HOLLAND, Mich., Oct. 16, 2006 (PRIMEZONE) -- Macatawa Bank Corporation (Nasdaq:MCBC) today announced net income for the third quarter of 2006. Net income for the quarter was a record $6.01 million, an 8% increase over third quarter 2005 net income of $5.55 million. Diluted earnings per share totaled $0.36 for the quarter compared to $0.34 for the third quarter of 2005. The results for the third quarter represent a 1.20% ROA and a 15.69% ROE. Net income for the first nine months of 2006 increased 11% to $16.99 million, or $1.03 per diluted share, as compared to net income of $15.35 million, or $0.93 per diluted share, for the first nine months of 2005. The results for the first nine months of 2006 represent a 1.16% ROA and 15.20% ROE.
"Macatawa achieved two major milestones during the third quarter, as quarterly earnings exceeded $6 million for the first time and total assets passed the $2 billion mark. Surpassing $2 billion in total assets is especially significant considering we began less than nine years ago," commented Ben Smith, Chairman and CEO. Macatawa now has over 460 employees, 24 full service branch locations, and a complete line of personal, business and investment services. Its market extends throughout Ottawa and Kent counties and into Allegan County. "In Ottawa County, we are now the No. 1 Bank in total deposit market share. We are proud of the lasting franchise we have developed," added Mr. Smith.
Total assets increased $216.5 million from September 30, 2005 to $2.04 billion at September 30, 2006. Over the same twelve month period, total loans increased $170.9 million to $1.68 billion and total deposits increased $175.3 million to $1.63 billion at September 30, 2006. For the quarter, core deposits grew $86 million, 27% on an annualized basis. Macatawa also opened over 1,000 net new deposit accounts during the quarter. "Generating growth by gathering deposit balances within our markets remains a hallmark of our success," stated Mr. Smith. "This outstanding growth in a difficult market is a tribute to the exceptional quality of our people and their commitment to community banking. Their focus on identifying the needs of our customers and recommending appropriate financial solutions has been the key to our success," added Mr. Smith.
Third quarter net interest income totaled $17.0 million, an increase of $978,000 compared to the third quarter of 2005. The improvement in net interest income was driven primarily by an increase in average earning assets offset by a decline in the net interest margin. Average earning assets grew by 10% or $168.5 million from $1.70 billion for the third quarter of 2005 to $1.87 billion for the third quarter of 2006. The net interest margin was 3.62% for the quarter, down 12 basis points from 3.74% for the second quarter of 2006 and 14 basis points from 3.76% for the third quarter of 2005. The cost of funds rose more than the yield on assets and is the primary reason for the decline in net interest margin. Deposit customers continue to shift into higher costing deposit products within the generally high rate environment. At the same time, the increase in the yield on loans began to moderate during the quarter as the Federal Reserve Bank halted its series of 17 straight rate increases.
Non-interest income was $3.5 million for the third quarter of 2006 compared to $3.6 million for the third quarter of 2005. Non-interest income for the prior year quarter included a $148,000 gain on the sale of a commercial property. In addition, mortgage sale gains decreased by $332,000 compared to the prior year quarter resulting from both a challenging real estate market and interest rate environment. However, this decline was offset by increases in revenue from trust and other financial services as the Company continues to gain new customers in these service areas.
Non-interest expense was $11.3 million for the quarter, remaining flat when compared to $11.3 million for the second quarter of 2006 and up slightly compared to $10.7 million for the third quarter of 2005. For the past three quarters, the Company has been able to manage its overhead costs at just over $11.0 million per quarter despite its continued commitment to expansion. Compared to the prior year quarter, the majority of the increase in non-interest expense relates to an increase of $438,000 in salaries and benefits. This increase included $174,000 in stock option compensation expense related to the adoption of FAS 123, Revised beginning January 1, 2006. The remainder of the increase was related to additional staffing in each line of business and in support departments consistent with growth of the Bank.
