EX-99.1 2 k86627exv99w1.txt PRESS RELEASE EXHIBIT 99.1 [MERCANTILE BANK CORPORATION LOGO] FOR FURTHER INFORMATION: AT MERCANTILE BANK CORPORATION: FOR MEDIA: Gerald R. Johnson, Jr. Charles Christmas Linda Margolin Chairman & CEO Chief Financial Officer Margolin & Associates, Inc. 616-406-3700 616-406-3750 216-765-0953 gjohnson@mercbank.com cchristmas@mercbank.com lmm@margolinIR.com MERCANTILE BANK CORPORATION ANNOUNCES SECOND QUARTER NET INCOME OF $3.1 MILLION, UP 23.9% Second Quarter Loan Growth of $74.2 Million, Up 27% Annualized WYOMING, MICH., July 8, 2004 -- Mercantile Bank Corporation (Nasdaq: MBWM), a rapidly growing community banking organization, reported net income for the second quarter of 2004 of $3.1 million, up 23.9 percent from the $2.5 million reported in the second quarter of 2003, reflecting continued strong loan growth. Diluted earnings per share were $0.43 compared to $0.44 reported for the prior-year second quarter, reflecting the combined impact of strong loan growth and the common stock offering completed in the fourth quarter of 2003, which increased average shares outstanding by 1.5 million, or 25.7 percent. For the first six months of 2004, Mercantile reported net income of $6.1 million, up 28.2 percent from the $4.8 million reported in the first six months of 2003. Diluted earnings per share were $0.84 compared to the $0.82 reported for the prior-year period. Per share results reflect the combined impact of strong loan growth and the common stock offering which increased average shares outstanding by 1.5 million, or 25.7 percent. Gerald R. Johnson, Jr., Chairman and CEO, commented, "Our loan growth continues to be exceptional. This has contributed to another excellent quarter for Mercantile. The strong level of revenue growth we generate quarter after quarter, combined with excellent asset quality, has been the basis for our profit growth and enhanced shareholder value over time. "We continue to improve our operating efficiency despite investments in people, premises and equipment made over the last year. Our new office locations under construction should help us to continue our strong growth trends and deliver high quality services to a growing West Michigan footprint. Our current projects -- construction of a 30,000 square foot full-service banking center in Holland and a 60,000 square foot corporate headquarters in downtown Grand Rapids -- are both progressing on schedule, with estimated completions of late 2004 and mid-2005, respectively." Total revenue, comprised of net interest income and non-interest income, was $11.0 million in the second quarter of 2004, an increase of 25.8 percent over the $8.7 million earned during the prior-year second quarter. Mr. Johnson noted that strong loan growth and a stable net interest margin drove the revenue increase. Net interest income increased 33.4 percent to $10.0 million, reflecting a combination of 33.1 percent growth in average earning assets and a net interest margin unchanged from the prior-year quarter at 3.24 percent. Non-interest income, net of securities gains, declined 3.3 percent; growth in deposit service charges was offset by a 70.5 percent decline in mortgage fees, reflecting a higher interest rate environment. Non-interest expense for the second quarter of 2004 increased 23.8 percent over the prior year period, reflecting Mercantile's infrastructure growth over the last twelve months. Salaries and benefits increased 27.2 percent, commensurate with an increase in FTE employees of 24.5 percent. Mercantile's efficiency ratio improved to 49.1 percent for the second quarter of 2004 from 49.9 percent for last year's second quarter. Commenting on Mercantile's asset quality, Mr. Johnson said, "Our asset quality position