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Macatawa Bank Corporation Reports Third Quarter 2022 Results
Source: Nasdaq GlobeNewswire / 27 Oct 2022 15:15:01 America/Chicago
HOLLAND, Mich., Oct. 27, 2022 (GLOBE NEWSWIRE) -- Macatawa Bank Corporation (NASDAQ: MCBC), the holding company for Macatawa Bank (collectively, the “Company”), today announced its results for the third quarter 2022.
- Net income of $10.0 million in third quarter 2022 – up 53% versus $6.6 million in second quarter 2022 and up 39% versus $7.2 million in third quarter 2021
- Net interest income of $19.8 million in third quarter 2022 versus $14.8 million in second quarter 2022 and $14.3 million in third quarter 2021
- Net interest margin increased 67 basis points to 2.86% in third quarter 2022 versus second quarter 2022
- Strong credit metrics and net loan recoveries resulted in no provision for loan losses for third quarter 2022
- Continued loan portfolio growth – nearly 11% annualized growth rate, excluding PPP loans, for the third quarter 2022
- Grew investment securities portfolio by $14.9 million in third quarter 2022 to supplement loan growth and continue strategic deployment of excess liquidity
- Deposit portfolio balances remained near all-time highs achieved during pandemic surge
The Company reported net income of $10.0 million, or $0.29 per diluted share, in third quarter 2022 compared to $7.2 million, or $0.21 per diluted share, in third quarter 2021. For the first nine months of 2022, the Company reported net income of $22.6 million, or $0.66 per diluted share, compared to $22.8 million, or $0.67 per diluted share, for the same period in 2021.
"We are pleased to report strong profitability for the third quarter of the year,” said Ronald L. Haan, President and CEO of the Company. “Our strategy of maintaining an asset-sensitive balance sheet is paying off in this rising rate environment. Net interest income for the third quarter 2022 was $4.9 million higher than the second quarter 2022 and $5.5 million higher than in the third quarter 2021 reflecting benefits from federal funds rate increases and growth in our loan and investment securities portfolios. Net interest income in the 2021 periods included high levels of fee income from PPP loans, which were mostly forgiven by the end of 2021. We remain encouraged by our commercial loan origination activity and pipeline of new loan opportunities while maintaining strong credit quality. Deposit levels also remain strong, growing during the third quarter 2022 by $61.6 million. Total deposit balances at the end of the quarter were consistent with the level of balances a year ago at the same time, showing no signs of significant runoff of the surge in deposits we experienced during the pandemic. These deposit levels continue to provide opportunities to grow loan and investment portfolio balances to further enhance earnings.”
Mr. Haan concluded: "Consistent loan demand and rising interest rates should continue to provide a catalyst for strong revenue growth as we close out 2022. We believe that our balance sheet is very well-positioned to deliver further improvement in operating performance into 2023. High inflation and higher interest rates may result in additional pressure on the economy. The months ahead will undoubtedly present new challenges, and we remain committed to keeping a diligent eye on an ever-changing operating environment.”
