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Macatawa Bank Corporation Reports Third Quarter 2023 Results
Источник: Nasdaq GlobeNewswire / 26 окт 2023 16:15:01 America/New_York
HOLLAND, Mich., Oct. 26, 2023 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (NASDAQ: MCBC), the holding company for Macatawa Bank (collectively, the “Company”), today announced its results for the third quarter 2023.
- Net income of $11.4 million in third quarter 2023 – an increase of 13.6% over $10.0 million earned in third quarter 2022 and up 10.7% from $10.3 million earned in second quarter 2023
- Net interest margin increased to 3.35% in third quarter 2023 versus 2.86% in third quarter 2022 and decreased slightly from 3.36% in second quarter 2023
- Continued loan portfolio growth – $19.7 million, or 6% annualized growth rate, for the third quarter 2023, and $152.6 million, or 13.4%, in the last 12 months
- Deposit portfolio balances increased $124.0 million in the third quarter 2023, all in core deposits primarily due to seasonal inflows from municipal customers
- Strong credit quality metrics – non-performing assets at 0.00004% of total assets, allowance to total loans coverage of 1.32%, and no delinquent loans
- Robust capital position - $140.0 million in excess capital over well-capitalized minimums
The Company reported net income of $11.4 million, or $0.33 per diluted share, in third quarter 2023 compared to $10.0 million, or $0.29 per diluted share, in third quarter 2022. For the first nine months of 2023, the Company reported net income of $33.7 million, or $0.98 per diluted share, compared to $22.6 million, or $0.66 per diluted share, for the same period in 2022.
"We are pleased to report strong profitability and good balance sheet results for the third quarter 2023,” said Jon Swets, incoming President and CEO of the Company. “Net interest income for third quarter 2023 was up $2.5 million from third quarter 2022, reflecting benefits from federal funds rate increases and growth in our loan and investment securities portfolios. Solid loan origination activity continued in the third quarter 2023 while we maintained excellent credit quality. We had no loan delinquencies at September 30, 2023. On the funding side of the balance sheet we continue to see shifting in our deposits to higher interest bearing types which has a downward impact on net interest margin, but are encouraged by the strength of our core deposit base. Our core deposit balances remain well above pre-pandemic levels and increased in the third quarter 2023.”
Mr. Swets concluded: "We believe our balance sheet is well positioned in the current environment. High levels of liquidity, capital, and excellent asset quality put us in a good position to weather softer economic conditions, should they occur, and to seize loan growth opportunities in our markets. We remain committed to the conservative and well-disciplined approach to running the Company that has provided strong and consistent financial performance to our shareholders.”
Operating Results
Net interest income for the third quarter 2023 totaled $22.2 million, an increase of $1.1 million from second quarter 2023 and an increase of $2.5 million from third quarter 2022. Net interest margin for third quarter 2023 was 3.35% percent, down 1 basis point from second quarter 2023 and up 49 basis points from third quarter 2022. Net interest income in third quarter 2023 versus third quarter 2022 benefited from the significant increases in the federal funds rate which totaled 225 basis points between September 2022 and September 2023 and the related increases in rate indices impacting the Company’s variable rate loan portfolios. Interest on commercial loans increased $4.8 million in the third quarter 2023 compared to third quarter 2022 due to increases in both rate and average portfolio balances. Interest on federal funds in the third quarter 2023 increased by $1.7 million compared to third quarter 2022 due to higher rates paid on lower average balances held. Net interest income also benefited from growth in the investment securities portfolio to further deploy excess liquid funds held by the Company. Interest on investment securities in the third quarter 2023 increased by $1.2 million over third quarter 2022. Interest expense totaled $7.5 million in the third quarter 2023 compared to $1.1 million in the third quarter 2022 as rates paid on deposits increased.Non-interest income increased $3,000 in third quarter 2023 compared to second quarter 2023 and decreased $273,000 from third quarter 2022. Deposit service charge income, including treasury management fees, was up $43,000 in third quarter 2023 compared to second quarter 2023 and was down $202,000 from third quarter 2022. The increase from second quarter 2023 was due to higher levels of treasury management fees while the decrease from third quarter 2022 was primarily due to higher earnings credits provided on treasury management accounts with the increase in deposit market interest rates. Brokerage income was up $128,000 in third quarter 2023 compared to second quarter 2023 and was up $67,000 compared to third quarter 2022. The rising rate environment continued to have a negative effect on mortgage loan sales gains. Gains on sales of mortgage loans in third quarter 2023 were just $5,000, down $16,000 compared to second quarter 2023 and were down $161,000 from third quarter 2022. The Company originated $284,000 in mortgage loans for sale in third quarter 2023 compared to $2.4 million in second quarter 2023 and $6.5 million in third quarter 2022. Trust fees were down $27,000 in third quarter 2023 compared to second quarter 2023 and were up $140,000 compared to third quarter 2022, due largely to changes in underlying trust asset valuations. Income from debit and credit cards was down $65,000 in third quarter 2023 compared to second quarter 2023 and was down $49,000 compared to third quarter 2022 due primarily to customer usage behavior.
