HOLLAND, Mich., July 25, 2019 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (NASDAQ: MCBC) today announced its results for the second quarter of 2019, reflecting continued strong financial performance.

  • Net income of $8.0 million in second quarter 2019 versus $6.7 million in second quarter 2018 – up 19%
  • Growth in revenue (up 10%) over second quarter of 2018 while expenses were stable (up less than 1%)
  • Strong profitability with return on assets and equity of 1.62% and 15.94%, respectively, in second quarter of 2019
  • Seasonal decline in loan portfolio balances during the quarter
  • Growth in core deposit balances during the quarter of $43.2 million and up 5% from June 30, 2018
  • Asset quality metrics remained strong

Macatawa reported net income of $8.0 million, or $0.24 per diluted share, in the second quarter 2019 compared to $6.7 million, or $0.20 per diluted share, in the second quarter 2018.  For the first six months of 2019, Macatawa reported net income of $15.6 million, or $0.46 per diluted share, compared to $12.5 million, or $0.37 per diluted share, for the same period in 2018.  Macatawa’s 2019 earnings were positively impacted by improving revenues with nominal increases in non-interest expenses.    

"Macatawa Bank Corporation continued its strong performance in the second quarter of 2019,” said Ronald L. Haan, President and CEO of the Company.  “Revenue growth, primarily higher net interest income, increased non-interest revenue and continued expense management resulted in a 19 percent increase in net income compared to the second quarter of 2018.  Continued growth in our balances of interest-earning assets has positively affected our net interest income while our core operating expenses remained well-controlled during the quarter.” 

Mr. Haan concluded:  "In the first half of 2019 our efforts have again resulted in strong and consistent financial performance for our shareholders.  The banking environment in Western Michigan remains highly competitive, yet with the focus of our strong and committed team of professional bankers, we believe that Macatawa Bank Corporation remains well-positioned for continued growth and success in the second half of 2019.”

Operating Results
Net interest income for the second quarter 2019 totaled $16.0 million, a decrease of $65,000 from the first quarter 2019 and an increase of $1.3 million from the second quarter 2018.  Net interest margin was 3.45 percent, down 9 basis points from the first quarter 2019, and up 8 basis points from the second quarter 2018.  Net interest income for the first quarter 2019 benefitted from the collection of $251,000 in prepayment fees on commercial loans, primarily related to one commercial relationship.  Prepayment fees were only $6,000 in the second quarter 2019 and $32,000 in the second quarter 2018.

Average interest earning assets for the second quarter 2019 increased $26.4 million from the first quarter 2019 and were up $103.4  million from the second quarter 2018.  This growth along with increases in yields on interest earning assets were the primary contributors to the improvement in net interest income.  

Non-interest income increased $770,000 in the second quarter 2019 compared to the first quarter 2019 and increased $630,000 from the second quarter 2018.  These changes were largely due to fluctuations in gains on sales of mortgage loans.  Gains on sales of mortgage loans in the second quarter 2019 were up $403,000 compared to the first quarter 2019 and were up $392,000  from the second quarter 2018.  The Bank originated $21.4 million in mortgage loans for sale in the second quarter 2019 compared to $6.8 million in the first quarter 2019 and $8.4 million in the second quarter 2018.  This increase in production is due to a declining mortgage rate environment as well as customer preference for loan types that are typically sold (long-term fixed rate loans).  This resulted in a reduction in the volume of loans originated for portfolio compared to 2018.  The Bank originated $8.8 million in portfolio mortgage loans in the second quarter 2019 compared to $6.8 million in the first quarter 2019 and $18.8 million in the second quarter 2018.  Also positively impacting non-interest income in the second quarter 2019 were increases in trust fee income and debit card interchange income.

Non-interest expense was $11.3 million for the second quarter 2019, compared to $11.2 million for the first quarter 2019 and $11.3 million for the second quarter 2018.  The largest component of non-interest expense was salaries and benefit expenses.  Salaries and benefit expenses were up $135,000 compared to the first quarter 2019 and were down $10,000 compared to the second quarter 2018.  The increase compared to the first quarter 2019 was largely due to higher variable based compensation from mortgage production volume.  The decrease from the second quarter 2018 was attributed to decreases in medical insurance costs due to lower claims experience in 2019. 

