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, 2016

Portfolio loans were as follows (dollars in thousands):

	March 31, 2016			December 31, 2015
Commercial and industrial	$	388,625		$	377,298

Commercial real estate:
Residential developed		13,141			10,448
Unsecured to residential developers		7,491			7,372
Vacant and unimproved		45,429			42,881
Commercial development		658			559
Residential improved		68,858			67,922
Commercial improved		294,392			289,651
Manufacturing and industrial		86,747			89,839
Total commercial real estate		516,716			508,672

Consumer
Residential mortgage		214,104			209,972
Unsecured		577			637
Home equity		87,874			92,716
Other secured		8,288			8,637
Total consumer		310,843			311,962

Total loans		1,216,184			1,197,932
Allowance for loan losses		(17,129	)		(17,081	)
	$	1,199,055		$	1,180,851

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, 2016	Commercial and Industrial		Commercial Real Estate			Consumer			Unallocated			Total
Beginning balance	$	4,826		8,457		$	3,761		$	37		$	17,081
Charge-offs		---		---			(76	)		---			(76	)
Recoveries		49		121			54			---			224
Provision for loan losses		70		(129	)		(40	)		(1	)		(100	)
Ending Balance	$	4,945	$	8,449		$	3,699		$	36		$	17,129

Three months ended March 31, 2015	Commercial and Industrial			Commercial Real Estate			Consumer			Unallocated			Total
Beginning balance	$	6,173		$	8,690		$	4,046		$	53		$	18,962
Charge-offs		---			---			(78	)		---			(78	)
Recoveries		84			608			104			---			796
Provision for loan losses		(83	)		(728	)		(165	)		(24	)		(1,000	)
Ending Balance	$	6,174		$	8,570		$	3,907		$	29		$	18,680

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, 2016	Commercial and Industrial		Commercial Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	574	$	495	$	810	$	---	$	1,879
Collectively evaluated for impairment		4,371		7,954		2,889		36		15,250
Total ending allowance balance	$	4,945	$	8,449	$	3,699	$	36	$	17,129

Loans:
Individually reviewed for impairment	$	8,622	$	15,840	$	13,149	$	---	$	37,611
Collectively evaluated for impairment		380,003		500,876		297,694		---		1,178,573
Total ending loans balance	$	388,625	$	516,716	$	310,843	$	---	$	1,216,184

December 31, 2015	Commercial and Industrial		Commercial Real Estate		Consumer		Unallocated		Total
Allowance for loan losses:
Ending allowance attributable to loans:
Individually reviewed for impairment	$	673	$	436	$	829	$	---	$	1,938
Collectively evaluated for impairment		4,153		8,021		2,932		37		15,143
Total ending allowance balance	$	4,826	$	8,457	$	3,761	$	37	$	17,081

Loans:
Individually reviewed for impairment	$	7,718	$	17,569	$	13,463	$	---	$	38,750
Collectively evaluated for impairment		369,580		491,103		298,499		---		1,159,182
Total ending loans balance	$	377,298	$	508,672	$	311,962	$	---	$	1,197,932

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, 2016 (dollars in thousands):

March 31, 2016	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
With no related allowance recorded:
Commercial and industrial	$	4,094	$	4,094	$	---

Commercial real estate:
Residential developed		---		---		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		206		206		---
Commercial development		---		---		---
Residential improved		87		87		---
Commercial improved		---		---		---
Manufacturing and industrial		---		---		---
		293		293		---
Consumer:
Residential mortgage		---		---		---
Unsecured		---		---		---
Home equity		---		---		---
Other secured		---		---		---
		---		---		---
	$	4,387	$	4,387	$	---

With an allowance recorded:
Commercial and industrial	$	4,528	$	4,528	$	574

Commercial real estate:
Residential developed		---		---		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		237		237		6
Commercial development		192		192		6
Residential improved		5,423		5,423		260
Commercial improved		9,457		9,457		214
Manufacturing and industrial		238		238		9
		15,547		15,547		495
Consumer:
Residential mortgage		8,579		8,579		529
Unsecured		---		---		---
Home equity		4,570		4,570		281
Other secured		---		---		---
		13,149		13,149		810
	$	33,224	$	33,224	$	1,879

Total	$	37,611	$	37,611	$	1,879

The following table presents loans individually evaluated for impairment by class of loans as of December 31, 2015 (dollars in thousands):

December 31, 2015	Unpaid Principal Balance		Recorded Investment		Allowance Allocated
With no related allowance recorded:
Commercial and industrial	$	2,736	$	2,736	$	---

Commercial real estate:
Residential developed		---		---		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		206		206		---
Commercial development		---		---		---
Residential improved		5		5		---
Commercial improved		---		---		---
Manufacturing and industrial		---		---		---
		211		211		---
Consumer:
Residential mortgage		---		---		---
Unsecured		---		---		---
Home equity		---		---		---
Other secured		---		---		---
		---		---		---
	$	2,947	$	2,947	$	---

