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Macatawas income earnings drop
Macatawa Bank Corp. of Holland announced net income of $1.87 million, or 11 cents per diluted share, for the third quarter of 2008, compared to net income of $2.46 million, or 14 cents per share, for the year ago quarter. In the first nine months of this year, the company took a net loss of $3.8 million, or 22 cents per share, versus net income of $11.9 million, or 68 cents per share, for the same nine-month period in 2007.
Last Friday, Macatawa filed an amended report with the Securities and Exchange Commission restating its earnings for the second quarter ended June 30. The company amended its 10-Q financial statements in regard to an additional $17.2 million in loan charge-offs, a corresponding $15 million in loan loss provisions, and $850,000 in losses on foreclosed properties that were deemed to have existed as of June 30.
Additional provisions and losses result in a $10.3 million decrease in earnings for both the first three months and the first six months of the year. Macatawa’s second quarter earnings on an after-tax basis declined from $2.2 million in earnings to $8.1 million in net losses. Earnings for the first half of the year declined from $4.6 million in earnings to $5.7 million in net losses. According to the company, the additional provisions and losses are a result of continued weakness in the bank’s portfolio of real estate loans.
Including that second quarter adjustment, Macatawa has recorded total loan loss provisions of $23.6 million for the first nine months of 2008, compared to $5.5 million for the first nine months of the prior year. The elevated loan loss provision has led to the reduced earnings for the first nine months of 2008 compared to the same period in the prior year.
On Monday the company indicated that its credit exposure is primarily isolated in residential development loans, which represent a narrow and declining slice of its total portfolio. It also announced that it would temporarily suspend the cash dividend to investors in order to supplement its capital position.
A lot has changed since the second quarter, said Chairman and CEO Ben Smith: The national and world economies and the financial and credit markets have come under extreme stress.
“The company has avoided many of the issues affecting the broader market, such as subprime loans, mortgage-backed securities and investments in Fannie Mae and Freddie Mac stock,” Smith pointed out. “We are, however, not immune to the impact of these trying times.”
Smith said that although the loan loss provisions have impacted Macatawa’s near term performance, the company remains well capitalized and continues to take specific steps to ensure the strength of its capital position.
“We are working hard to raise additional capital and expect to report the successful conclusion of these efforts during the fourth quarter,” Smith added.