GRAND RAPIDS, Mich., April 12, 2006 (PRIMEZONE) -- Mercantile Bank Corporation (Nasdaq:MBWM) reported net income for the first quarter of 2006 of $4.9 million, an increase of 13.0 percent from the $4.4 million reported for the first quarter of 2005. Diluted earnings per share were $0.64 compared with $0.57 reported for the year-ago quarter, an increase of 12.3 percent.
Gerald R. Johnson, Jr., Mercantile's Chairman and CEO, stated, "We are pleased to report strong operating results amidst our ongoing expansion eastward into Lansing and Ann Arbor. While these initiatives have increased expenses near-term, we believe the growth opportunities to be generated will repay our investment many times over. Loan growth remains strong, our margin is stable, and we are already returning to efficiency levels more historically in line with previous performance."
Total revenue, comprised of net interest income and non-interest income, was $16.3 million for the first quarter of 2006, an increase of 17.9 percent over the $13.9 million reported for the prior-year first quarter. Net interest income increased 19.3 percent over the 2005 period to $15.1 million, reflecting a combination of 17.6 percent growth in average earning assets and a five basis point improvement in the net interest margin to 3.51 percent. Mr. Johnson noted that the Company's net interest margin over the last twelve months has remained relatively stable, within a narrow band, despite deposit rate pressures and competition for quality loans. Non-interest income for the first quarter of 2006 was $1.2 million, a 2.7 percent increase over the first quarter of 2005.
Non-interest expense for the first quarter of 2006 was $8.0 million, an increase of $1.2 million, or 16.9 percent, over the prior year period. The increase supported extensive infrastructure expansion, in particular for the investment in two new full-service banking offices in Lansing and Ann Arbor, as well as the recently-opened headquarters building in Grand Rapids. Salaries and benefits, up $0.6 million, or 14.6 percent, accounted for about half of the dollar increase; Mercantile added 63 full-time equivalent employees (an increase of 29.7 percent, to 275) over the past twelve months. The remainder of the increase consisted predominantly of occupancy, equipment and furniture expense, which together rose 67.7 percent, also in support of infrastructure expansion.
The efficiency ratio was 48.99 percent for the first quarter of 2006, a 322 basis point improvement from the 52.21 percent reported in the fourth quarter of 2005, and a 42 basis point improvement from the year-ago quarter. Mr. Johnson continued, "We have completed the major expansionary phase of our operations for the near future, marked by an improvement in our operating efficiency reflective of our highly disciplined cost controls. We believe it is significant to note that, in the first quarter of 2005, we had incurred no expenses relative to our moves to our new corporate headquarters and into the Lansing and Ann Arbor markets."
According to Mr. Johnson, "Overall asset quality remains strong. Compared with our peer group, our portfolio continues to perform well above average." However, during the quarter, Mercantile identified eleven related loans totaling approximately $2.6 million that had been requested to finance the purchase of vacant residential real estate, where the purpose, collateral and structure of the loans does not appear to coincide with what was portrayed to the Bank in the loan application process. These loans have been placed on non-accrual. The Bank is currently pursuing various legal remedies against the multiple parties to these transactions and expects the real estate collateral it received in connection with the loans to eventually be liquidated as part of the collection process. While it is still early in the litigation and evaluation process, management has allocated a portion of the allowance for loan losses to these specific credits based on their current assessment of the value of the collateral and the other collection avenues being pursued.
Net charge-offs for the first quarter of 2006 were $0.8 million, or an annualized 0.19 percent of average loans, compared with $0.4 million, or an annualized 0.13 percent, for the first quarter of 2005. Non-performing assets were $8.8 million, or 0.46 percent of total assets at March 31, 2006, compared with $4.0 million, or 0.22 percent of assets, at December 31, 2005, and $5.2 million, or 0.31 percent, at March 31, 2005. Loan and lease loss reserves were $21.0 million, or 1.30 percent of total loans and leases at March 31, 2006.
Total assets were $1.90 billion at March 31, 2006, an increase of $232.1 million, or 13.9 percent, from March 31, 2005. Earning asset growth was $225.2 million, or 14.3 percent, during this twelve-month period, with loans increasing $237.8 million, or 17.3 percent. The increase in earning assets was primarily funded by a $192.2 million, or 14.9 percent, increase in deposits.
