EX-99.1 2 k50581exv99w1.htm EX-99.1 exv99w1
Exhibit 99.1
(MERCANTILE LOGO)
Mercantile Bank Corporation Reports Second Quarter 2011 Results
GRAND RAPIDS, Mich., July 19, 2011 — Mercantile Bank Corporation (NASDAQ: MBWM) (“Mercantile”) reported net income attributable to common shares of $2.4 million, or $0.27 per diluted share, for the second quarter of 2011, compared with a net loss attributable to common shares of $0.7 million, or ($0.08) per diluted share, for the prior-year period. The second quarter was highlighted by:
  •   Significantly improved profitability
 
  •   Strengthened capital ratios
 
  •   Additional improvement in asset quality; Nonperforming assets reduced by 19 percent from previous quarter-end, 44 percent from a year ago
 
  •   Provision for loan losses down $4.5 million or 73 percent from the previous year’s second quarter
 
  •   Level of loans in the 30- to 89-days delinquent category remains at virtually zero
 
  •   Continued improvement of core operating earnings; Net interest margin remains near historical high
“We continue to effectively manage the business as evidenced by our improved profitability, ability to further enhance capital ratios, the velocity at which we have reduced nonperforming assets, and our continued focus on re-engaging customers through new and innovative products. We remain diligent in shifting our loan portfolio towards more profitable lines of business, while continuing to grow our local deposits and limiting controllable expenses,” said Michael Price, Chairman and CEO of Mercantile Bank Corporation. “All of these efforts ultimately translate to a solid foundation on which to build as we continue to improve bottom-line results for our shareholders.”
Operating Results
Total revenue, which consists of net interest income and noninterest income, narrowed to $14.9 million during the 2011 second quarter, down $1.6 million or 9.5 percent from the

 

 

$16.4 million generated during the second quarter of 2010, primarily reflecting a reduction in average earning assets. Net interest income was $13.2 million, down $1.2 million or 8.8 percent from the $14.4 million earned in the prior-year second quarter. The decrease in net interest income resulted from a 16.2 percent decline in average earning assets, which was partially offset by a 30 basis point increase in the net interest margin. The reduction in average earning assets was the result of a shift of assets out of the loan portfolio as part of management’s strategic initiative to reduce the Bank’s commercial real estate lending.
Noninterest income for the 2011 second quarter was $1.7 million, down $0.3 million or 14.7 percent from the comparable prior-year period. The decrease in noninterest income primarily reflects lower rental income from fewer foreclosed properties.
Mercantile made further progress in reducing the provision for loan losses during the quarter as a result of a significant decline in total nonperforming loans, a slowdown in loan-rating downgrades, and an increase in loan-rating upgrades as the quality of the loan portfolio continues to markedly improve. The provision for loan losses was $1.7 million during the second quarter of 2011, compared to $6.2 million for the year-ago quarter. Additionally, despite the significant reduction in nonperforming loans throughout the last year, the Company maintained its allowance for loan losses at 3.45 percent of total loans as of June 30, 2011, compared to 3.59 percent as of December 31, 2010, and 3.38 percent as of June 30, 2010.
Over the past several years, the Company has made significant reductions in controllable costs and is now reporting progress in reducing costs associated with nonperforming assets, as well as FDIC insurance expense. Noninterest expense for the 2011 second quarter was $10.4 million, down $1.0 million from the year-ago quarter. Costs associated with the administration and resolution of problem assets, including legal expenses, property tax payments, appraisal costs and write-downs on foreclosed properties, totaled $2.0 million during the second quarter of 2011, down $0.5 million or 20.7 percent from the year-ago quarter. FDIC insurance premiums were $0.7 million in the second quarter of 2011, down from $1.2 million in the second quarter of 2010, resulting from a decreased assessment rate.
“We have taken an aggressive stance on resizing our operations and asset base to help sustain our return to profitability, and we are making a deliberate shift from preservation mode to growth,” Price added. “At the same time, we are cognizant of the role that our focused and consistent approach has played in maintaining our financial and brand strength through the recent downturn, and we will continue to be disciplined as we identify new opportunities and avenues for growth.”
Balance Sheet
While the Company continues to aggressively reduce its exposure to loans secured by commercial real estate, commercial/industrial activity has yet to rebound sufficiently to offset these efforts, resulting in a lower level of total assets. As of June 30, 2011, total assets were $1.54 billion, down $94.5 million or 5.8 percent from December 31, 2010; total