The provision for loan losses was $490,000 for the quarter, down from $855,000 for the third quarter of 2005. A decline in net charge-offs and slightly slower growth in total loans for the quarter resulted in the decline in the provision for loan losses. Annualized net charge-offs were 0.05% of average loans for the quarter, down from 0.09% for the third quarter of 2005. Non-performing assets to total assets increased slightly to 0.42% at September 30, 2006 compared to 0.38% at June 30, 2006 and 0.28% at September 30, 2005. The allowance for loan losses represents 1.33% of total loans at September 30, 2006.
The Company remained well-capitalized at September 30, 2006 with a total risk-based capital ratio of 10.95%.
"The banking environment continues to be challenging. Long-term rates are now lower than short-term rates, making it difficult to grow revenue through improved profit margins. Despite this challenging business climate, our third quarter results were favorable and we our confident our commitment to community banking will continue to ensure our long-term success," concluded Mr. Smith.
Conference Call
Macatawa Bank Corporation will hold its quarterly earnings conference call on Tuesday, October 17, 2006, at 10:00 A.M. Persons who wish to access the call may do so via the Internet by visiting www.macatawabank.com and clicking on the webcast link in the Investor Information section. It may also be accessed by logging on to www.streetevents.com. A replay of the call will be available for 30 days following the call.
Headquartered in Holland, Michigan, Macatawa Bank Corporation is the parent company for Macatawa Bank and Macatawa Investment Services. Through its subsidiaries, the Corporation offers a full range of banking, investment and trust services to individuals, businesses, and governmental entities from a network of 24 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, ATMs and Internet banking services, trust and employee benefit plan services, and various investment services. The Corporation emphasizes its local management team and decision making, along with providing customers excellent service and superior financial products.
"CAUTIONARY STATEMENT: This press release contains certain forward-looking statements that involve risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, economic, competitive, governmental and technological factors affecting our operations, markets, products, services, and pricing. These statements include, among others, statements related to future growth and funding sources, future profitability levels, the effects on earnings of changes in interest rates and the future level of other revenue sources. Annualized growth rates are not intended to imply future growth at those rates. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Further information concerning our business, including additional factors that could materially affect our financial results, is included in our filings with the Securities and Exchange Commission."
MACATAWA BANK CORPORATION
CONSOLIDATED FINANCIAL SUMMARY
(Unaudited)
(Dollars in thousands except per share information)
Three Months Ended Nine Months Ended
September 30 September 30
----------------- -----------------
2006 2005 2006 2005
EARNINGS SUMMARY ------- ------- ------- -------
Total interest income $34,779 $27,752 $97,916 $76,308
Total interest expense 17,696 11,647 47,544 29,872
------- ------- ------- -------
Net interest income 17,083 16,105 50,372 46,436
Provision for loan loss 490 855 1,990 2,880
------- ------- ------- -------
Net interest income
after provision for