Non-interest expense was $12.8 million for third quarter 2023, compared to $12.7 million for second quarter 2023 and $12.1 million for third quarter 2022. The largest component of non-interest expense was salaries and benefits expenses. Salaries and benefits expenses were up $106,000 compared to second quarter 2023 and were up $310,000 compared to third quarter 2022. The increase compared to third quarter 2022 was primarily due to a higher level of salary and other compensation resulting from merit adjustments to base pay effective April 1, 2023. The table below identifies the primary components of the changes in salaries and benefits between periods.
Dollars in 000s Q3 2023
to
Q2 2023Q3 2023
to
Q3 2022Salaries and other compensation $ 41 $ 228 Salary deferral from commercial loans 24 40 Bonus accrual --- (57 ) Mortgage production – variable comp (6 ) 34 Brokerage – variable comp 50 32 401k matching contributions (3 ) 8 Medical insurance costs --- 25 Total change in salaries and benefits $ 106 $ 310 Occupancy expenses were down $74,000 in third quarter 2023 compared to second quarter 2023 and were up $35,000 compared to third quarter 2022. Furniture and equipment expenses were down $14,000 compared to second quarter 2023 and were up $36,000 compared to third quarter 2022 due primarily to higher costs associated with equipment and software service contracts. FDIC assessment expense was flat in third quarter 2023 compared to second quarter 2023 and was up $129,000 compared to third quarter 2022, reflecting higher assessments placed on banks by the FDIC beginning in 2023. Data processing expenses were down $4,000 in third quarter 2023 compared to second quarter 2023 and were up $18,000 compared to third quarter 2022 due to usage of electronic banking services by the Company’s customers. Legal and professional fees were up $84,000 in third quarter 2023 compared to second quarter 2023 and were up $87,000 compared to third quarter 2022 due to higher use of corporate counsel in the third quarter 2023 as well as the outsourcing of certain internal audit activities. Other categories of non-interest expense were relatively flat compared to second quarter 2023 and third quarter 2022 due to a continued focus on expense management.
Federal income tax expense was $2.8 million for third quarter 2023, $2.5 million for second quarter 2023, and $2.5 million for third quarter 2022. The effective tax rate was 19.75% for third quarter 2023, compared to 19.35% for second quarter 2023 and 19.85% for third quarter 2022.