 

 

loans declined $140 million or 11.1 percent to $1.12 billion over the same time period. Compared to June 30, 2010, total assets declined $266 million or 14.8 percent, with total loans declining $288 million or 20.4 percent.
Real estate loans, particularly loans secured by non-owner-occupied commercial properties, comprise a majority of Mercantile’s loan portfolio. At June 30, 2011, real estate loans, excluding residential mortgage loans representing permanent financing of owner-occupied dwellings and home equity lines of credit, were $772 million, or approximately 69 percent of total loans, representing a decline of $192 million or 19.9 percent from the $964 million, or 68.4 percent of total loans, at June 30, 2010.
Non-owner-occupied commercial real estate (“CRE”) loans totaled $430 million as of June 30, 2011 (38.3 percent of total loans), a decline of $83.1 million over the past 12 months. Owner-occupied CRE loans were $265 million at the end of the second quarter of 2011, a decline of $37.9 million over the same period. Vacant land, land development and construction (“C&D”) loans, including both residential and commercial projects, totaled $77.5 million at June 30, 2011, down $71.1 million from a year ago. The commercial and industrial (“C&I”) segment of the loan portfolio was $262 million at June 30, 2011, a decline of approximately $83 million over the past 12 months, in large part reflecting the continued sluggishness 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
                                         
($000s)   6/30/11     3/31/11     12/31/10     9/30/10     6/30/10  
Residential-Related:
                                        
Vacant Land
   $ 13,484     $ 16,321     $ 17,201     $ 18,013     $ 20,351  
Land Development
     18,134       27,171       28,147       29,735       29,627  
Construction
     4,706       4,906       5,621       5,854       6,627  
 
                              
 
     36,324       48,398       50,969       53,602       56,605  
 
                                        
Comm’l Non-Owner Occupied:
                                        
Vacant Land
     12,639       13,669       14,293       15,416       19,812  
Land Development
     16,348       16,492       17,807       18,221       18,585  
Construction
     10,709       10,046       31,827       39,620       52,295  
Commercial Buildings
     429,708       484,629       489,371       509,777       512,816  
 
                              
 
     469,404       524,836       553,298       583,034       603,508  
 
                                        
Comm’l Owner Occupied:
                                        
Construction
     1,517       1,404       672       0       1,360  
Commercial Buildings
     264,848       273,739       282,388       298,846       302,768  
 
                              
 
     266,365       275,143       283,060       298,846       304,128  
 
                              
 
                                        
Total
   $ 772,093     $ 848,377     $ 887,327     $ 935,482     $ 964,241  
 
                              
 
Note —   Excludes residential mortgage loans representing permanent financing of owner occupied dwellings and home equity lines of credit.

 

 

Since a peak in December 2008, Mercantile has been focused on reducing wholesale funding and growing local deposits, especially interest-bearing checking and money market deposit accounts, in order to improve its liquidity. As of June 30, 2011, total deposits were $1.25 billion, a decline of $25.9 million since year-end 2010 and a reduction of $352 million since year-end 2008. By comparison, local deposits increased $300 million over the past 30 months to $770 million, representing 61.7 percent of total deposits compared to 29.4 percent at December 31, 2008. Compared to a year ago, local deposits increased $89.1 million, or 13.1 percent. Approximately 80 percent or $241 million of local deposit growth since year-end 2008 occurred in the interest-bearing checking and money market deposit account categories, primarily reflecting new and innovative products, various deposit-gathering initiatives, enhanced advertising and branding campaigns, and transfers from maturing time deposit accounts.
Wholesale funds were $523 million, or 38.3 percent of total funds, as of June 30, 2011, compared to $1.41 billion, or 71.5 percent of total funds, as of December 31, 2008. Compared to a year ago, wholesale funding was reduced by $311 million or 37.3 percent. The $891 million decline in wholesale funding since the end of 2008 reflects both the shift toward local deposits as well as a $734 million decline in total loans. This change has allowed Mercantile to reduce brokered deposits and FHLB advances as they matured over the past 30 months, and to prepay certain FHLB advances during the fourth quarter of 2010 and second quarter of 2011.
Short-term investments, consisting of federal funds sold and interest-bearing bank deposits, averaged $86.1 million during the second quarter of 2011. In addition to its short-term investments, Mercantile had approximately $145 million of borrowing capacity at the quarter’s end through various established lines of credit to meet potential funding needs as well as approximately $34 million of U.S. Government securities available to sell.
Asset Quality
Nonperforming assets (“NPAs”) at June 30, 2011 were $61.9 million, or 4.0 percent of total assets, compared to $86.1 million as of December 31, 2010, and $110.5 million as of June 30, 2010 (5.3 percent and 6.1 percent of total assets, respectively). This represents a decline of $24.2 million or 28.1 percent from the end of 2010 and a decline of $48.6 million or 44.0 percent from the year-ago quarter-end.
Robert B. Kaminski Jr., Mercantile’s Executive Vice President and Chief Operating Officer, added, “We are very pleased with the notable progress made on the overall asset quality as reflected in the significant decline of our nonperforming assets, recent upgrades within our loan portfolio and our 30-to 89-day delinquent loans remaining virtually at zero. Throughout this challenging economic period, we have remained diligent in the acceleration of our strategic plan to enhance our credit administration and resolve our problem assets, while maintaining a disciplined approach to controlling costs.
“Our plan calls for continued growth of local deposits and our team is working hard to make this plan a reality. As we work to grow our balance sheet, we will do so with the mindset of

