EX-99.1 2 ex991.htm MCBC PRESS RELEASE EXHIBIT ex991.htm
 
 
10753 Macatawa Drive
Holland, Michigan 49424
NEWS RELEASE
 
NASDAQ STOCK MARKET:
FOR RELEASE:
DATE:
MCBC
Immediate
April 24, 2014

Macatawa Bank Corporation Reports
First Quarter 2014 Results

Holland, Michigan, April 24, 2014 – Macatawa Bank Corporation (Nasdaq: MCBC) today announced its results for the first quarter of 2014, continuing its trend of improvement in key operating metrics and financial performance.

 
Net income increased to $2.6 million in the first quarter 2014 from $2.5 million in the first quarter 2013
 
Resumed payment of quarterly cash dividends - $0.02 per share paid on March 28, 2014 to shareholders of record on March 7, 2014
 
Strong loan collection results exemplified by net recoveries once again – net recoveries of $585,000 for the first quarter 2014, net recoveries in four of the previous five quarters
 
Net interest margin improvement in the first quarter 2014 compared to the first quarter 2013 and the fourth quarter 2013
 
Decrease in mortgage banking activity – gains on sales down consistent with industry-wide declines
 
Further expense reductions – total non-interest expense decreased by $412,000 for the first quarter 2014 compared to the first quarter 2013

Macatawa reported net income of $2.6 million, or $0.08 per diluted share, in the first quarter 2014 compared to net income of $2.5 million, or $0.09 per diluted share, for the first quarter 2013.

"The Company is pleased to report improved earnings in the first quarter 2014 compared to both the first quarter 2013 and the fourth quarter 2013.  With the completion of our capital initiatives at the end of last year, we were able to distribute our first quarterly cash dividend to shareholders in over five years in March 2014 and we expect to continue paying quarterly dividends given the financial condition of the Bank and our earnings performance.”

Mr. Postma continued: "Net income for the first quarter 2014 reflected continued improvement in core operating results.  Our net interest margin has stabilized after many quarters of margin compression showing a slight increase for the first quarter 2014 compared to the fourth quarter of 2013. We are encouraged by signs of stabilization in our loan yields and reductions in our cost of funds.  Noninterest income increased in all categories except for net gains on sales of mortgage loans, which were down from the first quarter 2013 due to increases in mortgage market interest rates and lower volumes experienced industry-wide.  Most of this reduction in noninterest income was offset by a decrease in problem asset costs, which continue to decline as we dispose of other real estate owned property.  Our total other real estate owned balance has decreased from $51.6 million at March 31, 2013 to $34.0 million at March 31, 2014.”

Mr. Postma concluded: "We have made strong progress over the past several years and our earnings are becoming more consistent.  We are pleased to resume our quarterly dividend payouts and report further improvement in nonperforming asset levels and related costs.  We are poised for growth in our earning assets to produce stronger future earnings for our shareholders."



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Macatawa Bank Corporation 1Q Results / page 2 of 4

Operating Results
Net interest income for the first quarter 2014 totaled $10.5 million, an increase of $263,000 from the fourth quarter 2013 and a decrease of $8,000 from the first quarter 2013.  Net interest margin was 3.15 percent, up 20 basis points from the fourth quarter 2013, and up 1 basis point from the first quarter 2013.  Margin in the first quarter of 2014 benefitted from a large interest recovery on a previously charged off loan.  While such recoveries may not be likely in future quarters, loan yield compression may be bottoming, and adjustments made to rates on certain deposit products in the middle of the first quarter will further benefit margin in future quarters.

Average interest earning assets for the first quarter 2014 decreased $30.5 million from the fourth quarter 2013 and were up $1.3 million from the first quarter 2013.

Non-interest income decreased $506,000 in the first quarter 2014 compared to the fourth quarter 2013 and decreased $453,000 from the first quarter 2013, due to decreases in gains on sales of mortgage loans as the market for this activity contracted beginning in the second part of 2013 with the rise in market interest rates.  The Bank originated $14.1 million in loans for sale in the first quarter 2014 compared to $16.9 million in loans for sale in the fourth quarter 2013 and $29.8 million in loans for sale in the first quarter 2013.  All other categories of non-interest income improved in the first quarter 2014.