Shareholders' equity at March 31, 2006 was $158.9 million, a twelve-month increase of $14.4 million, or 9.9 percent. Total shares outstanding at quarter-end were 7,596,980. Mercantile's total risk-based capital ratio was 11.91 percent at quarter-end. Mr. Johnson concluded, "We look forward to leveraging the new opportunities that arise from our growing reputation in the Ann Arbor and Lansing markets. We are committed to establishing Mercantile as the premier provider of financial services in all of our markets."
About Mercantile Bank Corporation
Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Headquartered in Grand Rapids, the Bank provides a wide variety of commercial banking services 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, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
(dollars in thousands except per share data)
Quarterly
------------------------------------------------------
1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr
2006 2005 2005 2005 2005
---------- --------- --------- --------- ---------
EARNINGS
--------
Net interest
income $ 15,099 14,957 14,072 13,608 12,655
Provision for
loan and
lease losses $ 1,225 1,270 895 900 725
Noninterest
income $ 1,243 1,903 1,330 1,218 1,210
Noninterest
expense $ 8,006 8,802 8,320 7,145 6,850
Net income $ 4,929 4,549 4,300 4,690 4,362
Basic earnings
per share $ 0.65 0.60 0.57 0.62 0.58
Diluted
earnings per
share $ 0.64 0.59 0.56 0.61 0.57
Average
shares
outstanding 7,594,458 7,589,174 7,585,879 7,579,437 7,566,638
Average
diluted
shares
outstanding 7,715,316 7,718,076 7,732,872 7,720,821 7,712,820
PERFORMANCE
RATIOS
-----------
Return on
average
assets 1.07% 1.00% 0.98% 1.13% 1.11%
Return on
average
common equity 12.74% 11.76% 11.33% 12.80% 12.36%
Net interest
margin (fully
tax-equiva-
lent) 3.51% 3.54% 3.46% 3.52% 3.46%
Efficiency
ratio 48.99% 52.21% 54.02% 48.19% 49.41%
Full-time
equivalent
employees 275 273 263 237 212
CAPITAL
-------
Period-ending
equity to
assets 8.37% 8.44% 8.48% 8.73% 8.68%
Tier 1
leverage
capital ratio 10.29% 10.45% 10.62% 10.86% 11.13%
Tier 1 risk-
based capital
ratio 10.74% 10.82% 11.07% 11.40% 11.53%
Total risk-
based capital
ratio 11.91% 12.00% 12.24% 12.58% 12.71%
Book value per
share $ 20.91 20.44 20.08 19.63 19.04
Cash dividend
per share $ 0.13 0.11 0.11 0.11 0.10
ASSET QUALITY
-------------
Gross loan
charge-offs $ 780 350 338 211 493
Net loan
charge-offs $ 756 315 181 140 447
Net loan
charge-offs
to average
loans 0.19% 0.08% 0.05% 0.04% 0.13%
Allowance for
loan and
lease losses $ 20,995 20,527 19,571 18,856 18,097
Allowance for
loan losses
to total
loans 1.30% 1.31% 1.31% 1.32% 1.32%
Nonperforming
loans $ 8,791 3,995 1,926 2,535 4,016
Other real
estate and
repossessed
assets $ 0 0 195 1,177 1,177
Nonperforming
assets to
total assets 0.46% 0.22% 0.12% 0.22% 0.31%
END OF PERIOD
BALANCES
-------------
Loans and
leases $1,612,351 1,561,812 1,488,959 1,424,463 1,374,577
Total earning
assets
(before
allowance) $1,800,909 1,743,971 1,701,275 1,620,632 1,575,697
Total assets $1,896,978 1,838,210 1,796,770 1,709,153 1,664,876
Deposits $1,482,219 1,419,352 1,397,280 1,321,844 1,290,017
Shareholder's
equity $ 158,863 155,125 152,320 149,200 144,501
AVERAGE
BALANCES
--------
Loans and
leases $1,581,617 1,519,616 1,460,792 1,402,469 1,345,336
Total earning
assets
(before
allowance) $1,778,694 1,709,612 1,647,294 1,582,453 1,511,891
Total assets $1,871,945 1,804,067 1,740,203 1,669,202 1,591,764
Deposits $1,459,266 1,394,023 1,339,486 1,281,652 1,214,890
Shareholder's
equity $ 156,901 153,522 150,540 146,997 143,169
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED
March 31,
--------------------------
2006 2005
----------- -----------
(Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $28,727,000 $19,772,000
Investment securities 2,237,000 1,887,000
Federal funds sold 132,000 44,000
