HOLLAND — Macatawa Bank Corp. sits in a far better position today than it did in the recent past.
Increased earnings in 2015 and in the first quarter of 2016, plus solid loan growth, follow Holland-based Macatawa Bank’s efforts in the last half-decade to recover from the Great Recession and improve performance.
“I think we’re in a good position right now. We’re growing and we continue to grow nicely,” President and CEO Ronald Haan said in a brief interview following the corporation’s recent annual shareholder meeting.
Executives highlighted the significant operating improvements Macatawa Bank (Nasdaq: MCBC) has made since bottoming out in 2011. The bank’s non-performing loans that year hit $28.9 million. By the end of 2015, non-performing loans had declined to less than $800,000.
The foreclosed real estate the bank owns has declined as well to about $17.6 million as of Dec. 21, 2015, compared to $36.7 million a year earlier and $66.4 million at the end of 2011. Foreclosed real estate holdings fell even further in the first quarter of 2016 to $16.2 million.
Selling off the remaining inventory of foreclosed properties that built up during the Great Recession remains a top priority for Macatawa Bank, said CFO Jon Swets. Macatawa Bank spent about $3 million in 2015 to manage its foreclosed real estate. That’s a fraction of the $15.5 million in management costs at its peak but is still a “significant drag on earnings,” Swets said.
“We’ve reduced it down to $3 million, but still, $3 million is too much,” Swets told shareholders. “So it’s absolutely an important issue for us to make sure we continue working down those non-performing assets so we can work down those non-performing expenses.”
Macatawa Bank — which has 26 offices in Ottawa, Kent and northern Allegan counties — recorded annual net income of $12.7 million for 2015, or 38 cents per diluted share. That compares with net income of $10.4 million, or 31 cents per diluted share, in the prior year.
The bank followed up 2015 with strong earnings and lending growth in the first quarter of 2016. Macatawa had quarterly net income of $3.5 million, or 10 cents per share. That’s an increase of 23 percent from the $2.8 million, or 8 cents per share, a year earlier.
“We’re off to a good start in 2016 in our performance,” Swets said.
The bank ended the quarter with $1.63 billion in total assets, versus $1.61 billion at the end of March 2015. Total loans in the year grew $80.9 million to $1.21 billion. Commercial loans were up $75.7 million from a year earlier.
Past due loans declined to 0.07 percent of all loans, compared to 0.22 percent for the first quarter of 2015.
The bank, now operating with a strong capital position, intends to continue with what Haan said is a prudent lending approach.
“We could grow loans faster but we’re not going to do that. We’ll grow loans at a pace where we’re comfortable with the quality of the assets,” Haan said. “Growth for growth’s sake is not going to happen.”
Macatawa Bank’s improved capital position also will enable it to take advantage of what Haan called “strategic opportunities” in his message to shareholders. That includes investing in technology and even considering a potential acquisition, should the opportunity ever arise, although the bank is not actively pursuing a deal, he said.
“Over the last couple of years, we’ve demonstrated the ability to grow organically within the markets that we currently service,” Haan said. “That isn’t to say that we’ve ruled out completely the possibility of the idea, maybe, that the acquisition of another bank may come into play. But clearly, up until now, we have not found any of those opportunities that we felt would be appropriate.
“Having sufficient capital, having a strong balance sheet, puts us in a position that if that opportunity were to make itself available, we could do that.”
As the banking industry invests more in technologies to meet a growing customer appetite for mobile and online banking, thus altering the role of branch offices, Macatawa Bank isn’t looking to pull back on its branch network.
Nor is the bank looking to expand its footprint any further, said Chairman Richard Postma.
“We like who we are. We like what we’re doing. We don’t see any expansions that make sense to us today other than the branches we have,” Postma said. “Right now, we don’t see anything on the horizon that would be an expansion.”
Postma reiterated to shareholders that Macatawa Bank is not for sale, although if a prospective buyer were to come forward with an offer, directors would have to fulfill their fiduciary duties and look at it, he said.
As the industry goes through a period of mergers involving community banks, Macatawa plans to remain independent.
“I personally believe we should have a strong, local bank,” Postma said. “I don’t see anything … that would say that there’s anything outside of where we are today that would change my mind on that. As of today, we’re happy to be a community bank that’s very strong.
“We believe that this bank can grow and it will be a strong member of our community for a considerable period of time.”
Sidebar: Macatawa Bank Corp.
Executives: Chairman Richard Postma, President and CEO Ronald Haan
Offices: 26 in Ottawa County, Kent County, and northern Allegan County
Total assets: $1.63 billion as of March 31, 2016
Total loans: $1.21 billion as of March 31, 2016
Total deposits: $1.34 billion as of March 31, 2016
1Q 2016 net income: $3.5 million
2015 net income: $12.7 million