-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VRHf4B4LnT+RPs27iHYGu0lZkRx8Fbnz2Wrm3wauueu4xgXFn2EO8oKdaTTvRueN LK53Oqv+DjJ4K5X7w8drxQ== 0000950124-98-006374.txt : 19981113 0000950124-98-006374.hdr.sgml : 19981113 ACCESSION NUMBER: 0000950124-98-006374 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MERCANTILE BANK CORP CENTRAL INDEX KEY: 0001042729 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 383360865 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 333-33081 FILM NUMBER: 98744370 BUSINESS ADDRESS: STREET 1: 42 DEER RUN DRIVE CITY: ADA STATE: MI ZIP: 49301 BUSINESS PHONE: 6166760201 MAIL ADDRESS: STREET 1: 42 DEER RUN DRIVE CITY: ADA STATE: MI ZIP: 49301 10QSB 1 FORM 10QSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File No. 333-33081 MERCANTILE BANK CORPORATION (Exact name of small business issuer as specified in its charter) Michigan 38-3360865 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 216 NORTH DIVISION AVENUE, GRAND RAPIDS, MICHIGAN 49503 (Address of principal executive offices) (616) 242-9000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- At September 30, 1998, there were 2,472,500 shares of Common Stock outstanding Transitional Small Business Disclosure Format: Yes No X --- --- 2 MERCANTILE BANK CORPORATION INDEX - -------------------------------------------------------------------------------- PART 1. Financial Information Page No. --------------------- -------- Item I. Financial Statements Condensed Consolidated Balance Sheets - September 30, 1998 (Unaudited) and December 31, 1997............... 3 Condensed Consolidated Statement of Income - Three and Nine Months Ended September 30, 1998 (Unaudited)......... 4 Condensed Consolidated Statement of Comprehensive Income - Three and Nine Months Ended September 30, 1998 (Unaudited)......... 5 Condensed Consolidated Statement of Changes in Shareholders Equity - September 30, 1998 (Unaudited) and December 31, 1997............... 6 Condensed Consolidated Statement of Cash Flows - Three and Nine Months Ended September 30, 1998 (Unaudited)......... 7 Notes to Condensed Consolidated Financial Statements (Unaudited)..... 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................15 PART II. Other Information ----------------- Item 1. Legal Proceedings...........................................20 Item 2. Changes in Securities and Use of Proceeds...................20 Item 3. Defaults upon Senior Securities.............................20 Item 4. Submission of Matters to a Vote of Security Stockholders....20 Item 5. Other Information...........................................20 Item 6. Exhibits and Reports on Form 8-K............................20 Signatures...........................................................21 2 3 MERCANTILE BANK CORPORATION PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MERCANTILE BANK CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
September 30, December 31, 1998 1997 --------------- ---------------- (Unaudited) ASSETS Cash and due from banks $ 7,691,694 $ 153,300 Short-term investments 500,000 3,250,000 Federal funds sold 6,100,000 3,700,000 --------------- ---------------- Total cash and cash equivalents 14,291,694 7,103,300 Securities available for sale 22,657,819 2,997,500 Total loans 140,838,861 12,886,763 Allowance for loan losses (2,135,100) (193,300) ---------------- ---------------- Total loans, net 138,703,761 12,693,463 Premises and equipment - net 1,401,897 953,982 Organizational costs - net 68,308 74,871 Accrued interest receivable 967,572 52,811 Other assets 403,448 233,258 --------------- ---------------- Total assets $ 178,494,499 $ 24,109,185 =============== ================ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 14,542,505 $ 7,207,482 Interest-bearing 121,500,220 2,480,782 --------------- ---------------- Total 136,042,725 9,688,264 Securities sold under agreements to repurchase 15,351,539 655,447 Accrued expenses and other liabilities 514,425 292,204 --------------- ---------------- Total liabilities 151,908,689 10,635,915 Shareholders' equity Preferred stock, no par value; 1,000,000 shares authorized, none issued Common stock, no par value: 9,000,000 shares, authorized; 2,472,500 shares outstanding at September 30, 1998, and 1,495,000 shares outstanding at December 31, 1997 28,181,798 13,880,972 Retained earnings (deficit) (1,724,072) (404,071) Net unrealized gain (loss) on securities available for sale 128,084 (3,631) --------------- ---------------- Total shareholders' equity 26,585,810 13,473,270 --------------- ---------------- Total liabilities and shareholders' equity $ 178,494,499 $ 24,109,185 =============== ================
3 4 MERCANTILE BANK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) - --------------------------------------------------------------------------------
Three Months Nine Months Ended Ended September 30, 1998 September 30, 1998 ------------------ ------------------ Interest income Loans, including fees $ 2,711,559 $ 5,712,169 Investment securities 285,197 541,560 Federal funds sold 66,791 183,582 Interest-bearing deposits 6,195 16,109 -------------- --------------- Total interest income 3,069,742 6,453,420 Interest expense Deposits 1,549,474 3,295,670 Other 164,412 296,671 -------------- --------------- Total interest expense 1,713,886 3,592,341 -------------- --------------- NET INTEREST INCOME 1,355,856 2,861,079 Provision for loan losses 470,000 1,941,800 -------------- --------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 885,856 919,279 Noninterest income Other income 176,040 263,303 -------------- --------------- Total noninterest income 176,040 263,303 Noninterest expense Salaries and benefits 504,351 1,322,618 Occupancy 78,098 217,023 Furniture and equipment 44,671 116,412 Other expense 318,576 846,530 -------------- --------------- Total noninterest expenses 945,696 2,502,583 INCOME (LOSS) BEFORE FEDERAL INCOME TAX 116,200 (1,320,001) Federal income tax expense 0 0 -------------- --------------- NET INCOME (LOSS) $ 116,200 $ (1,320,001) ============== =============== Basic and diluted income (loss) per share $ 0.05 $ (0.77) ============== =============== Average shares outstanding 2,145,435 1,714,194 ============== ===============
4 5 MERCANTILE BANK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (Unaudited) - --------------------------------------------------------------------------------
Three Months Nine Months Ended Ended September 30, 1998 September 30, 1998 ------------------ ------------------ NET INCOME (LOSS) $ 116,200 $ (1,320,001) Other comprehensive income (loss), net of tax Change in unrealized gains (losses) on securities 130,456 131,715 ------------------ ------------------ COMPREHENSIVE INCOME (LOSS) $ 246,656 $ (1,188,286) ================== ==================
