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