Asset Quality
The Company adopted ASU 2016-13, Financial Instruments – Credit Losses, commonly referred to as “CECL” on January 1, 2023. The impact on adoption was an increase to the allowance for credit losses of $1.5 million. A provision for credit losses benefit of $150,000 was taken in third quarter 2023 compared to provision expense of $300,000 in second quarter 2023. No provision for credit losses was recorded in third quarter 2022. Net loan recoveries for third quarter 2023 were $42,000, compared to second quarter 2023 net loan recoveries of $15,000 and third quarter 2022 net loan recoveries of $190,000. At September 30, 2023, the Company had experienced net loan recoveries in thirty-three of the past thirty-five quarters. Total loans past due on payments by 30 days or more amounted to $0 at September 30, 2023, versus $158,000 at June 30, 2023 and $84,000 at September 30, 2022. Further, the weighted average loan grade of the Company’s commercial loan portfolio continued to improve, ending at 3.46 at both September 30, 2023 and June 30, 2023, compared to 3.54 at September 30, 2022. An improving loan grade decreases the need for providing for credit losses on this portfolio.The allowance for credit losses of $17.0 million was 1.32% of total loans at September 30, 2023, compared to $17.1 million or 1.35% of total loans at June 30, 2023, and $14.8 million or 1.30% at September 30, 2022. The coverage ratio of allowance for credit losses to nonperforming loans continued to be strong and significantly exceeded 1-to-1 coverage at 17,001-to-1 as of September 30, 2023.
At September 30, 2023, the Company's nonperforming loans were $1,000, representing 0.00008% of total loans. This compares to $72,000 (0.01% of total loans) at June 30, 2023 and $85,000 (0.01% of total loans) at September 30, 2022. The Company had no other real estate owned and repossessed assets at September 30, 2023 and June 30, 2023, down from $2.4 million September 30, 2022. The Company sold its final other real estate owned property in first quarter 2023, recognizing a net gain of $356,000. Total nonperforming assets, including other real estate owned and nonperforming loans, decreased by $2.4 million from September 30, 2022 to September 30, 2023.
A break-down of non-performing loans is shown in the table below.
Dollars in 000s Sept 30,
2023June 30,
2023Mar 31,
2023Dec 31,
2022Sept 30,
2022Commercial Real Estate $ --- $ --- $ --- $ --- $ --- Commercial and Industrial --- --- --- --- --- Total Commercial Loans --- --- --- --- --- Residential Mortgage Loans 1 72 75 78 85 Consumer Loans --- --- --- --- --- Total Non-Performing Loans $ 1 $ 72 $ 75 $ 78 $ 85 A break-down of non-performing assets is shown in the table below.
Dollars in 000s Sept 30,
2023June 30,
2023Mar 31,
2023Dec 31,
2022Sept 30,
2022Non-Performing Loans $ 1 $ 72 $ 75 $ 78 $ 85 Other Repossessed Assets --- --- --- --- --- Other Real Estate Owned --- --- --- 2,343 2,343 Total Non-Performing Assets $ 1 $ 72 $ 75 $ 2,421 $ 2,428 Balance Sheet, Liquidity and Capital
Total assets were $2.76 billion at September 30, 2023, an increase of $129.5 million from $2.63 billion at June 30, 2023 and a decrease of $75.3 million from $2.84 billion at September 30, 2022.
The Company’s investment securities portfolio primarily consists of U.S. treasury and agency securities, agency mortgage backed securities and various municipal securities. Total securities were $833.3 million at September 30, 2023, a decrease of $20.0 million from $853.2 million at June 30, 2023 and an increase of $30.1 million from $803.2 million at September 30, 2022. The overall duration of the Company’s investment securities portfolio at September 30, 2023 is relatively short at less than three years. This provides a reliable source of cash inflows as investment securities mature to support liquidity.
Total loans were $1.29 billion at September 30, 2023, an increase of $19.7 million from $1.27 billion at June 30, 2023 and an increase of $152.6 million from $1.14 billion at September 30, 2022.