Operating Results
Net interest income for the third quarter 2022 totaled $19.8 million, an increase of $4.9 million from second quarter 2022 and an increase of $5.5 million from the third quarter 2021. Net interest margin for third quarter 2022 was 2.86 percent, up 67 basis points from the second quarter 2022 and up 82 basis points from the third quarter 2021. Net interest income for the third quarter 2022 reflected just $94,000 in interest and fees from loans originated under the PPP, compared to $199,000 in second quarter 2022 and $3.1 million in third quarter 2021. There was just one PPP loan remaining at September 30, 2022. Net interest income benefited in the third quarter 2022 versus the second quarter 2022 and third quarter 2021 from the significant increases in the federal funds rate beginning in March 2022 and through September 2022 totaling 300 basis points and the related increases in rate indices impacting the Company’s variable rate loan portfolios. Interest on federal funds increased by $2.9 million compared to second quarter 2022 and by $4.2 million compared to third quarter 2021. Net interest income also benefited from growth in the investment securities portfolio to further deploy excess liquid funds held by the Company. Interest on investments increased by $671,000 over second quarter 2022 and by $2.4 million over third quarter 2021.Non-interest income was negatively impacted by the rising interest rate environment as secondary mortgage market volume and trust fee income decreased. Non-interest income decreased $242,000 in third quarter 2022 compared to second quarter 2022 and decreased $753,000 from third quarter 2021. Gains on sales of mortgage loans in third quarter 2022 were down $33,000 compared to second quarter 2022 and were down $685,000 from third quarter 2021. The Company originated $6.5 million in mortgage loans for sale in third quarter 2022 compared to $8.4 million in second quarter 2022 and $21.3 million in third quarter 2021. Trust fees were down $127,000 in third quarter 2022 compared to second quarter 2022 and were down $110,000 compared to third quarter 2021, due largely to stock market conditions. Income from debit and credit cards was down $38,000 in third quarter 2022 compared to second quarter 2022 and was up $48,000 compared to third quarter 2021. Deposit service charge income, including treasury management fees, was up $45,000 in third quarter 2022 compared to second quarter 2022 and was up $80,000 from third quarter 2021.
Non-interest expense was $12.1 million for third quarter 2022, compared to $11.9 million for second quarter 2022 and $11.6 million for third quarter 2021. The largest component of non-interest expense was salaries and benefits expenses. Salaries and benefits expenses were up $237,000 compared to second quarter 2022 and were up $362,000 compared to third quarter 2021. The increase compared to second quarter 2022 was primarily due to a higher level of salaries and other compensation, bonus expense and medical insurance costs, while the increase from third quarter 2021 was due largely to a higher level of salary and other compensation resulting from merit adjustments to base pay effective April 1, 2022, a higher level of 401k matching contributions and a higher level of medical insurance costs, partially offset by lower mortgage sales commissions. The table below identifies the primary components of the changes in salaries and benefits between periods.
Dollars in 000sQ3 2022
to
Q2 2022Q3 2022
to
Q3 2021Salaries and other compensation $ 106 $ 171 Salary deferral from commercial loans 8 (7 ) Bonus accrual 124 55 Mortgage production – variable comp (50 ) (96 ) 401k matching contributions (1 ) 89 Medical insurance costs 50 150 Total change in salaries and benefits $ 237 $ 362 Occupancy expenses were down $83,000 in third quarter 2022 compared to second quarter 2022 and were down $4,000 compared to third quarter 2021. Data processing expenses were up $60,000 in third quarter 2022 compared to second quarter 2022 and were up $144,000 compared to third quarter 2021 due to higher usage of electronic banking services and debit cards by our customers. Other categories of non-interest expense were relatively flat compared to second quarter 2022 and third quarter 2021 due to a continued focus on expense management.
Federal income tax expense was $2.5 million for third quarter 2022, $1.5 million for second quarter 2022, and $1.7 million for third quarter 2021. The effective tax rate was 19.9 percent for third quarter 2022, compared to 18.5 percent for second quarter 2022 and 19.4 percent for third quarter 2021. The increase in the effective tax rate was due to higher levels of taxable income from both growth in taxable securities held in our investment portfolio and growth in taxable income from rising interest rates while our tax-exempt income has remained relatively flat.
Asset Quality
No provision for loan losses was recorded in third quarter 2022 or in second quarter 2022 while a provision benefit of $550,000 was recorded in third quarter 2021. Net loan recoveries for third quarter 2022 were $190,000, compared to second quarter 2022 net loan recoveries of $15,000 and third quarter 2021 net loan recoveries of $276,000. At September 30, 2022, the Company had experienced net loan recoveries in twenty-nine of the past thirty-one quarters. Total loans past due on payments by 30 days or more amounted to $84,000 at September 30, 2022, versus $197,000 at June 30, 2022 and $437,000 at September 30, 2021. Delinquencies at September 30, 2022 were comprised of just one individual loan. Delinquency as a percentage of total loans was just 0.01 percent at September 30, 2022, well below the Company’s peer level.The allowance for loan losses of $14.8 million was 1.30 percent of total loans at September 30, 2022, compared to $14.6 million or 1.32 percent of total loans at June 30, 2022, and $16.5 million or 1.45 percent at September 30, 2021. The ratio excluding PPP loans was 1.30 percent at September 30, 2022, 1.32 percent at June 30, 2022 and 1.56 percent at September 30, 2021. The coverage ratio of allowance for loan losses to nonperforming loans continued to be strong and significantly exceeded 1-to-1 coverage at 174-to-1 as of September 30, 2022.
