Macatawa Bank Corporation Reports Second Quarter 2020 Results

Rhea-AI Summary

Macatawa Bank Corporation (NASDAQ: MCBC) reported Q2 2020 net income of $7.6 million, down 5% from $8.0 million in Q2 2019. The bank experienced a loan charge-off of $4.1 million, contributing to a provision for loan losses of $1.0 million, an increase from a negative $200,000 a year earlier. The net interest margin fell to 2.74% from 3.45% due to lower Fed rates. Noninterest income rose 15% to $756,000, supported by increased mortgage activity. Overall, total deposits surged by 24% to $2.12 billion, bolstered by Paycheck Protection Program loans.

Positive

• Net interest income included $938,000 from PPP loan fees, expected to improve in Q3 and Q4.
• Deposits increased by 24% to $2.12 billion, driven by demand deposits from PPP loan proceeds.
• Noninterest income grew by 15% due to higher residential mortgage volume.
• Loan portfolio balances increased by 16% year-over-year, supported by PPP loans.

Negative

• Net income decreased by 5% compared to the same quarter last year.
• Loan charge-offs of $4.1 million significantly impacted profitability.
• Net interest margin fell to 2.74%, a decrease attributed to lower Fed rates.
• The provision for loan losses of $1.0 million marks an increase from a year earlier, indicating rising credit risk.

HOLLAND, Mich., July 23, 2020 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (NASDAQ: MCBC) today announced its results for the second quarter of 2020.

• Net income of $7.6 million in second quarter 2020 versus $8.0 million in second quarter 2019 – down 5%
• Loan charge-off of $4.1 million recorded in second quarter 2020 caused increase in provision for loan losses
• Provision for loan losses of $1.0 million in second quarter 2020, up from negative $200,000 in second quarter 2019
• Net interest margin decreased to 2.74% in second quarter 2020 versus 3.45% in second quarter 2019 due to Fed rate decreases since then and high on-balance sheet liquidity
• Origination of $336 million in Paycheck Protection Program (PPP) loans in second quarter 2020
• Growth in noninterest income of $756,000 (15%) driven by increased residential mortgage volume
• Reduction in total non-interest expense – down $830,000 (7%) from second quarter 2019
• Loan portfolio balances up by $219.2 million (16%) from second quarter 2019, driven by PPP loans
• Core deposit balances up by $457.2 million (28%) from second quarter 2019
• Capital and liquidity levels remain strong

Macatawa reported net income of $7.6 million, or $0.22 per diluted share, in the second quarter 2020 compared to $8.0 million, or $0.24 per diluted share, in the second quarter 2019. 

"We are pleased to report solid profitability for the second quarter of 2020,” said Ronald L. Haan, President and CEO of the Company.  “The COVID-19 pandemic has had a significant impact on our community, but the Bank has proven resilient and consistent in serving the financial needs of our customers and our community.  We were active participants in the Small Business Adminstration’s Paycheck Protection Program (PPP) and originated 1,635 PPP loans totaling $336 million in the second quarter of 2020.  The loans were distributed to many local small businesses in order to protect jobs and allow continued paychecks to employees in those companies.  Despite the challenging environment in the second quarter of 2020, we produced $7.6 million in earnings for the quarter.  Mortgage gains in the second quarter of 2020 were three times higher than a year ago and more than offset the reduction in net interest income caused by the significant decrease in market interest rates in 2020. An increase in provision for loan losses was the primary cause for the reduction in net income in the second quarter of 2020 compared to the second quarter of 2019.  We experienced a chargeoff of $4.1 million on a single loan relationship in the second quarter of 2020.  This was a bankruptcy liquidation, and the COVID-19 environment significantly impacted the level of bids on the borrower’s properties, which were primarily movie theatres.  This was our only borrower in that particular industry, so we believe this to be an isolated loss incident.” 