5 6 MERCANTILE BANK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) - --------------------------------------------------------------------------------
Net Unrealized Loss on Securities Total Common Retained Available Shareholders' Stock Earnings for Sale Equity ---------------- --------------- -------------- ---------------- BALANCE, JANUARY 1, 1998 $ 13,880,972 $ (404,071) $ (3,631) $ 13,473,270 Common stock sale, July 30, 1998 net of issuance expenses 14,300,826 14,300,826 Net loss for the period from January 1, 1998 through September 30, 1998 (1,320,001) (1,320,001) Change in unrealized gain (loss) on securities available for sale, net of tax 131,715 131,715 ---------------- --------------- ------------- ---------------- BALANCE, SEPTEMBER 30, 1998 $ 28,181,798 $ (1,724,072) $ 128,084 $ 26,585,810 ================ =============== ============= ================
6 7 MERCANTILE BANK CORPORATION CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - --------------------------------------------------------------------------------
Three Months Nine Months Ended Ended September 30, 1998 September 30, 1998 ------------------ ------------------ CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 116,200 $ (1,320,001) Adjustments to reconcile net loss to net cash from operating activities Depreciation and amortization 71,816 184,472 Provision for loan losses 470,000 1,941,800 Net change in: Accrued interest receivable (246,522) (914,761) Other assets 34,556 (191,917) Accrued expenses and other liabilities 140,657 156,221 --------------- ----------------- Net cash from operating activities 586,707 (144,186) CASH FLOWS FROM INVESTING ACTIVITIES Net change in loans (27,432,453) (127,952,098) Purchase of: Securities available for sale (10,048,616) (23,577,469) Premises and equipment, net (57,698) (570,965) Proceeds from sales and maturities of securities available for sale 2,081,733 4,081,733 --------------- ----------------- Net cash used in investing activities (35,457,034) (148,018,799) CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from sale of common stock 14,300,826 14,300,826 Net increase in deposits 19,351,539 126,354,461 Net increase in securities sold under agreements to repurchase 4,796,244 14,696,092 --------------- ----------------- Net cash from financing activities 38,448,609 155,351,379 --------------- ----------------- Net change in cash and cash equivalents 3,578,282 7,188,394 Cash and cash equivalents at beginning of period 10,713,412 7,103,300 --------------- ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,291,694 $ 14,291,694 =============== ================= Supplemental disclosures of cash flow information Cash paid during the year for Interest $ 1,584,873 $ 3,207,981
7 8 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 1. BASIS OF PRESENTATION: The unaudited financial statements for the three and nine months ended September 30, 1998 include the consolidated results of operations of Mercantile Bank Corporation ("Corporation") and its wholly-owned subsidiary, Mercantile Bank of West Michigan ("Bank"). These consolidated financial statements have been prepared in accordance with the Instructions for Form 10-QSB and Item 310(b) of Regulation S-B and do not include all disclosures required by generally accepted accounting principles for a complete presentation of the Corporation's financial condition and results of operations. In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary in order to make the financial statements not misleading and for a fair presentation of the results of operations for such periods. The results for the period ended September 30, 1998 should not be considered as indicative of results for a full year. For further information, refer to the consolidated financial statements and footnotes included in the Corporation's annual report on Form 10-KSB for the year ended December 31, 1997. 2. ALLOWANCE FOR LOAN LOSSES The following is a summary of the activity in the allowance for loan losses account for the nine months ended September 30, 1998: Balance at January 1, 1998 $ 193,300 Provision for loan losses charged to operating expense 1,941,800 -------------- Balance at September 30, 1998 $ 2,135,100 ============== 3. LOANS Total loans at September 30, 1998 were $140.8 million compared to $12.9 million at December 31, 1997, an increase of $127.9 million or 993%. The components of the outstanding balances and percentage increase in loans from the end of 1997 to the end of the third quarter 1998 are as follows:
Percent September 30, 1998 December 31, 1997 Increase/ Balance % Balance % (Decrease) ----------- ----- -------------- --- ---------- (in thousands) Consumer loans $ 1,646 1.2% $ 15 0.1% 10,873.3% Commercial, financial and other 45,198 32.1 7,433 57.7 508.1 Commercial real estate construction 8,844 6.3 --- ---- NA Commercial real estate mortgages 77,092 54.7 5,421 42.1 1,322.1 Residential real estate mortgages 8,059 5.7 18 0.1 44,672.2 ----------- ----- ----------- ----- ---------- $ 140,839 100.0% $ 12,887 100.0% 992.8% =========== ===== =========== ===== ==========
- -------------------------------------------------------------------------------- 8 9 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 4. PREMISES AND EQUIPMENT - NET Premises and equipment are comprised of the following:
September 30, December 31, 1998 1997 -------------- --------------- Leasehold improvements $ 771,942 $ 545,401 Furniture and equipment 753,005 408,581 -------------- --------------- 1,524,947 953,982 Less accumulated depreciation (123,050) --- -------------- --------------- $ 1,401,897 $ 953,982 ============== ===============
Depreciation expense for the third quarter 1998 amounted to $44,606. 5. DEPOSITS Total deposits at September 30, 1998 were $136.0 million compared to $9.7 million at December 31, 1997, an increase of $126.3 million or 1,304%. The components of the outstanding balances and percentage increase in deposits from the end of 1997 to the end of the third quarter 1998 are as follows:
Percent September 30, 1998 December 31, 1997 Increase/ Balance % Balance % (Decrease) ---------- ----- --------- ----- ---------- (in thousands) Noninterest-bearing Demand $ 14,543 10.7% $ 7,208 74.4% 101.8% Interest-bearing Checking 5,549 4.1 213 2.2 2,505.2 Money market 1,964 1.4 --- --- NA Savings 22,485 16.5 2,089 21.6 976.4 Time, under $100,000 58,911 43.3 178 1.8 32,996.1 Time, $100,000 and over 32,591 24.0 --- --- NA ---------- ----- --------- ----- ---------- $ 136,043 100.0% $ 9,688 100.0% 1,304.2% ========== ===== ========= ===== ==========
- -------------------------------------------------------------------------------- 9 10 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 6. BORROWINGS Information relating to securities sold under agreements to repurchase follows:
September 30, December 31, 1998 1997 -------------- ------------- Outstanding balance $ 15,351,539 $ 655,447 Average interest rate 4.70% 4.70% Average balance $ 8,191,223 $ 3,853 Average interest rate 4.70% 4.70% Maximum outstanding at any month end $ 15,351,539 $ 655,447
Securities sold under agreements to repurchase (repurchase agreements) generally have original maturities of less than one year. Repurchase agreements are treated as financings and the obligations to repurchase securities sold are reflected as liabilities. Securities involved with the agreements are recorded as assets of the Bank and are primarily held in safekeeping by correspondent banks. Repurchase agreements are offered principally to certain large deposit customers as deposit equivalent investments. 7. EMPLOYEE BENEFIT PLANS The Corporation established a 401(k) plan effective January 1, 1998, covering substantially all its employees. The Corporation's third quarter 1998 matching 401(k) contribution charged to expense was $15,173. The percent of the Corporation's matching contributions to the 401(k) is determined annually by the Board of Directors. - -------------------------------------------------------------------------------- 10 11 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- 8. COMMITMENTS AND OFF-BALANCE-SHEET RISK Some financial instruments are used to meet financing needs and to reduce exposure to interest rate changes. These financial instruments include commitments to extend credit and standby letters of credit. These involve, to varying degrees, credit and interest-rate risk in excess of the amount reported in the financial statements. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment, and generally have fixed expiration dates. Standby letters of credit are conditional commitments to guarantee a customer's performance to a third party. Exposure to credit loss if the other party does not perform is represented by the contractual amount for commitments to extend credit and standby letters of credit. Collateral or other security is normally not obtained for these financial instruments prior to their use, and many of the commitments are expected to expire without being used. A summary of the notional or contractual amounts of financial instruments with off-balance-sheet risk at September 30, 1998 and December 31, 1997 follows:
September 30, December 31, 1998 1997 --------------- --------------- Commitments to make loans $ 2,473,358 $ 7,198,584 Commercial unused lines of credit 57,382,926 3,701,272 Standby letters of credit 12,580,983 --- Consumer unused lines of credit 6,212,563 64,356
Commitments to make loans generally have remaining termination dates of one year or less and may require a fee if funded. Since many of the above commitments expire without being used, the above amounts do not necessarily represent future cash commitments. 9. REGULATORY MATTERS The Corporation and Bank are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. - -------------------------------------------------------------------------------- 11 12 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If adequately capitalized, regulatory approval is required to accept brokered deposits. If undercapitalized, capital distributions are limited, as is asset growth and expansion, and plans for capital restoration are required. The minimum requirements are: Capital to Risk- Weighted Assets --------------- Tier 1 Capital Total Tier 1 to Average Assets ----- ------ ----------------- Well capitalized 10% 6% 5% Adequately capitalized 8 4 4 Undercapitalized <8 <4 <4 Actual capital levels (in thousands) and minimum required levels for the Corporation and the Bank were:
Minimum Required to be Well Minimum Required Capitalized Under for Capital Prompt Corrective Actual Adequacy Purposes Action Regulations ------ ----------------- ------------------ Amount Ratio Amount Ratio Amount Ratio ----------- ----- ----------- ----- ----------- ----- September 30, 1998 Total capital (to risk weighted assets) Consolidated $ 28,488 16.2% $ 12,988 8.0% $ 16,235 10.0% Bank 27,434 15.6 12,980 8.0 16,226 10.0 Tier 1 capital (to risk weighted assets) Consolidated 26,458 15.0 6,498 4.0 9,747 6.0 Bank 25,403 14.4 6,495 4.0 9,742 6.0 Tier 1 capital (to average assets) Consolidated 26,458 17.0 6,234 4.0 7,792 5.0 Bank 25,403 16.3 6,221 4.0 7,776 5.0 December 31, 1997 Total capital (to risk weighted assets) Consolidated $ 13,595 78.1% $ 1,392 8.0% $ 1,740 10.0% Bank 13,056 75.6 1,382 8.0 1,728 10.0 Tier 1 capital (to risk weighted assets) Consolidated 13,402 77.0 696 4.0 1,044 6.0 Bank 12,863 74.5 691 4.0 1,037 6.0 Tier 1 capital (to average assets) Consolidated 13,402 69.7 769 4.0 961 5.0 Bank 12,863 69.3 743 4.0 928 5.0
- -------------------------------------------------------------------------------- 12 13 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- The Corporation and Bank were categorized as well capitalized at September 30, 1998 and year end 1997. 10. SALE OF COMMON STOCK During the third quarter the Corporation completed a secondary common stock offering, selling 977,500 shares. Net of issuance expenses the common stock sale raised $14.3 million. Substantially all of the net proceeds were contributed to the Bank, which will be used to support the anticipated growth in assets, fund investments in loans and securities, and for general corporate purposes. 11. YEAR 2000 ISSUE The approach of the year 2000 presents potential problems to businesses that utilize computers in their daily operations. Some computer systems may not be able to properly interpret dates after December 31, 1999, because they use only two digits to indicate the year in the date. Therefore, a date using "00" as the year may recognize the year as 1900 rather than the year 2000. The Corporation has formed a Year 2000 Working Group to address the potential problems associated with the Year 2000 computer issue. The Year 2000 Working Group, consisting of senior officers and employees, meets on a regular basis and provides regular reports to the Board of Directors detailing progress with the Year 2000 issue. As with any organization that depends on technology, particularly computer systems and software, a Year 2000 related failure poses a significant threat to continued business operations. While the Corporation has developed a plan to ensure Year 2000 readiness, we recognize that the success of our third party providers is vital to our success. Vendors of particular concern include, but are not limited to, our computer service providers, electronic banking vendors, correspondent banks, and utility and telecommunications companies. Additional risks include the Bank's lending and deposit relationships, as well as security and heating, ventilation, and air conditioning systems. The Corporation does not utilize any in-house programmed software. Management believes that all significant vendors have