Short-term investments 3,000 2,000
----------- -----------
Total interest income 31,099,000 21,705,000
INTEREST EXPENSE
Deposits 13,485,000 7,440,000
Short-term borrowings 601,000 338,000
Federal Home Loan Bank advances 1,315,000 857,000
Long-term borrowings 599,000 415,000
----------- -----------
Total interest expense 16,000,000 9,050,000
----------- -----------
Net interest income 15,099,000 12,655,000
Provision for loan and lease losses 1,225,000 725,000
----------- -----------
Net interest income after provision
for loan and lease losses 13,874,000 11,930,000
NON INTEREST INCOME
Service charges on accounts 316,000 338,000
Net gain on sales of securities 0 0
Net gain on sales of commercial loans 29,000 0
Other income 898,000 872,000
----------- -----------
Total non interest income 1,243,000 1,210,000
NON INTEREST EXPENSE
Salaries and benefits 4,765,000 4,159,000
Occupancy 830,000 518,000
Furniture and equipment 522,000 288,000
Other expense 1,889,000 1,885,000
----------- -----------
Total non interest expense 8,006,000 6,850,000
----------- -----------
Income before federal income tax 7,111,000 6,290,000
Federal income tax expense 2,182,000 1,928,000
----------- -----------
Net income $ 4,929,000 $ 4,362,000
=========== ===========
Basic earnings per share $ 0.65 $ 0.58
Diluted earnings per share $ 0.64 $ 0.57
Average shares outstanding 7,594,458 7,566,638
Average diluted shares outstanding 7,715,316 7,712,820
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, MARCH 31,
2006 2005 2005
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due
from banks $ 38,251,000 $ 36,208,000 $ 39,255,000
Short-term
investments 389,000 545,000 942,000
Federal funds sold 0 0 33,400,000
-------------- -------------- --------------
Total cash and
cash equivalents 38,640,000 36,753,000 73,597,000
Securities available
for sale 118,103,000 112,961,000 102,733,000
Securities held
to maturity 62,179,000 60,766,000 57,023,000
Federal Home Loan
Bank stock 7,887,000 7,887,000 7,022,000
Total loans
and leases 1,612,351,000 1,561,812,000 1,374,577,000
Allowance for loan
and lease losses (20,995,000) (20,527,000) (18,097,000)
-------------- -------------- --------------
Total loans and
leases, net 1,591,356,000 1,541,285,000 1,356,480,000
Premises and
equipment, net 29,885,000 30,206,000 26,576,000
Bank owned life
insurance policies 28,360,000 28,071,000 23,986,000
Accrued interest
receivable 9,374,000 8,274,000 6,883,000
Other assets 11,194,000 12,007,000 10,576,000
-------------- -------------- --------------
Total assets $1,896,978,000 $1,838,210,000 $1,664,876,000
============== ============== ==============
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Noninterest-
bearing $ 114,880,000 $ 120,828,000 $ 135,544,000
Interest-bearing 1,367,339,000 1,298,524,000 1,154,473,000
-------------- -------------- --------------
Total deposits 1,482,219,000 1,419,352,000 1,290,017,000
Securities sold
under agreements
to repurchase 67,956,000 72,201,000 60,208,000
Federal funds
purchased 6,600,000 9,600,000 0
Federal Home Loan
Bank advances 130,000,000 130,000,000 125,000,000
Subordinated
debentures 32,990,000 32,990,000 32,990,000
Other borrowed
money 2,791,000 2,347,000 1,916,000
Accrued expenses and
other liabilities 15,559,000 16,595,000 10,244,000
-------------- -------------- --------------
Total liabilities 1,738,115,000 1,683,085,000 1,520,375,000
SHAREHOLDERS' EQUITY
Common stock 148,583,000 148,533,000 131,113,000
Retained earnings 12,018,000 8,000,000 14,116,000
Accumulated other
comprehensive
income (loss) (1,738,000) (1,408,000) (728,000)
-------------- -------------- --------------
Total shareholders'
equity 158,863,000 155,125,000 144,501,000
Total liabilities
and shareholders'
equity $1,896,978,000 $1,838,210,000 $1,664,876,000
============== ============== ==============