Mr. Haan concluded:  "We will continue to experience challenges relating to the impact of COVID-19 on our customers and our business.  We have actively worked with our borrowers to provide payment relief where possible while protecting the Bank’s position.  We provided short-term modifications on $248.8 million of loans in the second quarter of 2020.  Our capital levels significantly exceed regulatory requirements, and our strong balance sheet should ensure the strength and stability to weather these difficult times.”

Operating Results
Net interest income for the second quarter 2020 totaled $15.0 million, a decrease of $256,000 from the first quarter 2020 and an decrease of $908,000 from the second quarter 2019.  Net interest margin for the second quarter 2020 was 2.74 percent, down 51 basis points from the first quarter 2020, and down 71 basis points from the second quarter 2019.  Net interest income for the second quarter 2020 benefitted from amortization of $938,000 in fees from loans issued under the SBA’s Paycheck Protection Program (PPP) in the second quarter 2020.  These fees are amortized over the loans’ contractual maturity, which is 24 months.  Upon SBA  forgiveness, the remaining unamortized fees will be recognized into interest income.  Forgiveness applications are expected to begin in the third quarter of 2020 and, as such, the Bank expects the related fee income amortization to accelerate in the third and fourth quarters of 2020, positively impacting net interest income.  Net interest margin was negatively impacted in the second quarter 2020 by these same loans carrying an interest rate of 1.00 percent.  These low-yielding loans caused a six basis point decrease in net interst margin in the second quarter 2020.  Even more significant was the impact of the 225 basis point decrease in the federal funds rate between second quarter 2019 and second quarter 2020.  Floor rates established by the Bank on its variable rate loans over recent years served to soften the negative impact on net interst income of these Fed rate decreases.  Without these floors net interst income would have been lower than stated by approximately $1 million.   Higher balances of overnight funds receiving interest at just 10 basis points also negatively impacted net interest margin for the second quarter of 2020.  Positively impacting net interest margin for the second quarter 2020 were prepayment fees on commercial loans of $113,000, primarily related to one commercial relationship.  Prepayment fees on commercial loans were only $70,000 in the first quarter 2020 and $6,000 in the second quarter 2019.

Average interest earning assets for the second quarter 2020 increased $319.0 million from the first quarter 2020 and were up $355.8 million from the second quarter 2019.  The addition of $344 million in PPP loans in the second quarter 2020 was the primary reason for the increase in average interest earning assets between quarters. 

Non-interest income increased $895,000 in the second quarter 2020 compared to the first quarter 2020 and increased $756,000 from the second quarter 2019.  These changes were largely due to fluctuations in gains on sales of mortgage loans.  Gains on sales of mortgage loans in the second quarter 2020 were up $1.2 million compared to the first quarter 2020 and were up $1.2 million from the second quarter 2019.  The Bank originated $50.1 million in mortgage loans for sale in the second quarter 2020 compared to $29.4 million in the first quarter 2020 and $21.4 million in the second quarter 2019.  Deposit service charges were down $250,000 in the second quarter 2020 compared to the first quarter 2020 and were down $218,000 compared to the second quarter 2019 due to lower overdraft fees as customers have generally retained higher deposit balances due to uncertaintly related to the COVID-19 pandemic.

Non-interest expense was $10.5 million for the second quarter 2020, compared to $11.7 million for the first quarter 2020 and $11.3 million for the second quarter 2019.  The largest component of non-interest expense was salaries and benefit expenses.  Salaries and benefit expenses were down $925,000 compared to the first quarter 2020 and were down $613,000 compared to the second quarter 2019.  The decreases compared to the first quarter 2020 and second quarter 2019 were due to a combination of actions taken to mitigate the negative effects of the COVID-19 shutdown on the economy including personnel freezes, salary reductions for senior management, and halting of 401k matching contributions and bonus accruals.  Also causing expense decreases were lower claims experience in the medical insurance plan and higher cost deferrals from commercial loan production of 1,635 PPP loans.  The table below identifies the primary components of the changes in salaries and benefits between periods.