Nonperforming asset expenses decreased $38,000 in the second quarter 2019 compared to the first quarter 2019 and decreased $68,000 compared to the second quarter 2018.  Net gains of $34,000 were realized on sales of foreclosed properties in the second quarter 2019, while there were net gains of $45,000 in the first quarter 2019 and net losses of $6,000 in the second quarter 2018.  Other categories of non-interest expense were relatively stable compared to the first quarter 2019 and the second quarter 2018. 

Federal income tax expense was $1.9 million for the second quarter 2019 compared to $1.7 million for the first quarter 2019 and $1.4 million for the second quarter 2018.  The effective tax rate was 19.3 percent for the second quarter 2019, compared to 18.3 percent for the first quarter 2019 and 17.6 percent for the second quarter 2018. 

Asset Quality
The Bank’s asset quality remained strong in the second quarter 2019 and again experienced net loan recoveries in the second quarter.  A negative provision for loan losses of $200,000 was recorded in the second quarter 2019, compared to a negative provision of $250,000 in the first quarter 2019 and a negative provision of $300,000 in the second quarter 2018.  Net loan recoveries for the second quarter 2019 were $194,000, compared to first quarter 2019 net loan recoveries of $266,000 and second quarter 2018 net loan recoveries of $320,000.  The Company has experienced net loan recoveries in seventeen of the past eighteen quarters. Total loans past due on payments by 30 days or more amounted to $360,000 at June 30, 2019, down 47 percent from $674,000 at March 31, 2019 and down 31 percent from $525,000 at June 30, 2018.  Delinquency as a percentage of total loans was a nominal 0.03 percent at June 30, 2019. 

The allowance for loan losses of $16.9 million was 1.26 percent of total loans at June 30, 2019, compared to 1.22 percent of total loans at March 31, 2019, and 1.26 percent at June 30, 2018.  The coverage ratio of allowance for loan losses to nonperforming loans continued to be strong and significantly exceeded 1-to-1 coverage at 58-to-1 as of June 30, 2019.

At June 30, 2019, the Company's nonperforming loans were $293,000, representing 0.02 percent of total loans.  This compares to $409,000 (0.03 percent of total loans) at March 31, 2019 and $125,000 (0.01 percent of total loans) at June 30, 2018.  Other real estate owned and repossessed assets were $3.1 million at June 30, 2019, compared to $3.3 million at March 31, 2019 and $3.9 million at June 30, 2018. Total nonperforming assets, including other real estate owned and nonperforming loans, decreased by $637,000, or 16 percent, from June 30, 2018 to June 30, 2019.

A break-down of non-performing loans is shown in the table below.


Dollars in 000s
 Jun 30,
2019
 Mar 31,
2019
 Dec 31,
2018
 Sept 30,
2018
 Jun 30,
2018
 
                
Commercial Real Estate $102 $213 $318 $121 $121 
Commercial and Industrial  ---  ---  873  ---  2 
Total Commercial Loans  102  213  1,191  121  123 
Residential Mortgage Loans  191  195  112  2  2 
Consumer Loans  ---  1  1  ---  --- 
Total Non-Performing Loans $293 $409 $1,304 $123 $125 
                 

Total non-performing assets were $3.4 million, or 0.17 percent of total assets, at June 30, 2019.  A break-down of non-performing assets is shown in the table below.

 
Dollars in 000s
 Jun 30,
2019
 Mar 31,
2019
 Dec 31,
2018
 Sept 30,
2018
 Jun 30,
2018
 
                
Non-Performing Loans $293 $409 $1,304 $123 $125 
Other Repossessed Assets  ---  ---  ---  ---  --- 
Other Real Estate Owned  3,067  3,261  3,380  3,465  3,872 
Total Non-Performing Assets $3,360 $3,670 $4,684 $3,588 $3,997 
                 

Balance Sheet, Liquidity and Capital
Total assets were $1.98 billion at June 30, 2019, an increase of $52.5 million from $1.93 billion at March 31, 2019 and an increase of $105.9 million from $1.87 billion at June 30, 2018.  Total loans were $1.34 billion at June 30, 2019, a decrease of $41.1 million from $1.38 billion at March 31, 2019 and an increase of $15.8 million from $1.33 billion at June 30, 2018.

Commercial loans increased by $25.7 million from June 30, 2018 to June 30, 2019, partially offset by decreases of $5.4 million in the residential mortgage portfolio and $4.5 million in the consumer loan portfolio.  Commercial real estate loans increased by $16.9 million while commercial and industrial loans increased by $8.8 million during the same period. 