Commercial loans increased by $106.2 million from September 30, 2022 to September 30, 2023, along with an increase of $50.3 million in the residential mortgage portfolio, partially offset by a decrease of $3.9 million in the consumer loan portfolio. Within commercial loans, commercial real estate loans increased by $45.1 million and commercial and industrial loans increased by $61.1 million. The loan growth experienced in this time period was the direct result of both new loan prospecting efforts and existing customers beginning to draw more on existing lines and borrow more for expansion of their businesses.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s Sept 30,
2023June 30,
2023Mar 31,
2023Dec 31,
2022Sept 30,
2022Construction and Development $ 120,892 $ 116,124 $ 120,268 $ 116,715 $ 111,624 Other Commercial Real Estate 446,393 443,489 423,080 420,888 410,600 Commercial Loans Secured by Real Estate 567,285 559,613 543,348 537,603 522,224 Commercial and Industrial 488,224 489,273 473,354 441,716 427,034 Paycheck Protection Program --- --- --- --- 32 Total Commercial Loans $ 1,055,509 $ 1,048,886 $ 1,016,702 $ 979,319 $ 949,290 Total deposits were $2.45 billion at September 30, 2023, up $124.0 million from $2.32 billion at June 30, 2023 and were down $110.6 million, or 4.3%, from $2.56 billion at September 30, 2022. While the Company experienced an overall decline in deposit balances compared to the prior year, much of this was attributable to balances moving into wealth management accounts at the Bank, so these balances should continue to benefit the Company. The Company experienced very little change in deposit balances following the March 2023 bank failures and resulting banking system disruption, with deposit balances increasing by $114.7 million since March 31, 2023.
Macatawa’s deposit base is primarily made up of many small accounts, and balances at September 30, 2023 were comprised of 42% personal customers and 58% business customers. Core deposits - which Management defines as deposits sourced within its local markets - represented 100% of total deposits at September 30, 2023. Total deposit balances of $2.45 billion at September 30, 2023 remained elevated, reflecting a $740.2 million increase, or 43%, over pre-pandemic totals of $1.71 billion as of March 31, 2020.
Noninterest bearing demand deposits were down $51.4 million at the end of third quarter 2023 compared to the end of second quarter 2023 and were down $202.7 million compared to the end of third quarter 2022. Interest bearing demand deposits, money market deposits and savings deposits were up $133.5 million from the end of second quarter 2023 and were down $115.3 million from the end of third quarter 2022. Certificates of deposit were up $41.9 million at September 30, 2023 compared to June 30, 2023 and were up $207.4 million compared to September 30, 2022 as customers reacted to increases in market interest rates. All certificates of deposit are to local customers as the Company does not have any brokered deposits at September 30, 2023. The Company continues to be successful at attracting and retaining core local deposit customers. Customer deposit accounts remain insured to the highest levels available under FDIC deposit insurance.
Management has actively pursued initiatives to maintain a strong liquidity position. The Company has had no brokered deposits on balance sheet since December 2011 and continues to maintain significant on-balance sheet liquidity. At September 30, 2023, balances held in federal funds sold and other short-term investments amounted to $469.8 million. In addition, the Company had total additional borrowing capacity, including from the Federal Reserve’s Bank Term Funding Program, of approximately $964.5 million as of September 30, 2023. Finally, because Management has maintained the discipline of buying shorter-term bond durations in the investment securities portfolio, there are $389.5 million in bond maturities and paydowns coming into the Company in the next 24 months ending September 30, 2025.
The Company's total risk-based regulatory capital ratio at September 30, 2023 was consistent with the ratio at June 30, 2023 and September 30, 2022. Macatawa Bank’s risk-based regulatory capital ratios continue to be at levels considerably above those required to be categorized as “well capitalized” under applicable regulatory capital guidelines. As such, the Bank was categorized as "well capitalized" with $140.0 million in excess capital over well capitalized minimums at September 30, 2023.