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		Q2 2020		Q2 2020
Dollars in 000s	to	To
	Q1 2020	Q2 2019
68%; width:68%; min-width:68%;">Salaries and other compensation	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">(117	1%; width:1%; min-width:1%;">)	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	13%; width:13%; min-width:13%;">56	1%; width:1%; min-width:1%;">
Salary deferral from commercial loans			(388	)			(310	)
Bonus accrual			(215	)			(228	)
Mortgage production – variable comp			150				202
401k matching contributions			(155	)			(120	)
Medical insurance costs			(200	)			(213	)
Total change in salaries and benefits		$	(925	)		$	(613	)

Nonperforming asset expenses remained low in the second quarter 2020 at just $17,000 compared to $61,000 in the first quarter 2020 and $15,000 in the second quarter 2019.  There were no sales of foreclosed properties in the first two quarters of 2020, while net gains of $34,000 were incurred on sales in the second quarter 2019.   FDIC assessment expense was $76,000 in the second quarter 2020.  There was no FDIC assessment expense in the first quarter 2020 as the FDIC assessment credits fully covered the assessment in the first quarter 2020.  All of the Bank’s FDIC assessment credits have been applied in the second quarter 2020, so expense will increase slightly in the third quarter 2020.  Other categories of non-interest expense were relatively flat compared to the first quarter 2020 and the second quarter 2019 due to a continued focus on expense management. 

Federal income tax expense was $1.8 million for the second quarter 2020 compared to $1.4 million for the first quarter 2020 and $1.9 million for the second quarter 2019.  The effective tax rate was 18.7 percent for the second quarter 2020, compared to 18.2 percent for the first quarter 2020 and 19.3 percent for the second quarter 2019. 

Asset Quality
A provision for loan losses of $1.0 million was recorded in the second quarter of 2020.  There was a negative provision of $200,000 in the second quarter 2019.  Net loan chargeoffs for the second quarter 2020 were $4.0 million, compared to first quarter 2020 net loan recoveries of $989,000 and second quarter 2019 net loan recoveries of $194,000.  The large provision in the second quarter 2020 was primarily due to a $4.1 million charge-off on a single loan relationship in the movie theater business.  The Bank has no other borrowers in that particular industry, so Management believes the loss was an isolated incident.  At June 30, 2020, the Company had experienced net loan recoveries in twenty of the past twenty-two quarters.  Partially offsetting the downward impact on the allowance for loan losses of the large charge-off was the significant reduction in total loan balances which decreased by $168 million, excluding PPP loans, during the second quarter 2020.  Delinquencies were up at June 30, 2020 due primarily to the remaining balance of the movie theater loan being in the process of liquidation.  Total loans past due on payments by 30 days or more amounted to $3.3 million at June 30, 2020, up from $513,000 at March 31, 2020 and up from $360,000 at June 30, 2019.  Delinquency as a percentage of total loans was 0.21 percent at June 30, 2020, still well below the Company’s peer level.

The allowance for loan losses of $15.9 million was 1.01 percent of total loans at June 30, 2020, compared to 1.35 percent of total loans at March 31, 2020, and 1.26 percent at June 30, 2019.  The ratio at June 30, 2020 is skewed by the $336 million in PPP loans originated during the quarter.  These loans are fully guaranteed by the SBA and receive no allowance allocation.  The ratio at June 30, 2020 excluding these loans was 1.29%.  The coverage ratio of allowance for loan losses to nonperforming loans continued to be strong and significantly exceeded 1-to-1 coverage at 536 percent as of June 30, 2020.

At June 30, 2020, the Company's nonperforming loans were $3.0 million, representing 0.19 percent of total loans.  This compares to $7.2 million (0.52 percent of total loans) at March 31, 2020 and $293,000 (0.02 percent of total loans) at June 30, 2019.  Other real estate owned and repossessed assets were $2.6 million at June 30, 2020, compared to $2.6 million at March 31, 2020 and $3.1 million at June 30, 2019. Total nonperforming assets, including other real estate owned and nonperforming loans, increased by $2.2 million from June 30, 2019 to June 30, 2020 due to the addition of a single commercial loan relationship to nonaccrual status in the first quarter 2020, $4.1 million of which was charged-off in the second quarter 2020.  The remaining balance of this single commercial loan relationship is deemed fully collectible. 

