EX-99.1 2 k98962exv99w1.txt PRESS RELEASE . . . EXHIBIT 99.1 (MERCANTILE(R) BANK CORPORATION LOGO) FOR FURTHER INFORMATION: AT MERCANTILE BANK CORPORATION: Gerald R. Johnson, Jr. Charles Christmas Chairman & CEO Chief Financial Officer 616-726-1200 616-726-1202 gjohnson@mercbank.com cchristmas@mercbank.com
MERCANTILE BANK CORPORATION ANNOUNCES THIRD QUARTER NET INCOME OF $4.3 MILLION, UP 38.1% Grand Rapids, MI, October 10, 2005 -- Mercantile Bank Corporation (Nasdaq: MBWM) reported net income for the quarter ended September 30, 2005 of $4.3 million, an increase of 38.1 percent from the $3.1 million reported for the quarter ended September 30, 2004. Diluted earnings per share were $0.56 compared with $0.41 reported for the prior-year third quarter, an increase of 36.6 percent. Earnings for the third quarter of 2004 include an $845,000 ($548,000 after-tax) write-off associated with the unamortized balance of issuance costs related to the redemption of a $16.0 million trust preferred offering issued in 1999. Excluding this one-time expense, net income and diluted earnings per share for the current period increased 17.4 percent and 16.7 percent, respectively, over earnings for the prior-year quarter. For the first nine months of 2005, Mercantile reported net income of $13.4 million, an increase of 44.6 percent from the $9.2 million reported in the prior-year period. Diluted earnings per share were $1.72, an increase of 43.3 percent from the first nine months of 2004. Excluding the one-time charge incurred in 2004, net income and diluted earnings per share for the current nine-month period increased 36.5 percent and 35.4 percent, respectively, over the prior-year period. Gerald R. Johnson, Jr., Chairman and CEO, commented, "The third quarter marked another period of strong organic balance sheet and revenue growth, combined with excellent asset quality. We now have full-service banking offices in Lansing and Ann Arbor, Michigan, headed by talented teams of local bankers experienced in middle-market lending. The business communities in both cities have welcomed Mercantile for the same reasons that have contributed to our success in Grand Rapids and Holland: commercial lending expertise combined with exceptional service. Our bank's new name -- Mercantile Bank of Michigan -- reflects these expansion initiatives." Mr. Johnson commented that effective management of Mercantile's balance sheet has enabled the company to benefit over the past year from the rising interest rate environment. "Year-to-date," Mr. Johnson continued, "Our 3.48 percent net interest margin has improved 24 basis points over the same period last year. Combined with consistently strong loan growth, our momentum continues unabated." Total revenue, comprised of net interest income and non-interest income, was $15.4 million for the third quarter of 2005, an increase of 28.2 percent over the $12.0 million reported for the third quarter of 2004. Net interest income for the current quarter increased 29.6 percent over the prior-year third quarter to $14.1 million, reflecting a combination of 20.9 percent growth in average earning assets and a 23 basis point improvement in the net interest margin to 3.46 percent. Non-interest income was $1.3 million, a 15.1 percent increase over last year's third quarter. Non-interest expense for the third quarter of 2005 was $8.3 million, an increase of $1.9 million or 29.7 percent over the prior-year period, in support of extensive infrastructure expansion. Excluding the one-time charge incurred in the third quarter of 2004, non-interest expense increased 49.4 percent. Salaries and benefits, up $1.4 million or 38.8 percent, represented 73.2 percent of the dollar increase; Mercantile added 73 full-time equivalent employees (an increase of 38.4 percent) year-over-year. Occupancy, equipment and furniture expense rose 86.4 percent, also in support of corporate growth, and in particular, from the investment in the Holland, Lansing and Ann Arbor full-service banking offices and the recently-opened new headquarters building in Grand Rapids. Other non-interest expense was $2.1 million for the 2005 third quarter, a decline of 3.5 percent from the year earlier level; excluding the one-time third quarter 2004 charge, this category rose 59.1 percent in 2005, primarily from expenses associated with the company's increased size. The efficiency ratio was 54.02 percent for the third quarter of 2005, reflecting the many expansion initiatives, compared