Macatawa Bank Corp. Reports Operating Results (10-Q)
Macatawa Bank Corp. has a market cap of $49.1 million; its shares were traded at around $2.78 with and P/S ratio of 0.4.
Highlight of Business Operations: At March 31, 2010, we had total assets of $1.72 billion, total loans of $1.44 billion, total deposits of $1.37 billion and shareholders' equity of $66.9 million. During the first quarter of 2010 we recognized a net loss of $21.1 million compared to a net loss of $5.1 million in the first quarter of 2009. The weak local and national economic conditions that have persisted over the past few years have contributed to the first quarter of 2010 operating loss and the $38.9 million and $63.6 million of annual operating losses reported by us during 2008 and 2009. The losses for each period were largely attributable to loan losses, lost interest on non-performing assets and costs of administering problem assets associated with problem loans and other real estate assets. We also incurred a non-cash charge of $18.0 million included in federal income tax expense in 2009 associated with a valuation allowance for deferred tax assets and non-cash, after tax impairment charges for goodwill and intangible assets of $27 million in 2008. There will be no further negative affect on our results of operations associated with deferred tax assets or goodwill, as these assets have been written off in their entirety. As of the date of this report, the Bank was categorized as "adequately capitalized" under applicable regulatory guidelines. However, as of the date of this report, the Bank's regulatory capital was below that required in the Consent Order.
Summary: Net loss available to common shares was $21.1 million or $1.19 loss per common share for the quarter ended March 31, 2010 compared to net loss of $5.1 million or $0.30 loss per common share for the same quarter in 2009.
The decline in earnings for the first quarter of 2010 compared to first quarter of 2009 was largely from increases in costs associated with problem loans and non-performing assets. The provision for loan losses was $19.7 million for the first quarter of 2010 compared to $10.5 million for the first quarter of 2009 resulting in significant increases in the allowance for loan losses to absorb loan losses that have not yet been realized. Costs associated with - 27 - nonperforming assets were $5.5 million for the first quarter of 2010 compared to $2.2 million for the first quarter of 2009. Lost interest from balances of non-performing assets was approximately $2.6 million and $2.4 million for the first quarter of 2010 and 2009. The first quarter 2009 results included a tax benefit of $2.7 million. During the second quarter of 2009 we established a tax valuation allowance on our deferred tax asset and we continued to maintain the valuation allowance at March 31, 2010 due to our recent operating losses. Accordingly, no tax benefit was recognized in the 2010 period. Each of these items is discussed more fully below.
Net Interest Income: Net interest income totaled $13.0 million for the first quarter of 2010 compared to $12.8 million for the first quarter of 2009.
Noninterest Income: Noninterest income for the three month period ended March 31, 2010 decreased to $3.5 million from $5.3 million for the same period in the prior year. The components of noninterest income are shown in the table below for the quarters ended March 31 (in thousands):
Noninterest Expense: Noninterest expense for the three month periods ended March 31, 2010 increased to $17.9 million from $14.5 million for the same period in the prior year. The components of noninterest expense are shown in the table below for the quarters ended March 31 (in thousands):
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