Macatawas Earnings Slide

January 15, 2008
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HOLLAND — Macatawa Bank Corp. reported that its fourth quarter earnings will be impacted by the need for additional loan loss provisions of $9.5 million because of a growing weakness in residential development loans. This brought the company's total fourth quarter loss provisions to $10.3 million and led to a net loss of $2.80 million, or a 16-cent loss per share for the quarter.

Net income for 2007 was $9.08 million, or 53 cents per diluted share, compared with net income of $19.83 million, or $1.14 per share for 2006.

"As we told the investment community in December, we considered these extra provisions both necessary and prudent in light of West Michigan's soft economic conditions, as reflected by declining property values throughout our community," said Chairman and CEO Ben Smith. "Many financial institutions across the state and around the country have found themselves in a similar position because of issues related to residential real estate."

Macatawa's credit exposure is primarily isolated in residential development loans, which are a declining portion of its total portfolio, the company said. Macatawa has no exposure to sub-prime mortgage loans.

The company's non-performing loans increased $25.2 million during the fourth quarter to $73.9 million, representing about 4.22 percent of total loans as of Dec. 31. Macatawa indicated that loans to residential developers comprised most of the increased in non-performing loans. Management believes that with the additional provisions in the fourth quarter, non-performing loans are either well collateralized of adequately reserved.

Smith said the bank has made every effort to identify its credit exposure based on the current environment.

"We remain well-capitalized," he observed. "Our loan loss reserve is a healthy 1.91 percent of total loans, we have a strong balance sheet and we remain profitable."

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