loan loss 16,593 15,250 48,382 43,556
NON-INTEREST INCOME
Deposit service charges 1,256 1,259 3,642 3,138
Gain on sale of loans 365 697 1,288 1,792
Trust fees 871 746 2,493 2,177
Other 1,011 947 2,903 2,584
------- ------- ------- -------
Total non-interest income 3,503 3,649 10,326 9,691
NON-INTEREST EXPENSE
Salaries and benefits 6,193 5,755 18,524 16,590
Occupancy 910 797 2,630 2,387
Furniture and equipment 790 759 2,362 2,182
Other 3,364 3,377 10,160 9,452
------- ------- ------- -------
Total non-interest expense 11,257 10,688 33,676 30,611
------- ------- ------- -------
Income before income tax 8,839 8,211 25,032 22,636
Federal income tax expense 2,830 2,661 8,046 7,289
------- ------- ------- -------
Net income $ 6,009 $ 5,550 $16,986 $15,347
======= ======= ======= =======
Basic earnings per share $ 0.37 $ 0.35 $ 1.05 $ 0.96
Diluted earnings per share $ 0.36 $ 0.34 $ 1.03 $ 0.93
Return on average assets 1.20% 1.21% 1.16% 1.16%
Return on average equity 15.69% 16.02% 15.20% 15.17%
Net interest margin 3.62% 3.76% 3.71% 3.81%
Efficiency ratio 54.68% 54.11% 55.48% 54.54%
BALANCE SHEET DATA September 30 December 31
Assets 2006 2005 2005
---------- ---------- ----------
Cash and due from banks $ 36,916 $ 36,767 $ 49,101
Federal funds sold 5,457 -- --
Securities available for sale 192,864 158,875 156,696
Securities held to maturity 2,713 3,909 3,907
Federal Home Loan Bank Stock 12,915 13,910 13,910
Loans held for sale 2,232 4,244 2,331
Total loans 1,682,359 1,511,458 1,547,879
Less allowance for loan loss 22,427 20,526 20,992
---------- ---------- ----------
Net loans 1,659,932 1,490,932 1,526,887
---------- ---------- ----------
Premises and equipment, net 57,853 51,347 53,028
Acquisition intangibles 25,571 25,955 25,856
Bank-owned life insurance 21,558 20,654 20,814
Other assets 23,020 17,890 17,460
---------- ---------- ----------
Total Assets $2,041,031 $1,824,483 $1,869,990
========== ========== ==========
Liabilities and
Shareholders' Equity
Noninterest-bearing deposits $ 168,438 $ 172,663 $ 188,762
Interest-bearing deposits 1,464,378 1,284,821 1,319,010
---------- ---------- ----------
Total deposits 1,632,816 1,457,484 1,507,772
Federal funds purchased -- 31,414 25,809
Other borrowed funds 202,055 147,196 145,161
Long-term debt 41,238 41,238 41,238
Other liabilities 9,797 7,820 8,266
---------- ---------- ----------
Total Liabilities 1,885,906 1,685,152 1,728,246
Shareholders' equity 155,125 139,331 141,744
---------- ---------- ----------
Total Liabilities and
Shareholders' Equity $2,041,031 $1,824,483 $1,869,990
========== ========== ==========
MACATAWA BANK CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands except per share information)
Quarterly
----------------------------------------------------------
3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr
2006 2006 2006 2005 2005
---------- ---------- ---------- ---------- ----------
EARNINGS
SUMMARY
Net interest
income $ 17,083 $ 16,975 $ 16,314 $ 16,401 $ 16,105
Provision for
loan loss 490 800 700 795 855
Total non-
interest
income 3,503 3,629 3,194 3,314 3,649
Total non-
interest
expense 11,257 11,333 11,085 10,813 10,688
Income taxes 2,830 2,715 2,501 2,565 2,661
Net income $ 6,009 $ 5,756 $ 5,222 $ 5,542 $ 5,550
Basic
earnings
per share $ 0.37 $ 0.36 $ 0.32 $ 0.34 $ 0.35
Diluted
earnings
per share $ 0.36 $ 0.35 $ 0.32 $ 0.34 $ 0.34
MARKET DATA
Book value
per share $ 9.56 $ 9.13 $ 8.97 $ 8.80 $ 8.66
Market value
per share $ 22.89 $ 23.39 $ 24.07 $ 23.10 $ 21.72
Average
basic
common
shares 16,214,390 16,200,172 16,164,946 16,100,083 16,076,699
Average
diluted
common
