EX-99.1 2 k49712exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(MERCANTILE BANK CORPORATION LOGO)
FOR FURTHER INFORMATION:
         
AT MERCANTILE BANK CORPORATION:    
 
  Michael Price   Charles Christmas
 
  Chairman & CEO   Chief Financial Officer
 
  616-726-1600    616-726-1202 
 
  mprice@mercbank.com   cchristmas@mercbank.com
Mercantile Bank Corporation Reports Third Quarter 2010 Results
GRAND RAPIDS, Mich., October 19, 2010 (GLOBE NEWSWIRE) — Mercantile Bank Corporation (NASDAQ: MBWM) (“Mercantile”) reported a 2010 third quarter net loss attributable to common shares of $5.7 million, or ($0.67) per diluted common share, compared to a net loss of $5.6 million, or ($0.66) per diluted common share, for the year-ago quarter. For the nine months year-to-date, Mercantile recorded a net loss attributable to common shares of $9.3 million, or ($1.10) per diluted common share, compared to a net loss of $16.5 million, or ($1.94) per diluted common share, for the prior-year nine-month period.
Due to the establishment of a deferred tax asset valuation allowance in the fourth quarter of 2009, distortions exist in comparisons between 2010 after-tax results and earlier periods. Under these circumstances, pre-tax results provide improved comparability and greater clarity of operating results. On a pre-tax basis, the 2010 third quarter loss was $6.1 million, an improvement of 33 percent compared to the $9.0 million loss recorded for the 2009 third quarter. For the nine months year-to-date period, the 2010 pre-tax loss was $10.4 million, an improvement of 60 percent compared to the 2009 pre-tax loss of $25.9 million. Stronger revenue generation as well as lower provisions to the allowance for loan and lease losses contributed to the improvement in pre-tax 2010 results.
Excluding the impact of loan and lease loss provisions, and certain nonrecurring items, namely pre-tax gains from the sale of SBA loans and tax-exempt securities and charges associated with branch consolidations and the industry-wide FDIC special assessment, pre-tax pre-provision operating earnings for the 2010 third quarter and nine-month periods

 

 

were $4.2 million and $13.8 million, respectively, compared to pre-tax pre-provision operating earnings of $2.9 million and $10.0 million for the comparable 2009 periods.
Michael Price, Chairman and CEO of Mercantile, commented, “We continue to make strides in both operating results and asset quality. This was a particularly strong quarter for improvement of existing problem loans; it was gratifying to return nearly $8 million of loans to performing status, as well as receive principal payments in excess of $5 million on nonaccrual loans. Nevertheless, we continue our aggressive credit administration practices.
“Although asset quality has improved substantially this quarter, the impact of credit issues on profitability remains significant. In addition to provision expense, we have spent considerable sums of money relating to the administration and resolution of problem assets, forgone interest income on nonaccrual loans and foreclosed properties and have allocated vast amounts of staff time to workouts and reporting. Despite the ongoing burden that has impacted so many facets of our organization, we continue to improve our core earnings performance.
“The economies in our markets appear to have stabilized. The rate of new problem credits has abated significantly, and we have begun to upgrade problem credit relationships and have witnessed an acceleration of sales of foreclosed properties and assets serving as loan collateral. Throughout this stressful period, we have maintained a clear focus on the importance of prudent banking practices and customer service. By many important measures — capital strength, net interest margin, operating efficiency and customer loyalty — we are emerging as a more effective organization. We still have much hard work in front of us; however, we’ve become more optimistic throughout 2010 that we are making substantial progress on the road to improved performance.”
Operating Results
Total revenue, consisting of net interest income and noninterest income, was $16.2 million during the 2010 third quarter, up $0.9 million, or 6.2 percent, from the $15.3 million generated during the third quarter of 2009. Net interest income was $13.9 million, up $0.3 million, or 2.7 percent, from the $13.6 million earned in the prior-year third quarter. Growth in net interest income was derived from a 48 basis point expansion in the net interest margin, partially offset by a 13.2 percent decline in average earning assets. For the nine months year-to-date 2010, net interest income was $42.7 million, an improvement of 12.8 percent from year-earlier levels despite a 14.1 percent decline in average earning assets. Mr. Price added, “We have achieved outstanding margin improvement during 2010 — 76 basis points higher than during the first nine months of 2009. In addition to improved funding costs resulting from a lower interest rate environment, we have achieved benefits from our loan pricing and administrative strategies that helped to offset the impact of elevated levels of nonaccrual loans.”
Noninterest income for the 2010 third quarter was $2.3 million. Excluding nonrecurring gains of $0.1 million from the sale of SBA-guaranteed commercial loans, third quarter noninterest income was up $0.5 million, or 28.1 percent, over the prior-year third quarter.

