| For Immediate Release | Contact: Phil Koning President, Macatawa Bank, 616.820.1429 or Jon Swets Chief Financial Officer, Macatawa Bank, 616.494.7645 |
Holland, Michigan, March 15, 2007 – Macatawa Bank Corp. (NASDAQ: MCBC) today issued revised results for the fourth-quarter and twelve-month periods ending Dec. 31, 2006.
These financial results, which were originally reported on January 15, 2007, have been revised based on information that only became available since that date. The revision reflects an additional loan loss provision of $4.7 million related to outstanding commercial loans to one borrower of $5.2 million that have become impaired. The Bank has reason to believe that the borrower will be unable to meet the repayment terms of the loans. The loans have been secured by collateral, but the collateral may not be of a sufficient value to cover the outstanding principal on these loans.
The impairment was discovered over the past week through internal investigations relating to the collateral and the borrower relationship. Macatawa Bank’s internal investigation suggests that the borrower may have made misrepresentations to the Bank regarding the loan collateral and its financial condition.
“The realization that this appears to be an intentional effort to defraud the Bank is very distressing to all of us,” said Benj. A. Smith III, chairman and CEO. “As part of our internal investigation, we have begun a review of our loan policies and procedures. As a management team, we pledge that these procedures will be tightened to prevent a recurrence.”
The additional loan loss provision will be recognized in the fourth quarter of 2006. The after-tax impact on net income is expected to be approximately $3.1 million, or $0.18 per share. As a result of this additional provision, net income for the fourth-quarter and full-year 2006 is $2.8 million and $19.8 million, respectively, instead of the $5.9 million and $22.9 million previously disclosed. Net income per diluted share for the fourth-quarter and full-year 2006 is $0.17 and $1.20, respectively, instead of the $0.36 and $1.38 per diluted share previously disclosed.
“In light of our ongoing investigation, which is still in the preliminary stage, we determined the need to revise our 2006 loan loss provision,” said Phil Koning, president. “We will aggressively seek to recover funds associated with this borrower.
“It is important to note that Macatawa Bank remains financially strong and well-capitalized. We have a solid foundation and, with the support of our shareholders and employees, will continue to grow.”
Revised financial results are attached to this press release. These results supersede the results previously disclosed in the January 15, 2007 press release.
About Macatawa Bank
Headquartered in Holland, Mich.,
Macatawa Bank Corp. is the parent company for Macatawa Bank, Macatawa Bank Mortgage Co.
and Macatawa Investment Services. Through its subsidiaries, the Corporation offers a full
range of banking, investment and trust services to individuals, businesses and
governmental entities from a network of 24 full-service branches located throughout
communities in Kent, Ottawa and northern Allegan counties. Services include commercial,
consumer and real estate financing; business and personal deposit services; ATMs 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. For more
information, visit www.macatawabank.com.
“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
REVISED CONSOLIDATED FINANCIAL SUMMARY
These results supersede the
results previously disclosed in the January 15, 2007 press release.