 

 

maintaining our profitability. Mercantile’s ability to re-engage customers on the lending side while maintaining a disciplined and conservative approach, has further underscored the importance of our relationship-based focus through the economic downturn. We will remember the lessons learned and maintain our standard of vigilance, even as conditions improve in our markets.”
Nonperforming loans (“NPLs”) totaled $43.4 million as of June 30, 2011, down $16.8 million and $44.1 million, respectively, from the sequential quarter-end and year-ago quarter-end, while foreclosed real estate and repossessed assets increased $2.6 million and declined $4.5 million from the respective period ends. CRE loans represent 63.6 percent of NPLs, or $27.6 million. Investor-owned nonperforming CRE loans account for $19.8 million of total CRE nonperforming loans (4.6 percent of $430 million investor-owned CRE loans), while owner-occupied CRE loans account for $7.8 million (3.0 percent of $265 million owner-occupied CRE loans). 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, although some acceleration has been noted over the past few quarters.
Progress has also been achieved this past year toward resolution of nonperforming C&D loans, including both residential and commercial projects. C&D loans currently total $77.5 million, of which $3.5 million or 4.5 percent were nonperforming at June 30, 2011. This represents a substantial improvement since June 30, 2010, when $27.4 million or 18.4 percent of the $149 million C&D loan portfolio was nonperforming. Nonperforming C&I loans were $3.8 million as of June 30, 2011, a decline of $3.2 million since the year-ago quarter-end. Owner-occupied and rental residential NPLs were $8.6 million as of June 30, 2011, up $2.8 million since the year-ago quarter-end.
                                         
    NONPERFORMING ASSETS              
 
($000s)   6/30/11     3/31/11     12/31/10     9/30/10     6/30/10  
Residential Real Estate:
                                        
Land Development
   $ 8,531     $ 14,252     $ 14,547     $ 16,746     $ 21,551  
Construction
     2,089       2,268       2,333       2,924       10,231  
Owner Occupied / Rental
     8,996       8,893       9,454       7,251       6,159  
 
                              
 
     19,616       25,413       26,334       26,921       37,941  
 
                                        
Commercial Real Estate:
                                        
Land Development
     2,223       2,422       2,454       2,277       2,050  
Construction
     0       0       0       0       571  
Owner Occupied
     10,749       13,389       14,740       15,083       16,216  
Non-Owner Occupied
     25,526       30,086       34,209       41,725       46,706  
 
                              
 
     38,498       45,897       51,403       59,085       65,543  
 
                                        
Non-Real Estate:
                                        
Commercial Assets
     3,777       4,728       8,221       6,386       7,049  
Consumer Assets
     4       51       161       5       0  
 
                              
 
     3,781       4,779       8,382       6,391       7,049  
 
                              
Total
   $ 61,895     $ 76,089     $ 86,119     $ 92,397     $ 110,533  
 
                              

 

 