been identified and contacted regarding their Year 2000 readiness. These vendors have indicated that either their products are currently Year 2000 compliant or will be by December 31, 1999. For computer-based systems that are considered vital to operations, such as data and transaction processing, actual testing has been or will be conducted prior to December 31, 1999, to ensure Year 2000 readiness. In addition, a Year 2000 questionnaire has been sent to all commercial loan customers (comprising 92% of the loan portfolio) requesting information concerning their Year 2000 readiness. Responses are currently being followed-up by the lending staff. - -------------------------------------------------------------------------------- 13 14 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- Costs to the Corporation related to the Year 2000 issue are estimated to be between $10,000 and $15,000. These costs include testing of the data processing equipment and programs, equipment upgrades, and employee/customer education. It is impossible to predict the exact expenses associated with the Year 2000 issue and additional funds may be needed for unknown expesnses relating to Year 2000 testing, training, and education, as well as system and software replacements. Despite careful planning by the Corporation, we recognize there may be circumstances beyond our control that may prohibit us from operating "as usual" after December 31, 1999. The Year 2000 Working Group is currently in the process of developing a contingency plan to address potential Year 2000 problems. - -------------------------------------------------------------------------------- 14 15 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The following discussion compares the financial condition of the Corporation and its wholly owned subsidiary, the Bank, at September 30, 1998 to December 31, 1997, and the results of operations for the three and nine months ended September 30, 1998. This discussion should be read in conjunction with the interim consolidated condensed financial statements and footnotes included herein. This report contains forward-looking statements that are based on management's beliefs, assumptions, current expectations, estimates and projections about the financial services industry, the economy, and about the Corporation. Words such as "anticipates," "believes," "estimates," "expects," "forecasts," "intends," "is likely," "plans," "projects," variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Future Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. The Corporation undertakes no obligation to update, amend, or clarify forward looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise. Future Factors include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; 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; and changes in the national and local economy. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a preceding forward-looking statement. During the third quarter of 1998, the assets of Mercantile Bank Corporation increased from $139.6 million on June 30, 1998, to $178.5 million on September 30, 1998. This represents a total increase in assets of $38.9 million. A $3.6 million increase in cash and cash equivalents; an $8.2 million increase in investment securities; and a $27.0 million increase in net loans primarily comprised this growth. The increase in assets was primarily funded by $19.3 million growth in deposits, an increase of $4.7 million in repurchase agreements, and an increase of $14.6 million in equity. The growth in deposits is the result of both core deposits and reliance on out-of-area CD's, while the increase in equity was due primarily from the sale of common stock. While management expects continuing growth, it is anticipated to be at a slower rate. - -------------------------------------------------------------------------------- 15 16 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- The following table sets forth certain information relating to the Corporation's consolidated average interest earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the period indicated. Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the period presented. During the period presented, there were no nonaccrual loans.
Quarter ended September 30, 1998 Average Average Balance Interest Rate ----------- ------------- -------- (in thousands) ASSETS Federal funds sold and interest-bearing deposits with banks $ 5,237 $ 73 5.58% Investment securities - available for sale 19,783 285 5.76 Loans 123,297 2,712 8.80 ----------- ----------- -------- Subtotal interest-bearing assets 148,317 3,070 8.28 Other assets 7,521 ----------- Total assets $ 155,838 =========== LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing deposits $ 108,152 $ 1,550 5.73% Other borrowings 13,750 164 4.77 ----------- ----------- -------- Subtotal interest-bearing liabilities 121,902 1,714 5.62 Noninterest-bearing deposits 11,781 Other liabilities 396 Shareholders' equity 21,759 ----------- Total liabilities and shareholders' equity $ 155,838 =========== Net interest income $ 1,356 =========== Net interest rate spread 2.66% ======== Net interest margin on earning assets 3.66% ========
- -------------------------------------------------------------------------------- 16 17 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- The following table sets forth the amounts of interest-earning assets and interest-bearing liabilities outstanding at September 30, 1998, which are expected to mature or reprice in each of the time periods shown (in thousands):
Interest Rate Sensitivity Period Within Three to One to After Three Twelve Five Five Months Months Years Years Total ---------- ---------- ---------- --------- ---------- Earning assets Federal funds sold $ 6,100 $ --- $ --- $ --- $ 6,100 Interest-bearing deposits 500 --- --- --- 500 Securities available for sale 2,002 4,524 14,130 2,002 22,658 Consumer loans 589 --- 777 280 1,646 Commercial, financial and other 27,495 168 16,843 692 45,198 Commercial real estate construction 1,781 957 2,983 3,123 8,844 Commercial real estate mortgages 15,487 --- 59,098 2,507 77,092 Residential real estate mortgages 1,922 1,417 4,098 622 8,059 ---------- ---------- ---------- --------- ---------- 55,876 7,066 97,929 9,226 170,097 Interest-bearing liabilities Interest-bearing checking $ 5,549 $ --- $ --- $ --- $ 5,549 Savings 22,485 --- --- --- 22,485 Money market 1,964 --- --- --- 1,964 Time deposits <$100,000 5,368 35,862 17,681 --- 58,911 Time deposits $100,000 and over 9,257 15,361 7,973 --- 32,591 Other borrowings 15,352 --- --- --- 15,352 ---------- ---------- ---------- --------- ---------- 59,975 51,223 25,654 --- 136,852 ---------- ---------- ---------- --------- ---------- Net asset (liability) gap $ (4,099) $ (44,157) $ 72,275 $ 9,226 $ 33,245 ========== ========== ========== ========= ========== Cumulative net asset (liability) gap $ (4,099) $ (48,256) $ 24,019 $ 33,245 ========== ========== ========== =========
