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

Quarterly report pursuant to Section 13 or 15(d)

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2022

SHAREHOLDERS' EQUITY [Abstract]

SHAREHOLDERS' EQUITY

NOTE 12 – 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.

NOTE 12 – SHAREHOLDERS’ EQUITY (Continued)

The regulatory capital requirements 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). The minimum leverage ratio is 4.0%.

At September 30, 2022 and December 31, 2021, actual capital levels and minimum required levels were (dollars in thousands):

						Minimum Capital					Minimum Capital Adequacy With					To Be Well Capitalized Under Prompt Corrective
	Actual					Adequacy					Capital Buffer					Action Regulations
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2022
CET1 capital (to risk weighted assets)
Consolidated	$	269,231		16.7	%	$	72,455		4.5	%	$	112,708		7.0	%		N/A		N/A
Bank		261,445		16.2			72,442		4.5			112,688		7.0		$	104,639		6.5	%
Tier 1 capital (to risk weighted assets)
Consolidated		269,231		16.7			96,607		6.0			136,860		8.5			N/A		N/A
Bank		261,445		16.2			96,589		6.0			136,835		8.5			128,786		8.0
Total capital (to risk weighted assets)
Consolidated		284,052		17.6			128,810		8.0			169,063		10.5			N/A		N/A
Bank		276,266		17.2			128,786		8.0			169,031		10.5			160,982		10.0
Tier 1 capital (to average assets)
Consolidated		269,331		9.3			115,941		4.0			N/A		N/A			N/A		N/A
Bank		261,445		9.0			115,930		4.0			N/A		N/A			144,912		5.0

December 31, 2021
CET1 capital (to risk weighted assets)
Consolidated	$	254,302		17.2	%	$	66,381		4.5	%	$	103,259		7.0	%		N/A		N/A
Bank		246,239		16.7			66,370		4.5			103,242		7.0		$	95,867		6.5	%
Tier 1 capital (to risk weighted assets)
Consolidated		254,302		17.2			88,508		6.0			125,386		8.5			N/A		N/A
Bank		246,239		16.7			88,493		6.0			125,365		8.5			117,991		8.0
Total capital (to risk weighted assets)
Consolidated		270,191		18.3			118,011		8.0			154,889		10.5			N/A		N/A
Bank		262,128		17.8			117,991		8.0			154,863		10.5			147,488		10.0
Tier 1 capital (to average assets)
Consolidated		254,302		8.7			116,664		4.0			N/A		N/A			N/A		N/A
Bank		246,239		8.4			116,654		4.0			N/A		N/A			145,818		5.0

The Bank was categorized as “well capitalized” at September 30, 2022 and December 31, 2021.

- 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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