 

 

Growth was derived from nearly all fee-income categories, especially mortgage banking activity and rental income from foreclosed properties, which more than offset the modest decline in service charges resulting from lower levels of overdrafts incurred by bank customers. For the first nine months of 2010, excluding nonrecurring gains of $0.5 million from the sale of securities and $0.3 million from the sale of SBA loans, noninterest income from operations was $6.1 million compared to $5.6 million for the 2009 nine-month period. The 9.5 percent improvement was driven primarily by a $0.9 million increase in rental income from foreclosed properties.
Provision for loan and lease losses was $10.4 million during the 2010 third quarter, compared to $6.2 million and $11.8 million in the linked and year-ago quarters, respectively. Approximately $3.8 million of the current quarter provision reflects the net impact of changes made to reserve allocation factors for accruing loans and leases during the quarter, which were made relative to changes and ongoing review of historical loan and lease losses as well as a variety of environmental factors. In addition, about $2.0 million of the current quarter provision is due to the return to performing status of $7.9 million of loans previously on nonaccrual status, and the associated change from impaired reserve allocations to pooled allocations for these now performing loans. For the first nine months of 2010, Mercantile provided $25.0 million to the loan and lease loss reserve compared to $33.7 million during the same 2009 period.
At September 30, 2010, the allowance for loan and lease losses was $43.9 million, of which only $6.2 million (about 14 percent) was specifically allocated to certain impaired loans. By comparison, $16.7 million (about 35 percent) of the $47.7 million total allowance for loan and lease losses at June 30, 2010 were specifically allocated. Although the allowance for loan and lease losses declined to 3.30 percent of total loans and leases at September 30, 2010 from 3.38 percent as of June 30, 2010, this quarter’s ending balance represents a substantial increase in general allocations and is well above the 3.11 percent of total loans and leases level as of December 31, 2009.
Noninterest expense for the 2010 third quarter was $11.9 million, compared to $12.5 million for the year-ago quarter, and totaled $35.0 million during the first nine months of 2010 compared to $35.7 million during the first nine months of 2009. Excluding 2009 branch consolidation expenses, noninterest expense during the 2010 third quarter was $0.5 million lower than the year-ago quarter, but was $0.6 million higher during the first nine months of 2010 compared to the same time period in 2009. The level of noninterest expense continues to be impacted by costs associated with the administration and resolution of problem assets (i.e., legal expenses, property tax payments, appraisal costs and write-downs on foreclosed properties) as well as by FDIC insurance premiums. These credit- and regulatory-related costs totaled $11.3 million during the first nine months of 2010 compared to $8.7 million during the year-ago nine months. Increased rental income from foreclosed properties has partially offset credit administration costs. Mercantile has also partially offset credit and regulatory costs through ongoing expense reductions, namely salaries and benefits, occupancy, and furniture and equipment costs. These controllable expenses were 7.1 percent lower during the third quarter of 2010 compared to the year-ago quarter, and 12.5 percent lower during the first nine months of 2010 compared to the same time period

 

 

in 2009. The consolidation of Eastern and Mid-Michigan banking activities during the second and third quarters of 2009 accounted for much of the expense reductions, although additional cost savings have been achieved throughout the organization.
Balance Sheet
Total assets as of September 30, 2010 were $1.81 billion, down $92.8 million, or 4.9 percent, from December 31, 2009; total loans and leases declined $211 million, or 13.7 percent, over the same nine-month period, to $1.33 billion. Compared to September 30, 2009, total assets declined $204 million, or 10.1 percent, with total loans and leases declining $285 million, or 17.7 percent.
Real estate loans, particularly loans secured by commercial properties, comprise a majority of Mercantile’s loan and lease portfolio, although the Company has been aggressively down-sizing its real estate exposures. Real estate loans, excluding residential mortgage loans representing permanent financing of owner-occupied dwellings and home equity lines of credit, were $935 million, or approximately 70 percent of total loans and leases as of September 30, 2010. During 2010, real estate loans declined $99.6 million, or 9.6 percent. Non-owner occupied commercial real estate (“CRE”) loans, which totaled $510 million and accounted for approximately 38 percent of the total loan and lease portfolio as of September 30, 2010, declined $28.1 million during the first nine months of 2010. Owner-occupied CRE loans were $299 million at September 30, 2010, a decline of $25.6 million over the past nine months. Total vacant land, land development and construction (“C&D”) loans, including both residential and commercial projects, totaled $127 million at September 30, 2010, down $45.9 million over the past nine months. The commercial and industrial (“C&I”) segment of the loan and lease portfolio has declined by approximately $105 million during the first nine months of 2010, in large part reflecting the slowdown in business activity and a corresponding reduction in accounts receivable and inventory financings as well as significantly reduced requests for new equipment financing.