At quarter-end, commercial loans approximated 93.1% of the total loan portfolio. The significant concentration in commercial loans and the rapid growth of this portion of our business is in keeping with our stated strategy of focusing a substantial amount of our efforts on "wholesale" banking. Corporate and business lending is an area of expertise for all of the Corporation's senior management team. Commercial loans are also the assets most efficiently originated and managed by the fewest number of staff, thus reducing overhead through necessitating fewer full-time equivalents (FTE's)/$million in assets. It is also the commercial sector of our business that generates the greatest amount of deposits, and it is virtually the only source of significant demand deposits. - -------------------------------------------------------------------------------- 17 18 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- Mortgage and consumer loans increased during the second quarter by $1.3 million and $0.6 million, respectively. As the extremely rapid growth of our commercial loan portfolio gradually slows, the retail portion of our loan assets is expected to increase as a percentage of total loans. However, our strategy for growth and profitability is expected to result in the commercial sector of our lending efforts and resultant assets continuing to be the dominant portfolio category. Total deposits were $136.0 million at September 30, 1998, compared to $116.7 million at June 30, 1998. Of this amount $14.5 million, or approximately 10.7%, were demand deposits. In addition, Business Investment Checking, our combined sweep account/repurchase agreement, increased from $10.6 million on June 30, 1998, to $15.4 million on September 30, 1998. Out-of-area deposits, consisting primarily of $99,000 certificates obtained from depositors located outside our market area and placed by deposit brokers for a fee, increased $14.5 million during the third quarter. As of September 30, 1998, out-of-area CDs totaled $72.1 million, or approximately 48% of combined deposits and Business Investment Checking. Reliance on out-of-area deposits is expected to be ongoing due to our planned significant future growth; however, a modest decline in the out-of-area deposit concentration level is expected as new business and retail relationships continue to be established and as existing customers fund deposit accounts/business investment checking accounts which have already been opened or as these customers require additional deposit products. The Corporation completed a secondary common stock offering during the third quarter, selling 977,500 shares. Net of issuance expenses the offering raised $14.3 million. Substantially all of the net proceeds were contributed to the Bank, which will be used to support the anticipated growth in assets, fund investments in loans and securities, and for general corporate purposes. The net operating income for the third quarter was $116,200 ($0.05/share), which compares favorably to the second quarter net operating loss of $294,624 ($0.20/share). Growth in net interest income and noninterest income, combined with only a modest increase in noninterest expense and a stable loan loss provision, primarily contributed to the improved performance. Net interest income during the third quarter totaled $1,355,856, or $450,397 higher than the second quarter level. Noninterest income during the third quarter increased by $103,089 over the level earned during the second quarter, primarily reflecting increased fee income from residential mortgage loan referrals and commercial letters of credit. Noninterest expense during the third quarter totaled $945,696, or $145,790 higher than the second quarter level. The increase in noninterest expense primarily resulted from the hiring of additional employees during the quarter. Provision for loan losses were $470,000 ($0.22 per share) and $473,000 ($0.31 per share) during the third and second quarters, respectively. Loan loss provisions are high due to the extremely rapid growth of the loan portfolio combined with management's decision to manage the portfolio utilizing a 1.5% allowance for loan and lease losses. Although the percentage loan loss reserve to total loans is high relative to the quality of the overall portfolio, company management feels it is prudent to operate with this level of reserves due to the newness of the organization and the significant number of credits at or near the legal lending limit of the Bank. Loan loss provisions are an immediate reduction to earnings; - -------------------------------------------------------------------------------- 18 19 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) - -------------------------------------------------------------------------------- moreover, these provisions will continue to reduce earnings, although more moderately, as the anticipated rate of loan growth slows. Payroll and other non-interest operating expenses have and are expected to continue to decline as a percentage of income as the Corporation grows. The efficiency ratio during the third quarter was 62%, which compares favorably to the 82% for the second quarter. The efficiency ratio should decrease, although at a slower rate, as the Corporation more adequately absorbs current overhead costs and amortization of prior period organization and start-up costs. Subsequent to September 30, 1998, the Bank notified the appropriate bank regulatory agencies of its intent to establish a branch/operations center within the Grand Rapids metropolitan area. This facility, scheduled to open on or about March 1, 1999, will be the Bank's first branch facility. Additional immediate and future plans for the remainder of 1998 include the continued growth of the recently implemented telephone banking product, as well as the introduction of PC banking to both our retail and commercial customers. It is management's opinion that the use of state-of-the-art technology will offset some of the potential advantages that establishing multiple branch banking locations throughout the market area might provide. This is especially true if ATM kiosks are strategically located throughout our market area and used in connection with and as an adjunct to our technology. - -------------------------------------------------------------------------------- 19 20 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS As a depository of funds, the Bank may occasionally be named as a defendant in lawsuits (such as garnishment proceedings) involving claims to the ownership of funds in particular accounts. Such litigation is incidental to the Bank's business. The Corporation's management is not aware of any pending litigation. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 5. OTHER INFORMATION. Not applicable. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: EXHIBIT NO. EXHIBIT DESCRIPTION ----------- ------------------- 3.1 Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Corporation's Registration Statement on Form SB-2 (Commission File no. 333-33081) that became effective on October 23, 1997 3.2 Bylaws of the Corporation are incorporated by reference to exhibit 3.2 of the Corporation's Registration Statement on Form SB-2 (Commission File No. 333-33081) that became effective on October 23, 1997 10.1 Buy and Sell Agreement dated August 19, 1998, covering a portion of Mercantile Bank of West Michigan's land purchase in Alpine Township to be used for branch location. 10.2 Buy and Sell Agreement dated August 19, 1998, covering a portion of Mercantile Bank of West Michigan's land purchase in Alpine Township to be used for branch location. 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule - -------------------------------------------------------------------------------- 20 21 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 11, 1998 MERCANTILE BANK CORPORATION By: /s/ Gerald R. Johnson, Jr. ------------------------------------------- Gerald R. Johnson, Jr. Chairman of the Board and Chief Executive Officer (Principal Executive Officer) By: /s/ Michael H. Price ------------------------------------------- Michael H. Price President and Chief Operating Officer By: /s/ Charles E. Christmas ------------------------------------------- Charles E. Christmas Vice President of Finance, Treasurer and Compliance Officer (Principal Financial and Accounting Officer) - -------------------------------------------------------------------------------- 21 22 EXHIBIT INDEX EXHIBIT NO. EXHIBIT DESCRIPTION - ----------- ------------------- 3.1 Articles of Incorporation are incorporated by reference to exhibit 3.1 of the Corporation's Registration Statement on Form SB-2 (Commission File no. 333-33081) that became effective on October 23, 1997 3.2 Bylaws of the Corporation are incorporated by reference to exhibit 3.2 of the Corporation's Registration Statement on Form SB-2 (Commission File No. 333-33081) that became effective on October 23, 1997 10.1 Buy and Sell Agreement dated August 19, 1998, covering a portion of Mercantile Bank of West Michigan's land purchase in Alpine Township to be used for branch location. 10.2 Buy and Sell Agreement dated August 19, 1998, covering a portion of Mercantile Bank of West Michigan's land purchase in Alpine Township to be used for branch location. 11 Statement re Computation of Per Share Earnings 27 Financial Data Schedule - -------------------------------------------------------------------------------- EX-10.1 2 BUY & SELL AGREEMENT 1 EXHIBIT 10.1 BUY AND SELL AGREEMENT Date: August 19, 1998 BUYER'S OFFER. The undersigned (the "Buyer") offers and agrees to purchase the property located in the Township of Alpine, Kent County, Michigan, commonly known as 4631 Alpine NW (the "Land"), together with all buildings, fixtures and improvements situated on the Land (The "Improvements")- Permanent Parcel Number 41-09-26-427-032 PURCHASE PRICE. The purchase price for the Premises is One Hundred Fifty Eight Thousand dollars ($158,000). TERMS OF PAYMENT. The Buyer shall pay the full purchase price to the Seller upon execution and delivery of a warranty deed and performance by Seller of the other closing obligations specified below. SURVEY. A new, showing all easements of record, re-certified ALTA existing survey shall be obtained by the Buyer. PEST INSPECTION. Waived TAXES AND ASSESSMENTS. All real property taxes and assessments on the Premises which are due and payable, or a lien or both, on or before the date of closing shall be paid by Seller at or prior to closing, without proration. TITLE INSURANCE. At Seller's expense, Seller shall provide purchaser with a standard owner's policy of title insurance without exceptions, in the amount of the purchase price, effective as of the date of closing. A commitment to issue such policy insuring marketable title vested in Buyer, including a tax status report, shall be made available for Buyer's inspection within five (5) days of Buyer's acceptance of this offer or Seller's acceptance of Buyer's Counteroffer. CONVEYANCE. Upon performance by Buyer of the closing obligations below, Seller shall convey the Premises to Buyer by warranty deed, land contract or assignment, as required above, subject to easement and building and use restrictions of record and subject to zoning ordinances. Exceptions: WARRANTIES OF SELLER. Except as otherwise provided or acknowledged in this Agreement, Seller represents and warrants to, and agrees with Buyer as follows: a. Seller's Interest in the Premises shall be transferred to Buyer on the closing date, free from liens, encumbrances and claims of others. WARRANTIES OF BUYER. Except as otherwise provided or acknowledged in this Agreement, Buyer represents and warrants to Seller as follows: 2 a. Buyer acknowledges that Buyer is aware that inspection services of building components and systems are commercially available at a reasonable fee, and that Buyer and/or inspectors hired by Buyer may or have inspected the Premises as fully as they desire. Buyer is fully familiar with the physical condition of the Premises, and agrees to accept the Premises "as is" and "with all faults" in their condition as of the date of this Agreement, subject to reasonable use, wear and tear between the date of this Agreement and the date of closing. DAMAGE TO PREMISES. If between the date of this Agreement and the closing date, all or any part of the Premises is damaged by fire or natural elements or other causes beyond Seller's control which can not be repaired prior to the closing date, or any part of the premises is taken pursuant to any power of eminent domain. Seller shall immediately notify Buyer of such occurrence and either Seller or Buyer may terminate this Agreement by written notice to the other within fifteen (15) days after the date of the damage or taking. If neither elects to terminate this Agreement, there shall be no reduction of the purchase price and at closing Seller shall assign to Buyer whatever rights Seller may have with respect to any insurance proceeds or eminent domain award, CLOSING. The closing shall be held not later than 30 days after the Buyer has satisfied itself that the property can be reasonably utilized for Buyers intended purpose, but not later than 120 days after the date of this agreement. Should Buyer determine that the property cannot be reasonably utilized for Buyers intended purpose (including but not limited to use, zoning, and site plan approvals). Buyer will notify the Seller and this agreement shall become void, and all earnest deposits shall be returned to the Buyer. POSSESSION. Seller shall tender to Buyer possession of the Premises not later than 15 days after the date of closing. SELLER'S CLOSING OBLIGATIONS. At the closing, Seller shall deliver %he following to Buyer: a. The warranty deed, land contract, or assignment of land contract required by this Agreement. b. A bill of sale for any Personal Property (attached as Exhibit "D"). c. Any other documents required by this Agreement to be delivered by Seller. BUYER'S CLOSING OBLIGATIONS. At closing, Buyer shall deliver to Seller the following: a. The cash portion of the purchase price specified above. b. Any other documents required by this Agreement to be delivered by Buyer. 