Macatawa Bank Corporation Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LOANS (Tables)

LOANS (Tables)

3 Months Ended

Mar. 31, 2013

Portfolio loans were as follows (dollars in thousands):

	March 31, 2013			December 31, 2012

Commercial and industrial	$	259,145		$	264,690

Commercial real estate:
Residential developed		23,620			26,090
Unsecured to residential developers		7,121			557
Vacant and unimproved		54,036			56,525
Commercial development		1,500			1,799
Residential improved		76,788			75,813
Commercial improved		254,313			255,738
Manufacturing and industrial		80,152			81,447
Total commercial real estate		497,530			497,969

Consumer
Residential mortgage		183,879			182,625
Unsecured		1,689			1,683
Home equity		96,914			92,764
Other secured		11,852			12,617
Total consumer		294,334			289,689

Total loans		1,051,009			1,052,348
Allowance for loan losses		(23,487	)		(23,739	)

	$	1,027,522		$	1,028,609

Activity in allowance for loan losses by portfolio segment

Activity in the allowance for loan losses by portfolio segment was as follows (dollars in thousands):

Three months ended March 31, 2013:	Commercial and Industrial			Commercial Real Estate			Consumer			Unallocated		Total
Beginning balance	$	6,459		$	13,457		$	3,787		$	36	$	23,739
Charge-offs		(161	)		(237	)		(244	)		---		(642	)
Recoveries		355			684			101			---		1,140
Provision for loan losses		(673	)		(546	)		458			11		(750	)
Ending Balance	$	5,980		$	13,358		$	4,102		$	47	$	23,487

Three months ended March 31, 2012:	Commercial and Industrial			Commercial Real Estate			Consumer			Unallocated			Total
Beginning balance	$	6,313		$	20,475		$	4,821		$	32		$	31,641
Charge-offs		(968	)		(1,707	)		(822	)		---			(3,497	)
Recoveries		171			4,683			53			---			4,907
Provision for loan losses		1,991			(5,886	)		314			(19	)		(3,600	)
Ending Balance	$	7,507		$	17,565		$	4,366		$	13		$	29,451

Allowance for loan losses and recorded investment in loans by portfolio segment based on impairment method

The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method (dollars in thousands):

March 31, 2013:

	Commercial and Industrial		Commercial Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	2,290	$	2,135	$	1,078	$	---	$	5,503
Collectively evaluated for impairment		3,690		11,223		3,024		47		17,984
Total ending allowance balance	$	5,980	$	13,358	$	4,102	$	47	$	23,487

Loans:
Individually reviewed for impairment	$	17,497	$	50,557	$	15,338	$	---	$	83,392
Collectively evaluated for impairment		241,648		446,973		278,996		---		967,617
Total ending loans balance	$	259,145	$	497,530	$	294,334	$	---	$	1,051,009

December 31, 2012:

	Commercial and Industrial		Commercial Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	2,920	$	2,418	$	716	$	---	$	6,054
Collectively evaluated for impairment		3,539		11,039		3,071		36		17,685
Total ending allowance balance	$	6,459	$	13,457	$	3,787	$	36	$	23,739

Loans:
Individually reviewed for impairment	$	14,390	$	54,831	$	14,086	$	---	$	83,307
Collectively evaluated for impairment		250,300		443,138		275,603		---		969,041
Total ending loans balance	$	264,690	$	497,969	$	289,689	$	---	$	1,052,348

Loans individually evaluated for impairment by class of loans

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2013 (dollars in thousands):

	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
With no related allowance recorded:
Commercial and industrial	$	6,882	$	6,879	$	-

Commercial real estate:
Residential developed		5,854		4,741		-
Unsecured to residential developers		-		-		-
Vacant and unimproved		1,303		1,261		-
Commercial development		-		-		-
Residential improved		840		705		-
Commercial improved		5,275		3,035		-
Manufacturing and industrial		1,033		1,033		-
		14,305		10,775
Consumer:
Residential mortgage		-		-		-
Unsecured		-		-		-
Home equity		-		-		-
Other secured		-		-		-
		-		-		-
	$	21,187	$	17,654	$	-