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

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Dollars in 000s		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sept 30, 2019		Jun 30, 2019
50%; width:50%; min-width:50%;">Commercial Real Estate	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">2,857	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">5,908	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">98	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">102	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">102
Commercial and Industrial			---			1,211			---			---			---
Total Commercial Loans			2,857			7,119			98			102			102
Residential Mortgage Loans			100			103			105			109			191
Consumer Loans			---			8			---			---			---
Total Non-Performing Loans		$	2,957		$	7,230		$	203		$	211		$	293

Total non-performing assets were $5.6 million, or 0.23 percent of total assets, at June 30, 2020.  A break-down of non-performing assets is shown in the table below.

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Dollars in 000s		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sept 30, 2019		Jun 30, 2019
50%; width:50%; min-width:50%;">Non-Performing Loans	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">2,957	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">7,230	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">203	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">211	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">293
Other Repossessed Assets			---			---			---			---			---
Other Real Estate Owned			2,624			2,626			2,748			3,109			3,067
Total Non-Performing Assets		$	5,581		$	9,856		$	2,951		$	3,320		$	3,360

Balance Sheet, Liquidity and Capital

Total assets were $2.45 billion at June 30, 2020, an increase of $420.1 million from $2.03 billion at March 31, 2020 and an increase of $472.7 million from $1.98 billion at June 30, 2019.  Assets were elevated at June 30, 2020 due to a higher level of deposits from customers holding a higher level of liquid deposits during the COVID-19 pandemic, including unused balances from PPP loan proceeds.  Total loans were $1.56 billion at June 30, 2020, an increase of $167.3 million from $1.40 billion at March 31, 2020 and an increase of $219.2 million from $1.34 billion at June 30, 2019.

Commercial loans increased by $279.6 million from June 30, 2019 to June 30, 2020, partially offset by a decrease of $50.1 million in the residential mortgage portfolio, and a decrease of $10.9 million in the consumer loan portfolio.  Commercial real estate loans increased by $6.0 million while commercial and industrial loans increased by $273.5 million during the same period.  The growth in commercial and industrial loans was due to PPP loan originations during the second quarter 2020.

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

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Dollars in 000s		Jun 30, 2020		Mar 31, 2020		Dec 31, 2019		Sept 30, 2019		Jun 30, 2019
50%; width:50%; min-width:50%;">Construction and Development	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">127,094	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">135,648	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">134,710	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">117,782	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">$	8%; width:8%; min-width:8%;">102,516
Other Commercial Real Estate			442,862			457,003			463,748			462,686			461,427
Commercial Loans Secured by Real Estate			569,956			592,651			598,458			580,468			563,943
Commercial and Industrial (1)			740,761			527,590			499,572			492,085			467,222
Total Commercial Loans		$	1,310,717		$	1,120,241		$	1,098,030		$	1,072,553		$	1,031,165
(1)  Includes $335.7 million in PPP loans at June 30, 2020

Total deposits were $2.12 billion at June 30, 2020, up $412.9 million, or 24 percent, from $1.71 billion at March 31, 2020 and were up $457.2 million, or 28 percent, from $1.66 billion at June 30, 2019.  The increase in total deposits from March 31, 2020 was primarily in demand deposits (up $348.9 million) as business customers account balances increased from proceeds from Paycheck Protection Program loans providing additional liquidity to those customers.  Demand deposits were up $372.0 million in the second quarter 2020 compared to the second quarter 2019.  Money market deposits and savings deposits were up $74.6 million from the first quarter 2020 and were up $97.7 million from the second quarter 2019.  Certificates of deposit were down $10.6 million at June 30, 2020 compared to March 31, 2020 and were down $12.7 million compared to June 30, 2019 as customers reacted to changes in market interest rates.  As deposit rates have dropped, the Bank has experienced some shifting between deposit types and overall, deposit customers are holding higher levels of liquid deposit balances during this pandemic and low interest rate environment.  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 total risk-based regulatory capital ratio at June 30, 2020 was higher than the ratios at both March 31, 2020 and June 30, 2019.  The Bank’s risk-based regulatory capital ratios continue 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, 2020.

