GRAND RAPIDS, Mich., July 12, 2006 (PRIMEZONE) -- Mercantile Bank Corporation (Nasdaq:MBWM) reported net income for the second quarter of 2006 of $5.1 million, an increase of 9.0 percent from the $4.7 million reported for the second quarter of 2005. Diluted earnings per share were $0.63 compared with $0.58 reported for the year-ago quarter, an increase of 8.6 percent. Second quarter performance reflects a continuation of first quarter trends, with solid loan growth supported by stable margins and good expense control.
For the first six months of 2006, Mercantile reported net income of $10.0 million, an increase of 10.9 percent from the $9.1 million reported in the prior-year period. Diluted earnings per share were $1.24, an increase of 10.7 percent from the first six months of 2005.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "We continue to identify opportunities for quality loan growth in this challenging environment, and we are particularly pleased with the success we have achieved in Lansing and Ann Arbor. As we gain recognition for our expertise and dedication to customer service, we are finding these new markets to be increasingly responsive and productive in terms of both loan and deposit growth. Our disciplined approach to balance sheet management continues to make an important contribution to earnings growth, as does our more normalized level of operating expense."
Total revenue, comprised of net interest income and non-interest income, was $16.9 million for the second quarter of 2006, an increase of 14.1 percent over the $14.8 million reported for the prior-year second quarter. Net interest income increased 15.0 percent over the 2005 period to $15.6 million, reflecting average earning assets growth of 16.4 percent, offset by a five basis point decline in net interest margin to 3.47 percent from year-ago levels. Year-to-date, the margin is unchanged from the prior year, at 3.49 percent, despite deposit rate pressures and competition for quality loans. Non-interest income for the second quarter of 2006 was $1.3 million, a 4.7 percent increase over the second quarter of 2005.
Non-interest expense for the second quarter of 2006 was $8.0 million, an increase of $0.9 million, or 12.4 percent, over the prior-year period, but virtually unchanged from the first quarter of 2006. According to Mr. Johnson, "Our expansion into Lansing and Ann Arbor was executed with a high degree of efficiency. However, the majority of costs associated with these initiatives did not occur until the second half of 2005, and the company's move into its new corporate headquarters did not begin to impact overhead expenses until May, 2005." Mr. Johnson also noted that operating expenses and staffing levels have remained stable since year-end 2005. The efficiency ratio was 47.5 percent for the second quarter of 2006, a 70 basis point improvement from the year-ago quarter. For the six-month 2006 period, the ratio was 48.2 percent compared with 48.8 percent for the prior-year period.
"We remain focused on asset quality," added Mr. Johnson. "Although our charge-off levels and nonperforming assets were flat relative to the first quarter of 2006, we are aggressively addressing the uptick in problem assets since year-end 2005. In our view, this is a short-term situation and not an indication of a secular trend. Mercantile's credit performance has traditionally ranked in the top quartile of community banks throughout its eight-year history, and that is where we want to return as quickly as possible."
Mr. Johnson continued, "We are working diligently to strengthen our administrative procedures and enhance our credit culture so we can sustain our responsiveness to customer needs as we grow. Through both strategic attrition as well as new additions to staff during the second quarter, we have already implemented positive changes to our credit and lending culture, including the hiring of a seasoned credit professional with over 30 years of experience to fill the newly-created position of SVP, Credit Administration."
Net loan charge-offs for the second quarter of 2006 were $1.0 million, equivalent to 0.24 percent of average loans on an annualized basis, compared with $0.8 million or 0.19 percent of annualized average loans in the first quarter of 2006, and $0.1 million or 0.04 percent for the second quarter of 2005. Non-performing assets were $8.7 million, or 0.44 percent of total assets at June 30, 2006, compared with $8.8 million, or 0.46 percent of assets at March 31, 2006, and $3.7 million or 0.22 percent of assets at June 30, 2005. Loan and lease loss reserves were $21.5 million, or 1.29 percent of total loans and leases at June 30, 2006.
