-
Macatawa Bank Corporation Reports Second Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 28 Jul 2022 16:15:02 America/New_York
HOLLAND, Mich., July 28, 2022 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (NASDAQ: MCBC), the holding company for Macatawa Bank (collectively, the “Company”), today announced its results for the second quarter 2022.
- Net income of $6.6 million in second quarter 2022 versus $6.0 million in first quarter 2022 and $7.8 million in second quarter 2021
- Net interest income of $14.8 million in second quarter 2022 versus $12.7 million in first quarter 2022 and $14.5 million in second quarter 2021
- Strong credit metrics and net loan recoveries resulted in no provision for loan losses for the quarter
- Continued loan portfolio growth – third quarter in a row
- Grew investment securities portfolio by $187.7 million in second quarter 2022 to supplement loan growth and continue strategic deployment of excess liquidity
- Reduction of $55.0 million in FHLB borrowings, resulting in over $650,000 in annual interest expense savings
The Company reported net income of $6.6 million, or $0.19 per diluted share, in second quarter 2022 compared to $7.8 million, or $0.23 per diluted share, in second quarter 2021. For the first six months of 2022, the Company reported net income of $12.6 million, or $0.37 per diluted share, compared to $15.6 million, or $0.46 per diluted share, for the same period in 2021.
"We are pleased to report solid results for the second quarter of the year,” said Ronald L. Haan, President and CEO of the Company. “We are encouraged to see our strategy of maintaining an asset-sensitive balance sheet paying off as we have entered a rising rate environment. Net interest income for the second quarter 2022 was $2.2 million higher than the first quarter 2022 and $386,000 higher than in the second quarter 2021 reflecting benefits from federal funds rate increases and growth in our investment securities portfolio. Net interest income in the 2021 periods included high levels of fee income from PPP loans, which were mostly forgiven by the end of 2021. We are again encouraged by our commercial loan origination activity and pipeline of new loan opportunities while maintaining strong credit quality. Regarding fee income, while mortgage gains are down, we are experiencing increases in other areas including wealth management fees, debit card interchange income and treasury management fees. Total non-interest expenses were up only slightly in the second quarter 2022 compared to the same period in the prior year, despite significant inflationary pressure.”
Mr. Haan concluded: "Consistent loan demand and rising interest rates will continue to have a positive impact on our high levels of liquidity and provide a catalyst for strong revenue growth during the remainder of 2022. We have a strong balance sheet that is very well-positioned to deliver further improvement in operating performance throughout the remainder of the year. High inflation, higher interest rates and continuing disruptions to the supply chain may result in additional pressure on the economy. The months ahead will undoubtedly present new challenges, and we remain committed to keeping a diligent eye on an ever-changing operating environment.”
Operating Results
Net interest income for the second quarter 2022 totaled $14.8 million, an increase of $2.2 million from first quarter 2022 and an increase of $386,000 from the second quarter 2021. Net interest margin for second quarter 2022 was 2.19 percent, up 34 basis points from the first quarter 2022 and the same as second quarter 2021. Net interest income for the second quarter 2022 reflected $199,000 in interest and fees from loans originated under the PPP, compared to $1.1 million in first quarter 2022 and $3.0 million in second quarter 2021. There were just $94,000 in net deferred PPP fees remaining as of June 30, 2022. Net interest income benefited in the second quarter 2022 versus the first quarter 2022 and second quarter 2021 by the significant increase in the federal funds rate in March 2022, May 2022 and June 2022, totaling 150 basis points and the related increases in rate indices impacting the Company’s variable rate loan portfolios. Net interest income also benefited from growth in the investment securities portfolio to further deploy excess liquid funds held by the Company. Interest on investments increased by $1.2 million over the first quarter 2022 and by $1.8 million over the second quarter 2021.During second quarter 2022, the Federal Home Loan Bank (“FHLB”) exercised put options on $35.0 million of advances and the Company voluntarily prepaid $20.0 million in FHLB advances. Prepayment fees on these advances totaled $87,000 and were included in interest expense in the second quarter 2022. The elimination of these advances will save the Company over $650,000 in annual interest expense.
On July 7, 2021, the Company redeemed its remaining $20.0 million of trust preferred securities. The Company estimates that this saves approximately $600,000 of interest expense annually, with regulatory capital remaining significantly above levels required to be categorized as well capitalized.