With an allowance recorded:
Commercial and industrial	$	4,982	$	4,982	$	673

Commercial real estate:
Residential developed		---		---		---
Unsecured to residential developers		---		---		---
Vacant and unimproved		247		247		7
Commercial development		192		192		6
Residential improved		5,254		5,254		140
Commercial improved		11,425		11,425		274
Manufacturing and industrial		240		240		9
		17,358		17,358		436
Consumer:
Residential mortgage		8,655		8,655		533
Unsecured		---		---		---
Home equity		4,808		4,808		296
Other secured		---		---		---
		13,463		13,463		829
	$	35,803	$	35,803	$	1,938

Total	$	38,750	$	38,750	$	1,938

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, 2016 and 2015 (dollars in thousands):

	Three Months Ended March 31, 2016		Three Months Ended March 31, 2015
Average of impaired loans during the period:
Commercial and industrial	$	8,265	$	9,703

Commercial real estate:
Residential developed		---		937
Unsecured to residential developers		---		---
Vacant and unimproved		446		1,490
Commercial development		192		198
Residential improved		5,543		7,661
Commercial improved		9,537		16,759
Manufacturing and industrial		239		2,706

Consumer		13,140		14,784


Interest income recognized during impairment:
Commercial and industrial		298		326
Commercial real estate		201		356
Consumer		122		137

Cash-basis interest income recognized
Commercial and industrial		288		328
Commercial real estate		200		351
Consumer		123		140

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, 2016 and December 31, 2015:

March 31, 2016	Nonaccrual		Over 90 days Accruing

Commercial and industrial	$	48	$	31

Commercial real estate:
Residential developed		---		---
Unsecured to residential developers		---		---
Vacant and unimproved		---		---
Commercial development		49		---
Residential improved		115		---
Commercial improved		148		---
Manufacturing and industrial		---		---
		312		---
Consumer:
Residential mortgage		2		---
Unsecured		25		---
Home equity		9		---
Other secured		---		---
		36		---
Total	$	396	$	31

December 31, 2015	Nonaccrual		Over 90 days Accruing

Commercial and industrial	$	174	$	---

Commercial real estate:
Residential developed		195		---
Unsecured to residential developers		---		---
Vacant and unimproved		---		---
Commercial development		49		---
Residential improved		124		---
Commercial improved		157		---
Manufacturing and industrial		---		---
		525		---
Consumer:
Residential mortgage		2		---
Unsecured		28		---
Home equity		10		17
Other secured		---		---
		40		17
Total	$	739	$	17

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, 2016 and December 31, 2015 by class of loans (dollars in thousands):

March 31, 2016	30-90 Days		Greater Than 90 Days		Total Past Due		Loans Not Past Due		Total
Commercial and industrial	$	344	$	31	$	375	$	388,250	$	388,625

Commercial real estate:
Residential developed		---		---		---		13,141		13,141
Unsecured to residential developers		---		---		---		7,491		7,491
Vacant and unimproved		---		---		---		45,429		45,429
Commercial development		192		49		241		417		658
Residential improved		122		6		128		68,730		68,858
Commercial improved		52		---		52		294,340		294,392
Manufacturing and industrial		---		---		---		86,747		86,747
		366		55		421		516,295		516,716
Consumer:
Residential mortgage		---		---		---		214,104		214,104
Unsecured		---		---		---		577		577
Home equity		---		---		---		87,874		87,874
Other secured		---		---		---		8,288		8,288
		---		---		---		310,843		310,843
Total	$	710	$	86	$	796	$	1,215,388	$	1,216,184

December 31, 2015	30-90 Days		Greater Than 90 Days		Total Past Due		Loans Not Past Due		Total
Commercial and industrial	$	719	$	100	$	819	$	376,479	$	377,298

Commercial real estate:
Residential developed		---		---		---		10,448		10,448
Unsecured to residential developers		---		---		---		7,372		7,372
Vacant and unimproved		---		---		---		42,881		42,881
Commercial development		---		49		49		510		559
Residential improved		73		6		79		67,843		67,922
Commercial improved		375		---		375		289,276		289,651
Manufacturing and industrial		---		---		---		89,839		89,839
		448		55		503		508,169		508,672
Consumer:
Residential mortgage		---		---		---		209,972		209,972
Unsecured		---		---		---		637		637
Home equity		32		17		49		92,667		92,716
Other secured		---		---		---		8,637		8,637
		32		17		49		311,913		311,962
Total	$	1,199	$	172	$	1,371	$	1,196,561	$	1,197,932

Troubled Debt Restructurings

The following table presents information regarding troubled debt restructurings as of March 31, 2016 and December 31, 2015 (dollars in thousands):