Total assets were $1.97 billion at June 30, 2006, an increase of $260.3 million, or 15.2 percent, from June 30, 2005. Earning asset growth was $238.8 million, or 14.7 percent, during this twelve-month period, with loans up $246.0 million, or 17.3 percent. The increase in earning assets was primarily funded by a $226.1 million, or 17.1 percent, increase in deposits.
Shareholders' equity at June 30, 2006 was $161.7 million, a twelve-month increase of $12.5 million, or 8.4 percent. Total shares outstanding at quarter-end were 8,014,044. Mercantile's total risk-based capital ratio was 11.7 percent at quarter-end.
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
------------------------------------------------------
2006 2006 2005 2005 2005
2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr
---------- --------- --------- --------- ---------
EARNINGS
Net interest
income $ 15,646 15,099 14,957 14,072 13,608
Provision for
loan and
lease
losses $ 1,500 1,225 1,270 895 900
NonInterest
income $ 1,275 1,243 1,903 1,330 1,218
NonInterest
expense $ 8,031 8,006 8,802 8,320 7,145
Net income $ 5,111 4,929 4,549 4,300 4,690
Basic earnings
per share $ 0.64 0.62 0.57 0.54 0.59
Diluted
earnings per
share $ 0.63 0.61 0.56 0.53 0.58
Average shares
out-
standing(a) 8,000,998 7,974,180 7,968,632 7,965,172 7,958,408
Average diluted
shares out-
standing(a) 8,119,820 8,102,052 8,102,195 8,115,575 8,099,740
PERFORMANCE
RATIOS
Return on
average
assets 1.06% 1.07% 1.00% 0.98% 1.13%
Return on
average
common equity 12.81% 12.74% 11.76% 11.33% 12.80%
Net interest
margin (fully
tax-equivalent) 3.47% 3.51% 3.54% 3.46% 3.52%
Efficiency
ratio 47.46% 48.99% 52.21% 54.02% 48.19%
Full-time
equivalent
employees 277 275 273 263 237
CAPITAL
Period-ending
equity to
assets 8.21% 8.37% 8.44% 8.48% 8.73%
Tier 1 leverage
capital ratio 10.15% 10.29% 10.45% 10.62% 10.86%
Tier 1 risk-
based capital
ratio 10.52% 10.74% 10.82% 11.07% 11.40%
Total risk-
based capital
ratio 11.66% 11.91% 12.00% 12.24% 12.58%
Book value per
share $ 20.17 19.86 19.42 19.08 18.65
Cash dividend
per share $ 0.13 0.12 0.11 0.11 0.11
ASSET QUALITY
Gross loan
charge-offs $ 1,083 780 350 338 211
Net loan
charge-offs $ 988 756 315 181 140
Net loan
charge-offs
to average
loans 0.24% 0.19% 0.08% 0.05% 0.04%
Allowance for
loan and
lease losses $ 21,507 20,995 20,527 19,571 18,856
Allowance for
losses to
total loans 1.29% 1.30% 1.31% 1.31% 1.32%
Nonperforming
loans $ 8,530 8,791 3,995 1,926 2,535
Other real
estate and
repossessed
assets $ 150 0 0 195 1,177
Nonperforming
assets to
total assets 0.44% 0.46% 0.22% 0.12% 0.22%
END OF PERIOD
BALANCES
Loans and
leases $1,670,471 1,612,351 1,561,812 1,488,959 1,424,463
Total earning
assets (before
allowance) $1,859,411 1,800,909 1,743,971 1,701,275 1,620,632
Total assets $1,969,429 1,896,974 1,838,210 1,796,770 1,709,153
Deposits $1,547,912 1,482,219 1,419,352 1,397,280 1,321,844
Shareholders'
equity $ 161,660 158,910 155,125 152,320 149,200
AVERAGE BALANCES
Loans and
leases $1,643,022 1,581,617 1,519,616 1,460,792 1,402,469
Total earning
assets (before
allowance) $1,841,666 1,778,694 1,709,612 1,647,294 1,582,453
Total assets $1,939,413 1,871,945 1,804,067 1,740,203 1,669,202
Deposits $1,521,037 1,459,266 1,394,023 1,339,486 1,281,652
Shareholders'
equity $ 160,039 156,901 153,522 150,540 146,997
Year-To-Date