About Macatawa Bank
Headquartered in Holland, Michigan, 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 thirteen 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, future interest rates, future net interest margin, future economic conditions, and future levels of unrealized gains or losses in the investment securities portfolio. All statements with references to future time periods are forward-looking. Management's determination of the provision and allowance for credit 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, interest rates 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, 2022. 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 Nine Months Ended 3rd Qtr 2nd Qtr 3rd Qtr September 30 EARNINGS SUMMARY 2023 2023 2022 2023 2022 Total interest income $ 29,787 $ 27,120 $ 20,875 $ 84,174 $ 49,452 Total interest expense 7,543 5,974 1,104 18,167 2,173 Net interest income 22,244 21,146 19,771 66,007 47,279 Provision for credit losses (150 ) 300 - 150 (1,500 ) Net interest income after provision for credit losses 22,394 20,846 19,771 65,857 48,779 NON-INTEREST INCOME Deposit service charges 1,061 1,018 1,263 3,072 3,693 Net gains on mortgage loans 5 21 166 37 673 Trust fees 1,109 1,136 969 3,277 3,153 Other 2,441 2,438 2,491 7,370 7,466 Total non-interest income 4,616 4,613 4,889 13,756 14,985 NON-INTEREST EXPENSE Salaries and benefits 6,949 6,843 6,639 20,490 19,331 Occupancy 1,024 1,098 989 3,260 3,232 Furniture and equipment 1,050 1,064 1,014 3,145 3,017 FDIC assessment 330 330 201 990 578 Other 3,436 3,338 3,284 9,742 9,620 Total non-interest expense 12,789 12,673 12,127 37,627 35,778 Income before income tax 14,221 12,786 12,533 41,986 27,986 Income tax expense 2,808 2,474 2,488 8,257 5,372 Net income $ 11,413 $ 10,312 $ 10,045 $ 33,729 $ 22,614 Basic earnings per common share $ 0.33 $ 0.30 $ 0.29 $ 0.98 $ 0.66 Diluted earnings per common share $ 0.33 $ 0.30 $ 0.29 $ 0.98 $ 0.66 Return on average assets 1.66 % 1.57 % 1.40 % 1.66 % 1.05 % Return on average equity 17.14 % 15.70 % 16.41 % 17.31 % 12.23 % Net interest margin (fully taxable equivalent) 3.35 % 3.36 % 2.86 % 3.38 % 2.30 % Efficiency ratio 47.61 % 49.20 % 49.18 % 47.17 % 57.46 % BALANCE SHEET DATA September 30 June 30 September 30 Assets 2023 2023 2022 Cash and due from banks $ 40,687 $ 40,255 $ 33,205 Federal funds sold and other short-term investments 469,786 343,676 733,347 Debt securities available for sale 503,277 512,837 453,728 Debt securities held to maturity 330,003 340,400 349,481 Federal Home Loan Bank Stock 10,211 10,211 10,211 Loans held for sale - - 234 Total loans 1,291,290 1,271,576 1,138,645 Less allowance for credit losses 17,001 17,109 14,821 Net loans 1,274,289 1,254,467 1,123,824 Premises and equipment, net 39,399 39,766 40,670 Bank-owned life insurance 54,043 53,791 53,193 Other real estate owned - - 2,343 Other assets 38,015 34,851 34,802 Total Assets $ 2,759,710 $ 2,630,254 $ 2,835,038 Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 653,052 $ 704,409 $ 855,744 Interest-bearing deposits 1,792,534 1,617,136 1,700,453 Total deposits 2,445,586 2,321,545 2,556,197 Other borrowed funds 30,000 30,000 30,000 Long-term