                                         
    NONPERFORMING LOANS              
 
($000s)   6/30/11     3/31/11     12/31/10     9/30/10     6/30/10  
Past due 90 days or more and accruing interest
   $ 0     $ 0     $ 766     $ 0     $ 24  
Nonaccrual, including troubled debt restructurings
     43,422       55,444       63,915       64,639       81,543  
Troubled debt restructurings, accruing interest
     0       4,761       4,763       5,862       5,946  
 
                              
 
                                        
Total
   $ 43,422     $ 60,205     $ 69,444     $ 70,501     $ 87,513  
 
                              
During the second quarter of 2011, Mercantile added $6.5 million of NPAs to its problem asset portfolio and successfully disposed of $14.6 million through a combination of asset sales and principal pay-downs. Loan charge-offs were $5.4 million and foreclosed asset valuation write-downs were $0.7 million. In total, NPAs decreased by a net $14.2 million during the second quarter of 2011.
Improvement in asset quality is even more apparent on a year-over-year basis. During the 12-month period ended June 30, 2011, Mercantile added $34.8 million of problem assets to its NPA portfolio, successfully disposed of $51.1 million, and charged-off or wrote-down an additional $32.3 million. In total, NPAs declined by a net $48.6 million since the year-ago quarter-end. By comparison, Mercantile added $98.3 million of NPAs, successfully disposed of $38.6 million, and charged-off or wrote-down an additional $35.8 million during the 12-month period ended June 30, 2010. In total, NPAs increased a net $23.9 million from June 30, 2009 to June 30, 2010.
                                         
    NONPERFORMING ASSETS RECONCILIATION        
 
($000s)   2Q 2011     1Q 2011     4Q 2010     3Q 2010     2Q 2010  
Beginning balance
   $ 76,089     $ 86,119     $ 92,397     $ 110,533     $ 117,557  
Additions
     6,478       3,848       13,602       10,905       13,101  
Returns to performing status
     0       (766 )     (1,019 )     (7,938 )     (1,356 )
Principal payments
     (12,067 )     (5,555 )     (7,217 )     (5,422 )     (7,332 )
Sale proceeds
     (2,547 )     (2,085 )     (5,282 )     (1,209 )     (2,398 )
Loan charge-offs
     (5,393 )     (4,800 )     (4,650 )     (12,829 )     (8,176 )
Valuation write-downs
     (665 )     (672 )     (1,712 )     (1,643 )     (863 )
 
                              
 
                                        
Total
   $ 61,895     $ 76,089     $ 86,119     $ 92,397     $ 110,533  
 
                              
Net loan charge-offs were $5.1 million during the second quarter of 2011, or an annualized 1.7 percent of average loans, compared with $5.4 million (1.8 percent annualized) and $8.6 million (2.4 percent annualized) for the linked and prior-year quarters, respectively.

 

 

                                         
    NET LOAN CHARGE-OFFS (RECOVERIES)              
 
($000s)   2Q 2011     1Q 2011     4Q 2010     3Q 2010     2Q 2010  
Residential Real Estate:
                                        
Land Development
   $ 2,496     $ (2 )   $ 312     $ 2,115     $ 1,254  
Construction
     (9 )     0       173       93       649  
Owner Occupied / Rental
     1,819       1,208       120       1,212       407  
 
                              
 
     4,306       1,206       605       3,420       2,310  
Commercial Real Estate:
                                        
Land Development
     (62 )     (73 )     219       360       674  
Construction
     0       0       0       0       660  
Owner Occupied
     755       1,436       976       2,159       726  
Non-Owner Occupied
     445       (40 )     2,642       6,805       2,551  
 
                              
 
     1,138       1,323       3,837       9,324       4,611  
Non-Real Estate:
                                        
Commercial Assets
     (336 )     2,794       819       1,517       1,670  
Consumer Assets
     (9 )     126       47       1       (3 )
 
                              
 
     (345 )     2,920       866       1,518       1,667  
 
                              
 
Total
   $ 5,099     $ 5,449     $ 5,308     $ 14,262     $ 8,588  
 
                              
Capital Position
Shareholders’ equity, totaling $131 million as of June 30, 2011, increased $5.0 million from year end 2010, and regulatory capital ratios continue to improve. The Bank remains “well-capitalized” with a total risk-based capital ratio of 14.0 percent as of June 30, 2011, compared to 11.9 percent at June 30, 2010. At June 30, 2011, the Bank had approximately $50.7 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 8,605,830 total shares outstanding at the end of the 2011 second quarter.
Mr. Price concluded: “While there remains work to do, we are pleased with the progress we’ve made over the last year and feel most of the ‘Great Recession’s’ impact is now behind us. We believe we are in a good position to take advantage of the opportunities within the markets we serve, allowing us to gain market share even as we continue to administer the remaining non-performing assets. We are determined to use the momentum we’ve built over the last few quarters to continue to improve our capital position, maintain our disciplined approach in regards to credit quality, and profitably grow our business on the relationship-based model our organization was founded upon.”
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.
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
Second Quarter 2011 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
                         