Non-interest income increased $166,000 in second quarter 2022 compared to first quarter 2022 and decreased $1.0 million from second quarter 2021. Income from debit and credit cards was up by $163,000 in the second quarter 2022 compared to first quarter 2022 and was up $78,000 compared to second quarter 2021. Gains on sales of mortgage loans in second quarter 2022 were down $109,000 compared to first quarter 2022 and were down $1.1 million from second quarter 2021. The Company originated $8.4 million in mortgage loans for sale in second quarter 2022 compared to $10.1 million in first quarter 2022 and $39.2 million in second quarter 2021. Deposit service charge income, including treasury management fees, was up $7,000 in second quarter 2022 compared to first quarter 2022 and was up $153,000 from second quarter 2021. Other noninterest income was up $105,000 compared to first quarter 2022 and was down $158,000 from second quarter 2021.
Non-interest expense was $11.9 million for second quarter 2022, compared to $11.7 million for first quarter 2022 and $11.7 million for second quarter 2021. The largest component of non-interest expense was salaries and benefits expenses. Salaries and benefits expenses were up $114,000 compared to first quarter 2022 and were down $100,000 compared to second quarter 2021. The increase compared to first quarter 2022 was due primarily to a higher level of salary and other compensation resulting from merit adjustments to base pay effective April 1, 2022, while the decrease from second quarter 2021 was due largely to a lower level of commissions from mortgage production as volume decreased. The table below identifies the primary components of the changes in salaries and benefits between periods.
Dollars in 000sQ2 2022
to
Q1 2022Q2 2022
to
Q2 2021Salaries and other compensation $ 146 $ 63 Salary deferral from commercial loans (4 ) 50 Bonus accrual (1 ) 3 Mortgage production – variable comp (3 ) (239 ) 401k matching contributions (24 ) 85 Medical insurance costs --- (62 ) Total change in salaries and benefits $ 114 $ (100 ) Occupancy expenses were down $102,000 in second quarter 2022 compared to first quarter 2022 and were up $76,000 compared to the second quarter 2021. Occupancy expenses in first quarter 2022 were elevated due to higher snow removal expenses. The increase compared to second quarter 2021 was due to higher building maintenance costs incurred in the second quarter 2022. FDIC assessment expense was $197,000 in second quarter 2022 compared to $180,000 in first quarter 2022 and $159,000 in second quarter 2021. FDIC assessment expense is impacted by changes in deposit balances between periods. Legal and professional fees were up $77,000 in second quarter 2022 compared to first quarter 2022 and were down $3,000 compared to second quarter 2021. The increase in second quarter 2022 includes higher regulatory examination fees and legal expense, which was down in first quarter 2022. Data processing expenses were up $41,000 in second quarter 2022 compared to first quarter 2022 and were up $69,000 compared to second quarter 2021. Other categories of non-interest expense were relatively flat compared to first quarter 2022 and second quarter 2021 due to a continued focus on expense management.
Federal income tax expense was $1.5 million for second quarter 2022, $1.4 million for first quarter 2022, and $1.8 million for second quarter 2021. The effective tax rate was 18.5 percent for second quarter 2022, compared to 18.8 percent for first quarter 2022 and 19.1 percent for second quarter 2021.
Asset Quality
No provision for loan losses was recorded in second quarter 2022 while a provision benefit of $1.5 million was recorded in first quarter 2022 and a provision benefit of $750,000 was recorded in second quarter 2021. Net loan recoveries for second quarter 2022 were $15,000, compared to first quarter 2022 net loan recoveries of $227,000 and second quarter 2021 net loan recoveries of $104,000. At June 30, 2022, the Company had experienced net loan recoveries in twenty-eight of the past thirty quarters. Total loans past due on payments by 30 days or more amounted to $197,000 at June 30, 2022, versus $171,000 at March 31, 2022 and $126,000 at June 30, 2021. Delinquencies at June 30, 2022 were comprised of just five individual loans. Delinquency as a percentage of total loans was just 0.02 percent at June 30, 2022, well below the Company’s peer level.The allowance for loan losses of $14.6 million was 1.32 percent of total loans at June 30, 2022, compared to $14.6 million or 1.33 percent of total loans at March 31, 2022, and $16.8 million or 1.36 percent at June 30, 2021. The ratio at June 30, 2022, March 31, 2022 and June 30, 2021 includes PPP loans, which are fully guaranteed by the SBA and receive no allowance allocation. The ratio excluding PPP loans was 1.32 percent at June 30, 2022, 1.34 percent at March 31, 2022 and 1.57 percent at June 30, 2021. The coverage ratio of allowance for loan losses to nonperforming loans continued to be strong and significantly exceeded 1-to-1 coverage at 163-to-1 as of June 30, 2022.