3 NOTICES. A notice required or permitted by this Agreement shall be sufficient if in writing and either delivered personally or by regular mail addressed to the parties at their addresses specified in the proximity of their signatures below, and any notices given by mail shall be deemed to have been given as of the day following the date of posting. ADDITIONAL ACTS. Buyer and Seller agree to execute and deliver such additional documents and to perform such additional acts as may become necessary to effectuate the transfers contemplated by this Agreement. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties with respect to the sale of the Premises. All contemporaneous or prior negotiations have been merged into this Agreement. This Agreement may be modified or amended only by written instrument signed by the parties to this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. EARNEST MONEY. Buyer gives Visser Development 2 days to obtain the written acceptance of this offer and agrees that this offer, when accepted by Seller, will constitute a binding agreement between Buyer and Seller. Upon acceptance, Buyer will deposit $5,000 with Colburn Hundley Realtors as earnest monies to secure this agreement. DISCLOSURE OF PRICE AND TERMS. The purchase price and the terms of this sale may not be disclosed without consent of both parties. AGENCY AND BROKERAGE FEE. The Seller acknowledges and agrees that Colburn Hundley, Inc. and Visser Development, Inc. and its Broker/Agents are acting as Buyers Agents in this matter and not as agent of the Seller, and further agree than that Colburn Hundley, Inc. and Visser Development, Inc. will be paid a commission based on the cooperative listing agreement between the Seller and the Listing Broker, or if none exists, then that Colburn Hundley, Inc. and Visser Development, Inc. shall be paid at closing a commission equal to 10% of the final purchase price. Witness: [SIG] /s/ DENNIS VAN DAM ---------------------- --------------------------- Buyer Phone No. 363-3825 FOR BUYER TO BE NAMED --------------------- --------------------------- Buyer BUYER(S) SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION NUMBER: -------------------------------------------- 4 SELLER'S ACCEPTANCE Date: August 19, 1998, 4:00 PM The above offer is hereby accepted with a sales price of $158,000 and with $5,000 earnest money to be held by seller's realtor. Witness: [SIG] /s/ MICHAEL WILLIAMS ---------------------- --------------------------- Seller Phone No. (616) 345-0388 /s/ LYNN WILLIAMS --------------------- --------------------------- Seller SELLER'S SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION NUMBER: -------------------------------------------- BUYERS RECEIPT OF ACCEPTANCE Grand Rapids, Michigan Date: 9/2, 1998, 10:15 AM Buyer acknowledges receipt of seller's acceptance of Buyer's offer. If the acceptance was subject to changes from Buyer's offer, the Buyer agrees to accept those changes, all other terms and conditions remaining unchanged. Witness: [SIG] /s/ MICHAEL PRICE ---------------------- --------------------------- Buyer President --------------------------- Mercantile Bank Buyer SELLER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan Date: , 19 , AM/PM ----------------------- -- ------ Seller acknowledges receipt of a copy of the Buyer's acceptance of the counter-offer (if Seller made a counter-offer). Witness: ---------------------- --------------------------- Seller EX-10.2 3 BUY & SELL AGREEMENT 1 EXHIBIT 10.2 BUY AND SELL AGREEMENT Date: August 19, 1998 BUYER'S OFFER. The undersigned (the "Buyer") offers and agrees to purchase the property located in the Township of Alpine, Kent County, Michigan, commonly known as 4613 Alpine NW (the "Land"), together with all buildings, fixtures and improvements situated on the Land (The "Improvements"). Permanent Parcel Number 41-09-26-427-028. PURCHASE PRICE. The purchase price for the Premises is One Hundred Fifty Five Thousand dollars ($155,000). TERMS OF PAYMENT. The Buyer shall pay the full purchase price to the Seller upon execution and delivery of a warranty deed and performance by Seller of the other closing obligations specified below. SURVEY. A new, showing all easements of record, re-certified ALTA existing survey shall be obtained by the Buyer. PEST INSPECTION. Waived TAXES AND ASSESSMENTS. All real property taxes and assessments for streets, sidewalks, utilities or improvements of any kind, on or against the Premises which are either deferred or now due and payable, or a lien or both, on or before the date of closing shall be paid by Seller at or prior to closing, without proration. Buyer to assume Wheaton assessment. TITLE INSURANCE. At Seller's expense, Seller shall provide purchaser with a standard owner's policy of title insurance without exceptions, in the amount of the purchase price, effective as of the date of closing. A commitment to issue such policy insuring marketable title vested in Buyer, including a tax status report, shall be made available for Buyer's inspection within five (5) days of Buyer's acceptance of this offer or Seller's acceptance of Buyer's Counteroffer. CONVEYANCE. Upon performance by Buyer of the closing obligations specified in below, Seller shall convey the Premises to Buyer by warranty deed, land contract or assignment, as required above, subject to easement and building and use restrictions of record and subject to zoning ordinances. Exceptions: WARRANTIES OF SELLER. Except as otherwise provided or acknowledged in this Agreement, Seller represents and warrants to, and agrees with Buyer as follows: a. Seller's interest in the Premises shall be transferred to Buyer on the closing date, free from liens, encumbrances and claims of others. 