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, 2014

Portfolio loans were as follows (dollars in thousands):

	March 31,			December 31,
	2014			2013
Commercial and industrial	$	271,924		$	274,099

Commercial real estate:
Residential developed		15,204			18,130
Unsecured to residential developers		7,112			7,315
Vacant and unimproved		44,538			42,988
Commercial development		2,236			2,434
Residential improved		73,341			76,294
Commercial improved		244,261			247,195
Manufacturing and industrial		76,505			77,984
Total commercial real estate		463,197			472,340

Consumer
Residential mortgage		189,926			188,648
Unsecured		1,285			1,337
Home equity		94,148			95,961
Other secured		9,631			9,992
Total consumer		294,990			295,938

Total loans		1,030,111			1,042,377
Allowance for loan losses		(20,383	)		(20,798	)

	$	1,009,728		$	1,021,579

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):

	Commercial and			Commercial
Three months ended March 31, 2014	Industrial			Real Estate			Consumer			Unallocated			Total
Beginning balance	$	6,174		$	10,868		$	3,703		$	53		$	20,798
Charge-offs		(39	)		---			(43	)		---			(82	)
Recoveries		39			590			38			---			667
Provision for loan losses		(87	)		(1,086	)		177			(4	)		(1,000	)
Ending Balance	$	6,087		$	10,372		$	3,875		$	49		$	20,383

	Commercial and			Commercial
Three months ended March 31, 2013	Industrial			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

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):

	Commercial and		Commercial
March 31, 2014	Industrial		Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	2,134	$	987	$	873	$	---	$	3,994
Collectively evaluated for impairment		3,953		9,385		3,002		49		16,389
Total ending allowance balance	$	6,087	$	10,372	$	3,875	$	49	$	20,383

Loans:
Individually reviewed for impairment	$	15,173	$	41,645	$	14,372	$	---	$	71,190
Collectively evaluated for impairment		256,751		421,552		280,618		---		958,921
Total ending loans balance	$	271,924	$	463,197	$	294,990	$	---	$	1,030,111

	Commercial and		Commercial
December 31, 2013:	Industrial		Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	1,981	$	1,008	$	881	$	---	$	3,870
Collectively evaluated for impairment		4,193		9,860		2,822		53		16,928
Total ending allowance balance	$	6,174	$	10,868	$	3,703	$	53	$	20,798

Loans:
Individually reviewed for impairment	$	13,155	$	41,285	$	14,483	$	---	$	68,923
Collectively evaluated for impairment		260,944		431,055		281,455		---		973,454
Total ending loans balance	$	274,099	$	472,340	$	295,938	$	---	$	1,042,377

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, 2014 (dollars in thousands):

	Unpaid
	Principal		Recorded		Allowance
March 31, 2014	Balance		Investment		Allocated
With no related allowance recorded:
Commercial and industrial	$	5,360	$	5,360	$	---

Commercial real estate:
Residential developed		3,826		2,893		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		---		---		---
Commercial development		286		286		---
Residential improved		475		475		---
Commercial improved		2,887		2,098		---
Manufacturing and industrial		253		253		---
		7,727		6,005		---
Consumer:
Residential mortgage		---		---		---
Unsecured		---		---		---
Home equity		---		---		---
Other secured		---		---		---
		---		---		---
	$	13,087	$	11,365	$	---

With an allowance recorded:
Commercial and industrial	$	9,813	$	9,813	$	2,134

Commercial real estate:
Residential developed		1,339		1,339		37
Unsecured to residential developers		---		---		---
Vacant and unimproved		1,672		1,672		50
Commercial development		205		205		6
Residential improved		9,881		9,881		320
Commercial improved		15,956		15,956		463
Manufacturing and industrial		6,587		6,587		111
		35,640		35,640		987
Consumer:
Residential mortgage		9,398		9,398		571
Unsecured		---		---		---
Home equity		4,974		4,974		302
Other secured		---		---		---
		14,372		14,372		873
	$	59,825	$	59,825	$	3,994

Total	$	72,912	$	71,190	$	3,994

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

	Unpaid
	Principal		Recorded		Allowance
December 31, 2013	Balance		Investment		Allocated
With no related allowance recorded:
Commercial and industrial	$	3,287	$	3,284	$	---

Commercial real estate:
Residential developed		5,273		4,340		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		3		3		---
Commercial development		362		362		---
Residential improved		1,493		1,493		---
Commercial improved		2,797		2,272		---
Manufacturing and industrial		252		252		---
		10,180		8,722		---
Consumer:
Residential mortgage		---		---		---
Unsecured		---		---		---
Home equity		---		---		---
Other secured		---		---		---
		---		---		---
	$	13,467	$	12,006	$	---