    JUNE 30,     DECEMBER 31,     JUNE 30,  
    2011     2010     2010  
    (Unaudited)     (Audited)     (Unaudited)  
ASSETS
                        
Cash and due from banks
   $ 13,988,000     $ 6,674,000     $ 16,521,000  
Interest-bearing deposit balances
     9,501,000       9,600,000       9,470,000  
Federal funds sold
     103,510,000       47,924,000       53,892,000  
 
                  
Total cash and cash equivalents
     126,999,000       64,198,000       79,883,000  
 
Securities available for sale
     199,785,000       220,830,000       217,117,000  
Federal Home Loan Bank stock
     11,961,000       14,345,000       15,681,000  
 
Loans
     1,122,999,000       1,262,630,000       1,410,710,000  
Allowance for loan losses
     (38,720,000 )     (45,368,000 )     (47,738,000 )
 
                  
Loans, net
     1,084,279,000       1,217,262,000       1,362,972,000  
 
                        
Premises and equipment, net
     27,144,000       27,873,000       28,636,000  
Bank owned life insurance
     47,631,000       46,743,000       45,890,000  
Accrued interest receivable
     5,010,000       5,942,000       6,278,000  
Other real estate owned and repossessed assets
     18,473,000       16,675,000       23,020,000  
Other assets
     16,592,000       18,553,000       24,585,000  
 
                  
 
Total assets
   $ 1,537,874,000     $ 1,632,421,000     $ 1,804,062,000  
 
                  
 
                        
LIABILITIES AND SHAREHOLDERS’ EQUITY
                        
Deposits:
                        
Noninterest-bearing
   $ 144,761,000     $ 112,944,000     $ 126,572,000  
Interest-bearing
     1,103,171,000       1,160,888,000       1,213,588,000  
 
                  
Total deposits
     1,247,932,000       1,273,832,000       1,340,160,000  
 
                        
Securities sold under agreements to repurchase
     71,207,000       116,979,000       108,271,000  
Federal Home Loan Bank advances
     45,000,000       65,000,000       160,000,000  
Subordinated debentures
     32,990,000       32,990,000       32,990,000  
Other borrowed money
     1,721,000       11,804,000       16,836,000  
Accrued interest and other liabilities
     8,107,000       5,880,000       6,762,000  
 
                  
Total liabilities
     1,406,957,000       1,506,485,000       1,665,019,000  
 
                        
SHAREHOLDERS’ EQUITY
                        
Preferred stock, net of discount
     20,202,000       20,077,000       19,955,000  
Common stock
     173,939,000       173,815,000       173,769,000  
Retained earnings (deficit)
     (65,312,000 )     (68,781,000 )     (57,818,000 )
Accumulated other comprehensive income (loss)
     2,088,000       825,000       3,137,000  
 
                  
Total shareholders’ equity
     130,917,000       125,936,000       139,043,000  
 
                  
 
                        
Total liabilities and shareholders’ equity
   $ 1,537,874,000     $ 1,632,421,000     $ 1,804,062,000  
 
                  

 

 

Mercantile Bank Corporation
Second Quarter 2011 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF OPERATIONS
                                 
    THREE MONTHS ENDED     THREE MONTHS ENDED     SIX MONTHS ENDED     SIX MONTHS ENDED  
    June 30, 2011     June 30, 2010     June 30, 2011     June 30, 2010  
    (Unaudited)     (Unaudited)     (Unaudited)     (Unaudited)  
Interest income
                                
Loans, including fees
   $ 16,171,000     $ 20,066,000     $ 32,903,000     $ 40,471,000  
Investment securities
     2,235,000       2,583,000       4,626,000       5,326,000  
Federal funds sold
     48,000       37,000       78,000       69,000  
Interest-bearing deposit balances
     6,000       10,000       12,000       19,000  
 