with 53.40 percent for the prior-year period, and 46.37 percent excluding the one-time third quarter 2004 charge. Mr. Johnson continued, "We have never compromised on asset quality despite our traditionally robust level of loan growth -- another indication of the caliber of our lenders and our credit controls." Net charge-offs for the third quarter of 2005 were $181,000, or 0.05 percent of average loans on an annualized basis, compared with $140,000 or 0.04 percent for the preceding quarter and $467,000, or 0.15 percent for the prior-year third quarter. Non-performing assets were $2.1 million, or 0.12 percent of total assets at September 30, 2005, compared with $3.7 million, or 0.22 percent at June 30, 2005, and $3.0 million, or 0.20 percent twelve months ago. Loan and lease loss reserves were $19.6 million, or 1.31 percent of total loans and leases, at September 30, 2005. Total assets were $1.80 billion at September 30, 2005, an increase of $321.8 million, or 21.8 percent, from last year's third quarter-end. Loan growth, virtually all of which was commercial, was $235.2 million, or 18.8 percent, during the same 12-month period; the increase was funded by a $252.4 million, or 22.0 percent, increase in deposits. Shareholders' equity at September 30, 2005 was $152.3 million, a twelve-month increase of $14.4 million, or 10.4 percent. Total shares outstanding at quarter-end were 7,587,365. Mercantile's total risk-based capital ratio at quarter-end was 12.2 percent. Mr. Johnson concluded, "The Lansing and Ann Arbor markets have been receptive to our arrival, giving us much optimism regarding additional growth opportunities going forward." About Mercantile Bank Corporation Mercantile Bank Corporation is the bank holding company for Mercantile Bank of 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 banking offices in greater Grand Rapids, and its full-service banking offices in Holland, Lansing, and Ann Arbor, Michigan. 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 Third Quarter 2005 Results MERCANTILE BANK CORPORATION CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30, 2005 2004 2004 ---------------- ---------------- ---------------- (Unaudited) (Audited) (Unaudited) ASSETS Cash and due from banks $ 38,894,000 $ 20,662,000 $ 35,304,000 Short-term investments 392,000 149,000 327,000 Federal funds sold 33,800,000 0 5,500,000 ---------------- ---------------- ---------------- Total cash and cash equivalents 73,086,000 20,811,000 41,131,000 Securities available for sale 109,966,000 93,826,000 87,625,000 Securities held to maturity 60,271,000 52,341,000 50,668,000 Federal Home Loan Bank stock 7,887,000 6,798,000 6,726,000 Total loans and leases 1,488,959,000 1,317,124,000 1,253,713,000 Allowance for loan and lease losses (19,571,000) (17,819,000) (17,045,000) ---------------- ---------------- ---------------- Total Loans and leases, net 1,469,388,000 1,299,305,000 1,236,668,000 Premises and equipment, net 30,791,000 24,572,000 21,319,000 Bank owned life insurance policies 26,075,000 23,750,000 16,966,000 Accrued interest receivable 8,039,000 5,644,000 5,638,000 Other assets 11,267,000 9,072,000 8,208,000 ---------------- ---------------- ---------------- Total assets $ 1,796,770,000 $ 1,536,119,000 $ 1,474,949,000 ================ ================ ================ LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 116,107,000 $ 101,742,000 $ 111,042,000 Interest-bearing 1,281,173,000 1,057,439,000 1,033,815,000 ---------------- ---------------- ---------------- Total deposits 1,397,280,000 1,159,181,000 1,144,857,000 Securities sold under agreement to repurchase 62,994,000 56,317,000 46,691,000 Federal funds purchased 0 15,000,000 0 Federal Home Loan Bank advances 135,000,000 120,000,000 120,000,000 Subordinated debentures 32,990,000 32,990,000 16,495,000 Other borrowed money 2,211,000 1,609,000 1,508,000 Accrued expenses and other liabilities 13,975,000 9,405,000 7,463,000 ---------------- ---------------- ---------------- Total liabilities 1,644,450,000 1,394,502,000 1,337,014,000 SHAREHOLDERS' EQUITY Common stock 148,472,000 131,010,000 130,935,000 Retained earnings 4,287,000 10,475,000 6,635,000 Accumulated other comprehensive income (loss) (439,000) 132,000 365,000 ---------------- ---------------- ---------------- Total shareholders' equity 152,320,000 141,617,000 137,935,000 Total liabilities and shareholders' equity $ 1,796,770,000 $ 1,536,119,000 $ 1,474,949,000 ================ ================ ================