 

 

LOANS SECURED BY REAL ESTATE
                                         
($000)   9/30/10     6/30/10     3/31/10     12/31/09     9/30/09  
Residential-Related:
                                        
Vacant Land
   $ 18,013     $ 20,351     $ 20,871     $ 19,465     $ 20,630  
Land Development
     29,735       29,627       32,199       34,027       33,862  
Construction
     5,854       6,627       7,872       7,199       9,446  
 
                              
 
     53,602       56,605       60,942       60,691       63,938  
 
                                        
Comm’l Non-Owner Occupied:
                                        
Vacant Land
     15,416       19,812       22,304       25,549       25,564  
Land Development
     18,221       18,585       19,058       19,402       22,412  
Construction
     39,620       52,295       52,107       65,697       79,339  
Commercial Buildings
     509,777       512,816       539,284       537,891       528,727  
 
                              
 
     583,034       603,508       632,753       648,539       656,042  
 
                                        
Comm’l Owner Occupied:
                                        
Construction
     0       1,360       1,651       1,404       5,456  
Commercial Buildings
     298,846       302,768       316,302       324,451       349,335  
 
                              
 
     298,846       304,128       317,953       325,855       354,791  
 
                              
Total
   $ 935,482     $ 964,241     $ 1,011,648     $ 1,035,085     $ 1,074,771  
 
                              
 
    Note -— Excludes residential mortgage loans representing permanent financing of owner occupied dwellings and home equity lines of credit.
Mercantile’s liquidity continues to improve as local deposits, especially interest-bearing checking and money market deposit accounts, increase in total dollars and as a percentage of total funding. As of September 30, 2010, total deposits were $1.35 billion, a decline of $49.8 million during the first nine months of 2010 and a reduction of $248 million since year-end 2008. By comparison, local deposits increased $284 million over the past 21 months; they now represent 55.8 percent of total deposits compared to 29.4 percent at December 31, 2008. During this same timeframe, interest-bearing checking and money market deposit accounts increased $180 million, primarily reflecting new and innovative products, various deposit-gathering initiatives, and enhanced advertising campaigns that have attracted new deposits as well as transfers from maturing time deposit accounts.
Wholesale funds totaled $768 million, or 46.9 percent of total funds, as of September 30, 2010, compared to $1.41 billion, or 71.5 percent of total funds, as of December 31, 2008. The $646 million decline in wholesale funding reflects both the increase in local deposits as well as a $528 million decline in total loans and leases; this allowed Mercantile to reduce brokered deposits and Federal Home Loan Bank advances as they matured.
Short-term investments, consisting of federal funds sold and interest-bearing bank deposits, averaged $73.9 million during the third quarter of 2010, purposely well above historical levels to address the stressed economic and operating environments. Mercantile’s large federal funds sold position of $147 million at September 30, 2010 reflects large cash inflows received from local deposit growth as well as loan pay-offs and principal payments during the latter portion of the third quarter. These inflows significantly exceeded maturing wholesale fund balances during the same time period. “The response of local depositors has been very gratifying, allowing us to make excellent progress toward reducing our reliance on wholesale funding. We expect the federal funds sold balance to return to a more normalized level during the fourth quarter primarily through the ongoing reduction of wholesale funds,” added Mr. Price. Since Mercantile is not in a position to fully utilize tax-exempt income in the near term, the Company sold approximately one-third of its tax-exempt municipal securities portfolio during the first quarter of 2010. Proceeds were reinvested in taxable securities, and all securities (taxable and remaining tax-exempt) are now included in the available-for-sale portfolio. In addition to its short-term investments, Mercantile has approximately $100 million of borrowing capacity through various established lines of credit to meet potential funding needs.