At June 30, 2022, the Company's nonperforming loans were $90,000, representing 0.01 percent of total loans. This compares to $90,000 (0.01 percent of total loans) at March 31, 2022 and $433,000 (0.03 percent of total loans) at June 30, 2021. Other real estate owned and repossessed assets were $2.3 million at June 30, 2022, compared to $2.3 million at March 31, 2022 and $2.3 million at June 30, 2021. Total non-performing assets, including other real estate owned and nonperforming loans, were $2.4 million, or 0.09 percent of total assets, at June 30, 2022. Total nonperforming assets, including other real estate owned and nonperforming loans, decreased by $343,000 from June 30, 2021 to June 30, 2022.
A break-down of non-performing loans is shown in the table below.
Dollars in 000s June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021June 30,
2021Commercial Real Estate $ 5 $ 5 $ 5 $ 332 $ 341 Commercial and Industrial 1 1 1 --- --- Total Commercial Loans 6 6 6 332 341 Residential Mortgage Loans 84 84 86 88 92 Consumer Loans --- --- --- --- --- Total Non-Performing Loans $ 90 $ 90 $ 92 $ 420 $ 433 A break-down of non-performing assets is shown in the table below.
Dollars in 000s June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021June 30,
2021Non-Performing Loans $ 90 $ 90 $ 92 $ 420 $ 433 Other Repossessed Assets --- --- --- --- --- Other Real Estate Owned 2,343 2,343 2,343 2,343 2,343 Total Non-Performing Assets $ 2,433 $ 2,433 $ 2,435 $ 2,763 $ 2,776 Balance Sheet, Liquidity and Capital
Total assets were $2.78 billion at June 30, 2022, a decrease of $148.7 million from $2.93 billion at March 31, 2022 and a decrease of $159.9 million from $2.94 billion at June 30, 2021. Assets were elevated at each period-end due to customers holding a higher level of deposits during the COVID-19 pandemic, including balances from PPP loan proceeds.
The Company continued to increase its investment portfolio to deploy some of its excess liquidity. The Company’s investment portfolio primarily consists of U.S. treasury and agency securities, agency mortgage backed securities and various municipal securities. Total securities were $788.3 million at June 30, 2022, an increase of $187.7 million from $600.7 million at March 31, 2022 and an increase of $426.5 million from $361.8 million at June 30, 2021.
Total loans were $1.11 billion at June 30, 2022, an increase of $10.0 million from $1.10 billion at March 31, 2022 and a decrease of $126.4 million from $1.24 billion at June 30, 2021.
Commercial loans decreased by $129.7 million from June 30, 2021 to June 30, 2022, partially offset by an increase of $1.6 million in the residential mortgage portfolio, and an increase of $1.7 million in the consumer loan portfolio. Within commercial loans, commercial real estate loans decreased by $10.8 million and commercial and industrial loans decreased by $118.9 million. However, the largest decrease in commercial loans was in PPP loans which decreased by $166.9 million due to forgiveness by the SBA. Excluding PPP loans, total commercial loans increased by $37.1 million. The loan growth experienced in this time period was the direct result of both new loan prospecting efforts and existing customers beginning to borrow more for expansion of their businesses as pandemic risks to economic conditions decrease.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021June 30,
2021Construction and Development $ 107,325 $ 104,945 $ 103,755 $ 104,636 $ 102,608 Other Commercial Real Estate 411,778 417,368 412,346 422,574 427,291 Commercial Loans Secured by Real Estate 519,103 522,313 516,101 527,210 529,899 Commercial and Industrial 407,788 402,854 378,318 356,812 359,846 Paycheck Protection Program 2,791 7,393 41,939 77,571 169,679 Total Commercial Loans $ 929,682 $ 932,560 $ 936,358 $ 961,593 $ 1,059,424 Bank owned life insurance was $53.0 million at June 30, 2022, up $243,000 from $52.7 million at March 31, 2022 and up $456,000 from $52.5 million at June 30, 2021 due to earnings on the underlying investments.