With an allowance recorded:
Commercial and industrial	$	10,618	$	10,618	$	2,290

Commercial real estate:
Residential developed		1,814		1,814		322
Unsecured to residential developers		-		-		-
Vacant and unimproved		2,073		2,073		67
Commercial development		15		15		1
Residential improved		11,245		11,245		508
Commercial improved		18,933		18,933		1,072
Manufacturing and industrial		5,702		5,702		165
		39,782		39,782		2,135
Consumer:
Residential mortgage		9,960		9,880		694
Unsecured		-		-		-
Home equity		5,458		5,458		384
Other secured		-		-		-
		15,418		15,338		1,078
	$	65,818	$	65,738	$	5,503

Total	$	87,005	$	83,392	$	5,503

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2012 (dollars in thousands):

	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
With no related allowance recorded:
Commercial and industrial	$	2,515	$	2,512	$	-

Commercial real estate:
Residential developed		7,136		6,283		-
Unsecured to residential developers		-		-		-
Vacant and unimproved		2,321		2,136		-
Commercial development		213		213		-
Residential improved		3,293		3,019		-
Commercial improved		7,268		6,127		-
Manufacturing and industrial		3,686		3,686		-
		23,917		21,464
Consumer:
Residential mortgage		4,614		3,062		-
Unsecured		-		-		-
Home equity		-		-		-
Other secured		-		-		-
		4,614		3,062		-
	$	31,046	$	27,038	$	-

With an allowance recorded:
Commercial and industrial	$	11,878	$	11,878	$	2,920

Commercial real estate:
Residential developed		1,524		1,524		337
Unsecured to residential developers		-		-		-
Vacant and unimproved		1,688		1,688		34
Commercial development		-		-		-
Residential improved		10,063		10,063		842
Commercial improved		15,386		15,386		1,071
Manufacturing and industrial		4,706		4,706		134
		33,367		33,367		2,418
Consumer:
Residential mortgage		10,220		10,220		664
Unsecured		-		-		-
Home equity		804		804		52
Other secured		-		-		-
		11,024		11,024		716
	$	56,269	$	56,269	$	6,054

Total	$	87,315	$	83,307	$	6,054

Average balances of impaired loans and interest recognized on impaired loans

The following table presents information regarding average balances of impaired loans and interest recognized on impaired loans for the three month periods ended March 31, 2013 and 2012 (dollars in thousands):

	Three Months Ended March 31, 2013		Three Months Ended March 31, 2012
Average of impaired loans during the period:
Commercial and industrial	$	17,233	$	18,960

Commercial real estate:
Residential developed		7,128		9,468
Unsecured to residential developers		-		-
Vacant and unimproved		3,647		3,483
Commercial development		16		219
Residential improved		12,526		14,545
Commercial improved		21,945		16,100
Manufacturing and industrial		7,018		9,468

Consumer		14,651		15,924

Interest income recognized during impairment:
Commercial and industrial		343		340
Commercial real estate		618		654
Consumer		123		140

Cash-basis interest income recognized
Commercial and industrial		337		319
Commercial real estate		589		619
Consumer		124		138

Recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2013:

	Nonaccrual		Over 90 days Accruing
Commercial and industrial	$	8,781	$	-

Commercial real estate:
Residential developed		2,135		-
Unsecured to residential developers		-		-
Vacant and unimproved		130		-
Commercial development		2		-
Residential improved		775		-
Commercial improved		1,207		224
Manufacturing and industrial		200		-
		4,449		224
Consumer:
Residential mortgage		207		91
Unsecured		19		-
Home equity		359		44
Other secured		-		-
		585		135
Total	$	13,815	$	359

The following table presents the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of December 31, 2012:

	Nonaccrual		Over 90 days Accruing
Commercial and industrial	$	7,657	$	-

Commercial real estate:
Residential developed		3,024		-
Unsecured to residential developers		-		-
Vacant and unimproved		706		-
Commercial development		2		196
Residential improved		1,159		-
Commercial improved		1,521		422
Manufacturing and industrial		225		-
		6,637		618
Consumer:
Residential mortgage		447		-
Unsecured		19		-
Home equity		625		-
Other secured		-		-
		1,091		-
Total	$	15,385	$	618