At September 30, 2022, the Company's nonperforming loans were $85,000, representing 0.01 percent of total loans. This compares to $90,000 (0.01 percent of total loans) at September 30, 2022 and $420,000 (0.04 percent of total loans) at September 30, 2021. Other real estate owned and repossessed assets were $2.3 million at September 30, 2022, June 30, 2022 and September 30, 2021. Total non-performing assets, including other real estate owned and nonperforming loans, were $2.4 million, or 0.09 percent of total assets, at September 30, 2022. Total nonperforming assets, including other real estate owned and nonperforming loans, decreased by $335,000 from September 30, 2021 to September 30, 2022.
A break-down of non-performing loans is shown in the table below.
Dollars in 000s Sept 30,
2022June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021Commercial Real Estate $ --- $ 5 $ 5 $ 5 $ 332 Commercial and Industrial --- 1 1 1 --- Total Commercial Loans --- 6 6 6 332 Residential Mortgage Loans 85 84 84 86 88 Consumer Loans --- --- --- --- --- Total Non-Performing Loans $ 85 $ 90 $ 90 $ 92 $ 420 A break-down of non-performing assets is shown in the table below.
Dollars in 000s Sept 30,
2022June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021Non-Performing Loans $ 85 $ 90 $ 90 $ 92 $ 420 Other Repossessed Assets --- --- --- --- --- Other Real Estate Owned 2,343 2,343 2,343 2,343 2,343 Total Non-Performing Assets $ 2,428 $ 2,433 $ 2,433 $ 2,435 $ 2,763 Balance Sheet, Liquidity and Capital
Total assets were $2.84 billion at September 30, 2022, an increase of $53.8 million from $2.78 billion at June 30, 2022 and a decrease of $66.5 million from $2.90 billion at September 30, 2021. Assets were elevated at each period-end due to customers holding a higher level of deposits during the COVID-19 pandemic, including balances from PPP loan proceeds.
The Company continued to increase its investment portfolio to deploy some of its excess liquidity. The Company’s investment portfolio primarily consists of U.S. treasury and agency securities, agency mortgage backed securities and various municipal securities. Total securities were $803.2 million at September 30, 2022, an increase of $14.9 million from $788.3 million at June 30, 2022 and an increase of $424.2 million from $379.0 million at September 30, 2021.
Total loans were $1.14 billion at September 30, 2022, an increase of $26.7 million from $1.11 billion at June 30, 2022 and an increase of $2.0 million from $1.14 billion at September 30, 2021.
Commercial loans decreased by $12.3 million from September 30, 2021 to September 30, 2022, offset by an increase of $11.0 million in the residential mortgage portfolio, and an increase of $3.3 million in the consumer loan portfolio. Within commercial loans, commercial real estate loans decreased by $5.0 million and commercial and industrial loans decreased by $7.3 million. However, the largest decrease in commercial loans was in PPP loans which decreased by $77.5 million due to forgiveness by the SBA. Excluding PPP loans, total commercial loans increased by $70.2 million. The loan growth experienced in this time period was the direct result of both new loan prospecting efforts and existing customers beginning to borrow more for expansion of their businesses.