                        
Total interest income
     18,460,000       22,696,000       37,619,000       45,885,000  
 
                                
Interest expense
                                
Deposits
     4,333,000       5,992,000       8,967,000       12,489,000  
Short-term borrowings
     116,000       353,000       277,000       697,000  
Federal Home Loan Bank advances
     606,000       1,576,000       1,212,000       3,272,000  
Other borrowed money
     247,000       354,000       556,000       700,000  
 
                        
Total interest expense
     5,302,000       8,275,000       11,012,000       17,158,000  
 
                        
 
Net interest income
     13,158,000       14,421,000       26,607,000       28,727,000  
 
                                
Provision for loan losses
     1,700,000       6,200,000       3,900,000       14,600,000  
 
                        
 
                                
Net interest income after provision for loan losses
     11,458,000       8,221,000       22,707,000       14,127,000  
 
                                
Noninterest income
                                
Service charges on accounts
     401,000       447,000       823,000       913,000  
Gain on sale of commercial loans
     0       5,000       0       225,000  
Net gain on sale of investment securities
     0       0       0       476,000  
Other income
     1,302,000       1,544,000       2,632,000       3,037,000  
 
                        
Total noninterest income
     1,703,000       1,996,000       3,455,000       4,651,000  
 
                                
Noninterest expense
                                
Salaries and benefits
     4,364,000       4,559,000       8,735,000       9,225,000  
Occupancy
     708,000       723,000       1,409,000       1,473,000  
Furniture and equipment
     304,000       396,000       607,000       805,000  
Nonperforming asset costs
     1,950,000       2,460,000       5,048,000       4,964,000  
FDIC insurance costs
     719,000       1,167,000       1,635,000       2,353,000  
Other expense
     2,398,000       2,137,000       4,590,000       4,256,000  
 
                        
Total noninterest expense
     10,443,000       11,442,000       22,024,000       23,076,000  
 
                        
 
                                
Income (loss) before federal income tax expense (benefit)
     2,718,000       (1,225,000 )     4,138,000       (4,298,000 )
 
                                
Federal income tax expense (benefit)
     0       (862,000 )     0       (1,292,000 )
 
                        
 
                                
Net income (loss)
     2,718,000       (363,000 )     4,138,000       (3,006,000 )
 
                                
Preferred stock dividends and accretion
     337,000       321,000       669,000       641,000  
 
                        
 
                                
Net income (loss) attributable to common shares
   $ 2,381,000     $ (684,000 )   $ 3,469,000     $ (3,647,000 )
 
                        
 
                                
Basic earnings (loss) per share
   $ 0.28     $ (0.08 )   $ 0.40     $ (0.43 )
Diluted earnings (loss) per share
   $ 0.27     $ (0.08 )   $ 0.39     $ (0.43 )
 
Average basic shares outstanding
     8,604,476       8,505,086       8,601,835       8,503,388  
Average diluted shares outstanding
     8,872,692       8,505,086       8,878,595       8,503,388  

 

 

Mercantile Bank Corporation
Second Quarter 2011 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
                                                         
    Quarterly     Year-To-Date  
    2011     2011     2010     2010     2010              
(dollars in thousands except per share data)   2nd Qtr     1st Qtr     4th Qtr     3rd Qtr     2nd Qtr     2011     2010  
EARNINGS
                                                        
Net interest income
   $ 13,158       13,449       13,687       13,935       14,421       26,607       28,727  
Provision for loan losses
   $ 1,700       2,200       6,800       10,400       6,200       3,900       14,600  
Noninterest income
   $ 1,703       1,752       2,304       2,289       1,996       3,455       4,651  
Noninterest expense
   $ 10,443       11,581       12,181       11,899       11,442       22,024       23,076  
Net income (loss) before federal income tax expense (benefit)
   $ 2,718       1,420       (2,990 )     (6,075 )     (1,225 )     4,138       (4,298 )
Net income (loss)
   $ 2,718       1,420       (4,953 )     (5,357 )     (363 )     4,138       (3,006 )
Net income (loss) common shares
   $ 2,381       1,088       (5,282 )     (5,682 )     (684 )     3,469       (3,647 )
Basic earnings (loss) per share
   $ 0.28       0.13       (0.62 )     (0.67 )     (0.08 )     0.40       (0.43 )
Diluted earnings (loss) per share
   $ 0.27       0.12       (0.62 )     (0.67 )     (0.08 )     0.39       (0.43 )
Average basic shares outstanding
     8,604,476       8,599,166       8,516,202       8,507,174       8,505,086       8,601,835       8,503,388  
Average diluted shares outstanding
     8,872,692       8,884,675       8,516,202       8,507,174       8,505,086       8,878,595       8,503,388  
 