Aging of recorded investment in past due loans by class of loans

The following table presents the aging of the recorded investment in past due loans as of March 31, 2013 by class of loans (dollars in thousands):

	30-90 Days		Greater Than 90 Days		Total Past Due		Loans Not Past Due		Total

Commercial and industrial	$	120	$	247	$	367	$	258,778	$	259,145

Commercial real estate:
Residential developed		-		1,712		1,712		21,908		23,620
Unsecured to residential developers		-		-		-		7,121		7,121
Vacant and unimproved		409		96		505		53,531		54,036
Commercial development		-		2		2		1,498		1,500
Residential improved		335		160		495		76,293		76,788
Commercial improved		1,067		1,084		2,151		252,162		254,313
Manufacturing and industrial		-		200		200		79,952		80,152
		1,811		3,254		5,065		492,465		497,530
Consumer:
Residential mortgage		146		294		440		183,439		183,879
Unsecured		-		-		-		1,689		1,689
Home equity		289		370		659		96,255		96,914
Other secured		54		-		54		11,798		11,852
		489		664		1,153		293,181		294,334
Total	$	2,420	$	4,165	$	6,585	$	1,044,424	$	1,051,009

The following table presents the aging of the recorded investment in past due loans as of December 31, 2012 by class of loans (dollars in thousands):

	30-90 Days		Greater Than 90 Days		Total Past Due		Loans Not Past Due		Total

Commercial and industrial	$	395	$	219	$	614	$	264,076	$	264,690

Commercial real estate:
Residential developed		-		35		35		26,055		26,090
Unsecured to residential developers		-		-		-		557		557
Vacant and unimproved		17		652		669		55,856		56,525
Commercial development		-		199		199		1,600		1,799
Residential improved		520		192		712		75,101		75,813
Commercial improved		2,502		1,436		3,938		251,800		255,738
Manufacturing and industrial		200		25		225		81,222		81,447
		3,239		2,539		5,778		492,191		497,969
Consumer:
Residential mortgage		647		110		757		181,868		182,625
Unsecured		-		-		-		1,683		1,683
Home equity		415		264		679		92,085		92,764
Other secured		59		-		59		12,558		12,617
		1,121		374		1,495		288,194		289,689
Total	$	4,755	$	3,132	$	7,887	$	1,044,461	$	1,052,348

Troubled debt restructurings

The following table presents information regarding troubled debt restructurings as of March 31, 2013 and December 31, 2012 (dollars in thousands):

	March 31, 2013				December 31, 2012
	Number of Loans		Outstanding Recorded Balance		Number of Loans		Outstanding Recorded Balance
Commercial and industrial		59	$	16,142		58	$	14,485
Commercial real estate		138		47,701		142		49,936
Consumer		100		15,196		86		13,634
		297	$	79,039		286	$	78,055

The following table presents information regarding troubled debt restructurings executed during the three month periods ended March 31, 2013 and 2012 (dollars in thousands):

	Three Months Ended March 31, 2013						Three Months Ended March 31, 2012
	Number of Loans		Outstanding Recorded Balance		Principal Writedown upon Modification		Number of Loans		Outstanding Recorded Balance		Principal Writedown upon Modification

Commercial and industrial		1	$	25	$	-		10	$	1,243	$	-
Commercial real estate		5		1,441		-		30		6,396		86
Consumer		23		5,022		1,770		7		1,188		260
		29	$	6,488	$	1,770		47	$	8,827	$	346

Modifications and renewal during period that are not considered TDRs

According to the accounting standards, not all loan modifications are TDRs. TDRs are modifications or renewals where the Company has granted a concession to a borrower in financial distress. The Company reviews all modifications and renewals for determination of TDR status. In some situations a borrower may be experiencing financial distress, but the Company does not provide a concession. These modifications are not considered TDRs. In other cases, the Company might provide a concession, such as a reduction in interest rate, but the borrower is not experiencing financial distress. This could be the case if the Company is matching a competitor's interest rate. These modifications would also not be considered TDRs. Finally, any renewals at existing terms for borrowers not experiencing financial distress would not be considered TDRs. The following table presents information regarding modifications and renewals executed during the three month periods ended March 31, 2013 and March 31, 2012 that are not considered TDRs (dollars in thousands):