2 WARRANTIES OF BUYER. Except as otherwise provided or acknowledged in this Agreement, Buyer represents and warrants to Seller as follows: a. Buyer acknowledges that Buyer is aware that inspection services of building components and systems are commercially available at a reasonable fee, and that Buyer and/or inspectors hired by Buyer may or have inspected the Premises as fully as they desire. Buyer is fully familiar with the physical condition of the Premises, and agrees to accept the Premises "as is" and "with all faults" in their condition as of the date of this Agreement, subject to reasonable use, wear and tear between the date of this Agreement and the date of closing. DAMAGE TO PREMISES. If between the date of this Agreement and the closing date, all or any part of the Premises is damaged by fire or natural elements or other causes beyond Seller's control which can not be repaired prior to the closing date, or any part of the premises is taken pursuant to any power of eminent domain, Seller shall immediately notify Buyer of such occurrence, and either Seller or Buyer may terminate this Agreement by written notice to the other within fifteen (15) days after the date of the damage or taking. If neither elects to terminate this Agreement, there shall be no reduction of the purchase price and at closing Seller shall assign to Buyer whatever rights Seller may have with respect to any insurance proceeds or eminent domain award. CLOSING. The closing shall be held not later than 30 days after the Buyer has satisfied itself that the property can be reasonably utilized for Buyers intended purpose, but not later than 120 days after the date of this agreement. Should the Seller desire to close at a later date to accommodate the Sellers relocation to pother property, the Buyer agrees to do so provided that the closing occurs not later than 180 days after the date of this agreement. Should Buyer determine that the property cannot be reasonably utilized for Buyers intended purpose (including but not limited to use, zoning, and site plan approvals) Buyer will notify the Seller and this agreement shall become void, and all earnest deposits shall be returned to the Buyer. POSSESSION. Seller shall tender to Buyer possession of the Premises not later than 15 days after the date of closing SELLER'S CLOSING OBLIGATIONS. At the closing, Seller shall deliver the following to Buyer: a. The warranty deed, land contract, or assignment of land contract required by this Agreement. b. A bill of sale for any Personal Property (attached as Exhibit "D"). c. Any other documents required by this Agreement to be delivered by Seller. 3 BUYER'S CLOSING OBLIGATIONS. At closing, Buyer shall deliver to Seller the following: a. The cash portion of the purchase price specified above. b. Any other documents required by this Agreement to be delivered by Buyer. NOTICES. A notice required or permitted by this Agreement shall be sufficient if in writing and either delivered personally or by regular mail addressed to the parties at their addresses specified in the proximity of their signatures below, and any notices given by mail shall be deemed to have been given as of the day following the date of posting. ADDITIONAL ACTS. Buyer and Seller agree to execute and deliver such additional documents and to perform such additional acts as may become necessary to effectuate the transfers contemplated by this Agreement. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties with respect to the sale of the Premises. All contemporaneous or prior negotiations have been merged into this Agreement. This Agreement may be modified or amended only by written instrument signed by the parties to this Agreement. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan. EARNEST MONEY. Buyer gives Visser Development 2 days to obtain the written acceptance of this offer and agrees that this offer, when accepted by Seller, will constitute a binding agreement between Buyer and Seller. Upon acceptance, Buyer will deposit $5,000 with Visser Development as earnest monies to secure this agreement. DISCLOSURE OF PRICE AND TERMS. The purchase price and the terms of this sale may not be disclosed without consent of both parties. AGENCY AND BROKERAGE FEE. The Seller acknowledges and agrees that Visser Development, Inc. and its Broker/Agents are acting as Buyers Agents in this matter and not as agent of the Seller, and further agree than that Visser Development, Inc. will be paid a commission based on the cooperative listing agreement between the Seller and the Listing Broker, or if none exists, then that Visser Development, Inc. shall be paid at closing a commission equal to None% of the final purchase price. Witness: /s/ DENNIS VAN DAM Buyer ----------------- ------------------ Phone No. AGENT FOR BUYER Buyer ---------------- ------------------ 4 BUYER(S) SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION NUMBER: ------------------------------------------------ SELLER'S ACCEPTANCE Date: August 31, 1998, AM/PM -------- The above offer is hereby accepted provided sale price to be $155,000 buyer to assume Wheaton Road Assessment, Seller may remove small storage bldg's and docking prior to close. Witness: [SIG] /s/ CATHY CENTILLI Seller ---------------- ------------------- Phone No: /s/ RICHARD CENTILLI Seller --------------- ------------------- SELLER'S SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION NUMBER: ------------------------------------------------ BUYER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan Date: 9/2 , 1998, 10:15 AM Buyer acknowledges receipt of seller's acceptance of Buyer's offer. If the acceptance was subject to changes from Buyer's offer, the Buyer agrees to accept those changes, all other terms and conditions remaining unchanged. Witness: [SIG] /s/ MICHAEL PRICE Buyer ---------------- ------------------ Buyer Buyer ------------------ SELLER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan Date: , 19 , AM/PM ------------------ --- ------- Seller acknowledges receipt of a copy of the Buyer's acceptance of the counter- offer (if Seller made a counter-offer). Witness: Seller -------------------- ------------------ EX-11 4 COMPUTATION OF PER SHARE EARNINGS 1 EXHIBIT 11 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS RETURN ON EQUITY AND ASSETS 12/31/97 TO ANNUALIZED 9/30/98 ---------- -------- Return on average total assets -1.60% -1.20% Return on average equity -11.27% -8.45% Dividend Payout Ratio NA NA Average Equity to Average Assets 14.20% STATEMENT OF COMPUTER PER SHARE EARNINGS Net Loss $(1,320,001) Average Shares Outstanding 1,714,194 Basic and Diluted Loss Per Share $(0.77) - -------------------------------------------------------------------------------- EX-27 5 FINANCIAL DATA SCHEDULE
9 9-MOS DEC-31-1998 SEP-30-1998 7,691,694 500,000 6,100,000 0 0 22,657,819 22,657,819 140,838,861 (2,135,100) 178,494,499 136,042,725 15,351,539 514,425 0 0 0 28,181,798 (1,724,072) 178,494,499 5,712,169 541,560 199,691 6,453,420 3,295,670 296,671 2,861,079 1,941,800 128 2,502,583 (1,320,001) (1,320,001) 0 0 (1,320,001) (0.77) (0.77) 0 0 6 0 0 (193,300) 0 0 (2,135,100) 0 0 (2,135,100)
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