The composition of the commercial loan portfolio is shown in the table below:
Dollars in 000s Sept 30,
2022June 30,
2022Mar 31,
2022Dec 31,
2021Sept 30,
2021Construction and Development $ 111,624 $ 107,325 $ 104,945 $ 103,755 $ 104,636 Other Commercial Real Estate 410,600 411,778 417,368 412,346 422,574 Commercial Loans Secured
by Real Estate522,224 519,103 522,313 516,101 527,210 Commercial and Industrial 427,034 407,788 402,854 378,318 356,812 Paycheck Protection Program 32 2,791 7,393 41,939 77,571 Total Commercial Loans $ 949,290 $ 929,682 $ 932,560 $ 936,358 $ 961,593 Bank owned life insurance was $53.2 million at September 30, 2022, up $230,000 from $53.0 million at June 30, 2022 and up $412,000 from $52.8 million at September 30, 2021 due to earnings on the underlying investments.
Total deposits were $2.56 billion at September 30, 2022, up $61.6 million, or 2.5 percent, from $2.49 billion at June 30, 2022 and up $3.0 million, or 0.1 percent, from $2.55 billion at September 30, 2021. Demand deposits were up $43.9 million at the end of third quarter 2022 compared to the end of second quarter 2022 and were down $53.2 million compared to the end of third quarter 2021. Money market deposits and savings deposits were up $23.3 million from the end of second quarter 2022 and were up $73.1 million from the end of third quarter 2021. Certificates of deposit were down $5.6 million at September 30, 2022 compared to June 30, 2022 and were down $16.8 million compared to September 30, 2021 as customers reacted to changes in market interest rates. As deposit rates dropped during the pandemic, the Company experienced some shifting between deposit types. As rates have now begun to increase, the Company has begun to see a shift to interest earning deposit types. Overall deposit customers are continuing to hold higher levels of liquid deposit balances due to uncertainty related to economic conditions. The Company continues to be successful at attracting and retaining core deposit customers. Customer deposit accounts remain insured to the highest levels available under FDIC deposit insurance.
Other borrowed funds of $30.0 million at September 30, 2022 were unchanged compared to June 30, 2022 and were down $55.0 million compared to $85.0 million at September 30, 2021. The decrease compared to the third quarter 2021 was largely due to the FHLB exercising its put options on a $25.0 million advance carrying a rate of 0.01% and a $10.0 million advance carrying a rate of 0.45%. In addition, during the second quarter 2022, the Company prepaid $20.0 million in FHLB advances, with interest rates ranging from 2.91% to 3.05%. Prepayment fees totaled $87,000 and were included in interest expense in the second quarter 2022. Paying these advances off early will save the Company over $650,000 in annual interest expense, net of the prepayment fees incurred.
The Company's total risk-based regulatory capital ratio at September 30, 2022 was consistent with the ratio at June 30, 2022 and September 30, 2021. Macatawa Bank’s risk-based regulatory capital ratios continue to be at levels considerably above those required to be categorized as “well capitalized” under applicable regulatory capital guidelines. As such, the Bank was categorized as "well capitalized" at September 30, 2022.
About Macatawa Bank
Headquartered in Holland, Michigan, Macatawa Bank offers a full range of banking, retail and commercial lending, wealth management and ecommerce services to individuals, businesses and governmental entities from a network of 26 full-service branches located throughout communities in Kent, Ottawa and northern Allegan counties. The bank is recognized for its local management team and decision making, along with providing customers excellent service, a rewarding experience and superior financial products. Macatawa Bank has been recognized for twelve years as one of “West Michigan’s 101 Best and Brightest Companies to Work For”. For more information, visit www.macatawabank.com.CAUTIONARY STATEMENT: This press release contains forward-looking statements that are based on management's current beliefs, expectations, assumptions, estimates, plans and intentions. Forward-looking statements are identifiable by words or phrases such as “anticipates,” "believe," "expect," "may," "should," "will," ”intend,” "continue," "improving," "additional," "focus," "forward," "future," "efforts," "strategy," "momentum," "positioned," and other similar words or phrases. Such statements are based upon current beliefs and expectations and involve substantial risks and uncertainties which could cause actual results to differ materially from those expressed or implied by such forward-looking statements. These statements include, among others, statements related to trends in our key operating metrics and financial performance, future levels of earnings and profitability, future levels of earning assets, future asset quality, future growth, future interest rates, future net interest margin and future economic conditions. All statements with references to future time periods are forward-looking. Management's determination of the provision and allowance for loan losses, the appropriate carrying value of intangible assets (including deferred tax assets) and other real estate owned and the fair value of investment securities (including whether any impairment on any investment security is temporary or other-than-temporary and the amount of any impairment) involves judgments that are inherently forward-looking. Our ability to sell other real estate owned at its carrying value or at all, reduce non-performing asset expenses, utilize our deferred tax asset, successfully implement new programs and initiatives, increase efficiencies, maintain our current level of deposits and other sources of funding, maintain liquidity, respond to declines in collateral values and credit quality, improve profitability, and produce consistent core earnings is not entirely within our control and is not assured. The future effect of changes in the real estate, financial and credit markets and the national and regional economy on the banking industry, generally, and Macatawa Bank Corporation, specifically, are also inherently uncertain. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("risk factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed in or implied by such forward-looking statements. Macatawa Bank Corporation does not undertake to update forward-looking statements to reflect the impact of circumstances or events that may arise after the date of the forward-looking statements.