With an allowance recorded:
Commercial and industrial	$	9,871	$	9,871	$	1,981

Commercial real estate:
Residential developed		618		618		33
Unsecured to residential developers		---		---		---
Vacant and unimproved		1,900		1,900		47
Commercial development		207		207		5
Residential improved		9,534		9,534		342
Commercial improved		14,450		14,450		479
Manufacturing and industrial		5,854		5,854		102
		32,563		32,563		1,008
Consumer:
Residential mortgage		9,454		9,454		575
Unsecured		---		---		---
Home equity		5,029		5,029		306
Other secured		---		---		---
		14,483		14,483		881
	$	56,917	$	56,917	$	3,870

Total	$	70,384	$	68,923	$	3,870

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, 2014 and 2013 (dollars in thousands):

	Three		Three
	Months		Months
	Ended		Ended
	March 31,		March 31,
	2014		2013
Average of impaired loans during the period:
Commercial and industrial	$	14,284	$	17,233

Commercial real estate:
Residential developed		4,532		7,128
Unsecured to residential developers		---		---
Vacant and unimproved		1,820		3,647
Commercial development		527		16
Residential improved		10,419		12,526
Commercial improved		18,291		21,945
Manufacturing and industrial		6,719		7,018

Consumer		14,415		14,651

Interest income recognized during impairment:
Commercial and industrial		338		343
Commercial real estate		453		618
Consumer		132		123

Cash-basis interest income recognized
Commercial and industrial		338		337
Commercial real estate		452		589
Consumer		134		124

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

The following tables present the recorded investment in nonaccrual and loans past due over 90 days still on accrual by class of loans as of March 31, 2014 and December 31, 2013:

			Over 90
			days
March 31, 2014	Nonaccrual		Accruing

Commercial and industrial	$	8,077	$	---

Commercial real estate:
Residential developed		2,205		---
Unsecured to residential developers		---		---
Vacant and unimproved		---		---
Commercial development		29		---
Residential improved		1,065		---
Commercial improved		2,377		623
Manufacturing and industrial		---		---
		5,676		623
Consumer:
Residential mortgage		621		141
Unsecured		81		---
Home equity		329		---
Other secured		---		---
		1,031		141
Total	$	14,784	$	764

			Over 90
			days
December 31, 2013	Nonaccrual		Accruing

Commercial and industrial	$	5,625	$	---

Commercial real estate:
Residential developed		2,590		153
Unsecured to residential developers		---		---
Vacant and unimproved		---		---
Commercial development		23		---
Residential improved		429		---
Commercial improved		2,511		---
Manufacturing and industrial		---		---
		5,553		153
Consumer:
Residential mortgage		639		---
Unsecured		33		---
Home equity		332		---
Other secured		---		---
		1,004		---
Total	$	12,182	$	153

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, 2014 and December 31, 2013 by class of loans (dollars in thousands):

		30-90	Greater Than		Total		Loans Not
March 31, 2014		Days	90 Days		Past Due		Past Due		Total
Commercial and industrial	$	21	$	---	$	21	$	271,903	$	271,924

Commercial real estate:
Residential developed		---		1,917		1,917		13,287		15,204
Unsecured to residential developers		---		---		---		7,112		7,112
Vacant and unimproved		---		---		---		44,538		44,538
Commercial development		---		29		29		2,207		2,236
Residential improved		176		697		873		72,468		73,341
Commercial improved		262		2,673		2,935		241,326		244,261
Manufacturing and industrial		---		---		---		76,505		76,505
		438		5,316		5,754		457,443		463,197
Consumer:
Residential mortgage		78		141		219		189,707		189,926
Unsecured		---		---		---		1,285		1,285
Home equity		539		---		539		93,609		94,148
Other secured		23		---		23		9,608		9,631
		640		141		781		294,209		294,990
Total	$	1,099	$	5,457	$	6,556	$	1,023,555	$	1,030,111

		30-90	Greater Than		Total		Loans Not
December 31, 2013		Days	90 Days		Past Due		Past Due		Total
Commercial and industrial	$	---	$	---	$	---	$	274,099	$	274,099

Commercial real estate:
Residential developed		143		2,296		2,439		15,691		18,130
Unsecured to residential developers		---		---		---		7,315		7,315
Vacant and unimproved		---		---		---		42,988		42,988
Commercial development		---		23		23		2,411		2,434
Residential improved		98		50		148		76,146		76,294
Commercial improved		438		2,056		2,494		244,701		247,195
Manufacturing and industrial		---		---		---		77,984		77,984
		679		4,425		5,104		467,236		472,340
Consumer:
Residential mortgage		78		---		78		188,570		188,648
Unsecured		9		---		9		1,328		1,337
Home equity		317		---		317		95,644		95,961
Other secured		12		---		12		9,980		9,992
		416		---		416		295,522		295,938
Total	$	1,095	$	4,425	$	5,520	$	1,036,857	$	1,042,377