Total deposits were $2.49 billion at June 30, 2022, down $87.7 million, or 3.4 percent, from $2.58 billion at March 31, 2022 and down $105.5 million, or 4.1 percent, from $2.60 billion at June 30, 2021. Demand deposits were down $53.7 million at the end of the second quarter 2022 compared to the end of the first quarter 2022 and were down $154.6 million compared to the end of the second quarter 2021. Money market deposits and savings deposits were down $31.2 million from the end of the first quarter 2022 and were up $63.0 million from the end of the second quarter 2021. Certificates of deposit were down $7.8 million at June 30, 2022 compared to March 31, 2022 and were down $13.9 million compared to June 30, 2021 as customers reacted to changes in market interest rates. As deposit rates dropped during the pandemic, the Company experienced some shifting between deposit types and, while balances have decreased over the last year, overall, deposit customers are continuing to hold higher levels of liquid deposit balances due to uncertainty related to economic conditions. The Company 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.
Other borrowed funds of $30.0 million at June 30, 2022 were down $55.0 million compared to $85.0 million at March 31, 2022 and were down $30.0 million compared to $60.0 million at June 30, 2021. The decrease in the second quarter 2022 was largely due to the FHLB exercising its put options on a $25.0 million advance carrying a rate of 0.05% and a $10.0 million advance carrying a rate of 0.45%. Both advances were repaid by the Company during the second quarter 2022. In addition, during the second quarter 2022, the Company prepaid $20.0 million in FHLB advances, with interest rates ranging from 2.91% to 3.05%. Prepayment fees totaled $87,000 and were included in interest expense in the second quarter 2022. Paying these advances off early will save the Company over $650,000 in annual interest expense, net of the prepayment fees incurred.
Long-term debt decreased by $20.6 million from June 30, 2021 to June 30, 2022 due to the redemption of the Company’s remaining $20.6 million trust preferred securities on July 7, 2021. The Company had no long-term debt remaining at June 30, 2022.
The Company's total risk-based regulatory capital ratio at June 30, 2022 was consistent with the ratio at December 31, 2021. 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" at June 30, 2022.
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 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 COVID-19 pandemic on the business, 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, future interest rates 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, 2021. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.
MACATAWA BANK CORPORATION CONSOLIDATED FINANCIAL SUMMARY (Unaudited) (Dollars in thousands except per share information) Quarterly Six Months Ended 2nd Qtr 1st Qtr 2nd Qtr June 30 EARNINGS SUMMARY 2022 2022 2021 2022 2021 Total interest income $ 15,435 $ 13,143 $ 15,184 $ 28,578 $ 30,458 Total interest expense 592 478 727 1,070 1,511 Net interest income 14,843 12,665 14,457 27,508 28,947 Provision for loan losses - (1,500 ) (750 ) (1,500 ) (750 ) Net interest income after provision for loan losses 14,843 14,165 15,207 29,008 29,697 NON-INTEREST INCOME Deposit service charges 1,218 1,211 1,065 2,430 2,057 Net gains