Macatawa in Michigan Swaps Out Its Preferred Stock

Macatawa Bank (MCBC) in Holland, Mich., has exchanged all of its outstanding preferred stock for common stock and cash to simplify its capital structure and direct dividends to investors.

The $1.6 billion-asset company said in a Monday press release that it exchanged each share of preferred stock for common stock at an above-market price of $5.25 each. Shareholders also had the option of receiving one-time cash payments equal to 5% and 4.5% dividend rates, respectively, for preferred A and preferred B shares.

Macatawa decided to make the exchange after being released from a 2010 consent order issued by the Federal Deposit Insurance Corp. The order, which included a requirement that the company refrain from paying dividends on preferred stock, was lifted in 2012. The order was replaced by a memorandum of understanding that was terminated last April.

"Now that the company has returned to a normal regulatory operating environment, the existence of the preferred stock was an impediment to restoring dividends to common shareholders," Macatawa Chairman Richard Postma said in the release. "At the same time, the company is thankful to those individuals who took a significant risk at the time of the issuance of the preferred stock" and so decided to make the exchange at an above-market price.

The exchange "simplifies the capital structure of the company going forward and completes the capital initiatives that the board had adopted at the beginning of 2013," Postma said. The exchange will have no impact on the company's fourth-quarter net income.

Macatawa redeemed $1.6 million of subordinated debt in the third quarter and resumed interest payments on trust-preferred securities that had been deferred for 15 quarters. It earnings for the first nine months of 2013 fell 49% from a year earlier, to $7.3 million. The company had a Tier 1 leverage ratio of 10.8% and a total risk-based capital ratio of 15.9% as of Sept. 30.