is strong. Net charge-offs remain modest, and reserves comfortably cover nonperforming loans. Total nonperforming loans remain at very acceptable levels." Non-performing loans were 0.31 percent of total loans at June 30, 2004, compared to 0.06 percent last year. Annualized net charge-offs for the quarter were 0.09 percent of average loans, compared to 0.04 percent for the prior-year period. The loan and lease loss provision was $1.2 million for the second quarter of 2004, an increase of 45.6 percent over the prior-year period, primarily reflecting growth in the loan portfolio. The loan and lease loss reserves were $16.3 million, or 1.38 percent of total loans and leases at June 30, 2004. Total assets were $1.4 billion at June 30, 2004, an increase of $343.3 million, or 33.2 percent, from the prior-year second-quarter. Loans rose $319.4 million, or 36.9 percent during the same time period, primarily funded by $202.5 million in deposits, $75.0 million in advances from the Federal Home Loan Bank, and $42.8 million in net proceeds from the sale of common stock. Shareholders' equity at June 30, 2004 was $134.3 million, a twelve-month increase of $50.8 million, or 60.9 percent. Total shares outstanding at quarter end were 7,175,896. Mercantile's total risk-based capital ratio at quarter-end was 12.74 percent. Mr. Johnson concluded, "The sustainability of our strong balance sheet growth validates the success of our business model, our commitment to the Grand Rapids and Holland communities, and our value to shareholders. We look forward to continuing our strong performance in a more favorable interest rate environment." About Mercantile Bank Corporation Mercantile Bank Corporation is the bank holding company for Mercantile Bank of West Michigan. The Bank's primary service area is the Kent and Ottawa County area of West Michigan, which includes the City of Grand Rapids, the second-largest city in the State of Michigan. The Bank provides a wide variety of commercial banking services primarily to businesses, individuals, and governmental units through its five full-service offices in greater Grand Rapids, and its Holland, Michigan office located thirty miles southwest of Grand Rapids. Mercantile Bank Corporation's common stock is listed on the Nasdaq National 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 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; changes in the national and local economy; and other factors, including risk factors, referred to from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise. Mercantile Bank Corporation Second Quarter 2004 Results MERCANTILE BANK CORPORATION CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, JUNE 30, 2004 2003 2003 ----- ----- ---- (Unaudited) (Audited) (Unaudited) ASSETS Cash and due from banks $ 35,005,000 $ 16,309,000 $ 34,202,000 Short-term investments 967,000 255,000 137,000 Federal funds sold 0 0 3,000,000 ---------------- ---------------- ---------------- Total cash and cash equivalents 35,972,000 16,564,000 37,339,000 Securities available for sale 69,751,000 71,421,000 60,980,000 Securities held to maturity 48,466,000 45,112,000 40,587,000 Federal Home Loan Bank stock 6,644,000 4,977,000 2,250,000 Total loans and leases 1,185,363,000 1,035,963,000 866,009,000 Allowance for loan and lease losses (16,312,000) (14,379,000) (12,158,000) ---------------- ---------------- ---------------- Total Loans and leases, net 1,169,051,000 1,021,584,000 853,851,000 Premises and equipment, net 18,468,000 15,305,000 14,171,000 Bank owned life insurance policies 16,796,000 16,441,000 15,581,000 Accrued interest receivable 4,257,000 4,098,000 3,461,000 Other assets 9,221,000 7,835,000 7,059,000 ---------------- ---------------- ---------------- Total