(Unaudited)
(Dollars in thousands except per share information)
| Three Months Ended December 31 | Twelve Months Ended December 31 | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2006 | 2005 | 2006 | 2005 | |||||||||||
| EARNINGS SUMMARY | ||||||||||||||
| Total interest income | $ | 35,589 | $ | 29,087 | $ | 133,506 | $ | 105,395 | ||||||
| Total interest expense | 18,544 | 12,686 | 66,089 | 42,558 | ||||||||||
| Net interest income | 17,045 | 16,401 | 67,417 | 62,837 | ||||||||||
| Provision for loan loss | 5,725 | 795 | 7,715 | 3,675 | ||||||||||
| Net interest income after provision for loan loss | 11,320 | 15,606 | 59,702 | 59,162 | ||||||||||
| NON-INTEREST INCOME | ||||||||||||||
| Deposit service charges | 1,231 | 1,185 | 4,874 | 4,323 | ||||||||||
| Gain on sale of loans | 433 | 544 | 1,721 | 2,336 | ||||||||||
| Trust fees | 1,096 | 744 | 3,589 | 2,921 | ||||||||||
| Other | 1,091 | 841 | 3,993 | 3,424 | ||||||||||
| Total non-interest income | 3,851 | 3,314 | 14,177 | 13,004 | ||||||||||
| NON-INTEREST EXPENSE | ||||||||||||||
| Salaries and benefits | 6,268 | 5,798 | 24,791 | 22,388 | ||||||||||
| Occupancy | 928 | 852 | 3,558 | 3,239 | ||||||||||
| Furniture and equipment | 859 | 793 | 3,221 | 2,975 | ||||||||||
| Other | 3,182 | 3,370 | 13,343 | 12,821 | ||||||||||
| Total non-interest expense | 11,237 | 10,813 | 44,913 | 41,423 | ||||||||||
| Income before income tax | 3,934 | 8,107 | 28,966 | 30,743 | ||||||||||
| Federal income tax expense | 1,089 | 2,565 | 9,135 | 9,854 | ||||||||||
| Net income | $ | 2,845 | $ | 5,542 | $ | 19,831 | $ | 20,889 | ||||||
| Basic earnings per share | $ | 0.18 | $ | 0.34 | $ | 1.22 | $ | 1.30 | ||||||
| Diluted earnings per share | $ | 0.17 | $ | 0.34 | $ | 1.20 | $ | 1.27 | ||||||
| Return on average assets | 0.56 | % | 1.20 | % | 1.01 | % | 1.17 | % | ||||||
| Return on average equity | 7.17 | % | 15.69 | % | 13.09 | % | 15.30 | % | ||||||
| Net interest margin | 3.55 | % | 3.82 | % | 3.67 | % | 3.81 | % | ||||||
| Efficiency ratio | 53.78 | % | 54.85 | % | 55.04 | % | 54.62 | % | ||||||
| BALANCE SHEET DATA | December 31 2006 | December 31 2005 | ||||||
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash and due from banks | $ | 39,882 | $ | 49,101 | ||||
| Securities available for sale | 198,546 | 156,696 | ||||||
| Securities held to maturity | 2,711 | 3,907 | ||||||
| Federal Home Loan Bank Stock | 12,275 | 13,910 | ||||||
| Loans held for sale | 1,547 | 2,331 | ||||||
| Total loans | 1,711,450 | 1,547,879 | ||||||
| Less allowance for loan loss | 23,259 | 20,992 | ||||||
| Net loans | 1,688,191 | 1,526,887 | ||||||
| Premises and equipment, net | 60,731 | 53,028 | ||||||
| Acquisition intangibles | 25,478 | 25,856 | ||||||
| Bank-owned life insurance | 21,843 | 20,814 | ||||||
| Other assets | 23,612 | 17,460 | ||||||
| Total Assets | $ | 2,074,816 | $ | 1,869,990 | ||||
| Liabilities and Shareholders' Equity | ||||||||
| Noninterest-bearing deposits | $ | 180,032 | $ | 188,762 | ||||
| Interest-bearing deposits | 1,487,525 | 1,319,010 | ||||||
| Total deposits | 1,667,557 | 1,507,772 | ||||||
| Federal funds purchased | 11,990 | 25,809 | ||||||
| Other borrowed funds | 192,018 | 145,161 | ||||||
| Long-term debt | 41,238 | 41,238 | ||||||
| Other liabilities | 5,164 | 8,266 | ||||||
| Total Liabilities | 1,917,967 | 1,728,246 | ||||||
| Shareholders' equity | 156,849 | 141,744 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 2,074,816 | $ | 1,869,990 | ||||
MACATAWA BANK CORPORATION
REVISED SELECTED CONSOLIDATED FINANCIAL DATA
These results supersede the
results previously disclosed in the January 15, 2007 press release.