Troubled debt restructurings

The following table presents information regarding troubled debt restructurings as of March 31, 2014 and December 31, 2013 (dollars in thousands):

	March 31, 2014				December 31, 2013
	Number of Loans		Outstanding Recorded Balance		Number of Loans		Outstanding Recorded Balance
Commercial and industrial		37	$	9,082		43	$	7,787
Commercial real estate		118		46,238		122		45,774
Consumer		106		14,426		106		14,531
		261	$	69,746		271	$	68,092

The following tables present information regarding troubled debt restructurings executed during the three month periods ended March 31, 2014 and 2013 (dollars in thousands):

Three Months Ended March 31, 2014	Number of Loans		Pre-Modification Outstanding Recorded Balance		Principal Writedown upon Modification
Commercial and industrial		1	$	60	$	---
Commercial real estate		4		2,263		---
Consumer		1		4		---
		6	$	2,327	$	---

Three Months Ended March 31, 2013	Number of Loans		Pre-Modification Outstanding Recorded Balance		Principal Writedown upon Modification
Commercial and industrial		1	$	25	$	---
Commercial real estate		5		1,441		---
Consumer		23		5,022		1,770
		29	$	6,488	$	1,770

Modifications and renewal during period that are not considered TDRs

The following table presents information regarding modifications and renewals executed during the three month periods ended March 31, 2014 and 2013 that are not considered TDRs (dollars in thousands):

	Three Months Ended					Three Months Ended
	March 31, 2014					March 31, 2013
	Number of Loans		Outstanding Recorded Balance			Number of Loans		Outstanding Recorded Balance
Commercial and industrial		65		$	15,984		86		$	29,927
Commercial real estate		40			7,585		94			35,589
Consumer		8			1,002		11			194
		113		$	24,571		191		$	65,710

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, 2014 and 2013 (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					Three Months Ended
	March 31, 2014					March 31, 2013
	Number of Loans		Outstanding Recorded Balance			Number of Loans		Outstanding Recorded Balance
Commercial and industrial		---		$	---		---		$	---
Commercial real estate		1			131		---			---
Consumer		---			---		---			---

Risk grade category of loans by class of loans

As of March 31, 2014 and December 31, 2013, the risk grade category of commercial loans by class of loans were as follows (dollars in thousands):

March 31, 2014		1		2		3		4		5		6		7		8
Commercial and industrial	$	505	$	13,640	$	76,159	$	159,056	$	13,196	$	1,291	$	8,077	$	---

Commercial real estate:
Residential developed		---		---		583		5,396		6,025		995		2,205		---
Unsecured to residential developers		---		---		---		7,107		5		---		---		---
Vacant and unimproved		---		---		12,171		25,174		6,799		394		---		---
Commercial development		---		---		---		1,485		517		205		29		---
Residential improved		---		108		15,005		43,039		8,912		5,212		1,065		---
Commercial improved		---		6,413		48,175		159,483		22,453		5,360		2,377		---
Manufacturing and industrial		---		787		23,386		42,512		9,178		642		---		---
	$	505	$	20,948	$	175,479	$	443,252	$	67,085	$	14,099	$	13,753	$	---

December 31, 2013		1		2		3		4		5		6		7		8
Commercial and industrial	$	509	$	15,836	$	81,577	$	155,680	$	13,513	$	1,359	$	5,625	$	---

Commercial real estate:
Residential developed		---		---		2,039		5,653		5,232		2,616		2,590		---
Unsecured to residential developers		---		---		---		7,309		6		---		---		---
Vacant and unimproved		---		---		11,191		24,638		6,761		398		---		---
Commercial development		---		---		---		1,673		532		207		23		---
Residential improved		---		109		15,121		45,018		9,391		6,226		429		---
Commercial improved		---		7,382		45,391		161,897		24,937		5,075		2,511		---
Manufacturing and industrial		---		311		24,546		42,133		10,402		593		---		---
	$	509	$	23,638	$	179,865	$	444,001	$	70,774	$	16,474	$	11,178	$	---

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,			December 31,
	2014			2013
Not classified as impaired		$	5,501		$	7,400
Classified as impaired			22,351			20,252
Total commercial loans classified substandard or worse		$	27,852		$	27,652

Recorded investment in consumer loans based on payment activity

The following table presents the recorded investment in consumer loans based on payment activity (dollars in thousands):

	Residential			Consumer			Home			Consumer
March 31, 2014	Mortgage			Unsecured			Equity			Other
Performing		$	189,785		$	1,285		$	94,148		$	9,631
Nonperforming			141			---			---			---
Total		$	189,926		$	1,285		$	94,148		$	9,631

	Residential			Consumer			Home			Consumer
December 31, 2013	Mortgage			Unsecured			Equity			Other
Performing		$	188,648		$	1,337		$	95,961		$	9,992
Nonperforming			---			---			---			---
Total		$	188,648		$	1,337		$	95,961		$	9,992