	March 31, 2016				December 31, 2015
	Number of Loans		Outstanding Recorded Balance		Number of Loans		Outstanding Recorded Balance
Commercial and industrial		31	$	8,522		33	$	7,611
Commercial real estate		55		16,132		56		17,871
Consumer		123		13,385		124		13,570
		209	$	38,039		213	$	39,052

The following table presents information related to accruing troubled debt restructurings as of March 31, 2016 and December 31, 2015. The table presents the amount of accruing troubled debt restructurings that were on nonaccrual status prior to the restructuring, accruing at the time of restructuring and those that were upgraded to accruing status after receiving six consecutive monthly payments in accordance with the restructured terms as of each period reported (dollars in thousands):

	March 31, 2016		December 31, 2015
Accruing TDR - nonaccrual at restructuring	$	---	$	---
Accruing TDR - accruing at restructuring		31,400		33,691
Accruing TDR - upgraded to accruing after six consecutive payments		6,319		4,784
	$	37,719	$	38,475

The following tables present information regarding troubled debt restructurings executed during the three month periods ended March 31, 2016 and 2015 (dollars in thousands):

Three Months Ended March 31, 2016	Number of Loans		Pre-Modification Outstanding Recorded Balance		Principal Writedown upon Modification
Commercial and industrial		---	$	---	$	---
Commercial real estate		---		---		---
Consumer		4		238		---
		4	$	238	$	---

Three Months Ended March 31, 2015	Number of Loans		Pre-Modification Outstanding Recorded Balance		Principal Writedown upon Modification
Commercial and industrial		1	$	408	$	---
Commercial real estate		1		42		---
Consumer		29		753		---
		31	$	1,203	$	---

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, 2016 and 2015 (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, 2016

Three Months Ended

March 31, 2015

Number of

Loans

Outstanding

Recorded

Balance

Number of

Loans

Outstanding

Recorded

Balance

Commercial and industrial

---

Commercial real estate

---

Consumer

---

Risk Grade Category of Loans by Class of Loans

As of March 31, 2016 and December 31, 2015, the risk grade category of commercial loans by class of loans were as follows (dollars in thousands):

March 31, 2016		1		2		3		4		5		6		7		8	Total
Commercial and industrial	$	---	$	14,597	$	111,894	$	244,231	$	10,713	$	7,142	$	48	$	---	$	388,625

Commercial real estate:
Residential developed		---		---		2,555		7,560		2,834		192		---		---		13,141
Unsecured to residential developers		---		---		---		7,491		---		---		---		---		7,491
Vacant and unimproved		---		---		21,700		19,362		4,367		---		---		---		45,429
Commercial development		---		---		---		417		---		192		49		---		658
Residential improved		---		---		6,217		56,078		4,681		1,767		115		---		68,858
Commercial improved		---		1,796		61,179		216,218		12,938		2,113		148		---		294,392
Manufacturing & industrial		---		1,427		33,500		50,077		1,743		---		---		---		86,747
	$	---	$	17,820	$	237,045	$	601,434	$	37,276	$	11,406	$	360	$	---	$	905,341

December 31, 2015		1		2		3		4		5		6		7		8	Total
Commercial and industrial	$	196	$	8,774	$	114,451	$	242,253	$	5,235	$	6,215	$	174	$	---	$	377,298

Commercial real estate:
Residential developed		---		---		2,226		5,191		2,836		---		195		---		10,448
Unsecured to residential developers		---		---		---		7,372		---		---		---		---		7,372
Vacant and unimproved		---		---		17,768		20,588		4,525		---		---		---		42,881
Commercial development		---		---		---		318		---		192		49		---		559
Residential improved		---		---		7,191		54,376		4,722		1,509		124		---		67,922
Commercial improved		---		3,094		60,475		208,127		15,645		2,153		157		---		289,651
Manufacturing & industrial		---		1,478		34,857		50,023		3,481		---		---		---		89,839
	$	196	$	13,346	$	236,968	$	588,248	$	36,444	$	10,069	$	699	$	---	$	885,970

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, 2016		December 31, 2015
Not classified as impaired	$	1,828	$	1,986
Classified as impaired		9,938		8,782
Total commercial loans classified substandard or worse	$	11,766	$	10,768

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):

March 31, 2016	Residential Mortgage		Consumer Unsecured		Home Equity		Consumer Other
Performing	$	214,104	$	577	$	87,874	$	8,288
Nonperforming		---		---		---		---
Total	$	214,104	$	577	$	87,874	$	8,288

December 31, 2015	Residential Mortgage		Consumer Unsecured		Home Equity		Consumer Other
Performing	$	209,972	$	637	$	92,699	$	8,637
Nonperforming		---		---		17		---
Total	$	209,972	$	637	$	92,716	$	8,637