- people on the move
Macatawa hit by losses
Macatawa Bank Corp. of Holland announced this morning it will take $15 million in loan loss provisions and $878,000 in losses on foreclosed properties in order to maintain its financial strength as soft economic conditions persist in West Michigan.
The loan loss provision and foreclosed property losses are being recorded in the quarter ended June, 30, 2008, and that will be reflected in an amended Form 10Q report for the just passed quarter.
Macatawa indicated that the additional provisions and losses result in a $10.3 million decrease in the company’s second quarter earnings on an after-tax basis from $2.2 million in earnings to $8.1 million in net losses. According to Macatawa, even after these adjustments, the company remains well capitalized under regulatory guidelines.
The additional provisions and losses reflect continued weakness in the company’s portfolio of real estate loans. The bank’s board and its management “have determined the need for the adjustments based upon current and evolving information regarding its loan portfolio and the continued decline in the housing market,” according to the company’s press release.
Macatawa’s credit exposure is primarily isolated in residential development loans, which is a declining piece of its total portfolio. The bank doesn’t have any exposure to subprime mortgage loans and doesn’t have any exposure to Fannie Mae and Freddie Mac equity or mortgage-backed securities, the company noted. Also, the company has made changes in its lending practices, primarily in the areas of credit and loan administration.
Chairman and CEO Ben Smith said Macatawa has begun work to raise additional capital to provide additional liquidity and to further strengthen its financial position. The company is temporarily suspending its shareholder dividend, a move that is expected to save about $9 million in the first year.
“We realize the importance of the dividend to our shareholders and took significant steps to preserve the dividend as long as we were able,” Smith said. “We look forward to reinstituting the dividend as our capital situation improves.”