MACATAWA BANK CORP (MCBC)·Q4 2023 Earnings Summary

Executive Summary

• Q4 2023 net income was $9.5M ($0.28 diluted EPS), down from $11.4M ($0.33) in Q3 2023 and $12.1M ($0.35) in Q4 2022; the quarter included $1.3M non-recurring CEO retirement costs (~$1.0M after-tax), compressing EPS and efficiency metrics .
• Net interest margin declined 7 bps QoQ to 3.28% as deposit mix continued shifting to higher-cost categories, though management noted the pace of shifting “has clearly slowed” in recent months .
• Balance sheet remains highly liquid and well-capitalized: $418.0M in overnight funds, ~$300M of investments maturing in the next 12 months, ~$1.0B in additional borrowing capacity, and $143M excess capital over well-capitalized minimums; AOCI improved by $10.6M in Q4 .
• Credit quality strong with nonperforming loans at $1K (0.00% of total loans), allowance coverage to NPLs at 17,442x, and 34 of last 36 quarters showing net recoveries; provision of $0.4M driven by loan growth .
• No formal guidance issued; dividend was raised to $0.09 per share in October (+12%), offering an incremental capital return signal amid stable fundamentals .

What Went Well and What Went Wrong

What Went Well

• Strong loan growth and runway: Loans up $47.1M QoQ (+14.6% annualized) and +$160.6M YoY, with commercial and industrial +$65.3M YoY; loan-to-deposit ratio at 55% supports future growth without wholesale funding .
• Liquidity and capital positioning: $418.0M overnight funds, ~$300M investments maturing in next 12 months; total additional borrowing capacity nearly $1.0B; “Our liquidity, high level of capital, and excellent asset quality put us in a good position to weather softer economic conditions” – Jon Swets .
• AOCI and asset quality tailwinds: AOCI improved $10.6M QoQ; NPLs at $1K (0.00%), ACL/loans at 1.30% and ACL/NPL coverage at 17,442x, with net recoveries of $41K in Q4 .

What Went Wrong

• Margin compression and funding cost pressure: NIM fell to 3.28% (−7 bps QoQ, −6 bps YoY) as deposits shifted to interest-bearing CDs/MMDA; interest expense rose to $8.2M vs $7.5M in Q3 and $2.6M in Q4 2022 .
• Elevated non-interest expense from one-time items: Total non-interest expense rose to $14.0M (+$1.2M QoQ), primarily due to $1.3M in CEO retirement-related costs .
• Non-interest income softness YoY: Total non-interest income down to $4.7M from $5.0M in Q4 2022 as brokerage, deposit service charges, and card income remained pressured by rate environment and customer behavior .

Financial Results

Income Statement Highlights

Balance Sheet and Portfolio

Commercial Loan Composition

Credit Quality KPIs

Guidance Changes

Earnings Call Themes & Trends

Note: No Q4 2023 earnings call transcript was available in our document set; themes reflect management commentary across Q2–Q4 press releases.

Management Commentary

• “We maintained our excellent asset quality, having just one loan past due more than 30 days at December 31, 2023… the pace of [deposit] shifting has clearly slowed in recent months.” – Jon Swets, President & CEO .
• “Our loan-to-deposit ratio at December 31, 2023 was just 55%, giving us a significant amount of room to grow our loan portfolio without the need to look to wholesale funding sources.” – Jon Swets .
• “Deploying [~$418.0M overnight funds and ~300M maturing investments] into loans or even additional overnight funds will likely be accretive to our interest income.” – Jon Swets .
• “We are pleased to provide an increase in the amount of the dividend payment to our shareholders… continued growth in Company earnings performance and our strong capital position make this increase possible.” – Jon Swets (dividend PR) .

Q&A Highlights

• No Q4 2023 earnings call transcript or Q&A was available in the document set; no call-based guidance clarifications or tone assessment can be provided [ListDocuments returned none for earnings-call-transcript].

Estimates Context

• S&P Global consensus estimates for Q4 2023 could not be retrieved due to a missing CIQ mapping for ticker MCBC; thus, a comparison to Street estimates is unavailable. Values would normally be retrieved from S&P Global but were unavailable in this case.
• Implication: Without consensus, framing relative performance relies on internal benchmarks (QoQ/YoY) and qualitative drivers; EPS declined primarily due to non-recurring retirement costs and deposit-cost/mix headwinds .

Key Takeaways for Investors

• Margin pressure persists but appears to be moderating as deposit mix shifting slows; watch 2024 NIM trajectory as CDs reprice and overnight liquidity is redeployed .
• Balance sheet optionality is a catalyst: $418.0M overnight funds plus ~$300M near-term investment maturities provide capacity to support loan growth or manage rates, potentially accretive to NII as opportunities emerge .
• Credit quality remains a differentiator, with negligible NPLs and consistent net recoveries; low loss content supports lower provisioning absent macro deterioration .
• Capital return stance modestly tightened with dividend increase to $0.09/qtr; continued excess capital ($143M) offers potential flexibility for future returns or growth investments .
• Operating expense normalization should follow the one-time CEO retirement costs; near-term efficiency ratio should improve as those costs roll off and revenue stabilizes .
• Monitor deposit flows post seasonal municipal outflows; core franchise remains intact, with deposit base fully core and insured, but funding costs remain the key swing factor for NIM .
• Leadership transition completed with continuity (long-tenured CFO to CEO; internal CFO promotion); expect a conservative, disciplined approach to persist, limiting execution risk .