Non-interest expense was $11.2 million for the first quarter 2014, compared to $12.0 million for the fourth quarter 2013 and $11.6 million for the first quarter 2013.  The largest fluctuations in non-interest expense related to costs associated with the administration and disposition of problem loans and non-performing assets, which decreased $981,000 compared to the fourth quarter 2013 and decreased $490,000 compared to the first quarter 2013.  Salaries and benefits were up $170,000 compared to the fourth quarter 2013 and were up $29,000 compared to the first quarter 2013 due a higher level of 401(k) plan matching contributions and expenses associated with restricted stock vesting.

Federal income tax expense was $1.2 million for the first quarter 2014 compared to $1.0 million for the fourth quarter 2013 and $1.1 million for the first quarter 2013.  The effective tax rate decreased from 31.59% for the first quarter 2013 to 30.85% for the first quarter 2014 as a result of an increase in tax-free municipal investments.

Asset Quality
As a result of the consistent improvements in nonperforming loans and past due loans over the past several quarters, and the reduction in historical loan loss ratios, a negative provision for loan losses of $1.0 million was recorded in the first quarter 2014.  Net loan recoveries for the first quarter 2014 were $585,000, compared to fourth quarter 2013 net loan recoveries of $526,000 and first quarter 2013 net loan recoveries of $498,000.  The Bank has experienced net loan recoveries in four of the past five quarters. Total loans past due on payments by 30 days or more amounted to $6.6 million at March 31, 2014, up from $5.5 million at December 31, 2013 and unchanged from March 31, 2013.

The allowance for loan losses of $20.4 million was 1.98 percent of total loans at March 31, 2014, compared to 2.00 percent of total loans at December 31, 2013, and 2.23 percent at March 31, 2013.    The coverage ratio of allowance for loan losses to nonperforming loans continued to be strong and exceeded 1-to-1 coverage at 131.10 percent as of March 31, 2014, compared to 168.61 percent at December 31, 2013, and 165.70 percent at March 31, 2013.

At March 31, 2014, the Company's nonperforming loans were $15.5 million, representing 1.51 percent of total loans.  This compares to $12.3 million (1.18 percent of total loans) at December 31, 2013 and $14.2 million (1.35 percent of total loans) at March 31, 2013.  Other real estate owned and repossessed assets was $34.1 million at March 31, 2014, compared to $36.8 million at December 31, 2013, down significantly from $51.6 million at March 31, 2013. Total nonperforming assets, including other real estate owned and nonperforming loans, have decreased by $16.2 million, or 24.6 percent, from March 31, 2013 to March 31, 2014.

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Macatawa Bank Corporation 1Q Results / page 3 of 4


A break-down of non-performing loans is shown in the table below.
 
 
Dollars in 000s
 
March 31,
2014
   
December 31,
2013
   
September 30,
2013
   
June 30,
2013
   
March 31,
2013
 
                               
Commercial Real Estate
  $ 6,299     $ 5,706     $ 4,934     $ 5,701     $ 4,673  
Commercial and Industrial
    8,077       5,625       4,240       4,081       8,781  
     Total Commercial Loans
    14,376       11,331       9,174       9,782       13,454  
Residential Mortgage Loans
    762       639       639       619       298  
Consumer Loans
    410       365       407       373       422  
     Total Non-Performing Loans
  $ 15,548     $ 12,335     $ 10,220     $ 10,774     $ 14,174  
                                         
Residential Developer Loans (a)
  $ 2,205     $ 2,591     $ 2,651     $ 2,723     $ 2,265  

(a)
Represents the amount of loans to residential developers secured by single family residential property which is included in non-performing commercial loans secured by real estate.

Total non-performing assets were $49.6 million, or 3.33 percent of total assets, at March 31, 2014.  A break-down of non-performing assets is shown in the table below.

 
Dollars in 000s
 
March 31,
2014
   
December 31,
2013
   
September 30,
2013
   
June 30,
2013
   
March 31,
2013
 
                               
Non-Performing Loans
  $ 15,548     $ 12,335     $ 10,220     $ 10,774     $ 14,174  
Other Repossessed Assets
    42       40       ---       ---       22  
Other Real Estate Owned
    34,035       36,796       42,796       45,845       51,593  
     Total Non-Performing Assets
  $ 49,625     $ 49,171     $ 53,016     $ 56,619     $ 65,789  

Balance Sheet, Liquidity and Capital
Total assets were $1,490.9 million at March 31, 2014, a decrease of $26.5 million from $1,517.4 million at December 31, 2013 and a decrease of $16.5 million from $1,507.4 million at March 31, 2013.  Total loans were $1,030.1 million at March 31, 2014, a decrease of $12.3 million from $1,042.4 million at December 31, 2013 and a decrease of $20.9 million from $1,051.0 million at March 31, 2013.