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

 
Dollars in 000s
 Jun 30,
2019
 Mar 31,
2019
 Dec 31,
2018
 Sept 30,
2018
 Jun 30,
2018
 
                
Construction and Development $102,516 $102,133 $99,867 $93,794 $85,193 
Other Commercial Real Estate  461,427   470,667   468,840   459,146   461,808  
Commercial Loans Secured
by Real Estate
   

563,943
   

572,800
   

568,707
   

552,940
   

547,001
 
Commercial and Industrial  467,222  493,891  513,347  467,703  458,468 
Total Commercial Loans $1,031,165  $1,066,691  $1,082,054  $1,020,643  $1,005,469  
                 

The commercial and industrial portfolio is subject to seasonal fluctuations as the Company typically experiences large paydowns on agricultural credits and loans to automobile, recreational vehicle and boat dealers in the first half of each year. The seasonal paydowns in these loan categories amounted to $38.4 million in the second quarter of 2019.  In addition there were two relationships totaling $7.9 million that paid-off during the second quarter of 2019 resulting from the sale of their businesses.    

Total deposits were $1.66 billion at June 30, 2019, up $43.2 million from $1.62 billion at March 31, 2019 and up $80.6 million, or 5 percent, from $1.58 billion at June 30, 2018.  Demand deposits were up $26.6 million in the second quarter 2019 compared to the first quarter 2019 and were up $7.0 million compared to the second quarter 2018.  Money market deposits and savings deposits were up $10.7 million from the first quarter 2019 and were up $31.5 million from the second quarter 2018.  Certificates of deposit were up $5.9 million in the second quarter 2019 compared to March 31, 2019 and were up $42.1 million compared to June 30, 2018.  As deposit rates have risen, the Bank has experienced some shifting between deposit types, particularly certificates of deposit.  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 risk-based regulatory capital ratios were higher at June 30, 2019 compared to March 31, 2019 and December 31, 2018 due to earnings growth, and continued to be at levels comfortably above those required to be categorized as “well capitalized” under applicable regulatory capital guidelines.  As such, the Bank was categorized as "well capitalized" at June 30, 2019.

About Macatawa Bank
Headquartered in Holland, Mich., Macatawa Bank offers a full range of banking, retail and commercial lending, wealth management and ecommerce services to individuals, businesses and governmental entities from a network of 26 full-service branches located throughout communities in Kent, Ottawa and northern Allegan counties.  The bank is recognized for its local management team and decision making, along with providing customers excellent service, a rewarding experience and superior financial products. Macatawa Bank has been recognized for the past nine consecutive years as one of “West Michigan’s 101 Best and Brightest Companies to Work For”. For more information, visit www.macatawabank.com.

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 “anticipates,” "believe," "expect," "may," "should," "will," ”intend,” "continue," "improving," "additional," "focus," "forward," "future," "efforts," "strategy," "momentum," "positioned," 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, future asset quality, future growth, and future net interest margin.  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, reduce non-performing asset expenses, 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, extent, 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, 2018.  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)
               
      Quarterly Six Months Ended
      2nd Qtr 1st Qtr 2nd Qtr June 30
EARNINGS SUMMARY      2019   2019   2018   2019   2018 
Total interest income     $  19,239  $  19,189  $  16,836  $  38,429  $  32,855 
Total interest expense        3,284     3,169     2,183     6,453     4,019 
Net interest income        15,955     16,020     14,653     31,976     28,836 
Provision for loan losses        (200)    (250)    (300)    (450)    (400)
Net interest income after provision for loan losses        16,155     16,270     14,953     32,426     29,236 
               
NON-INTEREST INCOME              
Deposit service charges        1,078     1,050     1,060     2,128     2,110 
Net gains on mortgage loans        614     211     222     825     363 
Trust fees        1,003     890     945     1,893     1,870 
Other         2,403     2,177     2,241     4,580     4,256 
Total non-interest income        5,098     4,328     4,468     9,426     8,599 
               
NON-INTEREST EXPENSE              
Salaries and benefits        6,379     6,244     6,389     12,623     12,583 
Occupancy        996     1,093     973     2,089     2,045 
Furniture and equipment        866     844     773     1,710     1,578 
FDIC assessment        119     120     132     239     264 
Problem asset costs, including losses and (gains)        15     53     83     68     544 
Other        2,959     2,884     2,909     5,844     5,679 
Total non-interest expense        11,334     11,238     11,259     22,573     22,693 
Income before income tax        9,919     9,360     8,162     19,279     15,142 
Income tax expense        1,916     1,714     1,434     3,630     2,659 
Net income     $  8,003  $  7,646  $  6,728  $  15,649  $  12,483 
               