 

 

Asset Quality
Nonperforming assets (“NPAs”) at September 30, 2010 were $92.4 million, or 5.1 percent of total assets, compared to approximately $111 million as of both June 30, 2010, and September 30, 2009 (6.1 percent and 5.5 percent of total assets, respectively). This represents a decline of approximately $18 million, or 16 percent, from both the linked and year-ago quarters.
Robert B. Kaminski Jr., Mercantile’s Executive Vice President and Chief Operating Officer, commented on the progress Mercantile has made reducing the level of problem assets and portfolio risk. “We are pleased but not surprised by this quarter’s improvement in asset quality. We have been prudently managing our loan portfolio all along, and it was just a matter of time before we started to see the benefits. We continue to make painful but needed provisions to our loan loss reserve, including a significant increase to our pooled reserves during the third quarter. In this environment, we cannot relax nor appear too optimistic; a great deal of uncertainty remains in our markets. Our real estate markets are improving, but have not completely stabilized and weaknesses still exist.”
CRE loans, which account for 61 percent of the total loan and lease portfolio, represent 58 percent of total nonperforming loans (“NPLs”), or $40.8 million. Investor-owned CRE loans account for the majority of NPLs by virtue of portfolio size ($510 million, or 38 percent of total loans and leases) and intensity of problems (5.7 percent are nonperforming). By comparison, owner-occupied CRE loans, which account for 22.5 percent of the total loan and lease portfolio, or $299 million, have a much lower incidence of problems (3.9 percent are nonperforming). Given the nature of collateral and the condition of the economy in general, and real estate markets specifically, progress toward resolution has been slow in both CRE categories.
More progress has been achieved this past year toward resolution of nonperforming C&D loans. C&D loans, including residential and commercial projects, currently constitute 9.5 percent of total loans and leases, or $127 million. Nonperforming C&D loans totaled $16.4 million at September 30, 2010, or 12.9 percent of the total C&D portfolio. This represents a substantial improvement since year-end 2009, when $27.9 million, or 16.1 percent, of a $173 million portfolio of C&D loans were nonperforming. C&I NPLs totaled $6.4 million as of September 30, 2010, a decline of $3.2 million since December 31, 2009. Owner-occupied and rental residential NPLs totaled $6.9 million at the end of the 2010 third quarter, modestly higher than year-end 2009.

 

 

NONPERFORMING ASSETS
                                         
($000)   9/30/10     6/30/10     3/31/10     12/31/09     9/30/09  
Residential Real Estate:
                                        
Land Development
   $ 16,746     $ 21,551     $ 22,781     $ 19,722     $ 13,645  
Construction
     2,924       10,231       11,425       12,103       13,021  
Owner Occupied / Rental
     7,251       6,159       5,908       7,493       6,830  
 
                              
 
     26,921       37,941       40,114       39,318       33,496  
 
                                        
Commercial Real Estate:
                                        
Land Development
     2,277       2,050       3,031       2,971       4,621  
Construction
     0       571       1,238       1,268       228  
Owner Occupied
     15,083       16,216       17,311       19,918       21,429  
Non-Owner Occupied
     41,725       46,706       46,552       38,417       36,473  
 
                              
 
     59,085       65,543       68,132       62,574       62,751  
 
                                        
Non-Real Estate:
                                        
Commercial Assets
     6,386       7,049       9,303       9,758       14,510  
Consumer Assets
     5       0       8       8       8  
 
                              
 
     6,391       7,049       9,311       9,766       14,518  
 
                              
 
                                        
Total
   $ 92,397     $ 110,533     $ 117,557     $ 111,658     $ 110,765  
 
                              
NONPERFORMING LOANS
                                         
($000s)   9/30/10     6/30/10     3/31/10     12/31/09     9/30/09  
Past due 90 days or more and
                                        
accruing interest
   $ 0     $ 24     $ 0     $ 243     $ 3,040  
Nonaccrual, including troubled
                                        
debt restructurings
     64,639       81,543       88,450       81,818       87,190  
Troubled debt restructurings,
                                        
accruing interest
     5,862       5,946       6,011       2,989       1,012  
 
                              
 