debt - - - Other liabilities 14,247 14,890 12,287 Total Liabilities 2,489,833 2,366,435 2,598,484 Shareholders' equity 269,877 263,819 236,554 Total Liabilities and Shareholders' Equity $ 2,759,710 $ 2,630,254 $ 2,835,038 MACATAWA BANK CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands except per share information) Quarterly Year to Date 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2023 2023 2023 2022 2022 2023 2022 EARNINGS SUMMARY Net interest income $ 22,244 $ 21,146 $ 22,616 $ 22,867 $ 19,771 $ 66,007 $ 47,279 Provision for credit losses (150 ) 300 - 375 - 150 (1,500 ) Total non-interest income 4,616 4,613 4,528 5,035 4,889 13,756 14,985 Total non-interest expense 12,789 12,673 12,165 12,448 12,127 37,627 35,778 Federal income tax expense 2,808 2,474 2,975 2,961 2,488 8,257 5,372 Net income $ 11,413 $ 10,312 $ 12,004 $ 12,118 $ 10,045 $ 33,729 $ 22,614 Basic earnings per common share $ 0.33 $ 0.30 $ 0.35 $ 0.35 $ 0.29 $ 0.98 $ 0.66 Diluted earnings per common share $ 0.33 $ 0.30 $ 0.35 $ 0.35 $ 0.29 $ 0.98 $ 0.66 MARKET DATA Book value per common share $ 7.87 $ 7.69 $ 7.60 $ 7.20 $ 6.91 $ 7.87 $ 6.91 Tangible book value per common share $ 7.87 $ 7.69 $ 7.60 $ 7.20 $ 6.91 $ 7.87 $ 6.91 Market value per common share $ 8.96 $ 9.28 $ 10.22 $ 11.03 $ 9.26 $ 8.96 $ 9.26 Average basic common shares 34,291,487 34,292,179 34,297,221 34,277,839 34,251,792 34,293,531 34,253,459 Average diluted common shares 34,291,487 34,292,179 34,297,221 34,277,839 34,251,792 34,293,531 34,253,459 Period end common shares 34,291,487 34,291,487 34,292,294 34,298,640 34,251,485 34,291,487 34,251,485 PERFORMANCE RATIOS Return on average assets 1.66 % 1.57 % 1.74 % 1.72 % 1.40 % 1.66 % 1.05 % Return on average equity 17.14 % 15.70 % 19.19 % 20.22 % 16.41 % 17.31 % 12.23 % Efficiency ratio 47.61 % 49.20 % 44.82 % 44.61 % 49.18 % 47.17 % 57.46 % Full-time equivalent employees (period end) 313 322 317 318 316 313 316 YIELDS AND COST OF FUNDS RATIOS Federal funds sold and other short-term investments 5.36 % 5.05 % 4.58 % 3.72 % 2.27 % 4.97 % 0.99 % Total securities (fully taxable equivalent) 2.47 % 2.43 % 2.40 % 2.25 % 2.07 % 2.43 % 1.89 % Commercial loans 5.66 % 5.58 % 5.40 % 4.93 % 4.30 % 5.55 % 3.97 % Residential mortgage loans 4.20 % 3.93 % 3.73 % 3.53 % 3.39 % 3.96 % 3.92 % Consumer loans 8.00 % 7.63 % 7.20 % 6.22 % 5.18 % 7.61 % 4.41 % Total loans 5.57 % 5.47 % 5.28 % 4.83 % 4.24 % 5.44 % 3.92 % Total yield on interest earning assets (fully taxable equivalent) 4.48 % 4.31 % 4.15 % 3.72 % 3.02 % 4.31 % 2.41 % Interest bearing demand deposits 0.45 % 0.48 % 0.43 % 0.34 % 0.14 % 0.46 % 0.06 % Savings and money market accounts 1.90 % 1.64 % 1.35 % 0.73 % 0.29 % 1.63 % 0.13 % Time deposits 3.86 % 3.23 % 2.22 % 0.84 % 0.29 % 3.30 % 0.24 % Total interest bearing deposits 1.69 % 1.42 % 1.05 % 0.57 % 0.22 % 1.39 % 0.11 % Total deposits 1.21 % 1.01 % 0.74 % 0.38 % 0.14 % 0.99 % 0.07 % Other borrowed funds 2.08 % 2.08 % 2.08 % 2.08 % 2.08 % 2.08 % 1.94 % Total average cost of funds on interest bearing liabilities 1.69 % 1.43 % 1.07 % 0.60 % 0.26 % 1.40 % 0.17 % Net interest margin (fully taxable equivalent) 3.35 % 3.36 % 3.44 % 3.34 % 2.86 % 3.38 % 