Michigan Heritage Bancorp, Inc. Reports Q2 and 6-Month Results

FARMINGTON HILLS, Mich., July 27 /PRNewswire-FirstCall/ -- MichiganHeritage Bancorp, Inc. (OTC Bulletin Board: MHBC), the holding company forMichigan Heritage Bank, posted net income of $210,000 or $0.14 per dilutedshare for the first six months of 2007 compared to a net income of $506,000or $0.33 per diluted share for the same six-month period of 2006. MHBC'snet income for the second quarter of 2007 was $54,000 or $0.04 per dilutedshare compared to $252,000 or $0.16 per diluted share for the secondquarter of 2006. Total assets for the quarter ended June 30, 2007 were$181,274,000, up $9,518,000 or 5.54% from the same quarter of 2006 and$1,232,000 above total assets as of December 31, 2006. Perry Driggs,Chairman, reported today. Net interest margin has continued to compress due to the flat yieldcurve, the Bank's competitive market for quality loans and higher-costingdeposits. As of June 30, 2007, the Bank's net interest margin was 3.99%compared to 4.17% for the same six-month period of 2006. During the first half of 2007, the Bank added to its loan loss reservesby $120,000, compared to no provisions added for the same time period of2006. During the second quarter of 2007 the Bank had a recovery of $154,000from a previously charged-off loan, helping to increase the Bank's June 30,2007 loan loss reserve ratio to 1.28% compared to a 1.14% for the sameperiod ended 2006. Mr. Driggs added, "During the first half of 2007 we limited assetgrowth in light of the current economic conditions in our market area.Raymond Biggs, the Bank's president and CEO, continued restructuring theBank's organization and changing the bank's business model in order tocreate future profitable growth opportunities and improved earnings. Thesechanges are building a solid foundation that will enable MHBC to achievethe earnings performance expected by our shareholders." Raymond Biggs stated: "While MHB continues to feel margin pressure viacompetitive loan rates and intense competition for deposits, we remainoptimistic about our markets and the changes we have made to transform ourBank. We have strengthened our lending and credit areas with the additionof Vince Borowski as our new Senior Lender in April of 2007 and Jan Donahueas our Credit Manager in the fourth quarter of 2006. Despite the economicconditions that exist in Michigan and specifically the SoutheasternMichigan economy, we continue to be optimistic about our Bank's prospects.Opportunities have been helped by the merger announcements and otherstructural changes among the larger banks in our market. This kind ofmarket turbulence creates opportunities for community banks and we plan tomake the most of these situations." FINANCIAL DATA Total assets as of June 30, 2007 were $181,274,000, compared to$180,042,000 at December 31, 2006, an increase of $1,232,000, or 0.68%. Total net loans as of June 30, 2007 were $142,966,000, compared to$144,285,000, at December 31, 2006, a decrease of $1,319,000, or 0.91%. Total deposits were $151,283,000 as of June 30, 2007 compared to$152,428,000 from December 31, 2006, a decrease of $1,145,000, or 0.75%. Shareholders' equity was $16,908,000, a decrease of $315,000 or 1.83%compared to December 31, 2006. The primary reason for the decrease wasMichigan Heritage Bancorp, Inc., the Bank's holding corporation,repurchased 29,390 shares of its stock for $352,000 during the first sixmonths of 2007 Michigan Heritage Bank is a state chartered, full-service commercialbank and wholly owned subsidiary of Michigan Heritage Bancorp, Inc. Amember of both the Federal Reserve System and the Federal Home Loan Bank,deposits are FDIC insured. Michigan Heritage operates from branch officesin Farmington Hills, Livonia, Novi, Troy and Wixom. Michigan HeritageBancorp stock trades on the over-the-counter (OTC) market and quotationsare reported on the OTC Bulletin Board under the symbol "MHBC". Safe Harbor. This press release contains "forward looking statements"within the meaning of the federal securities law regarding proposeddevelopments and operations of the Company. These statements represent theCompany's expectations of beliefs concerning future events. Statementscontaining expressions such as "believes", "anticipates" or "expects" areintended to identify such forward-looking statements. All forward-lookingstatements involve risks and uncertainties. Although the Company believesits expectations are based upon reasonable assumptions within the bounds ofits knowledge of its business and operations, there can be no assurancethat actual results will not materially differ from expected results. TheCompany cautions that these and similar statements are further qualified byimportant factors that could cause actual results to differ materially fromthose in the forward-looking statements, including regional and nationaleconomic conditions, substantial changes in levels of market interestrates, credit and other risks of lending and investment activities andcompetitive and regulatory factors. The Company does not undertake andspecifically disclaims any obligation to update any forward-lookingstatements, to reflect occurrences or unanticipated events of circumstancesafter the date of such statements. Michigan Heritage Bancorp, Inc. Consolidated Balance Sheets June 30, 2007 and December 31, 2006 (000s omitted) June 30, 2006 December 31, 2006 ASSETS (Unaudited) Cash and due from banks, noninterest bearing $ 1,465 $ 2,241 Interest bearing deposits with banks 133 234 Federal funds sold 48 79 Total cash and cash equivalents 1,646 2,554 Securities available for sale 29,824 26,682 Federal Reserve Bank and FHLB stock 1,072 1,072 Total investments 30,896 27,754 Gross Loans and Leases 144,894 146,036 Less: Net deferred fees (77) (87) Allowance for credit losses (1,851) (1,664) Net loans and leases 142,966 144,285 Loans held for sale - - Total earning assets 174,043 172,352 Leasehold improvements, net 604 660 Furniture & equipment, net 386 390 Total fixed assets 990 1,050 Interest receivable 2,147 1,772 Other real-estate and assets owned 570 570 Bank owned life insurance 1,382 1,361 Other assets 677 696 Total other assets 4,776 4,399 Total assets $ 181,274 $ 180,042 LIABILITIES AND STOCKHOLDERS' EQUITY Total deposits $ 151,283 $ 152,428 Other borrowed funds 10,550 7,150 Interest payable and other liabilities 2,533 3,241 Total liabilities 164,366 162,819 Stockholders' Equity Preferred stock--no par value; 500,000 shares authorized, none issued and outstanding - - Common stock--no par value; 4,500,000 shares authorized issued and outstanding-- 1,519,899 13,739 14,090 Retained earnings 3,323 3,215 Accumulated other comprehensive income (154) (82) Total stockholders' equity 16,908 17,223 Total liabilities and stockholders' equity $ 181,274 $ 180,042 Total loan loss reserve ratio 1.28% 1.14% Total loan to asset ratio 80% 81% Michigan Heritage Bancorp, Inc. Consolidated Statement of Earnings June 30, 2007 and June 30, 2006 (Unaudited) (000s omitted except per share data) Three Months Ended Six Months Ended June 30, June 30, 2007 2006 2007 2006 OPERATING INCOME: Interest income $ 3,595 $ 3,334 $ 7,115 $ 6,419 Interest expense 1,818 1,511 3,637 2,825 Net interest income before provision for credit losses 1,777 1,823 3,478 3,594 Less: provision for credit losses 60 - 120 0 Net interest income after provision for credit losses 1,717 1,823 3,358 3,594 Loss on sale of securities held available for sale (3) (2) (3) (2) Gain on sale of loans and other assets 0 21 129 118 Other income 55 66 152 163 Total other operating income 52 85 278 279 Total operating income 1,769 1,908 3,636 3,873 OTHER OPERATING EXPENSES: Salaries and employee benefits 743 745 1,584 1,502 Occupancy expense 186 171 375 343 Equipment expense 87 85 171 163 Data processing expense 68 58 134 115 Insurance expense 19 23 35 41 Advertising/promotion expense 54 60 90 109 Office supplies and printing expense 12 17 24 31 Professional fees 193 137 329 323 FDIC assessment 12 5 9 10 Lien, recording, and other loan fees, net 27 27 29 17 Michigan single business tax 14 43 26 52 Director fees 21 21 40 49 Minority interest in net income of consolidated subsidiaries 165 87 289 195 Other expense 121 59 265 180 Total other operating expense 1,722 1,538 3,400 3,130 Net operating income (loss) 47 370 236 743 Provision for federal income taxes (7) 118 26 237 Net income $ 54 $ 252 $ 210 $ 506 Per Common Share Data Basic earnings per share $ 0.04 $ 0.16 $ 0.14 $ 0.33 Diluted earnings per share $ 0.04 $ 0.16 $ 0.14 $ 0.33