Commercial loans decreased by $11.3 million from December 31, 2013 to March 31, 2014, along with a decrease of $948,000 in our residential mortgage and consumer loan portfolios.  Commercial real estate loans were reduced by $9.1 million, as the Company continued its efforts to reduce exposure in this segment, and commercial and industrial loans decreased by $2.2 million during the same period.

The composition of the commercial loan portfolio is shown in the table below:

 
Dollars in 000s
 
March 31,
2014
   
December 31,
2013
   
September 30,
2013
   
June 30,
2013
   
March 31,
2013
 
                               
Construction and Development
  $ 84,875     $ 86,413     $ 86,824     $ 81,841     $ 88,670  
Other Commercial Real Estate
    378,322       385,927       395,108       397,814       408,860  
     Commercial Loans Secured by
      Real Estate
    463,197       472,340       481,932       479,655       497,530  
Commercial and Industrial
    271,924       274,099       253,216       242,759       259,145  
     Total Commercial Loans
  $ 735,121     $ 746,439     $ 735,148     $ 722,414     $ 756,675  
                                         
Residential Developer Loans (a)
  $ 33,970     $ 35,164     $ 39,886     $ 41,903     $ 45,598  

(a)
Represents the amount of loans to residential developers secured by single family residential property which is included in commercial loans secured by real estate.

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Macatawa Bank Corporation 1Q Results / page 4 of 4

Total deposits were $1,216.8 million at March 31, 2014, down $32.9 million from $1,249.7 million at December 31, 2013 due to normal seasonal decreases and were down $14.6 million from $1,231.4 million at March 31, 2013.  The decrease from March 31, 2013 was related to the intentional run-off of higher costing certificates of deposit.  These balances decreased $37.5 million from March 31, 2013.  Balances in checking, savings and money market accounts grew by 2.2 percent compared to the first quarter 2013.  The Bank continues to be successful at attracting and retaining core deposit customers.  Customer deposit accounts remain insured to the highest levels available under FDIC deposit insurance.

The Bank's regulatory capital increased in the first quarter 2014 and continued to be at levels among the highest in Bank history, comfortably above levels required to be categorized as “well capitalized” under applicable regulatory capital guidelines.  As such, the Bank was categorized as "well capitalized" at March 31, 2014.

About Macatawa Bank
Headquartered in Holland, Michigan, Macatawa Bank Corporation is the parent company for Macatawa Bank.  Through its banking subsidiary, the Company offers a full range of banking, investment and trust services to individuals, businesses, and governmental entities from a network of 26 full service branches located in communities in Kent County, Ottawa County, and northern Allegan County.  Services include commercial, consumer and real estate financing, business and personal deposit services, ATM's and Internet banking services, trust and employee benefit plan services, and various investment services.  The Company emphasizes its local management team and decision making, along with providing customers excellent service and superior financial products.
 
 
 
CAUTIONARY STATEMENT: This press release contains forward-looking statements that are based on management's current beliefs, expectations, assumptions, estimates, plans and intentions. Forward-looking statements are identifiable by words or phrases such as "expect", "may", "will", "initiative," "continue," "improving," "efforts," "focus," "future," "strategies," "pave the way," "poised for growth" and other similar words or phrases. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to trends in our key operating metrics and financial performance, future levels of earnings and profitability, future levels of earning assets, our ability to further reduce nonperforming asset levels and related expenses and strategies to enhance shareholder value. The declaration and payment of future dividends to common shareholders will be considered by the Board of Directors in its discretion and will depend on a number of factors, including our financial condition and anticipated profitability. All statements with references to future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including deferred tax assets) and other real estate owned and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involves judgments that are inherently forward-looking. Our ability to sell other real estate owned at its carrying value or at all, utilize our deferred tax asset, successfully implement new programs and initiatives, increase efficiencies, maintain our current level of deposits and other sources of funding, maintain liquidity, respond to declines in collateral values and credit quality, improve profitability, and produce consistent core earnings is not entirely within our control and is not assured. The future effect of changes in the real estate, financial and credit markets and the national and regional economy on the banking industry, generally, and Macatawa Bank Corporation, specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extend, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed in or implied by such forward-looking statements. Macatawa Bank Corporation does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
 
 
Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2013. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.
 