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 ten years as “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 risks and uncertainties related to, and the impact of, the global coronavirus (COVID-19) pandemic on the businesss, financial condition and results of operations of our company and our customers, 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, 2019.  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.

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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							2020				2020				2019				2020				2019
Total interest income						$	16,507			$	17,494			$	19,239			$	34,001			$	38,429
Total interest expense							1,460				2,191				3,284				3,651				6,453
Net interest income							15,047				15,303				15,955				30,350				31,976
Provision for loan losses							1,000				700				(200	)			1,700				(450	)
Net interest income after provision for loan losses							14,047				14,603				16,155				28,650				32,426
NON-INTEREST INCOME
Deposit service charges							860				1,110				1,078				1,970				2,128
Net gains on mortgage loans							1,849				650				614				2,499				825
Trust fees							945				935				1,003				1,880				1,893
Other							2,200				2,264				2,403				4,464				4,580
Total non-interest income							5,854				4,959				5,098				10,813				9,426
NON-INTEREST EXPENSE
Salaries and benefits							5,766				6,691				6,379				12,457				12,623
Occupancy							949				1,009				996				1,958				2,089
Furniture and equipment							882				855				866				1,737				1,710
FDIC assessment							76				-				119				76				239
Problem asset costs, including losses and (gains)							17				61				15				78				68
Other							2,814				3,106				2,959				5,920				5,844
Total non-interest expense							10,504				11,722				11,334				22,226				22,573
Income before income tax							9,397				7,840				9,919				17,237				19,279
Income tax expense							1,759				1,429				1,916				3,188				3,630
Net income						$	7,638			$	6,411			$	8,003			$	14,049			$	15,649
Basic earnings per common share						$	0.22			$	0.19			$	0.24			$	0.41			$	0.46
Diluted earnings per common share						$	0.22			$	0.19			$	0.24			$	0.41			$	0.46
Return on average assets							1.31	%			1.27	%			1.62	%			1.29	%			1.59	%
Return on average equity							13.50	%			11.63	%			15.94	%			12.58	%			15.87	%
Net interest margin (fully taxable equivalent)							2.74	%			3.25	%			3.45	%			2.98	%			3.50	%
Efficiency ratio							50.26	%			57.85	%			53.84	%			54.00	%			54.52	%
BALANCE SHEET DATA										June 30		March 31		June 30
Assets											2020				2020				2019
Cash and due from banks										$	33,079			$	25,861			$	30,943
Federal funds sold and other short-term investments											426,926				181,334				199,940
Debt securities available for sale											229,489				243,368				222,825
Debt securities held to maturity											89,195				82,514				79,054
Federal Home Loan Bank Stock											11,558				11,558				11,558
Loans held for sale											1,677				1,966				1,016
Total loans											1,562,688				1,395,341				1,343,512
Less allowance for loan loss											15,855				18,889				16,886
Net loans											1,546,833				1,376,452				1,326,626
Premises and equipment, net											43,052				43,461				44,424
Bank-owned life insurance											42,654				42,411				41,695
Other real estate owned											2,624				2,626				3,067
Other assets											24,061				19,539				17,257