(Unaudited)
(Dollars in thousands except per share information)
| Quarterly | Year to Date | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 4th Qtr 2006 | 3rd Qtr 2006 | 2nd Qtr 2006 | 1st Qtr 2006 | 4th Qtr 2005 | 2006 | 2005 | |||||||||||||||||
| EARNINGS SUMMARY | |||||||||||||||||||||||
| Net interest income | $ | 17,045 | $ | 17,083 | $ | 16,975 | $ | 16,314 | $ | 16,401 | $ | 67,417 | $ | 62,837 | |||||||||
| Provision for loan loss | 5,725 | 490 | 800 | 700 | 795 | 7,715 | 3,675 | ||||||||||||||||
| Total non-interest income | 3,851 | 3,503 | 3,629 | 3,194 | 3,314 | 14,177 | 13,004 | ||||||||||||||||
| Total non-interest expense | 11,237 | 11,257 | 11,333 | 11,085 | 10,813 | 44,913 | 41,423 | ||||||||||||||||
| Income taxes | 1,089 | 2,830 | 2,715 | 2,501 | 2,565 | 9,135 | 9,854 | ||||||||||||||||
| Net income | $ | 2,845 | $ | 6,009 | $ | 5,756 | $ | 5,222 | $ | 5,542 | $ | 19,831 | $ | 20,889 | |||||||||
| Basic earnings per share | $ | 0.18 | $ | 0.37 | $ | 0.36 | $ | 0.32 | $ | 0.34 | $ | 1.22 | $ | 1.30 | |||||||||
| Diluted earnings per share | $ | 0.17 | $ | 0.36 | $ | 0.35 | $ | 0.32 | $ | 0.34 | $ | 1.20 | $ | 1.27 | |||||||||
| MARKET DATA | |||||||||||||||||||||||
| Book value per share | $ | 9.65 | $ | 9.56 | $ | 9.13 | $ | 8.97 | $ | 8.80 | $ | 9.65 | $ | 8.80 | |||||||||
| Market value per share | $ | 21.26 | $ | 22.89 | $ | 23.39 | $ | 24.07 | $ | 23.10 | $ | 22.89 | $ | 23.10 | |||||||||
| Average basic common shares | 16,227,588 | 16,214,390 | 16,200,172 | 16,164,946 | 16,100,083 | 16,201,514 | 16,060,600 | ||||||||||||||||
| Average diluted common shares | 16,553,239 | 16,557,849 | 16,542,131 | 16,568,345 | 16,520,970 | 16,551,879 | 16,485,069 | ||||||||||||||||
| Period end common shares | 16,233,179 | 16,221,682 | 16,205,196 | 16,188,015 | 16,109,087 | 16,233,179 | 16,109,087 | ||||||||||||||||
| PERFORMANCE RATIOS | |||||||||||||||||||||||
| Return on average assets | 0.56 | % | 1.20 | % | 1.18 | % | 1.11 | % | 1.20 | % | 1.01 | % | 1.17 | % | |||||||||
| Return on average equity | 7.17 | % | 15.69 | % | 15.53 | % | 14.34 | % | 15.69 | % | 13.09 | % | 15.30 | % | |||||||||
| Net interest margin (FTE) | 3.55 | % | 3.62 | % | 3.74 | % | 3.78 | % | 3.82 | % | 3.67 | % | 3.81 | % | |||||||||
| Efficiency ratio | 53.78 | % | 54.68 | % | 55.00 | % | 56.82 | % | 54.85 | % | 55.04 | % | 54.62 | % | |||||||||
| ASSET QUALITY | |||||||||||||||||||||||
| Net charge-offs | $ | 4,894 | $ | 208 | $ | 46 | $ | 300 | $ | 329 | $ | 5,448 | $ | 1,934 | |||||||||
| Nonperforming loans | $ | 22,290 | $ | 5,768 | $ | 5,781 | $ | 5,545 | $ | 4,204 | $ | 22,290 | $ | 4,204 | |||||||||