------------------------
2006 2005
---------- -----------
EARNINGS
Net interest income $ 30,745 26,263
Provision for loan and lease losses $ 2,725 1,625
NonInterest income $ 2,518 2,428
NonInterest expense $ 16,037 13,995
Net income $ 10,040 9,052
Basic earnings per share $ 1.26 1.14
Diluted earnings per share $ 1.24 1.12
Average shares outstanding(a) 7,987,616 7,951,726
Average diluted shares outstanding(a) 8,111,449 8,094,716
PERFORMANCE RATIOS
Return on average assets 1.06% 1.12%
Return on average common equity 12.77% 12.58%
Net interest margin (fully tax-equivalent) 3.49% 3.49%
Efficiency ratio 48.21% 48.78%
Full-time equivalent employees 277 237
CAPITAL
Period-ending equity to assets 8.21% 8.73%
Tier 1 leverage capital ratio 10.15% 10.86%
Tier 1 risk-based capital ratio 10.52% 11.40%
Total risk-based capital ratio 11.66% 12.58%
Book value per share $ 20.17 18.65
Cash dividend per share $ 0.25 0.21
ASSET QUALITY
Gross loan charge-offs $ 1,863 704
Net loan charge-offs $ 1,744 587
Net loan charge-offs to average loans 0.22% 0.09%
Allowance for loan and lease losses $ 21,507 18,856
Allowance for losses to total loans 1.29% 1.32%
Nonperforming loans $ 8,528 2,535
Other real estate and repossessed assets $ 150 1,177
Nonperforming assets to total assets 0.44% 0.22%
END OF PERIOD BALANCES
Loans and leases $1,670,471 1,424,463
Total earning assets (before allowance) $ 1,859,411 1,620,632
Total assets $1,969,429 1,709,153
Deposits $1,547,912 1,321,844
Shareholders' equity $ 161,660 149,200
AVERAGE BALANCES
Loans and leases $1,612,489 1,374,061
Total earning assets (before allowance) $ 1,810,354 1,547,367
Total assets $1,905,865 1,630,697
Deposits $1,490,322 1,248,455
Shareholders' equity $ 158,487 145,093
(a) - Adjusted for 5% stock dividend paid on May 16, 2006
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
------------------------ ------------------------
2006 2005 2006 2005
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases,
including fees $31,304,000 $22,250,000 $60,031,000 $42,022,000
Investment
securities 2,299,000 2,036,000 4,536,000 3,923,000
Federal funds
sold 139,000 56,000 271,000 100,000
Short-term
investments 4,000 4,000 7,000 6,000
----------- ----------- ----------- -----------
Total interest
income 33,746,000 24,346,000 64,845,000 46,051,000
INTEREST EXPENSE
Deposits 15,358,000 8,892,000 28,843,000 16,332,000
Short-term
borrowings 720,000 375,000 1,321,000 713,000
Federal Home Loan
Bank advances 1,369,000 1,006,000 2,684,000 1,863,000
Long-term
borrowings 653,000 465,000 1,252,000 880,000
----------- ----------- ----------- -----------
Total interest
expense 18,100,000 10,738,000 34,100,000 19,788,000
----------- ----------- ----------- -----------
Net interest
income 15,646,000 13,608,000 30,745,000 26,263,000
Provision for loan
and lease losses 1,500,000 900,000 2,725,000 1,625,000
----------- ----------- ----------- -----------
Net interest
income after
provision for
loan and lease
losses 14,146,000 12,708,000 28,020,000 24,638,000
NON INTEREST
INCOME
Service charges
on accounts 329,000 341,000 645,000 679,000
Net gain on sales
of commercial
loans 0 28,000 29,000 28,000
Other income 946,000 849,000 1,844,000 1,721,000
----------- ----------- ----------- -----------
Total non
interest income 1,275,000 1,218,000 2,518,000 2,428,000
NON INTEREST
EXPENSE
Salaries and