shares 16,557,849 16,542,131 16,568,345 16,520,970 16,507,189
Period end
common
shares 16,221,682 16,205,196 16,188,015 16,109,087 16,091,173
PERFORMANCE
RATIOS
Return on
average
assets 1.20% 1.18% 1.11% 1.20% 1.21%
Return on
average
equity 15.69% 15.53% 14.34% 15.69% 16.02%
Net interest
margin (FTE) 3.62% 3.74% 3.78% 3.82% 3.76%
Efficiency
ratio 54.68% 55.00% 56.82% 54.85% 54.11%
ASSET QUALITY
Net charge-
offs $ 208 $ 46 $ 300 $ 329 $ 339
Nonper-
forming
loans $ 5,768 $ 5,781 $ 5,545 $ 4,204 $ 3,565
Other real
estate and
repossessed
assets $ 2,758 $ 1,725 $ 1,401 $ 692 $ 1,632
Nonper-
forming
loans to
total loans 0.34% 0.35% 0.35% 0.27% 0.24%
Nonper-
forming
assets to
total assets 0.42% 0.38% 0.36% 0.26% 0.28%
Net charge-
offs to
average
loans
(annualized) 0.05% 0.01% 0.08% 0.09% 0.09%
Allowance
for loan
loss to
total loans 1.33% 1.34% 1.35% 1.36% 1.36%
CAPITAL &
LIQUIDITY
Average
equity to
average
assets 7.62% 7.61% 7.76% 7.66% 7.56%
Tier 1
capital to
risk-
weighted
assets 9.59% 9.49% 9.69% 9.54% 9.65%
Total capital
to risk-
weighted
assets 10.95% 10.85% 11.06% 11.07% 11.02%
Loans to
deposits
+ Other
borrowed
funds 91.69% 93.88% 94.52% 93.64% 94.19%
END OF PERIOD
BALANCES
Total port-
folio
loans $1,682,359 $1,653,035 $1,590,138 $1,547,879 $1,511,458
Earning
assets 1,897,447 1,841,812 1,776,486 1,725,832 1,691,699
Total
assets 2,041,031 1,981,318 1,903,965 1,869,990 1,824,483
Deposits 1,632,816 1,573,101 1,542,567 1,507,772 1,457,484
Total share-
holders'
equity 155,125 147,899 145,153 141,744 139,331
AVERAGE
BALANCES
Total port-
folio
loans $1,664,378 $1,626,102 $1,563,277 $1,528,007 $1,496,063
Earning
assets 1,873,191 1,815,807 1,743,952 1,710,742 1,704,660
Total
assets 2,010,840 1,949,399 1,876,713 1,843,737 1,833,571
Deposits 1,605,567 1,556,712 1,517,460 1,445,437 1,433,795
Total share-
holders'
equity 153,147 148,252 145,639 141,311 138,556
Year to Date
--------------------------
2006 2005
---------- ----------
EARNINGS SUMMARY
Net interest income $ 50,372 $ 46,436
Provision for loan loss 1,990 2,880
Total non-interest income 10,326 9,691
Total non-interest expense 33,676 30,611
Income taxes 8,046 7,289
Net income $ 16,986 $ 15,347
Basic earnings per share $ 1.05 $ 0.96
Diluted earnings per share $ 1.03 $ 0.93
MARKET DATA
Book value per share $ 9.56 $ 8.66
Market value per share $ 22.89 $ 21.72
Average basic common shares 16,192,727 16,047,294
Average diluted common shares 16,568,633 16,457,667
Period end common shares 16,221,682 16,091,173
PERFORMANCE RATIOS
Return on average assets 1.16% 1.16%
Return on average equity 15.20% 15.17%
Net interest margin (FTE) 3.71% 3.81%
Efficiency ratio 55.48% 54.54%
ASSET QUALITY
Net charge-offs $ 554 $ 1,605
Nonperforming loans $ 5,768 $ 3,565
Other real estate and repossessed assets $ 2,758 $ 1,632
Nonperforming loans to total loans 0.34% 0.24%
Nonperforming assets to total assets 0.42% 0.28%
Net charge-offs to average
loans (annualized) 0.05% 0.15%
Allowance for loan loss to total loans 1.33% 1.36%
CAPITAL & LIQUIDITY
Average equity to average assets 7.66% 7.65%
Tier 1 capital to risk-weighted assets 9.59% 9.65%
Total capital to risk-weighted assets 10.95% 11.02%
Loans to deposits + Other borrowed funds 91.69% 94.19%
END OF PERIOD BALANCES
Total portfolio loans $1,682,359 $1,511,458
Earning assets 1,897,447 1,691,699
Total assets 2,041,031 1,824,483
Deposits 1,632,816 1,457,484
Total shareholders' equity 155,125 139,331
AVERAGE BALANCES
Total portfolio loans $1,618,289 $1,452,328
Earning assets 1,811,457 1,635,072
Total assets 1,946,142 1,762,574
Deposits 1,560,236 1,371,877
Total shareholders' equity 149,040 134,895