Risk factors include, but are not limited to, the risk factors described in "Item 1A - Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2021. These and other factors are representative of the risk factors that may emerge and could cause a difference between an ultimate actual outcome and a preceding forward-looking statement.
MACATAWA BANK CORPORATION CONSOLIDATED FINANCIAL SUMMARY (Unaudited) (Dollars in thousands except per share information) Quarterly Nine Months Ended 3rd Qtr 2nd Qtr 3rd Qtr September 30 EARNINGS SUMMARY 2022 2022 2021 2022 2021 Total interest income $ 20,875 $ 15,435 $ 14,842 $ 49,452 $ 45,300 Total interest expense 1,104 592 546 2,173 2,057 Net interest income 19,771 14,843 14,296 47,279 43,243 Provision for loan losses - - (550 ) (1,500 ) (1,300 ) Net interest income after provision for loan losses 19,771 14,843 14,846 48,779 44,543 NON-INTEREST INCOME Deposit service charges 1,263 1,218 1,183 3,693 3,240 Net gains on mortgage loans 166 199 851 673 4,177 Trust fees 969 1,096 1,079 3,153 3,217 Other 2,491 2,618 2,529 7,466 7,715 Total non-interest income 4,889 5,131 5,642 14,985 18,349 NON-INTEREST EXPENSE Salaries and benefits 6,639 6,402 6,278 19,331 19,192 Occupancy 989 1,071 992 3,232 3,023 Furniture and equipment 1,014 988 1,014 3,017 2,929 FDIC assessment 201 197 204 578 532 Other 3,284 3,255 3,062 9,620 9,077 Total non-interest expense 12,127 11,913 11,550 35,778 34,753 Income before income tax 12,533 8,061 8,938 27,986 28,139 Income tax expense 2,488 1,493 1,736 5,372 5,341 Net income $ 10,045 $ 6,568 $ 7,202 $ 22,614 $ 22,798 Basic earnings per common share $ 0.29 $ 0.19 $ 0.21 $ 0.66 $ 0.67 Diluted earnings per common share $ 0.29 $ 0.19 $ 0.21 $ 0.66 $ 0.67 Return on average assets 1.40 % 0.92 % 0.98 % 1.05 % 1.08 % Return on average equity 16.41 % 10.80 % 11.52 % 12.23 % 12.40 % Net interest margin (fully taxable equivalent) 2.86 % 2.19 % 2.04 % 2.30 % 2.18 % Efficiency ratio 49.18 % 59.64 % 57.93 % 57.46 % 56.42 % BALANCE SHEET DATA September 30 June 30 September 30 Assets 2022 2022 2021 Cash and due from banks $ 33,205 $ 38,376 $ 30,413 Federal funds sold and other short-term investments 733,347 721,826 1,239,525 Debt securities available for sale 453,728 435,628 241,475 Debt securities held to maturity 349,481 352,721 137,569 Federal Home Loan Bank Stock 10,211 10,211 11,558 Loans held for sale 234 1,163 2,635 Total loans 1,138,645 1,111,915 1,136,613 Less allowance for loan loss 14,821 14,631 16,532 Net loans 1,123,824 1,097,284 1,120,081 Premises and equipment, net 40,670 41,088 42,343 Bank-owned life insurance 53,193 52,963 52,781 Other real