2.30 % ASSET QUALITY Gross charge-offs $ 41 $ 22 $ 21 $ 23 $ 46 $ 84 $ 141 Net charge-offs/(recoveries) $ (42 ) $ (15 ) $ (33 ) $ (89 ) $ (190 ) $ (90 ) $ (432 ) Net charge-offs to average loans (annualized) -0.01 % -0.00 % -0.01 % -0.03 % -0.07 % -0.01 % -0.05 % Nonperforming loans $ 1 $ 72 $ 75 $ 78 $ 85 $ 1 $ 85 Other real estate and repossessed assets $ - $ - $ - $ 2,343 $ 2,343 $ - $ 2,343 Nonperforming loans to total loans 0.00 % 0.01 % 0.01 % 0.01 % 0.01 % 0.00 % 0.01 % Nonperforming assets to total assets 0.00 % 0.00 % 0.00 % 0.08 % 0.09 % 0.00 % 0.09 % Allowance for credit losses $ 17,001 $ 17,109 $ 16,794 $ 15,285 $ 14,821 $ 17,001 $ 14,821 Allowance for credit losses to total loans 1.32 % 1.35 % 1.38 % 1.30 % 1.30 % 1.32 % 1.30 % Allowance for credit losses to nonperforming loans 1700100.00 % 23762.50 % 22392.00 % 19596.15 % 17436.47 % 1700100.00 % 17436.47 % CAPITAL Average equity to average assets 9.71 % 10.01 % 9.07 % 8.49 % 8.52 % 9.59 % 8.56 % Common equity tier 1 to risk weighted assets (Consolidated) 17.66 % 17.16 % 17.08 % 16.94 % 16.72 % 17.66 % 16.72 % Tier 1 capital to average assets (Consolidated) 10.91 % 11.08 % 10.26 % 9.73 % 9.29 % 10.91 % 9.29 % Total capital to risk-weighted assets (Consolidated) 18.65 % 18.16 % 18.08 % 17.87 % 17.64 % 18.65 % 17.64 % Common equity tier 1 to risk weighted assets (Bank) 17.14 % 16.66 % 16.58 % 16.44 % 16.24 % 17.14 % 16.24 % Tier 1 capital to average assets (Bank) 10.59 % 10.75 % 9.96 % 9.44 % 9.02 % 10.59 % 9.02 % Total capital to risk-weighted assets (Bank) 18.13 % 17.66 % 17.58 % 17.37 % 17.16 % 18.13 % 17.16 % Common equity to assets 9.78 % 10.03 % 9.88 % 8.50 % 8.34 % 9.78 % 8.34 % Tangible common equity to assets 9.78 % 10.03 % 9.88 % 8.50 % 8.34 % 9.78 % 8.34 % END OF PERIOD BALANCES Total portfolio loans $ 1,291,290 $ 1,271,576 $ 1,220,939 $ 1,177,748 $ 1,138,645 $ 1,291,290 $ 1,138,645 Earning assets 2,648,445 2,518,396 2,531,184 2,781,515 2,727,924 2,648,445 2,727,924 Total assets 2,759,710 2,630,254 2,637,153 2,906,919 2,835,038 2,759,710 2,835,038 Deposits 2,445,586 2,321,545 2,330,895 2,615,142 2,556,197 2,445,586 2,556,197 Total shareholders' equity 269,877 263,819 260,568 247,038 236,554 269,877 236,554 AVERAGE BALANCES Federal funds sold and other short-term investments $ 467,434 $ 360,023 $ 555,670 $ 681,489 $ 803,082 $ 460,719 $ 923,153 Total securities 879,379 900,724 898,691 862,613 808,477 892,860 711,765 Total portfolio loans 1,274,344 1,246,217 1,186,684 1,159,449 1,124,950 1,236,069 1,107,311 Earning assets 2,630,894 2,516,837 2,650,972 2,713,294 2,746,975 2,599,494 2,753,200 Total assets 2,743,069 2,625,334 2,757,594 2,822,770 2,874,343 2,708,612 2,879,571 Non-interest bearing deposits 692,436 674,565 732,434 847,752 917,552 699,666 896,989 Total interest bearing deposits 1,737,579 1,641,857 1,727,883 1,687,693 1,668,613 1,702,475 1,667,270 Total deposits 2,430,015 2,316,422 2,460,318 2,535,446 2,586,165 2,402,141 2,564,259 Borrowings 30,000 30,000 30,000 30,000 30,000 30,000 56,234 Total shareholders' equity 266,339 262,764 250,160 239,684 244,857 259,814 246,578 Contact: Jon Swets Chief Financial Officer 616-494-7645 jswets@macatawabank.com