assets $ 1,378,626,000 $ 1,203,337,000 $ 1,035,279,000 ================ ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 114,441,000 $ 76,579,000 $ 77,025,000 Interest-bearing 931,628,000 826,313,000 766,562,000 ---------------- ---------------- ---------------- Total deposits 1,046,069,000 902,892,000 843,587,000 Securities sold under agreement to repurchase 46,960,000 49,545,000 39,690,000 Federal funds purchased 7,000,000 6,000,000 0 Federal Home Loan Bank advances 120,000,000 90,000,000 45,000,000 Subordinated debentures 16,495,000 16,495,000 16,495,000 Other borrowed money 1,414,000 1,114,000 922,000 Accrued expenses and other liabilities 6,416,000 7,090,000 6,128,000 ---------------- ---------------- ---------------- Total liabilities 1,244,354,000 1,073,136,000 951,822,000 SHAREHOLDERS' EQUITY Common stock 130,902,000 118,560,000 75,595,000 Retained earnings 4,166,000 11,421,000 7,157,000 Accumulated other comprehensive income (loss) (796,000) 220,000 705,000 ---------------- ---------------- ---------------- Total shareholders' equity 134,272,000 130,201,000 83,457,000 Total liabilities and shareholders' equity $ 1,378,626,000 $ 1,203,337,000 $ 1,035,279,000 ================ ================ ================
Mercantile Bank Corporation Second Quarter 2004 Results MERCANTILE BANK CORPORATION CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED June 30, 2004 June 30, 2003 June 30, 2004 June 30, 2003 ----------------- ------------------ ----------------- ---------------- (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans and leases, including fees $ 14,722,000 $ 12,223,000 $ 28,630,000 $ 23,666,000 Investment securities 1,400,000 1,186,000 2,826,000 2,402,000 Federal funds sold 8,000 23,000 27,000 39,000 Short-term investments 0 1,000 1,000 1,000 -------------- ------------- ----------------- -------------- Total interest income 16,130,000 13,433,000 31,484,000 26,108,000 INTEREST EXPENSE Deposits 4,929,000 5,165,000 9,679,000 10,401,000 Short-term borrowings 186,000 173,000 356,000 344,000 Federal Home Loan Bank advances 597,000 183,000 1,126,000 257,000 Long-term borrowings 418,000 413,000 834,000 825,000 -------------- ------------- ----------------- -------------- Total interest expense 6,130,000 5,934,000 11,995,000 11,827,000 -------------- ------------- ----------------- -------------- Net interest income 10,000,000 7,499,000 19,489,000 14,281,000 Provision for loan and lease losses 1,230,000 845,000 2,474,000 1,470,000 -------------- ------------- ----------------- -------------- Net interest income after provision for loan and lease losses 8,770,000 6,654,000 17,015,000 12,811,000 NON INTEREST INCOME Service charges on accounts 312,000 280,000 611,000 549,000 Net gain on sales of securities 0 212,000 78,000 212,000 Net gain on sales of loans 40,000 0 40,000 0 Other income 649,000 755,000 1,311,000 1,475,000 -------------- ------------- ----------------- -------------- Total non interest income 1,001,000 1,247,000 2,040,000 2,236,000 NON INTEREST EXPENSE Salaries and benefits 3,510,000 2,759,000 6,793,000 5,256,000 Occupancy 383,000 345,000 769,000 679,000 Furniture and equipment 267,000 245,000 540,000 466,000 Other expense 1,240,000 1,012,000 2,453,000 1,989,000 -------------- ------------- ----------------- -------------- Total non interest expense 5,400,000 4,361,000 10,555,000 8,390,000 -------------- ------------- ----------------- -------------- Income before federal income tax expense 4,371,000 3,540,000 8,500,000 6,657,000 Federal income tax expense 1,225,000 1,000,000 2,381,000 1,884,000 -------------- ------------- ----------------- -------------- Net income $ 3,146,000 $ 2,540,000 $ 6,119,000 $ 4,773,000 ============== ============= ================= ============== Basic earnings per share $0.44 $0.45 $0.85 $0.84 Diluted earnings per share $0.43 $0.44 $0.84 $0.82 Average shares outstanding * 7,172,633 5,692,176 7,165,744 5,687,686 Average diluted shares outstanding * 7,322,474 5,823,186 7,310,298 5,817,740
