.17 $ 0.35 $ 0.34
Diluted
earnings
per
share $ 0.26 $ 0.28 $ 0.16 $ 0.35 $ 0.33
MARKET
DATA
Book
value
per
share $ 9.52 $ 9.49 $ 9.20 $ 9.11 $ 8.69
Market
value
per
share $ 15.91 $ 17.52 $ 20.25 $ 21.80 $ 22.28
Average
basic
common
shares 17,191,063 17,221,595 17,038,967 17,025,110 17,010,181
Average
diluted
common
shares 17,405,018 17,499,098 17,380,901 17,385,741 17,369,238
Period
end
common
shares 17,170,235 17,226,564 17,044,838 17,032,766 17,015,456
PERFORMANCE
RATIOS
Return on
average
assets 0.87% 0.93% 0.56% 1.20% 1.18%
Return on
average
equity 11.08% 12.06% 7.17% 15.69% 15.53%
Net
interest
margin
(FTE) 3.32% 3.35% 3.55% 3.62% 3.74%
Efficiency
ratio 61.93% 59.55% 53.78% 54.68% 55.00%
ASSET
QUALITY
Net
charge-
offs $ 711 $ 445 $ 4,894 $ 208 $ 46
Nonperforming
loans $ 29,470 $ 16,985 $ 22,290 $ 5,768 $ 5,781
Other
real
estate
and
repossessed
assets $ 6,302 $ 3,891 $ 3,293 $ 2,758 $ 1,725
Nonperforming
loans to
total
loans 1.71% 0.99% 1.30% 0.34% 0.35%
Nonperforming
assets
to total
assets 1.69% 0.98% 1.23% 0.42% 0.38%
Net
charge-offs
to
average
loans
(annualized) 0.16% 0.10% 1.16% 0.05% 0.01%
Allowance
for loan
loss to
total
loans 1.39% 1.38% 1.36% 1.33% 1.34%
CAPITAL &
LIQUIDITY
Average
equity
to
average
assets 7.83% 7.71% 7.77% 7.62% 7.61%
Tier 1
capital
to risk-
weighted
assets 9.57% 9.53% 9.49% 9.59% 9.49%
Total
capital
to risk-
weighted
assets 10.93% 10.89% 10.85% 10.95% 10.85%
Loans to
deposits
+ other
borrowings 90.47% 90.26% 92.03% 91.69% 93.88%
END OF
PERIOD
BALANCES
Total
portfolio
loans $ 1,724,773 $ 1,721,192 $ 1,711,450 $ 1,682,359 $ 1,653,035
Earning
assets 1,966,563 1,972,111 1,921,735 1,897,447 1,841,812
Total
assets 2,116,295 2,120,043 2,074,816 2,041,031 1,981,318
Deposits 1,661,686 1,639,332 1,667,557 1,632,816 1,573,101
Total
shareholders'
equity 163,524 163,406 156,849 155,125 147,899
AVERAGE
BALANCES
Total
portfolio
loans $ 1,732,553 $ 1,713,204 $ 1,686,139 $ 1,664,378 $ 1,626,102
Earning
assets 1,967,055 1,937,392 1,903,566 1,873,191 1,815,807
Total
assets 2,114,974 2,078,501 2,042,005 2,010,840 1,949,399
Deposits 1,645,849 1,645,806 1,616,606 1,605,567 1,556,712
Total
shareholders'
equity 165,702 160,348 158,716 153,147 148,252
Year to Date
------------------------
2007 2006
----------- -----------
EARNINGS SUMMARY
Net interest income $ 32,395 $ 33,289
Provision for loan loss 1,840 1,500
Total non-interest income 7,755 6,823
Total non-interest expense 24,393 22,418
Income taxes 4,492 5,217
Net income $ 9,425 $ 10,977
Basic earnings per share $ 0.55 $ 0.65
Diluted earnings per share $ 0.54 $ 0.63
MARKET DATA
Book value per share $ 9.52 $ 8.69
Market value per share $ 15.91 $ 22.28
Average basic common shares 17,195,050 16,990,802
Average diluted common shares 17,443,100 17,390,749
Period end common shares 17,170,235 17,015,456
PERFORMANCE RATIOS
Return on average assets 0.90% 1.15%
Return on average equity 11.56% 14.94%
Net interest margin (FTE) 3.33% 3.76%
Efficiency ratio 60.75% 55.89%
ASSET QUALITY
Net charge-offs $ 1,156 $ 346
Nonperforming loans $ 29,470 $ 5,781
Other real estate and repossessed assets $ 6,302 $ 1,725
Nonperforming loans to total loans 1.71% 0.35%
Nonperforming assets to total assets 1.69% 0.38%
Net charge-offs to average loans (annualized) 0.13% 0.04%
Allowance for loan loss to total loans 1.39% 1.34%
CAPITAL & LIQUIDITY
Average equity to average assets 7.78% 7.68%
Tier 1 capital to risk-weighted assets 9.57% 9.49%
Total capital to risk-weighted assets 10.93% 10.85%
Loans to deposits + other borrowings 90.47% 93.88%
END OF PERIOD BALANCES
Total portfolio loans $ 1,724,773 $ 1,653,035
Earning assets 1,966,563 1,841,812
Total assets 2,116,295 1,981,318
Deposits 1,661,686 1,573,101
Total shareholders' equity 163,524 147,899
AVERAGE BALANCES
Total portfolio loans $ 1,722,932 $ 1,594,863
Earning assets 1,952,305 1,780,078
Total assets 2,096,838 1,913,257
Deposits 1,645,828 1,537,194
Total shareholders' equity 163,040 146,953
CONTACT: Macatawa Bank Corporation
Jon Swets, CFO
616.494.7645
Released July 16, 2007