Total Assets										$	2,451,148			$	2,031,090			$	1,978,405
Liabilities and Shareholders' Equity
Noninterest-bearing deposits										$	748,624			$	492,409			$	476,700
Interest-bearing deposits											1,369,667				1,212,971				1,184,406
Total deposits											2,118,291				1,705,380				1,661,106
Other borrowed funds											70,000				70,000				60,000
Long-term debt											20,619				20,619				41,238
Other liabilities											12,900				11,511				10,542
Total Liabilities											2,221,810				1,807,510				1,772,886
Shareholders' equity											229,338				223,580				205,519
Total Liabilities and Shareholders' Equity										$	2,451,148			$	2,031,090			$	1,978,405
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
30%; width:30%; min-width:30%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2019	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2020	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	1%; width:1%; min-width:1%;">	7%; width:7%; min-width:7%;">2019	1%; width:1%; min-width:1%;">
EARNINGS SUMMARY
Net interest income		$	15,047			$	15,303			$	15,675			$	15,836			$	15,955			$	30,350			$	31,976
Provision for loan losses			1,000				700				-				-				(200	)			1,700				(450	)
Total non-interest income			5,854				4,959				5,089				5,213				5,098				10,813				9,426
Total non-interest expense			10,504				11,722				10,643				11,009				11,334				22,226				22,573
Federal income tax expense			1,759				1,429				1,949				1,882				1,916				3,188				3,630
Net income		$	7,638			$	6,411			$	8,172			$	8,158			$	8,003			$	14,049			$	15,649
Basic earnings per common share		$	0.22			$	0.19			$	0.24			$	0.24			$	0.24			$	0.41			$	0.46
Diluted earnings per common share		$	0.22			$	0.19			$	0.24			$	0.24			$	0.24			$	0.41			$	0.46
MARKET DATA
Book value per common share		$	6.72			$	6.56			$	6.38			$	6.22			$	6.04			$	6.72			$	6.04
Tangible book value per common share		$	6.72			$	6.56			$	6.38			$	6.22			$	6.04			$	6.72			$	6.04
Market value per common share		$	7.82			$	7.12			$	11.13			$	10.39			$	10.26			$	7.82			$	10.26
Average basic common shares			34,108,982				34,106,719				34,080,275				34,060,796				34,042,886				34,108,057				34,041,628
Average diluted common shares			34,108,982				34,106,719				34,080,275				34,060,796				34,042,886				34,108,057				34,041,628
Period end common shares			34,114,901				34,107,995				34,103,542				34,061,080				34,042,331				34,114,901				34,042,331
PERFORMANCE RATIOS
Return on average assets			1.31	%			1.27	%			1.59	%			1.59	%			1.62	%			1.29	%			1.59	%
Return on average equity			13.50	%			11.63	%			15.27	%			15.69	%			15.94	%			12.58	%			15.87	%
Net interest margin (fully taxable equivalent)			2.74	%			3.25	%			3.24	%			3.29	%			3.45	%			2.98	%			3.50	%
Efficiency ratio			50.26	%			57.85	%			51.26	%			52.30	%			53.84	%			54.00	%			54.52	%
Full-time equivalent employees (period end)			335				331				325				327				338				335				338
ASSET QUALITY
Gross charge-offs		$	4,183			$	39			$	33			$	48			$	41			$	4,222			$	198
Net charge-offs/(recoveries)		$	4,034			$	(989	)		$	(55	)		$	(259	)		$	(194	)		$	3,046			$	(460	)
Net charge-offs to average loans (annualized)			1.03	%			-0.29	%			-0.02	%			-0.08	%			-0.06	%			0.41	%			-0.07	%
Nonperforming loans		$	2,957			$	7,230			$	203			$	211			$	293			$	2,957			$	293
Other real estate and repossessed assets		$	2,624			$	2,626			$	2,748			$	3,109			$	3,067			$	2,624			$	3,067