on mortgage loans 199 308 1,311 508 3,326 Trust fees 1,096 1,088 1,133 2,184 2,138 Other 2,618 2,358 2,660 4,974 5,186 Total non-interest income 5,131 4,965 6,169 10,096 12,707 NON-INTEREST EXPENSE Salaries and benefits 6,402 6,289 6,502 12,691 12,914 Occupancy 1,071 1,172 994 2,243 2,031 Furniture and equipment 988 1,016 978 2,004 1,915 FDIC assessment 197 180 159 377 329 Other 3,255 3,082 3,085 6,337 6,014 Total non-interest expense 11,913 11,739 11,718 23,652 23,203 Income before income tax 8,061 7,391 9,658 15,452 19,201 Income tax expense 1,493 1,391 1,840 2,884 3,605 Net income $ 6,568 $ 6,000 $ 7,818 $ 12,568 $ 15,596 Basic earnings per common share $ 0.19 $ 0.18 $ 0.23 $ 0.37 $ 0.46 Diluted earnings per common share $ 0.19 $ 0.18 $ 0.23 $ 0.37 $ 0.46 Return on average assets 0.92 % 0.82 % 1.11 % 0.87 % 1.14 % Return on average equity 10.80 % 9.54 % 12.79 % 10.16 % 12.85 % Net interest margin (fully taxable equivalent) 2.19 % 1.85 % 2.19 % 2.02 % 2.25 % Efficiency ratio 59.64 % 66.59 % 56.81 % 62.90 % 55.70 % BALANCE SHEET DATA June 30 March 31 June 30 Assets 2022 2022 2021 Cash and due from banks $ 38,376 $ 31,957 $ 31,051 Federal funds sold and other short-term investments 721,826 1,078,983 1,189,266 Debt securities available for sale 435,628 346,114 239,955 Debt securities held to maturity 352,721 254,565 121,867 Federal Home Loan Bank Stock 10,211 10,211 11,558 Loans held for sale 1,163 855 4,752 Total loans 1,111,915 1,101,902 1,238,327 Less allowance for loan loss 14,631 14,616 16,806 Net loans 1,097,284 1,087,286 1,221,521 Premises and equipment, net 41,088 41,413 42,906 Bank-owned life insurance 52,963 52,720 52,507 Other real estate owned 2,343 2,343 2,343 Other assets 27,605 23,436 23,360 Total Assets $ 2,781,208 $ 2,929,883 $ 2,941,086 Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 903,334 $ 918,907 $ 956,961 Interest-bearing deposits 1,591,249 1,663,390 1,643,115 Total deposits 2,494,583 2,582,297 2,600,076 Other borrowed funds 30,000 85,000 60,000 Long-term debt - - 20,619 Other liabilities 13,516 16,984 12,174 Total Liabilities 2,538,099 2,684,281 2,692,869 Shareholders' equity 243,109 245,602 248,217 Total Liabilities and Shareholders' Equity $ 2,781,208 $ 2,929,883 $ 2,941,086 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 2022 2022 2021 2021 2021 2022 2021 EARNINGS SUMMARY Net interest income $ 14,843 $ 12,665 $ 12,826 $ 14,296 $ 14,457 $ 27,508 $ 28,947 Provision for loan losses - (1,500 ) (750 ) (550 ) (750 ) (1,500 ) (750 ) Total non-interest income 5,131 4,965 5,346 5,642 6,169 10,096 12,707 Total non-interest expense 11,913 11,739 11,337 11,550 11,718 23,652 23,203 Federal income tax expense 1,493 1,391 1,369 1,736 1,840 2,884 3,605 Net income $ 6,568 $ 6,000 $ 6,216 $ 7,202 $ 7,818 $ 12,568 $ 15,596 Basic earnings per common share $ 0.19 $ 0.18 $ 0.18 $ 0.21 $ 0.23 $ 0.37 $ 0.46 Diluted earnings per common share $ 0.19 $ 0.18 $ 0.18 $ 0.21 $ 0.23 $ 0.37 $ 0.46 MARKET DATA Book value per common share $ 7.10 $ 7.17 $ 7.41 $ 7.38 $ 7.26 $ 7.10 $ 7.26 Tangible book value per common share $ 7.10 $ 7.17 $ 7.41 $ 7.38 $ 7.26 $ 7.10 $ 7.26 Market value per common share $ 8.84 $ 9.01 $ 8.82 $ 8.03 $ 8.75 $ 8.84 $ 8.75 Average basic common shares 34,253,846 34,254,772 34,229,664 34,190,264 34,193,016 34,254,306 34,194,264 Average diluted common shares 34,253,846 34,254,772 34,229,664 34,190,264 34,193,016 