                                        
Total
   $ 70,501     $ 87,513     $ 94,461     $ 85,050     $ 91,242  
 
                              
Nonperforming loans totaled $70.5 million as of September 30, 2010, a decline of $17.0 million during the third quarter of 2010. Foreclosed real estate and repossessed assets declined by $1.1 million during the same time period. During the third quarter, Mercantile added $10.9 million of NPAs to its problem asset portfolio, but successfully disposed of $14.6 million through a combination of asset sales, principal pay-downs, and returns to performing status. Loan charge-offs represented a reduction of $12.8 million, and foreclosed asset valuation write-downs were $1.6 million. In total, nonperforming assets decreased a net $18.1 million from the end of the 2010 second quarter. During the first nine months of 2010, Mercantile added $47.1 million of problem assets to its NPA portfolio, successfully disposed of $35.8 million, and charged-off or wrote-down an additional $30.6 million.

 

 

NONPERFORMING ASSETS RECONCILIATION
                                         
($000)   9/30/10     6/30/10     3/31/10     12/31/09     9/30/09  
 
                                        
Beginning balance
   $ 110,533     $ 117,557     $ 111,658     $ 110,765     $ 86,631  
Additions
     10,905       13,101       23,054       22,308       39,815  
Returns to performing status
     (7,938 )     (1,356 )     (811 )     0       (47 )
Principal payments
     (5,422 )     (7,332 )     (4,242 )     (8,652 )     (3,707 )
Sale proceeds
     (1,209 )     (2,398 )     (5,080 )     (3,353 )     (1,630 )
Loan charge-offs
     (12,829 )     (8,176 )     (6,117 )     (7,862 )     (8,578 )
Valuation write-downs
     (1,643 )     (863 )     (905 )     (1,548 )     (1,719 )
 
                              
 
                                        
Total
   $ 92,397     $ 110,533     $ 117,557     $ 111,658     $ 110,765  
 
                              
Net loan and lease charge-offs were $14.3 million during the third quarter of 2010, or 4.1 percent of average loans and leases (annualized), compared with $8.6 million (2.4 percent annualized) and $11.0 million (2.6 percent annualized) for the linked and prior-year quarters, respectively. In the 2010 third quarter, Mercantile charged-off approximately $11 million of specific reserves that were created through provision expense in prior periods.
NET LOAN CHARGE-OFFS
                                         
($000)   3Q 2010     2Q 2010     1Q 2010     4Q 2009     3Q 2009  
Residential Real Estate:
                                        
Land Development
   $ 2,115     $ 1,254     $ 565     $ 2,204     $ 467  
Construction
     93       649       587       733       3,208  
Owner Occupied / Rental
     1,212       407       326       946       530  
 
                              
 
     3,420       2,310       1,478       3,883       4,205  
 
                                        
Commercial Real Estate:
                                        
Land Development
     360       674       617       45       0  
Construction
     0       660       0       0       0  
Owner Occupied
     2,159       726       1,091       1,140       1,254  
Non-Owner Occupied
     6,805       2,551       1,945       3,009       3,265  
 
                              
 
     9,324       4,611       3,653       4,194       4,519  
 
                                        
Non-Real Estate:
                                        
Commercial Assets
     1,517       1,670       1,012       2,788       2,232  
Consumer Assets
     1       (3 )     9       (1 )     7  
 
                              
 
     1,518       1,667       1,021       2,787       2,239  
 
                              
 
                                        
Total
   $ 14,262     $ 8,588     $ 6,152     $ 10,864     $ 10,963  
 
                              
Capital Position
Shareholders’ equity totaled $135 million as of September 30, 2010, a decrease of $5.4 million, or 3.8 percent, from December 31, 2009; however, regulatory capital ratios continue to improve. The Bank remains “well-capitalized” with a total risk-based capital ratio of 12.0 percent as of September 30, 2010 compared to 11.1 percent at December 31, 2009. At September 30, 2010, the Bank had approximately $30.3 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile’s total shares outstanding at third quarter-end were 8,596,618.
Mr. Price concluded, “We believe the results this quarter confirm the value of the strategies we’ve applied to our loan portfolio. As the burden of impaired asset quality diminishes, we expect its positive impact will be far-reaching throughout our organization, with upside benefits on the operating performance of our Company.”