	Three Months Ended March 31, 2012			Three Months Ended March 31, 2012
	Number of Loans	Outstanding Recorded Balance		Number of Loans	Outstanding Recorded Balance

Commercial and industrial	86	$	29,927	94	$	33,290
Commercial real estate	94		35,589	79		36,800
Consumer	11		194	24		872
	191	$	65,710	197	$	70,962

Troubled debt restructured loans that defaulted during the period

The table below presents, by class, information regarding troubled debt restructured loans which had payment defaults during the three month periods ended March 31, 2013 and 2012 (dollars in thousands). Included are loans that became delinquent more than 90 days past due or transferred to nonaccrual within 12 months of restructuring.

	Three Months Ended March 31, 2013			Three Months Ended March 31, 2012
	Number of Loans	Outstanding Recorded Balance		Number of Loans	Outstanding Recorded Balance

Commercial and industrial	-	$	-	2	$	92
Commercial real estate	-		-	1		76
Consumer	-		-	1		70

Risk grade category of loans by class of loans

As of March 31, 2013, the risk grade category of commercial loans by class of loans was as follows (dollars in thousands):

	1		2		3		4		5		6		7		8

Commercial and industrial	$	1,297	$	18,350	$	66,913	$	146,421	$	14,782	$	2,601	$	8,781	$	-

Commercial real estate:
Residential developed		-		-		691		7,459		7,188		6,147		2,135		-
Unsecured to residential developers		-		-		-		7,111		10		-		-		-
Vacant and unimproved		-		-		12,097		30,029		10,581		1,199		130		-
Commercial development		-		-		-		477		1,006		15		2		-
Residential improved		-		114		10,256		43,933		14,178		7,532		775		-
Commercial improved		-		1,769		46,041		158,116		35,143		12,037		1,207		-
Manufacturing and industrial		-		277		21,490		45,669		9,270		3,246		200		-

	$	1,297	$	20,510	$	157,488	$	439,215	$	92,158	$	32,777	$	13,230	$	-

As of December 31, 2012, the risk grade category of commercial loans by class of loans was as follows (dollars in thousands):

	1		2		3		4		5		6		7		8

Commercial and industrial	$	1,349	$	20,630	$	72,723	$	146,415	$	12,027	$	3,884	$	7,662	$	-

Commercial real estate:
Residential developed		-		-		715		6,240		9,772		6,339		3,024		-
Unsecured to residential developers		-		-		-		545		12		-		-		-
Vacant and unimproved		-		-		12,532		29,654		12,412		1,221		706		-
Commercial development		-		-		-		482		1,102		213		2		-
Residential improved		-		115		9,973		41,578		14,471		8,517		1,159		-
Commercial improved		-		2,009		40,253		159,353		37,449		15,153		1,521		-
Manufacturing and industrial		-		2,087		17,795		48,061		9,592		3,687		225		-

	$	1,349	$	24,841	$	153,991	$	432,328	$	96,837	$	39,014	$	14,299	$	-

Commercial loans classified as substandard or worse

Commercial loans rated a 6 or worse per the Company's internal risk rating system are considered substandard, doubtful or loss. Commercial loans classified as substandard or worse were as follows at period-end (dollars in thousands):

	March 31, 2013		December 31, 2012

Not classified as impaired	$	11,287	$	13,015
Classified as impaired		34,720		40,298

Total commercial loans classified substandard or worse	$	46,007	$	53,313

Recorded investment in consumer loans based on payment activity

The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in consumer loans based on payment activity (dollars in thousands):

March 31, 2013	Residential Mortgage		Consumer Unsecured		Home Equity		Consumer Other
Performing	$	183,585	$	1,689	$	96,544	$	11,852
Nonperforming		294		-		370		-
Total	$	183,879	$	1,689	$	96,914	$	11,852

December 31, 2012	Residential Mortgage		Consumer Unsecured		Home Equity		Consumer Other
Performing	$	182,515	$	1,683	$	92,500	$	12,617
Nonperforming		110		-		264		-
Total	$	182,625	$	1,683	$	92,764	$	12,617