Executive Summary

Q2 2023 EPS was $0.30, with net income of $10.3M, up 57% year over year (vs. $6.6M in Q2 2022) but down 14% sequentially (vs. $12.0M in Q1 2023) .
Net interest margin (NIM) improved year over year to 3.36% (vs. 2.19%) but slipped 8 bps q/q due to deposit mix shifting toward higher-cost CDs; net interest income was $21.1M in Q2 2023 (vs. $14.8M in Q2 2022; down $1.5M q/q) .
Loans grew $50.6M in the quarter (17% annualized), deposits stabilized (down just $9.4M), with zero brokered deposits and robust on-balance-sheet liquidity ($343.7M) plus $964.2M available borrowing capacity; total deposits remain 36% above pre-pandemic levels .
Asset quality remained exceptional: nonperforming assets just $72K (0.00% of assets), allowance coverage 1.35% of loans, and continued net recoveries; capital well above “well-capitalized” minimums with $131.4M excess .
Wall Street consensus estimates from S&P Global were unavailable for MCBC for Q2 2023; relative performance assessment centers on internal trends (NIM trajectory, deposit mix, loan growth) rather than explicit beats/misses.*

What Went Well and What Went Wrong

What Went Well

Profitability strength and rate leverage: “Net interest income…was up $6.3 million from second quarter 2022, reflecting benefits from federal funds rate increases and growth in our loan and investment securities portfolios” .
Balanced growth with stable funding: Loans +$50.6M q/q; deposits down only $9.4M with no brokered deposits and 100% core deposits sourced locally .
Credit quality/capital: NPLs $72K (0.01% of loans), NPAs $72K, ACL 1.35% of loans, and $131.4M excess capital over well-capitalized thresholds .

What Went Wrong

Margin compression q/q: NIM declined to 3.36% from 3.44% in Q1 as deposits shifted into higher-rate CDs; net interest income fell $1.5M q/q .
Rising deposit costs: Interest expense rose to $6.0M (vs. $592K in Q2 2022) as rates paid on deposits increased; total average cost of interest-bearing liabilities up to 1.43% (vs. 0.14% YoY) .
Non-interest dynamics and assessments: Non-interest income declined YoY and FDIC assessments rose ($330K in Q2 2023 vs. $197K in Q2 2022), while operating expenses were higher YoY (salaries/benefits, data processing, equipment) .

Financial Results

Earnings and Margin Comparison (prior year → prior quarter → current)

Metric	Q2 2022	Q1 2023	Q2 2023
Diluted EPS ($)	$0.19	$0.35	$0.30
Net Income ($M)	$6.57	$12.00	$10.31
Total Interest Income ($M)	$15.44	$27.27	$27.12
Net Interest Income ($M)	$14.84	$22.62	$21.15
Non-Interest Income ($M)	$5.13	$4.53	$4.61
Net Interest Margin (%)	2.19%	3.44%	3.36%
Efficiency Ratio (%)	59.64%	44.82%	49.20%
ROAA (%)	0.92%	1.74%	1.57%
ROAE (%)	10.80%	19.19%	15.70%

Balance Sheet and KPIs (prior year → prior quarter → current)

Metric	Q2 2022	Q1 2023	Q2 2023
Total Assets ($B)	$2.78	$2.64	$2.63
Loans ($B)	$1.11	$1.221	$1.272
Deposits ($B)	$2.495	$2.331	$2.322
Nonperforming Loans ($K)	$90	$75	$72
Nonperforming Assets ($K)	$2,433	$75	$72
Allowance for Credit Losses ($M)	$14.63	$16.79	$17.11
ACL / Loans (%)	1.32%	1.38%	1.35%
Liquidity (Fed funds & ST inv., $M)	$721.8	$391.3	$343.7
Available Borrowing Capacity ($M)	—	$951.0	$964.2

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share ($)	Q2/Q3 2023	$0.08/quarter (paid in Q2)	$0.08 (declared July 27, 2023)	Maintained
Revenue, Margins, OpEx, OI&E, Tax Rate	2023	No formal guidance provided	No formal guidance provided	Maintained (no guidance)

Earnings Call Themes & Trends

Note: No public Q2 2023 earnings call transcript could be located; themes reflect management’s press release and MD&A commentary from filings.