 

 

About Mercantile Bank Corporation
Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Founded in 1997 to provide banking services to businesses, individuals, and governmental units, the Bank differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has seven full-service banking offices in Grand Rapids, Holland and Lansing, Michigan. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select Market under the symbol “MBWM.”
Forward-Looking Statements
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and nontraditional competitors; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economies; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

 

 

Mercantile Bank Corporation
Third Quarter 2010 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
                         
    SEPTEMBER 30,     DECEMBER 31,     SEPTEMBER 30,  
    2010     2009     2009  
    (Unaudited)     (Audited)     (Unaudited)  
ASSETS
                        
Cash and due from banks
   $ 15,854,000     $ 18,896,000     $ 14,445,000  
Short-term investments
     9,474,000       1,471,000       1,804,000  
Federal funds sold
     146,668,000       1,368,000       50,426,000  
 
                  
Total cash and cash equivalents
     171,996,000       21,735,000       66,675,000  
 
                        
Securities available for sale
     214,343,000       182,491,000       160,880,000  
Securities held to maturity
     0       59,212,000       61,927,000  
Federal Home Loan Bank stock
     15,681,000       15,681,000       15,681,000  
 
                        
Loans and leases
     1,329,156,000       1,539,818,000       1,614,226,000  
Allowance for loan and lease losses
     (43,876,000 )     (47,878,000 )     (33,443,000 )
 
                  
Loans and leases, net
     1,285,280,000       1,491,940,000       1,580,783,000  
 
                        
Premises and equipment, net
     28,251,000       29,684,000       30,247,000  
Bank owned life insurance
     46,335,000       45,024,000       44,490,000  
Accrued interest receivable
     6,143,000       7,088,000       8,069,000  
Other real estate owned and repossessed assets
     21,896,000       26,608,000       19,523,000  
Other assets
     23,458,000       26,745,000       29,075,000  
 
                  
 
                        
Total assets
   $ 1,813,383,000     $ 1,906,208,000     $ 2,017,350,000  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Noninterest-bearing
   $ 111,338,000     $ 121,157,000     $ 108,509,000  
Interest-bearing
     1,240,526,000       1,280,470,000       1,342,459,000  
 
                  
Total deposits
     1,351,864,000       1,401,627,000       1,450,968,000  
 
                        
Securities sold under agreements to repurchase
     116,241,000       99,755,000       102,847,000  
Federal funds purchased
     0       2,600,000       0  
Federal Home Loan Bank advances
     160,000,000       205,000,000       225,000,000  
Subordinated debentures
     32,990,000       32,990,000       32,990,000  
Other borrowed money
     11,831,000       16,890,000       16,867,000  
Accrued interest and other liabilities
     5,723,000       7,242,000       11,387,000  
 
                  
Total liabilities
     1,678,649,000       1,766,104,000       1,840,059,000  
 
                        
SHAREHOLDERS’ EQUITY
                        
Preferred stock, net of discount
     20,016,000       19,839,000       19,782,000  
Common stock
     173,906,000       173,576,000       173,500,000  
Retained earnings (deficit)
     (63,500,000 )     (54,170,000 )     (17,764,000 )
Accumulated other comprehensive income (loss)
     4,312,000       859,000       1,773,000  
 
                  
Total shareholders’ equity
     134,734,000       140,104,000       177,291,000  
 
                  
Total liabilities and shareholders’ equity
   $ 1,813,383,000     $ 1,906,208,000     $ 2,017,350,000  
 
                  

 

 

Mercantile Bank Corporation
Third Quarter 2010 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF OPERATIONS
                                 
    THREE MONTHS ENDED     THREE MONTHS ENDED     NINE MONTHS ENDED     NINE MONTHS ENDED  
    September 30, 2010     September 30, 2009     September 30, 2010     September 30, 2009  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Interest income
                                
Loans and leases, including fees
   $ 19,284,000     $ 23,185,000     $ 59,755,000     $ 72,450,000  
Investment securities
     2,398,000       2,685,000       7,725,000       8,205,000  
Federal funds sold
     41,000       22,000       110,000       108,000  
Short-term investments
     11,000       1,000       29,000       17,000  
 
                        
Total interest income
     21,734,000       25,893,000       67,619,000       80,780,000  
 
                                
Interest expense
                                
Deposits
     5,636,000       9,357,000       18,125,000       33,419,000  
Short-term borrowings
     394,000       471,000       1,091,000       1,385,000  
Federal Home Loan Bank advances
     1,441,000       2,113,000       4,713,000       6,860,000  
Other borrowed money
     328,000       385,000       1,029,000       1,294,000  
 