Basic earnings per common share     $  0.24  $  0.22  $  0.20  $  0.46  $  0.37 
Diluted earnings per common share     $  0.24  $  0.22  $  0.20  $  0.46  $  0.37 
Return on average assets       1.62%  1.57%  1.44%  1.59%  1.34%
Return on average equity      15.94%  15.81%  15.23%  15.87%  14.24%
Net interest margin (fully taxable equivalent)      3.45%  3.54%  3.37%  3.50%  3.35%
Efficiency ratio      53.84%  55.23%  58.88%  54.52%  60.62%
               
BALANCE SHEET DATA          June 30 March 31 June 30
Assets          2019   2019   2018 
Cash and due from banks         $  30,943  $  28,143  $  37,105 
Federal funds sold and other short-term investments            199,940     115,843     107,416 
Debt securities available for sale            222,825     224,645     218,770 
Debt securities held to maturity            79,054     70,336     79,569 
Federal Home Loan Bank Stock            11,558     11,558     11,558 
Loans held for sale            1,016     512     61 
Total loans            1,343,512     1,384,567     1,327,686 
Less allowance for loan loss            16,886     16,892     16,695 
Net loans            1,326,626     1,367,675     1,310,991 
Premises and equipment, net            44,424     44,805     45,907 
Bank-owned life insurance            41,695     41,433     40,744 
Other real estate owned            3,067     3,261     3,872 
Other assets            17,257     17,669     16,548 
               
Total Assets         $  1,978,405  $  1,925,880  $  1,872,541 
               
Liabilities and Shareholders' Equity              
Noninterest-bearing deposits         $  476,700  $  466,631  $  496,605 
Interest-bearing deposits            1,184,406     1,151,233     1,083,856 
Total deposits            1,661,106     1,617,864     1,580,461 
Other borrowed funds            60,000     60,000     65,667 
Long-term debt            41,238     41,238     41,238 
Other liabilities            10,542     8,812     5,461 
Total Liabilities            1,772,886     1,727,914     1,692,827 
               
Shareholders' equity            205,519     197,966     179,714 
               
Total Liabilities and Shareholders' Equity         $  1,978,405  $  1,925,880  $  1,872,541 
               
               
               
               
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except per share information)
               
  Quarterly Year to Date
               
  2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr    
   2019   2019   2018   2018   2018   2019   2018 
EARNINGS SUMMARY              
Net interest income $  15,955  $  16,020  $  15,628  $  15,162  $  14,653  $  31,976  $  28,836 
Provision for loan losses    (200)    (250)    850     -      (300)    (450)    (400)
Total non-interest income    5,098     4,328     4,405     4,499     4,468     9,426     8,599 
Total non-interest expense    11,334     11,238     10,397     11,239     11,259     22,573     22,693 
Federal income tax expense    1,916     1,714     1,743     1,570     1,434     3,630     2,659 
Net income $  8,003  $  7,646  $  7,043  $  6,852  $  6,728  $  15,649  $  12,483 
               
Basic earnings per common share $  0.24  $  0.22  $  0.21  $  0.20  $  0.20  $  0.46  $  0.37 
Diluted earnings per common share $  0.24  $  0.22  $  0.21  $  0.20  $  0.20  $  0.46  $  0.37 
               
MARKET DATA              
Book value per common share $  6.04  $  5.81  $  5.61  $  5.41  $  5.28  $  6.04  $  5.28 
Tangible book value per common share $  6.04  $  5.81  $  5.61  $  5.41  $  5.28  $  6.04  $  5.28 
Market value per common share $  10.26  $  9.94  $  9.62  $  11.71  $  12.14  $  10.26  $  12.14 
Average basic common shares    34,042,886     34,040,380     34,031,454     34,014,319     34,016,679     34,041,628     34,013,555 
Average diluted common shares    34,042,886     34,040,380     34,031,454     34,014,319     34,016,679     34,041,628     34,014,152 
Period end common shares    34,042,331     34,044,149     34,045,411     34,014,319     34,014,319     34,042,331     34,014,319 
               
