Macatawa Bank Corporation Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

12 Months Ended

Dec. 31, 2020

SHAREHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

NOTE 17 – SHAREHOLDERS' EQUITY

Regulatory Capital

The Company and the Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements.

The prompt corrective action regulations provide five categories, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If a bank is only adequately capitalized, regulatory approval is required to, among other things, accept, renew or roll-over brokered deposits. If a bank is undercapitalized, capital distributions and growth and expansion are limited, and plans for capital restoration are required.

In July 2013, the Board of Governors of the Federal Reserve Board and the FDIC approved the rules implementing the Basel Committee on Banking Supervision's capital guidelines for U.S. banks (commonly known as Basel III). The rules include a common equity Tier 1 capital to risk-weighted assets ratio (CET1 ratio) of 4.5% and a capital conservation buffer of 2.5% of risk-weighted assets, which effectively results in a minimum CET1 ratio of 7.0%. The minimum ratio of Tier 1 capital to risk-weighted assets is 6.0% (which, with the capital conservation buffer, effectively results in a minimum Tier 1 capital ratio of 8.5%), which effectively results in a minimum total capital to risk-weighted assets ratio of 10.5% (with the capital conservation buffer), and requires a minimum leverage ratio of 4.0%.

Actual capital levels (dollars in thousands) and minimum required levels were as follows at year-end:

	Actual					Minimum Capital Adequacy					Minimum Capital Adequacy With Capital Buffer					To Be Well Capitalized Under Prompt Corrective Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2020
CET1 capital (to risk weighted assets)
Consolidated	$	235,629		15.8	%	$	67,170		4.5	%	$	104,487		7.0	%		N/A		N/A
Bank		248,829		16.7			67,161		4.5			104,473		7.0		$	97,010		6.5	%
Tier 1 capital (to risk weighted assets)
Consolidated		255,629		17.1			89,561		6.0			126,877		8.5			N/A		N/A
Bank		248,829		16.7			89,548		6.0			126,860		8.5			119,397		8.0
Total capital (to risk weighted assets)
Consolidated		273,037		18.3			119,414		8.0			156,731		10.5			N/A		N/A
Bank		266,237		17.8			119,397		8.0			156,709		10.5			149,247		10.0
Tier 1 capital (to average assets)
Consolidated		255,629		9.9			103,420		4.0			N/A		N/A			N/A		N/A
Bank		248,829		9.6			103,391		4.0			N/A		N/A			129,238		5.0

December 31, 2019
CET1 capital (to risk weighted assets)
Consolidated	$	215,925		13.5	%	$	72,187		4.5	%	$	112,290		7.0	%		N/A		N/A
Bank		228,761		14.3			72,182		4.5			112,284		7.0		$	104,263		6.5	%
Tier 1 capital (to risk weighted assets)
Consolidated		235,925		14.7			96,249		6.0			136,353		8.5			N/A		N/A
Bank		228,761		14.3			96,243		6.0			136,344		8.5			128,324		8.0
Total capital (to risk weighted assets)
Consolidated		253,125		15.8			128,332		8.0			168,436		10.5			N/A		N/A
Bank		245,961		15.3			128,324		8.0			168,425		10.5			160,405		10.0
Tier 1 capital (to average assets)
Consolidated		235,925		11.5			82,130		4.0			N/A		N/A			N/A		N/A
Bank		228,761		11.2			82,070		4.0			N/A		N/A			102,587		5.0

The full $20.0 million of trust preferred securities outstanding at December 31, 2020 and 2019, respectively, qualified as Tier 1 capital.

The Bank was categorized as "well capitalized" at December 31, 2020 and 2019.

- Definition

The entire disclosure for regulatory capital requirement for depository and lending institutions. Institutions include, but not are not limited to, finance company, insured depository institution, bank holding company, savings and loan association holding company, bank and savings institution not federally insured, mortgage company, foreign financial institution and credit union.

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