* - Adjusted for 5% stock dividend paid on May 3, 2004 Mercantile Bank Corporation Second Quarter 2004 Results MERCANTILE BANK CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
QUARTERLY YEAR-TO-DATE ---------------------------------------------------------------- ----------------------- (dollars in thousands except per 2004 2004 2003 2003 2003 share data) 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2ND QTR 2004 2003 ----------- ----------- ----------- ----------- ------------- ----------- ---------- EARNINGS Net interest income $ 10,000 9,489 8,939 8,047 7,501 19,489 14,281 Provision for loan and lease losses $ 1,230 1,244 950 1,380 845 2,474 1,470 NonInterest income $ 1,001 1,039 1,100 1,069 1,245 2,040 2,236 NonInterest expense $ 5,400 5,155 4,917 4,764 4,361 10,555 8,390 Net income $ 3,146 2,973 3,015 2,228 2,540 6,119 4,773 Basic earnings per share $ 0.44 0.42 0.42 0.38 0.45 0.85 0.84 Diluted earnings per share $ 0.43 0.41 0.42 0.37 0.44 0.84 0.82 Average shares outstanding * 7,172,633 7,158,970 7,102,196 5,792,537 5,692,176 7,165,744 5,687,686 Average diluted shares outstanding * 7,322,474 7,314,126 7,260,163 5,945,459 5,823,186 7,310,298 5,817,740 PERFORMANCE RATIOS Return on average assets 0.95% 0.96% 1.02% 0.82% 1.02% 0.95% 0.99% Return on average common equity 9.50% 9.10% 9.38% 10.22% 12.36% 9.30% 11.81% Net interest margin (fully tax-equivalent) 3.24% 3.26% 3.26% 3.19% 3.24% 3.25% 3.21% Efficiency ratio 49.09% 48.96% 48.98% 52.26% 49.86% 49.03% 50.80% Full-time equivalent employees 183 167 161 156 147 183 147 CAPITAL Average equity to average assets 10.01% 10.50% 10.91% 7.99% 8.22% 10.25% 8.40% Tier 1 leverage capital ratio 11.35% 11.87% 12.49% 12.75% 9.86% 11.35% 9.86% Tier 1 risk-based capital ratio 11.50% 11.99% 12.60% 12.69% 10.13% 11.50% 10.13% Total risk-based capital ratio 12.74% 13.23% 13.84% 13.93% 11.38% 12.74% 11.38% Book value per share $ 18.71 18.52 18.17 17.52 14.62 18.71 14.62 Cash dividend per share $ 0.09 0.09 0.08 0.08 0.08 0.18 0.16 ASSET QUALITY Gross loan charge-offs $ 263 299 72 95 297 562 429 Net loan charge-offs $ 255 286 53 56 93 541 202 Net loan charge-offs to average loans 0.09% 0.11% 0.02% 0.02% 0.04% 0.10% 0.05% Allowance for loan and lease losses $ 16,312 15,337 14,379 13,482 12,158 16,312 12,158 Allowance for losses to total loans 1.38% 1.38% 1.39% 1.39% 1.40% 1.38% 1.40% Past due and nonaccrual loans $ 3,731 3,122 1,785 287 495 3,731 495 Past due and nonaccrual loans to total loans 0.31% 0.28% 0.17% 0.03% 0.06% 0.31% 0.06% Other real estate and repossessed assets $ 0 0 0 0 0 0 0 END OF PERIOD BALANCES Loans and leases $1,185,363 1,111,152 1,035,963 972,191 866,009 1,185,363 866,009 Total earning assets (before allowance) $1,311,191 1,234,158 1,157,728 1,092,171 972,963 1,311,191 972,963 Total assets $1,378,626 1,293,935 1,203,337 1,154,388 1,035,279 1,378,626 1,035,279 Deposits $1,046,069 995,334 902,892 889,581 843,587 1,046,069 843,587 Shareholders' equity $ 134,272 133,075 130,201 122,157 83,457 134,272 83,457 AVERAGE BALANCES Loans and leases $1,144,758 1,067,710 999,618 918,966 842,370 1,106,234 814,542 Total earning assets (before allowance) $1,269,300 1,196,936 1,115,960 1,029,203 953,851 1,233,118 923,424 Total assets $1,330,507 1,250,733 1,169,521 1,083,389 1,002,714 1,290,620 970,850 Deposits $1,004,651 946,562 886,299 867,291 809,986 975,606 792,508 Shareholders' equity $ 133,211 131,361 127,511 86,510 82,410 132,284 81,513
* - Adjusted for 5% stock dividend paid on May 3, 2004