                        
Total interest expense
     7,799,000       12,326,000       24,958,000       42,958,000  
 
                        
 
                                
Net interest income
     13,935,000       13,567,000       42,661,000       37,822,000  
 
                                
Provision for loan and lease losses
     10,400,000       11,800,000       25,000,000       33,700,000  
 
                        
 
                                
Net interest income after provision for loan and lease losses
     3,535,000       1,767,000       17,661,000       4,122,000  
 
                                
Noninterest income
                                
Service charges on accounts
     452,000       488,000       1,365,000       1,500,000  
Gain on sale of commercial loans
     99,000       0       324,000       0  
Net gain on sale of investment securities
     0       0       476,000       0  
Other income
     1,738,000       1,222,000       4,775,000       4,105,000  
 
                        
Total noninterest income
     2,289,000       1,710,000       6,940,000       5,605,000  
 
                                
Noninterest expense
                                
Salaries and benefits
     4,649,000       4,798,000       13,874,000       15,597,000  
Occupancy
     696,000       855,000       2,169,000       2,659,000  
Furniture and equipment
     358,000       486,000       1,163,000       1,419,000  
Nonperforming asset costs
     2,895,000       2,903,000       7,859,000       5,005,000  
FDIC insurance costs
     1,097,000       1,220,000       3,450,000       3,650,000  
Branch consolidation costs
     0       158,000       0       1,308,000  
Other expense
     2,204,000       2,097,000       6,459,000       6,015,000  
 
                        
Total noninterest expense
     11,899,000       12,517,000       34,974,000       35,653,000  
 
                        
 
                                
Income (loss) before federal income tax expense (benefit)
     (6,075,000 )     (9,040,000 )     (10,373,000 )     (25,926,000 )
 
                                
Federal income tax expense (benefit)
     (718,000 )     (3,754,000 )     (2,010,000 )     (9,926,000 )
 
                        
 
                                
Net income (loss)
     (5,357,000 )     (5,286,000 )     (8,363,000 )     (16,000,000 )
 
                                
Preferred stock dividends and accretion
     325,000       320,000       966,000       483,000  
 
                        
 
                                
Net income (loss) available to common shares
   $ (5,682,000 )   $ (5,606,000 )   $ (9,329,000 )   $ (16,483,000 )
 
                        
 
                                
Basic earnings (loss) per share
     ($0.67 )     ($0.66 )     ($1.10 )     ($1.94 )
Diluted earnings (loss) per share
     ($0.67 )     ($0.66 )     ($1.10 )     ($1.94 )
 
                                
Average basic shares outstanding
     8,507,174       8,492,946       8,504,664       8,487,362  
Average diluted shares outstanding
     8,507,174       8,492,946       8,504,664       8,487,362  

 

 

Mercantile Bank Corporation
Third Quarter 2010 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                                                         
    Quarterly   Year-To-Date
    2010   2010   2010   2009   2009        
(dollars in thousands except per share data)   3rd Qtr   2nd Qtr   1st Qtr   4th Qtr   3rd Qtr   2010   2009
                                                         
EARNINGS
                                                        
Net interest income
   $ 13,935       14,421       14,306       13,511       13,567       42,661       37,822  
Provision for loan and lease losses
   $ 10,400       6,200       8,400       25,300       11,800       25,000       33,700  
Noninterest income
   $ 2,289       1,996       2,655       1,953       1,710       6,940       5,605  
Noninterest expense
   $ 11,899       11,442       11,634       10,835       12,517       34,974       35,653  
Net income (loss) before federal income
                                                        
tax expense (benefit)
   $ (6,075 )     (1,225 )     (3,073 )     (20,671 )     (9,040 )     (10,373 )     (25,926 )
Net income (loss)
   $ (5,357 )     (363 )     (2,643 )     (36,087 )     (5,286 )     (8,363 )     (16,000 )
Net income (loss) common shares
   $ (5,682 )     (684 )     (2,963 )     (36,406 )     (5,606 )     (9,329 )     (16,483 )
Basic earnings (loss) per share
   $ (0.67 )     (0.08 )     (0.35 )     (4.28 )     (0.66 )     (1.10 )     (1.94 )
Diluted earnings (loss) per share
   $ (0.67 )     (0.08 )     (0.35 )     (4.28 )     (0.66 )     (1.10 )     (1.94 )
Average basic shares outstanding
     8,507,174       8,505,086       8,501,671       8,496,555       8,492,946       8,504,664       8,487,362  
Average diluted shares outstanding
     8,507,174       8,505,086       8,501,671       8,496,555       8,492,946       8,504,664       8,487,362  
 