 


 
 

 

MACATAWA BANK CORPORATION
           
CONSOLIDATED FINANCIAL SUMMARY
           
(Unaudited)
           
             
(Dollars in thousands except per share information)
           
   
Quarter Ended
 
   
March 31
 
EARNINGS SUMMARY
 
2014
   
2013
 
Total interest income
  $ 11,970     $ 12,433  
Total interest expense
    1,495       1,950  
  Net interest income
    10,475       10,483  
Provision for loan losses
    (1,000 )     (750 )
  Net interest income after provision for loan losses
    11,475       11,233  
                 
NON-INTEREST INCOME
               
Deposit service charges
    991       952  
Net gains on mortgage loans
    258       825  
Trust fees
    631       588  
Other
    1,630       1,598  
  Total non-interest income
    3,510       3,963  
                 
NON-INTEREST EXPENSE
               
Salaries and benefits
    5,823       5,794  
Occupancy
    1,008       946  
Furniture and equipment
    840       749  
FDIC assessment
    328       471  
Administration and disposition of problem assets
    471       961  
Other
    2,699       2,660  
  Total non-interest expense
    11,169       11,581  
Income before income tax
    3,816       3,615  
Income tax expense
    1,177       1,142  
Net income
  $ 2,639     $ 2,473  
Net income attributable to common shareholders
  $ 2,639     $ 2,473  
                 
Basic earnings per common share
  $ 0.08     $ 0.09  
Diluted earnings per common share
  $ 0.08     $ 0.09  
Return on average assets
    0.71 %     0.66 %
Return on average equity
    7.85 %     7.50 %
Net interest margin
    3.15 %     3.14 %
Efficiency ratio
    79.86 %     80.17 %
 

BALANCE SHEET DATA
 
March 31
   
December 31
   
March 31
 
Assets
 
2014
   
2013
   
2013
 
Cash and due from banks
  $ 34,615     $ 38,714     $ 21,585  
Federal funds sold and other short-term investments
    92,668       118,178       127,742  
Interest-bearing time deposits in other financial institutions
    32,500       25,000       25,000  
Securities available for sale
    153,327       139,659       126,795  
Securities held to maturity
    19,175       19,248       5,380  
Federal Home Loan Bank Stock
    11,236       11,236       11,236  
Loans held for sale
    194       1,915       3,976  
Total loans
    1,030,111       1,042,377       1,051,009  
Less allowance for loan loss
    20,383       20,798       23,487  
  Net loans
    1,009,728       1,021,579       1,027,522  
Premises and equipment, net
    53,619       53,641       53,284  
Bank-owned life insurance
    27,671       27,517       26,974  
Other real estate owned
    34,035       36,796       51,593  
Other assets
    22,131       23,922       26,351  
                         
Total Assets
  $ 1,490,899     $ 1,517,405     $ 1,507,438  
                         
Liabilities and Shareholders' Equity
                       
Noninterest-bearing deposits
  $ 342,357     $ 344,550     $ 312,176  
Interest-bearing deposits
    874,421       905,184       919,214  
  Total deposits
    1,216,778       1,249,734       1,231,390  
Other borrowed funds
    88,774       89,991       90,658  
Subordinated debt
    -       -       1,650  
Long-term debt
    41,238       41,238       41,238  
Other liabilities
    8,921       3,920       9,597  
Total Liabilities
    1,355,711       1,384,883       1,374,533  
                         
Shareholders' equity
    135,188       132,522       132,905  
                         
Total Liabilities and Shareholders' Equity
  $ 1,490,899     $ 1,517,405     $ 1,507,438  


 
 

 

MACATAWA BANK CORPORATION
                             
SELECTED CONSOLIDATED FINANCIAL DATA
                         
(Unaudited)
                             
                               
(Dollars in thousands except per share information)
                         
   
Quarterly
 
                               
   
1st Qtr
   
4th Qtr
   
3rd Qtr
   
2nd Qtr
   
1st Qtr
 
   
2014
   
2013
   
2013
   
2013
   
2013
 
EARNINGS SUMMARY
                             
Net interest income
  $ 10,475     $ 10,212     $ 10,124     $ 10,463     $ 10,483  
Provision for loan losses
    (1,000 )     (1,000 )     (1,500 )     (1,000 )     (750 )
Total non-interest income
    3,510       4,016       3,951       4,211       3,963  
Total non-interest expense
    11,169       12,036       12,362       11,875       11,581  
Federal income tax expense (benefit)
    1,177       958       975       1,196       1,142  
Net income
  $ 2,639     $ 2,234     $ 2,238     $ 2,603     $ 2,473  
                                         