Nonperforming loans to total loans			0.19	%			0.52	%			0.01	%			0.02	%			0.02	%			0.19	%			0.02	%
Nonperforming assets to total assets			0.23	%			0.49	%			0.14	%			0.15	%			0.17	%			0.23	%			0.17	%
Allowance for loan losses		$	15,855			$	18,889			$	17,200			$	17,145			$	16,886			$	15,855			$	16,886
Allowance for loan losses to total loans			1.01	%			1.35	%			1.24	%			1.24	%			1.26	%			1.01	%			1.26	%
Allowance for loan losses to total loans (excluding PPP loans)		1.29	%			1.35	%			1.24	%			1.24	%			1.26	%			1.01	%			1.26	%
Allowance for loan losses to nonperforming loans			536.19	%			261.26	%			8472.91	%			8125.59	%			5763.14	%			536.19	%			5763.14	%
CAPITAL
Average equity to average assets			9.68	%			10.93	%			10.42	%			10.15	%			10.15	%			10.26	%			10.04	%
Common equity tier 1 to risk weighted assets (Consolidated)			14.92	%			13.43	%			13.46	%			13.23	%			13.13	%			14.92	%			13.13	%
Tier 1 capital to average assets (Consolidated)			10.49	%			11.90	%			11.49	%			12.22	%			12.34	%			10.49	%			12.34	%
Total capital to risk-weighted assets (Consolidated)			17.30	%			15.81	%			15.78	%			16.83	%			16.78	%			17.30	%			16.78	%
Common equity tier 1 to risk weighted assets (Bank)			15.81	%			14.23	%			14.26	%			15.31	%			15.27	%			15.81	%			15.27	%
Tier 1 capital to average assets (Bank)			10.21	%			11.56	%			11.15	%			11.88	%			12.01	%			10.21	%			12.01	%
Total capital to risk-weighted assets (Bank)			16.87	%			15.39	%			15.33	%			16.39	%			16.36	%			16.87	%			16.36	%
Common equity to assets			9.36	%			11.01	%			10.52	%			9.88	%			10.40	%			9.36	%			10.40	%
Tangible common equity to assets			9.36	%			11.01	%			10.52	%			9.88	%			10.40	%			9.36	%			10.40	%
END OF PERIOD BALANCES
Total portfolio loans		$	1,562,688			$	1,395,341			$	1,385,627			$	1,377,227			$	1,343,512			$	1,562,688			$	1,343,512
Earning assets			2,316,213				1,912,400				1,943,356				1,999,817				1,856,962				2,316,213				1,856,962
Total assets			2,451,148				2,031,090				2,068,770				2,144,498				1,978,405				2,451,148				1,978,405
Deposits			2,118,291				1,705,380				1,753,294				1,820,140				1,661,106				2,118,291				1,661,106
Total shareholders' equity			229,338				223,580				217,469				211,785				205,519				229,338				205,519
AVERAGE BALANCES
Total portfolio loans		$	1,571,544			$	1,384,465			$	1,377,051			$	1,348,417			$	1,367,202			$	1,478,005			$	1,383,244
Earning assets			2,216,193				1,897,236				1,931,333				1,921,346				1,860,353				2,056,714				1,847,211
Total assets			2,338,888				2,017,823				2,055,398				2,049,006				1,978,880				2,178,355				1,963,675
Deposits			2,007,258				1,701,994				1,727,946				1,728,657				1,667,580				1,854,626				1,656,983
Total shareholders' equity			226,288				220,538				214,112				208,031				200,888				223,413				197,196

FAQ

What were Macatawa Bank Corporation's Q2 2020 earnings?

Macatawa Bank Corporation reported net income of $7.6 million for Q2 2020.

How did the net interest margin change for MCBC in Q2 2020?

The net interest margin for MCBC decreased to 2.74% in Q2 2020 from 3.45% in Q2 2019.

What were the loan charge-offs reported by MCBC in Q2 2020?

Macatawa Bank Corporation recorded loan charge-offs of $4.1 million in Q2 2020.

How much did Macatawa Bank Corporation grow in total deposits in Q2 2020?

Total deposits increased by 24% to $2.12 billion in Q2 2020.

What is the provision for loan losses for MCBC in Q2 2020?

The provision for loan losses for Macatawa Bank was $1.0 million in Q2 2020.