                                                        
PERFORMANCE RATIOS
                                                        
Return on average assets
     (1.27 %)     (0.15 %)     (0.63 %)     (7.28 %)     (1.09 %)     (0.67 %)     (1.03 %)
Return on average common equity
     (16.14 %)     (1.98 %)     (8.62 %)     (81.98 %)     (12.26 %)     (8.95 %)     (12.45 %)
Net interest margin (fully tax-equivalent)
     3.33 %     3.31 %     3.25 %     2.93 %     2.85 %     3.29 %     2.53 %
Efficiency ratio
     73.34 %     69.69 %     68.59 %     70.07 %     81.93 %     70.51 %     82.10 %
Full-time equivalent employees
     250       248       251       257       265       250       265  
 
                                                        
CAPITAL
                                                        
Period-ending equity to assets
     7.43 %     7.71 %     7.26 %     7.35 %     8.79 %     7.43 %     8.79 %
Tier 1 leverage capital ratio
     9.15 %     9.02 %     8.77 %     8.64 %     9.70 %     9.15 %     9.70 %
Tier 1 risk-based capital ratio
     10.77 %     10.65 %     10.02 %     9.92 %     10.72 %     10.77 %     10.72 %
Total risk-based capital ratio
     12.04 %     11.92 %     11.29 %     11.18 %     11.98 %     12.04 %     11.98 %
Book value per common share
   $ 13.23       13.74       13.64       13.86       18.19       13.23       18.19  
Cash dividend per common share
   $ 0.00       0.00       0.01       0.01       0.01       0.01       0.06  
 
                                                        
ASSET QUALITY
                                                        
Gross loan charge-offs
   $ 14,499       9,891       6,846       11,225       11,545       31,236       28,396  
Net loan charge-offs
   $ 14,262       8,588       6,152       10,864       10,963       29,002       27,366  
Net loan charge-offs to average loans
     4.11 %     2.35 %     1.64 %     2.72 %     2.61 %     2.67 %     2.10 %
Allowance for loan and lease losses
   $ 43,876       47,738       50,126       47,878       33,443       43,876       33,443  
Allowance for losses to total loans
     3.30 %     3.38 %     3.35 %     3.11 %     2.07 %     3.30 %     2.07 %
Nonperforming loans
   $ 70,501       87,513       94,461       85,050       91,242       70,501       91,242  
Other real estate and repossessed assets
   $ 21,896       23,020       23,096       26,608       19,523       21,896       19,523  
Nonperforming assets to total assets
     5.10 %     6.13 %     6.18 %     5.86 %     5.49 %     5.10 %     5.49 %
 
                                                        
END OF PERIOD BALANCES
                                                        
Loans and leases
   $ 1,329,156       1,410,710       1,497,624       1,539,818       1,614,226       1,329,156       1,614,226  
Total earning assets (before allowance)
   $ 1,715,322       1,706,870       1,810,081       1,800,041       1,904,944       1,715,322       1,904,944  
Total assets
   $ 1,813,383       1,804,062       1,902,923       1,906,208       2,017,350       1,813,383       2,017,350  
Deposits
   $ 1,351,864       1,340,160       1,420,209       1,401,627       1,450,968       1,351,864       1,450,968  
Shareholders’ equity
   $ 134,734       139,043       138,220       140,104       177,291       134,734       177,291  
 
                                                        
AVERAGE BALANCES
                                                        
Loans and leases
   $ 1,378,248       1,465,631       1,516,898       1,585,523       1,663,510       1,453,084       1,744,374  
Total earning assets (before allowance)
   $ 1,680,362       1,770,391       1,823,828       1,874,752       1,935,637       1,757,668       2,046,191  
Total assets
   $ 1,774,671       1,862,526       1,920,751       1,983,111       2,042,355       1,852,114       2,146,975  
Deposits
   $ 1,313,902       1,390,397       1,433,091       1,421,850       1,469,264       1,378,693       1,561,239  
Shareholders’ equity
   $ 139,629       138,907       139,485       176,196       181,400       139,341       177,030