Basic earnings per common share
  $ 0.08     $ (0.56 )   $ 0.08     $ 0.10     $ 0.09  
Diluted earnings per common share
  $ 0.08     $ (0.56 )   $ 0.08     $ 0.10     $ 0.09  
                                         
MARKET DATA
                                       
Book value per common share
  $ 4.00     $ 3.92     $ 3.77     $ 3.68     $ 3.68  
Tangible book value per common share
  $ 4.00     $ 3.92     $ 3.77     $ 3.68     $ 3.68  
Market value per common share
  $ 5.04     $ 5.00     $ 5.38     $ 5.04     $ 5.41  
Average basic common shares
    33,790,542       27,276,722       27,261,325       27,260,748       27,211,603  
Average diluted common shares
    33,790,542       27,276,722       27,261,325       27,260,748       27,211,603  
Period end common shares
    33,788,431       33,801,097       27,261,325       27,261,325       27,253,825  
                                         
PERFORMANCE RATIOS
                                       
Return on average assets
    0.71 %     0.58 %     0.59 %     0.70 %     0.66 %
Return on average equity
    7.85 %     6.54 %     6.67 %     7.74 %     7.50 %
Net interest margin (fully taxable equivalent)
    3.15 %     2.95 %     2.96 %     3.15 %     3.14 %
Efficiency ratio
    79.86 %     84.59 %     87.83 %     80.93 %     80.17 %
Full-time equivalent employees (period end)
    354       361       363       360       365  
                                         
ASSET QUALITY
                                       
Gross charge-offs
  $ 82     $ 508     $ 354     $ 698     $ 643  
Net charge-offs
  $ (585 )   $ (526 )   $ (523 )   $ 238     $ (498 )
Net charge-offs to average loans (annualized)
    -0.23 %     -0.20 %     -0.21 %     0.09 %     -0.19 %
Nonperforming loans
  $ 15,548     $ 12,335     $ 10,220     $ 10,774     $ 14,174  
Other real estate and repossessed assets
  $ 34,077     $ 36,836     $ 42,796     $ 45,845     $ 51,615  
Nonperforming loans to total loans
    1.51 %     1.18 %     0.99 %     1.06 %     1.35 %
Nonperforming assets to total assets
    3.33 %     3.24 %     3.39 %     3.83 %     4.36 %
Allowance for loan losses
  $ 20,383     $ 20,798     $ 21,272     $ 22,248     $ 23,487  
Allowance for loan losses to total loans
    1.98 %     2.00 %     2.07 %     2.20 %     2.23 %
Allowance for loan losses to nonperforming loans
    131.10 %     168.61 %     208.14 %     206.50 %     165.70 %
                                         
CAPITAL
                                       
Average equity to average assets
    9.01 %     8.95 %     8.86 %     9.03 %     8.76 %
Tier 1 capital to average assets
    11.06 %     10.61 %     10.89 %     10.85 %     10.45 %
Total capital to risk-weighted assets
    16.11 %     15.69 %     16.04 %     16.12 %     15.35 %
Tier 1 capital to average assets (Bank)
    10.99 %     10.45 %     10.80 %     10.72 %     10.35 %
Total capital to risk-weighted assets (Bank)
    16.00 %     15.45 %     15.90 %     15.80 %     14.98 %
Tangible common equity to assets
    9.15 %     8.82 %     6.63 %     6.87 %     6.71 %
                                         
END OF PERIOD BALANCES
                                       
Total portfolio loans
  $ 1,030,111     $ 1,042,377     $ 1,028,793     $ 1,012,887     $ 1,051,009  
Earning assets
    1,337,512       1,359,686       1,402,703       1,320,540       1,348,565  
Total assets
    1,490,899       1,517,405       1,562,680       1,476,828       1,507,438  
Deposits
    1,216,778       1,249,734       1,288,041       1,199,578       1,231,390  
Total shareholders' equity
    135,188       132,522       135,507       133,252       132,905  
                                         
AVERAGE BALANCES
                                       
Total portfolio loans
  $ 1,037,678     $ 1,026,603     $ 1,012,361     $ 1,035,564     $ 1,048,984  
Earning assets
    1,349,971       1,380,510       1,362,223       1,331,557       1,348,703  
Total assets
    1,493,201       1,527,910       1,514,555       1,489,887       1,506,722  
Deposits
    1,223,928       1,255,221       1,238,303       1,212,089       1,232,489  
Total shareholders' equity
    134,488       136,718       134,118       134,537       131,941