Topic	Previous Mentions (Q4 2022)	Previous Mentions (Q1 2023)	Current Period (Q2 2023)	Trend
Interest rates/NIM	NIM +48 bps q/q to 3.34% on Fed hikes	NIM +10 bps q/q to 3.44%; asset-sensitive balance sheet benefiting	NIM 3.36% (-8 bps q/q) as deposit mix shifts to CDs	Moderating margin; pressure from deposit costs
Deposit mix/liquidity	Deposits +$58.9M q/q in Q4; no brokered deposits	Seasonal outflows; deposits -$284M in Q1; liquidity ~$951M capacity	Deposits stable (-$9.4M), liquidity $343.7M on-balance +$964.2M capacity	Stabilized; ample contingent liquidity
Asset quality/CECL	NPLs $78K; OREO $2.3M; provision $375K (growth-driven)	CECL adopted; NPLs $75K; net recoveries; no provision in Q1	NPLs $72K; provision $300K; ACL 1.35% of loans; net recoveries	Stable, very strong
Mortgage banking	Lower gains, originations reduced amid higher rates	Gains just $11K; originations for sale $0.18M	Gains $21K; originations for sale $2.4M (still low YoY)	Subdued activity
Expenses/regulatory	Efficiency ~44.6%; FDIC assessment $211K	Efficiency 44.82%; FDIC assessment $330K	Efficiency 49.20%; FDIC assessment $330K	Slight operating cost pressure

Management Commentary

“We are pleased to report strong profitability and good balance sheet results for the second quarter 2023… Net interest income…reflecting benefits from federal funds rate increases and growth in our loan and investment securities portfolios.” — Ronald L. Haan, President & CEO .
“We have seen some shifting in our deposits to higher interest bearing types, particularly certificates of deposit, which has a downward impact on net interest margin, but our core deposit balances remain well above pre-pandemic levels…” .
“High levels of liquidity, capital, and excellent asset quality put us in a good position to weather softer economic conditions… and to seize loan growth opportunities.” .

Q&A Highlights

No Q2 2023 earnings call transcript could be found; the company furnished detailed press release and filed its Form 10‑Q. We searched for an earnings call transcript and only found the press release and dividend announcement .

Estimates Context

S&P Global/Capital IQ consensus for Q2 2023 EPS and revenue was unavailable for MCBC in our system. We attempted to retrieve “Primary EPS Consensus Mean,” “Revenue Consensus Mean,” and counts, but no CIQ mapping existed for MCBC, so estimates could not be returned.*
Implication: Focus on internal trend signals (NIM trajectory, deposit repricing, loan growth, asset quality) rather than explicit beats/misses for Q2.

Key Takeaways for Investors

Profitability remains robust on a YoY basis, but sequential NIM compression from deposit mix into CDs bears monitoring; interest expense rose sharply with higher deposit rates .
Funding base stayed resilient post-March bank failures: deposits dipped only $9.4M in Q2, with zero brokered deposits and 100% core deposits; uninsured deposits ~41% with liquidity sources exceeding uninsured by >$300M .
Credit remains a differentiator: NPLs at $72K and recurring net recoveries; ACL/loans at 1.35% supports benign loss outlook while CECL provisioning is modest and largely tied to growth .
Balance sheet positioned for flexibility: $343.7M overnight liquidity and $964.2M borrowing capacity, plus $411.8M security maturities/paydowns in 24 months to support funding if needed .
Operating costs are creeping up (FDIC assessments, data processing, equipment, salaries/benefits); efficiency ratio worsened q/q to 49.20%—watch expense discipline into 2H .
Mortgage banking is unlikely to be a swing factor near term; gains remained minimal as rates constrain saleable volumes .
Dividend maintained at $0.08/share per quarter—income profile intact; capital comfortably above well-capitalized thresholds .

* S&P Global consensus estimates unavailable for MCBC (attempted retrieval failed due to missing CIQ mapping).

MACATAWA BANK CORP (MCBC)·Q2 2023 Earnings Summary