estate owned 2,343 2,343 2,343 Other assets 34,802 27,605 20,777 Total Assets $ 2,835,038 $ 2,781,208 $ 2,901,500 Liabilities and Shareholders' Equity Noninterest-bearing deposits $ 855,744 $ 903,334 $ 934,477 Interest-bearing deposits 1,700,453 1,591,249 1,618,698 Total deposits 2,556,197 2,494,583 2,553,175 Other borrowed funds 30,000 30,000 85,000 Long-term debt - - - Other liabilities 12,287 13,516 11,112 Total Liabilities 2,598,484 2,538,099 2,649,287 Shareholders' equity 236,554 243,109 252,213 Total Liabilities and Shareholders' Equity $ 2,835,038 $ 2,781,208 $ 2,901,500 MACATAWA BANK CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands except per share information) Quarterly Year to Date 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2022 2022 2022 2021 2021 2022 2021 EARNINGS SUMMARY Net interest income $ 19,771 $ 14,843 $ 12,665 $ 12,826 $ 14,296 $ 47,279 $ 43,243 Provision for loan losses - - (1,500 ) (750 ) (550 ) (1,500 ) (1,300 ) Total non-interest income 4,889 5,131 4,965 5,346 5,642 14,985 18,349 Total non-interest expense 12,127 11,913 11,739 11,337 11,550 35,778 34,753 Federal income tax expense 2,488 1,493 1,391 1,369 1,736 5,372 5,341 Net income $ 10,045 $ 6,568 $ 6,000 $ 6,216 $ 7,202 $ 22,614 $ 22,798 Basic earnings per common share $ 0.29 $ 0.19 $ 0.18 $ 0.18 $ 0.21 $ 0.66 $ 0.67 Diluted earnings per common share $ 0.29 $ 0.19 $ 0.18 $ 0.18 $ 0.21 $ 0.66 $ 0.67 MARKET DATA Book value per common share $ 6.91 $ 7.10 $ 7.17 $ 7.41 $ 7.38 $ 6.91 $ 7.38 Tangible book value per common share $ 6.91 $ 7.10 $ 7.17 $ 7.41 $ 7.38 $ 6.91 $ 7.38 Market value per common share $ 9.26 $ 8.84 $ 9.01 $ 8.82 $ 8.03 $ 9.26 $ 8.03 Average basic common shares 34,251,792 34,253,846 34,254,772 34,229,664 34,190,264 34,253,459 34,192,916 Average diluted common shares 34,251,792 34,253,846 34,254,772 34,229,664 34,190,264 34,253,459 34,192,916 Period end common shares 34,251,485 34,253,147 34,253,962 34,259,945 34,189,799 34,251,485 34,189,799 PERFORMANCE RATIOS Return on average assets 1.40 % 0.92 % 0.82 % 0.85 % 0.98 % 1.05 % 1.08 % Return on average equity 16.41 % 10.80 % 9.54 % 9.84 % 11.52 % 12.23 % 12.40 % Net interest margin (fully taxable equivalent) 2.86 % 2.19 % 1.85 % 1.85 % 2.04 % 2.30 % 2.18 % Efficiency ratio 49.18 % 59.64 % 66.59 % 62.39 % 57.93 % 57.46 % 56.42 % Full-time equivalent employees (period end) 316 315 311 311 318 316 318 ASSET QUALITY Gross charge-offs $ 46 $ 60 $ 35 $ 22 $ 22 $ 141 $ 102 Net charge-offs/(recoveries) $ (190 ) $ (15 ) $ (227 ) $ (107 ) $ (276 ) $ (432 ) $ (424 ) Net charge-offs to average loans (annualized) -0.07 % -0.01 % -0.08 % -0.04 % -0.09 % -0.05 % -0.04 % Nonperforming loans $ 85 $ 90 $ 90 $ 92 $ 420 $ 85 $ 420 Other real estate and repossessed assets $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 $ 2,343 Nonperforming loans to total loans 0.01 % 0.01 % 0.01 % 0.01 % 0.04 % 0.01 % 0.04 % Nonperforming assets to total assets 0.09 % 0.09 % 0.08 % 0.08 % 0.10 % 0.09 % 0.10 % Allowance for loan losses $ 14,821 $ 14,631 $ 14,616 $ 15,889 $ 16,532 $ 14,821 $ 16,532 Allowance for loan losses to total loans 1.30 % 1.32 % 1.33 % 1.43 % 1.45 % 1.30 % 1.45 % Allowance for loan losses to total loans (excluding PPP loans) 1.30 % 1.32 % 1.34 % 1.49 % 1.56 % 1.30 % 1.56 % Allowance for loan losses to nonperforming loans 17436.47 % 16256.67 % 16240.00 % 17270.65 % 3936.19 % 17436.47 % 3936.19 % CAPITAL Average equity to average assets 8.52 % 8.55 % 8.62 % 8.66 % 8.48 % 8.56 % 8.73 % Common equity tier 1 to risk weighted assets (Consolidated) 16.72 % 16.54 % 16.92 % 17.24 % 17.43 % 16.72 % 17.43 % Tier 1 capital to average assets (Consolidated) 9.29 % 9.13 % 8.82 % 8.72 % 8.51 % 9.29 % 8.51 % Total capital to risk-weighted assets (Consolidated) 17.64 % 17.47 % 17.88 % 18.32 % 18.58 % 17.64 % 18.58 % Common equity tier 1 to risk weighted assets (Bank) 16.24 % 16.04 % 16.39 % 16.70 % 16.88 % 16.24 % 16.88 % Tier 1 capital to average assets (Bank) 9.02 % 8.85 % 8.55 % 8.44 % 8.24 % 9.02 % 8.24 % Total capital to risk-weighted assets (Bank) 17.16 % 16.97 % 17.35 % 17.77 % 18.02 % 17.16 % 18.02 % Common equity to assets 8.34 % 8.74 % 8.38 % 8.67 % 8.69 % 8.34 % 8.69 % Tangible common equity to assets 8.34 % 8.74 % 8.38 % 8.67 % 8.69 % 8.34 % 8.69 % END OF PERIOD BALANCES Total portfolio loans $ 1,138,645 $ 1,111,915 $ 1,101,902 $ 1,108,993 $ 1,136,613 $ 1,138,645 $ 1,136,613 Earning assets 2,727,924 2,655,706 2,802,498 2,803,853 2,768,507 2,727,924 2,768,507 Total assets 2,835,038 2,781,208 2,929,883 2,928,751 2,901,500 2,835,038 2,901,500 Deposits 2,556,197 2,494,583 2,582,297 2,577,958 2,553,175 2,556,197 2,553,175 Total shareholders' equity 236,554 243,109 245,602 254,005 252,213 236,554 252,213 AVERAGE BALANCES Total portfolio loans $ 1,124,950 $ 1,103,955 $ 1,092,673 $ 1,109,863 $ 1,182,633 $ 1,107,311 $ 1,302,181 Earning assets 2,746,975 2,724,714 2,788,254 2,780,236 2,804,157 2,753,200 2,671,417 Total assets 2,874,343 2,847,381 2,917,462 2,917,569 2,948,664 2,879,571 2,809,350 Deposits 2,586,165 2,537,111 2,569,315 2,564,961 2,605,043 2,564,259 2,465,858 Total shareholders' equity 244,857 243,352 251,600 252,606 249,994 246,578 245,211 Contact: Jon W. Swets Chief Financial Officer 616-494-7645 jswets@macatawabank.com