Mercantile Bank Corporation Third Quarter 2005 Results MERCANTILE BANK CORPORATION CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004 ------------------ ------------------ ------------------ ------------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans and leases, including fees $ 24,570,000 $ 16,193,000 $ 66,592,000 $ 44,823,000 Investment securities 2,113,000 1,598,000 6,036,000 4,424,000 Federal funds sold 76,000 26,000 176,000 53,000 Short-term investments 5,000 2,000 11,000 3,000 -------------- -------------- -------------- -------------- Total interest income 26,764,000 17,819,000 72,815,000 49,303,000 INTEREST EXPENSE Deposits 10,554,000 5,706,000 26,886,000 15,385,000 Short-term borrowings 475,000 220,000 1,188,000 576,000 Federal Home Loan Bank advances 1,148,000 652,000 3,011,000 1,778,000 Long-term borrowings 515,000 385,000 1,395,000 1,219,000 -------------- -------------- -------------- -------------- Total interest expense 12,692,000 6,963,000 32,480,000 18,958,000 -------------- -------------- -------------- -------------- Net interest income 14,072,000 10,856,000 40,335,000 30,345,000 Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000 -------------- -------------- -------------- -------------- Net interest income after provision for loan and lease losses 13,177,000 9,656,000 37,815,000 26,671,000 NON INTEREST INCOME Service charges on accounts 369,000 319,000 1,048,000 930,000 Net gain on sales of securities 0 0 0 78,000 Net gain on sales of loans 56,000 135,000 84,000 175,000 Other income 905,000 702,000 2,626,000 2,013,000 -------------- -------------- -------------- -------------- Total non interest income 1,330,000 1,156,000 3,758,000 3,196,000 NON INTEREST EXPENSE Salaries and benefits 4,983,000 3,589,000 13,547,000 10,382,000 Occupancy 805,000 401,000 1,889,000 1,170,000 Furniture and equipment 459,000 277,000 1,109,000 817,000 Other expense 2,073,000 2,148,000 5,770,000 4,601,000 -------------- -------------- -------------- -------------- Total non interest expense 8,320,000 6,415,000 22,315,000 16,970,000 -------------- -------------- -------------- -------------- Income before federal income tax expense 6,187,000 4,397,000 19,258,000 12,897,000 Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000 -------------- -------------- -------------- -------------- Net income $ 4,300,000 $ 3,114,000 $ 13,352,000 $ 9,233,000 ============== ============== ============== ============== Basic earnings per share $ 0.57 $ 0.41 $ 1.76 $ 1.23 Diluted earnings per share $ 0.56 $ 0.41 $ 1.72 $ 1.20 Average shares outstanding * 7,585,879 7,534,833 7,577,339 7,527,657 Average diluted shares outstanding * 7,732,872 7,684,262 7,747,293 7,682,335
Mercantile Bank Corporation Third Quarter 2005 Results MERCANTILE BANK CORPORATION CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited)
QUARTERLY YEAR-TO-DATE -------------------------------------------------------------- ----------------------- 2005 2005 2005 2004 2004 (dollars in thousands except per share data) 3RD QTR 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2005 2004 ---------- ---------- ---------- ---------- ---------- ---------- ---------- EARNINGS Net interest income $ 14,072 13,608 12,655 12,082 10,856 40,335 30,345 Provision for loan and lease losses $ 895 900 725 1,000 1,200 2,520 3,674 NonInterest income $ 1,330 1,218 1,210 1,106 1,156 3,758 3,196 NonInterest expense $ 8,320 7,145 6,850 6,228 6,415 22,315 16,970 Net income $ 4,300 4,690 4,362 4,488 3,114 13,352 9,233 Basic earnings per share $ 0.57 0.62 0.58 0.59 0.41 1.76 1.23 Diluted earnings per share $ 0.56 0.61 0.57 0.58 0.41 1.72 1.20 Average shares outstanding 7,585,879 7,579,437 7,566,638 7,549,053 7,534,833 7,577,339 7,527,657 Average diluted shares outstanding 7,732,872 7,720,821 7,712,820 7,717,686 7,684,262 7,747,293 7,682,335 PERFORMANCE RATIOS Return on average assets 0.98% 1.13% 1.11% 1.18% 0.86% 1.07% 0.92% Return on average common equity 11.33% 12.80% 12.36% 12.74% 9.06% 12.15% 9.23% Net interest margin (fully tax-equivalent) 3.46% 3.52% 3.46% 3.43% 3.23% 3.48% 3.24% Efficiency ratio 54.02% 48.19% 49.41% 47.22% 53.40% 50.61% 50.60% Full-time equivalent employees 263 237 212 194 190 263 190 CAPITAL Average equity to average assets 8.65% 8.81% 8.99% 9.29% 9.54% 8.81% 9.99% Tier 1 leverage capital ratio 10.62% 10.86% 11.13% 11.53% 10.75% 10.62% 10.75% Tier 1 risk-based capital ratio 11.07% 11.40% 11.53% 11.82% 10.99% 11.07% 10.99% Total risk-based capital