34,254,306 34,194,264 Period end common shares 34,253,147 34,253,962 34,259,945 34,189,799 34,192,317 34,253,147 34,192,317 PERFORMANCE RATIOS Return on average assets 0.92 % 0.82 % 0.85 % 0.98 % 1.11 % 0.87 % 1.14 % Return on average equity 10.80 % 9.54 % 9.84 % 11.52 % 12.79 % 10.16 % 12.85 % Net interest margin (fully taxable equivalent) 2.19 % 1.85 % 1.85 % 2.04 % 2.19 % 2.02 % 2.25 % Efficiency ratio 59.64 % 66.59 % 62.39 % 57.93 % 56.81 % 62.90 % 55.70 % Full-time equivalent employees (period end) 315 311 311 318 321 315 321 ASSET QUALITY Gross charge-offs $ 60 $ 35 $ 22 $ 22 $ 30 $ 95 $ 80 Net charge-offs/(recoveries) $ (15 ) $ (227 ) $ (107 ) $ (276 ) $ (104 ) $ (242 ) $ (148 ) Net charge-offs to average loans (annualized) -0.01 % -0.08 % -0.04 % -0.09 % -0.03 % -0.04 % -0.02 % Nonperforming loans $ 90 $ 90 $ 92 $ 420 $ 433 $ 90 $ 433 Other real estate and repossessed assets $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 Nonperforming loans to total loans 0.01 % 0.01 % 0.01 % 0.04 % 0.03 % 0.01 % 0.03 % Nonperforming assets to total assets 0.09 % 0.08 % 0.08 % 0.10 % 0.09 % 0.09 % 0.09 % Allowance for loan losses $ 14,631 $ 14,616 $ 15,889 $ 16,532 $ 16,806 $ 14,631 $ 16,806 Allowance for loan losses to total loans 1.32 % 1.33 % 1.43 % 1.45 % 1.36 % 1.32 % 1.36 % Allowance for loan losses to total loans (excluding PPP loans) 1.32 % 1.34 % 1.49 % 1.56 % 1.57 % 1.32 % 1.57 % Allowance for loan losses to nonperforming loans 16256.67 % 16240.00 % 17270.65 % 3936.19 % 3881.29 % 16256.67 % 3881.29 % CAPITAL Average equity to average assets 8.55 % 8.62 % 8.66 % 8.48 % 8.70 % 8.59 % 8.87 % Common equity tier 1 to risk weighted assets (Consolidated) 16.54 % 16.92 % 17.24 % 17.43 % 17.10 % 16.54 % 17.10 % Tier 1 capital to average assets (Consolidated) 9.13 % 8.82 % 8.72 % 8.51 % 9.48 % 9.13 % 9.48 % Total capital to risk-weighted assets (Consolidated) 17.47 % 17.88 % 18.32 % 18.58 % 19.66 % 17.47 % 19.66 % Common equity tier 1 to risk weighted assets (Bank) 16.04 % 16.39 % 16.70 % 16.88 % 16.57 % 16.04 % 16.57 % Tier 1 capital to average assets (Bank) 8.85 % 8.55 % 8.44 % 8.24 % 8.49 % 8.85 % 8.49 % Total capital to risk-weighted assets (Bank) 16.97 % 17.35 % 17.77 % 18.02 % 17.73 % 16.97 % 17.73 % Common equity to assets 8.74 % 8.38 % 8.67 % 8.69 % 8.44 % 8.74 % 8.44 % Tangible common equity to assets 8.74 % 8.38 % 8.67 % 8.69 % 8.44 % 8.74 % 8.44 % END OF PERIOD BALANCES Total portfolio loans $ 1,111,915 $ 1,101,902 $ 1,108,993 $ 1,136,613 $ 1,238,327 $ 1,111,915 $ 1,238,327 Earning assets 2,655,706 2,802,498 2,803,853 2,768,507 2,803,634 2,655,706 2,803,634 Total assets 2,781,208 2,929,883 2,928,751 2,901,500 2,941,086 2,781,208 2,941,086 Deposits 2,494,583 2,582,297 2,577,958 2,553,175 2,600,076 2,494,583 2,600,076 Total shareholders' equity 243,109 245,602 254,005 252,213 248,217 243,109 248,217 AVERAGE BALANCES Total portfolio loans $ 1,103,955 $ 1,092,673 $ 1,109,863 $ 1,182,633 $ 1,324,915 $ 1,098,346 $ 1,362,946 Earning assets 2,724,714 2,788,254 2,780,236 2,804,157 2,669,862 2,756,363 2,603,948 Total assets 2,847,381 2,917,462 2,917,569 2,948,664 2,809,487 2,882,228 2,738,539 Deposits 2,537,111 2,569,315 2,564,961 2,605,043 2,468,398 2,553,124 2,395,112 Total shareholders' equity 243,352 251,600 252,606 249,994 244,516 247,453 242,779 Contact: Jon W. Swets Chief Financial Officer 616-494-7645 jswets@macatawabank.com