                                                        
PERFORMANCE RATIOS
                                                        
Return on average assets
     0.61 %     0.28 %     (1.21 %)     (1.27 %)     (0.15 %)     0.44 %     (0.39 %)
Return on average common equity
     7.39 %     3.49 %     (15.83 %)     (16.14 %)     (1.98 %)     5.47 %     (5.28 %)
Net interest margin (fully tax-equivalent)
     3.61 %     3.64 %     3.36 %     3.33 %     3.31 %     3.62 %     3.28 %
Efficiency ratio
     70.27 %     76.19 %     76.17 %     73.34 %     69.69 %     73.26 %     69.14 %
Full-time equivalent employees
     235       241       242       250       248       235       248  
 
                                                        
CAPITAL
                                                        
Period-ending equity to assets
     8.51 %     8.04 %     7.71 %     7.43 %     7.71 %     8.51 %     7.71 %
Tier 1 leverage capital ratio
     10.27 %     9.88 %     9.09 %     9.15 %     9.02 %     10.27 %     9.02 %
Tier 1 risk-based capital ratio
     12.58 %     11.70 %     11.17 %     10.77 %     10.65 %     12.58 %     10.65 %
Total risk-based capital ratio
     13.85 %     12.98 %     12.45 %     12.04 %     11.92 %     13.85 %     11.92 %
Book value per common share
   $ 12.77       12.30       12.20       13.23       13.74       12.77       13.74  
Cash dividend per common share
   $ 0.00       0.00       0.00       0.00       0.00       0.00       0.01  
 
                                                        
ASSET QUALITY
                                                        
Gross loan charge-offs
   $ 6,733       6,031       5,892       14,499       9,891       12,764       16,737  
Net loan charge-offs
   $ 5,099       5,449       5,308       14,262       8,588       10,548       14,740  
Net loan charge-offs to average loans
     1.73 %     1.79 %     1.63 %     4.11 %     2.35 %     1.76 %     1.99 %
Allowance for loan losses
   $ 38,720       42,118       45,368       43,876       47,738       38,720       47,738  
Allowance for loan losses to total loans
     3.45 %     3.49 %     3.59 %     3.30 %     3.38 %     3.45 %     3.38 %
Nonperforming loans
   $ 43,422       60,205       69,444       70,501       87,513       43,422       87,513  
Other real estate and repossessed assets
   $ 18,473       15,884       16,675       21,896       23,020       18,473       23,020  
Nonperforming assets to total assets
     4.02 %     4.83 %     5.28 %     5.10 %     6.13 %     4.02 %     6.13 %
 
                                                        
END OF PERIOD BALANCES
                                                        
Loans
   $ 1,122,999       1,206,886       1,262,630       1,329,156       1,410,710       1,122,999       1,410,710  
Total earning assets (before allowance)
   $ 1,447,756       1,494,163       1,555,329       1,715,322       1,706,870       1,447,756       1,706,870  
Total assets
   $ 1,537,874       1,576,935       1,632,421       1,813,383       1,804,062       1,537,874       1,804,062  
Deposits
   $ 1,247,932       1,253,644       1,273,832       1,351,864       1,340,160       1,247,932       1,340,160  
Shareholders’ equity
   $ 130,917       126,814       125,936       134,734       139,043       130,917       139,043  
 
                                                        
AVERAGE BALANCES
                                                        
Loans
   $ 1,179,786       1,233,037       1,292,289       1,378,248       1,465,631       1,206,264       1,491,123  
Total earning assets (before allowance)
   $ 1,483,409       1,519,304       1,636,471       1,680,362       1,770,391       1,501,258       1,796,962  
Total assets
   $ 1,566,708       1,602,882       1,728,375       1,774,671       1,862,526       1,584,695       1,891,478  
Deposits
   $ 1,251,818       1,261,590       1,339,149       1,313,902       1,390,397       1,256,677       1,411,626  
Shareholders’ equity
   $ 129,242       126,412       132,409       139,629       138,907       127,835       139,194