ratio 12.24% 12.58% 12.71% 13.03% 12.21% 12.24% 12.21% Book value per share $ 20.08 19.63 19.04 18.71 18.26 20.08 18.26 Cash dividend per share $ 0.11 0.11 0.10 0.09 0.09 0.32 0.27 ASSET QUALITY Gross loan charge-offs $ 338 211 493 262 581 1,042 1,143 Net loan charge-offs $ 181 140 447 226 467 768 1,008 Net loan charge-offs to average loans 0.05% 0.04% 0.13% 0.07% 0.15% 0.07% 0.12% Allowance for loan and lease losses $ 19,571 18,856 18,097 17,819 17,045 19,571 17,045 Allowance for losses to total loans 1.31% 1.32% 1.32% 1.35% 1.36% 1.31% 1.36% Nonperforming loans $ 1,926 2,535 4,016 2,842 2,985 1,926 2,985 Other real estate and repossessed assets $ 195 1,177 1,177 0 0 195 0 Nonperforming assets to total assets 0.12% 0.22% 0.31% 0.19% 0.20% 0.12% 0.20% END OF PERIOD BALANCES Loans and leases $1,488,959 1,424,463 1,374,577 1,317,124 1,253,713 1,488,959 1,253,713 Total earning assets (before allowance) $1,701,275 1,620,632 1,575,697 1,470,238 1,404,559 1,701,275 1,404,559 Total assets $1,796,770 1,709,153 1,664,876 1,536,119 1,474,949 1,796,770 1,474,949 Deposits $1,397,280 1,321,844 1,290,017 1,159,181 1,144,857 1,397,280 1,144,857 Shareholders' equity $ 152,320 149,200 144,501 141,617 137,935 152,320 137,935 AVERAGE BALANCES Loans and leases $1,460,792 1,402,469 1,345,336 1,276,913 1,219,325 1,403,289 1,144,206 Total earning assets (before allowance) $1,647,294 1,582,453 1,511,891 1,428,121 1,361,985 1,581,042 1,276,387 Total assets $1,740,203 1,669,202 1,591,764 1,504,526 1,429,059 1,667,600 1,337,686 Deposits $1,339,486 1,281,652 1,214,890 1,150,606 1,094,166 1,279,132 1,015,415 Shareholders' equity $ 150,540 146,997 143,169 139,744 136,290 146,926 133,629
Mercantile Bank Corporation Third Quarter 2005 Results MERCANTILE BANK CORPORATION Reconciliation of GAAP-Based Operating Performance Measures and Adjusted Operating Performance Measures The following schedule reflects the adjustment of GAAP-based operating results and certain performance measures for the one-time charge associated with the unamortized balance of issuance costs of trust preferred securities that were redeemed during the third quarter of 2004. Management believes excluding the impact of the one-time charge from 2004 operating results and performance measures allows a more meaningful comparison of 2005 results to 2004 results.
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004 ------------------ ------------------ ------------------ ------------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) GAAP-BASED OPERATING PERFORMANCE MEASURES Net interest income $ 14,072,000 $ 10,856,000 $ 40,335,000 $ 30,345,000 Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000 Noninterest income 1,330,000 1,156,000 3,758,000 3,196,000 Noninterest expense 8,320,000 6,415,000 22,315,000 16,970,000 -------------- -------------- -------------- -------------- Income before federal income tax expense 6,187,000 4,397,000 19,258,000 12,897,000 Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000 -------------- -------------- -------------- -------------- Net income 4,300,000 3,114,000 13,352,000 9,233,000 Basic earnings per share $ 0.57 $ 0.41 $ 1.76 $ 1.23 Diluted earnings per share 0.56 0.41 1.72 1.20 Return on average assets 0.98% 0.86% 1.07% 0.92% Return on average equity 11.33% 9.06% 12.15% 9.23% Net interest margin 3.46% 3.23% 3.48% 3.24% Efficiency ratio 54.02% 53.40% 50.61% 50.60% ADJUSTED OPERATING PERFORMANCE MEASURES Net interest income $ 14,072,000 $ 10,856,000 $ 40,335,000 $ 30,345,000 Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000 Noninterest income 1,330,000 1,156,000 3,758,000 3,196,000 Noninterest expense 8,320,000 6,415,000 22,315,000 16,970,000 Elimination of one-time charge associated with redemption of trust preferred securities 0 845,000 0 845,000 -------------- -------------- -------------- -------------- Income before federal income tax expense 6,187,000 5,242,000 19,258,000 13,742,000 Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000 Increase in federal income tax expense due to elimination of one-time charge 0 297,000 0 297,000 -------------- -------------- -------------- -------------- Net income 4,300,000 3,662,000 13,352,000 9,781,000 Basic earnings per share $ 0.57 $ 0.49 $ 1.76 $ 1.30 Diluted earnings per share 0.56 0.48 1.72 1.27 Return on average assets 0.98% 1.02% 1.07% 0.98% Return on average equity 11.33% 10.66% 12.15% 9.78% Net interest margin 3.46% 3.23% 3.48% 3.24% Efficiency ratio 54.02% 46.37% 50.61% 48.08%