| Other real estate and repossessed assets | $ | 3,293 | $ | 2,758 | $ | 1,725 | $ | 1,401 | $ | 692 | $ | 3,293 | $ | 692 | |||||||||
| Nonperforming loans to total loans | 1.30 | % | 0.34 | % | 0.35 | % | 0.35 | % | 0.27 | % | 1.30 | % | 0.27 | % | |||||||||
| Nonperforming assets to total assets | 1.23 | % | 0.42 | % | 0.38 | % | 0.36 | % | 0.26 | % | 1.23 | % | 0.26 | % | |||||||||
| Net charge-offs to average loans (annualized) | 1.16 | % | 0.05 | % | 0.01 | % | 0.08 | % | 0.09 | % | 0.33 | % | 0.13 | % | |||||||||
| Allowance for loan loss to total loans | 1.36 | % | 1.33 | % | 1.34 | % | 1.35 | % | 1.36 | % | 1.36 | % | 1.36 | % | |||||||||
| CAPITAL & LIQUIDITY | |||||||||||||||||||||||
| Average equity to average assets | 7.77 | % | 7.62 | % | 7.61 | % | 7.76 | % | 7.66 | % | 7.69 | % | 7.66 | % | |||||||||
| Tier 1 capital to risk-weighted assets | 9.49 | % | 9.59 | % | 9.49 | % | 9.69 | % | 9.69 | % | 9.49 | % | 9.69 | % | |||||||||
| Total capital to risk-weighted assets | 10.85 | % | 10.95 | % | 10.85 | % | 11.06 | % | 11.07 | % | 10.85 | % | 11.07 | % | |||||||||
| Loans to deposits + Other borrowed funds | 92.03 | % | 91.69 | % | 93.88 | % | 94.52 | % | 93.64 | % | 92.03 | % | 93.64 | % | |||||||||
| END OF PERIOD BALANCES | |||||||||||||||||||||||
| Total portfolio loans | $ | 1,711,450 | $ | 1,682,359 | $ | 1,653,035 | $ | 1,590,138 | $ | 1,547,879 | $ | 1,711,450 | $ | 1,547,879 | |||||||||
| Earning assets | 1,921,735 | 1,897,447 | 1,841,812 | 1,776,486 | 1,725,832 | 1,921,735 | 1,725,832 | ||||||||||||||||
| Total assets | 2,074,816 | 2,041,031 | 1,981,318 | 1,903,965 | 1,869,990 | 2,074,816 | 1,869,990 | ||||||||||||||||
| Deposits | 1,667,557 | 1,632,816 | 1,573,101 | 1,542,567 | 1,507,772 | 1,667,557 | 1,507,772 | ||||||||||||||||
| Total shareholders' equity | 156,849 | 155,125 | 147,899 | 145,153 | 141,744 | 156,849 | 141,744 | ||||||||||||||||
| AVERAGE BALANCES | |||||||||||||||||||||||
| Total portfolio loans | $ | 1,686,139 | $ | 1,664,378 | $ | 1,626,102 | $ | 1,563,277 | $ | 1,528,007 | $ | 1,635,391 | $ | 1,471,404 | |||||||||
| Earning assets | 1,903,566 | 1,873,191 | 1,815,807 | 1,743,952 | 1,710,742 | 1,834,673 | 1,654,145 | ||||||||||||||||
| Total assets | 2,042,005 | 2,010,840 | 1,949,399 | 1,876,713 | 1,843,737 | 1,970,305 | 1,783,032 | ||||||||||||||||
| Deposits | 1,616,606 | 1,605,567 | 1,556,712 | 1,517,460 | 1,445,437 | 1,574,444 | 1,390,418 | ||||||||||||||||
| Total shareholders' equity | 158,716 | 153,147 | 148,252 | 145,639 | 141,311 | 151,479 | 136,512 | ||||||||||||||||