benefits 4,683,000 4,405,000 9,448,000 8,564,000
Occupancy 772,000 566,000 1,602,000 1,084,000
Furniture and
equipment 515,000 362,000 1,037,000 650,000
Other expense 2,061,000 1,812,000 3,950,000 3,697,000
----------- ----------- ----------- -----------
Total non
interest expense 8,031,000 7,145,000 16,037,000 13,995,000
----------- ----------- ----------- -----------
Income before
federal income
tax expense 7,390,000 6,781,000 14,501,000 13,071,000
Federal income
tax expense 2,279,000 2,091,000 4,461,000 4,019,000
----------- ----------- ----------- -----------
Net income $ 5,111,000 $ 4,690,000 $10,040,000 $ 9,052,000
=========== =========== =========== ===========
Basic earnings
per share $ 0.64 $ 0.59 $ 1.26 $ 1.14
Diluted earnings
per share $ 0.63 $ 0.58 $ 1.24 $ 1.12
Average shares
outstanding(a) 8,000,998 7,958,408 7,987,616 7,951,726
Average diluted
shares out-
standing(a) 8,119,820 8,099,740 8,111,449 8,094,716
(a) - Adjusted for 5% stock dividend paid on May 16, 2006
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, JUNE 30,
2006 2005 2005
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due
from banks $ 47,142,000 $ 36,208,000 $ 35,462,000
Short-term
investments 271,000 545,000 597,000
Federal funds sold 0 0 21,400,000
-------------- -------------- --------------
Total cash and
cash equivalents 47,413,000 36,753,000 57,459,000
Securities available
for sale 119,023,000 112,961,000 107,896,000
Securities held
to maturity 61,759,000 60,766,000 58,851,000
Federal Home Loan
Bank stock 7,887,000 7,887,000 7,425,000
Total loans and
leases 1,670,471,000 1,561,812,000 1,424,463,000
Allowance for loan
and lease losses (21,507,000) (20,527,000) (18,856,000)
-------------- -------------- --------------
Total Loans and
leases, net 1,648,964,000 1,541,285,000 1,405,607,000
Premises and
equipment, net 30,824,000 30,206,000 29,118,000
Bank owned life
insurance policies 29,852,000 28,071,000 24,669,000
Accrued interest
receivable 9,047,000 8,274,000 6,550,000
Other assets 14,660,000 12,007,000 11,578,000
-------------- -------------- --------------
Total assets $1,969,429,000 $1,838,210,000 $1,709,153,000
-------------- -------------- --------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 129,483,000 $ 120,828,000 $ 136,830,000
Interest-bearing 1,418,429,000 1,298,524,000 1,185,014,000
-------------- -------------- --------------
Total deposits 1,547,912,000 1,419,352,000 1,321,844,000
Securities sold
under agreement to
repurchase 64,431,000 72,201,000 56,034,000
Federal funds
purchased 11,400,000 9,600,000 0
Federal Home Loan
Bank advances 130,000,000 130,000,000 135,000,000
Subordinated
debentures 32,990,000 32,990,000 32,990,000
Other borrowed money 2,957,000 2,347,000 2,069,000
Accrued expenses and
other liabilities 18,079,000 16,595,000 12,016,000
-------------- -------------- --------------
Total liabilities 1,807,769,000 1,683,085,000 1,559,953,000
SHAREHOLDERS' EQUITY
Common stock 160,872,000 148,533,000 148,373,000
Retained earnings 4,070,000 8,000,000 821,000
Accumulated other
comprehensive
income (loss) (3,282,000) (1,408,000) 6,000
-------------- -------------- --------------
Total shareholders'
equity 161,660,000 155,125,000 149,200,000
Total liabilities
and shareholders'
equity $1,969,429,000 $1,838,210,000 $1,709,153,000
============== ============== ==============