PERFORMANCE RATIOS              
Return on average assets  1.62%  1.57%  1.47%  1.43%  1.44%  1.59%  1.34%
Return on average equity  15.94%  15.81%  15.12%  15.12%  15.23%  15.87%  14.24%
Net interest margin (fully taxable equivalent)  3.45%  3.54%  3.46%  3.37%  3.37%  3.50%  3.35%
Efficiency ratio  53.84%  55.23%  51.90%  57.16%  58.88%  54.52%  60.62%
Full-time equivalent employees (period end)  338   332   334   332   339   338   339 
               
ASSET QUALITY              
Gross charge-offs $  41  $  157  $  1,179  $  30  $  30  $  198  $  126 
Net charge-offs/(recoveries) $  (194) $  (266) $  776  $  (108) $  (320) $  (460) $  (495)
Net charge-offs to average loans (annualized)  -0.06%  -0.08%  0.23%  -0.03%  -0.10%  -0.07%  -0.07%
Nonperforming loans $  293  $  409  $  1,304  $  123  $  125  $  293  $  125 
Other real estate and repossessed assets $  3,067  $  3,261  $  3,380  $  3,465  $  3,872  $  3,067  $  3,872 
Nonperforming loans to total loans  0.02%  0.03%  0.09%  0.01%  0.01%  0.02%  0.01%
Nonperforming assets to total assets  0.17%  0.19%  0.24%  0.19%  0.21%  0.17%  0.21%
Allowance for loan losses $  16,886  $  16,892  $  16,876  $  16,803  $  16,695  $  16,886  $  16,695 
Allowance for loan losses to total loans  1.26%  1.22%  1.20%  1.25%  1.26%  1.26%  1.26%
Allowance for loan losses to nonperforming loans  5763.14%  4130.07%  1293.18%  13660.98%  13356.00%  5763.14%  13356.00%
               
CAPITAL              
Average equity to average assets  10.15%  9.93%  9.71%  9.47%  9.44%  10.04%  9.43%
Common equity tier 1 to risk weighted assets (Consolidated)  13.13%  12.55%  12.01%  12.13%  11.83%  13.13%  11.83%
Tier 1 capital to average assets (Consolidated)  12.34%  12.22%  12.12%  11.90%  11.91%  12.34%  11.91%
Total capital to risk-weighted assets (Consolidated)  16.78%  16.14%  15.54%  15.79%  15.49%  16.78%  15.49%
Common equity tier 1 to risk weighted assets (Bank)  15.27%  14.66%  14.09%  14.28%  14.01%  15.27%  14.01%
Tier 1 capital to average assets (Bank)  12.01%  11.90%  11.78%  11.56%  11.58%  12.01%  11.58%
Total capital to risk-weighted assets (Bank)  16.36%  15.73%  15.13%  15.36%  15.09%  16.36%  15.09%
Common equity to assets  10.40%  10.29%  9.67%  9.59%  9.60%  10.40%  9.60%
Tangible common equity to assets  10.40%  10.29%  9.67%  9.59%  9.60%  10.40%  9.60%
               
END OF PERIOD BALANCES              
Total portfolio loans $  1,343,512  $  1,384,567  $  1,405,658  $  1,344,683  $  1,327,686  $  1,343,512  $  1,327,686 
Earning assets    1,856,962     1,809,469     1,849,630     1,804,672     1,751,167     1,856,962     1,751,167 
Total assets    1,978,405     1,925,880     1,975,124     1,919,273     1,872,541     1,978,405     1,872,541 
Deposits    1,661,106     1,617,864     1,676,739     1,617,743     1,580,461     1,661,106     1,580,461 
Total shareholders' equity    205,519     197,966     190,853     183,976     179,714     205,519     179,714 
               
AVERAGE BALANCES              
Total portfolio loans $  1,367,202  $  1,399,464  $  1,363,548  $  1,325,268  $  1,327,408  $  1,383,244  $  1,321,158 
Earning assets    1,860,353     1,833,924     1,806,229     1,799,600     1,756,909     1,847,211     1,743,815 
Total assets    1,978,880     1,948,301     1,918,543     1,915,655     1,872,559     1,963,675     1,859,309 
Deposits    1,667,580     1,646,268     1,618,861     1,614,151     1,575,408     1,656,983     1,556,497 
Total shareholders' equity    200,888     193,463     186,361     181,329     176,749     197,196     175,339