Mercantile Bank Corp. Reports Third Quarter 2006 EPS of $0.64, Up 20.8 Percent

Assets Surpass $2 Billion


GRAND RAPIDS, Mich., Oct. 11, 2006 (PRIMEZONE) -- Mercantile Bank Corporation (Nasdaq:MBWM) reported net income for the third quarter of 2006 of $5.2 million, an increase of 21.0 percent from the $4.3 million reported for the third quarter of 2005. Diluted earnings per share were $0.64 compared with $0.53 reported for the year-ago quarter, an increase of 20.8 percent. Results reflect solid growth in earning assets and disciplined control of expenses, partially offset by the impact of rising funding costs and higher provision expense.

For the first nine months of 2006, Mercantile reported net income of $15.2 million, an increase of 14.2 percent from the $13.4 million reported in the prior-year period. Diluted earnings per share were $1.88, an increase of 14.6 percent from the first nine months of 2005.

Gerald R. Johnson, Jr., Chairman and CEO, commented, "Our Company continues to expand at a dynamic pace, despite the extremely competitive environment in which we operate. This quarter, we surpassed the $2.0 billion milestone in total assets. All of our growth since we opened for business late in 1997 has been organic. We reached the $1.0 billion asset mark in June 2003, and our annual compound asset growth rate since that time has been approximately 26 percent. More recently, our growth has moderated somewhat as our competition has demonstrated an increasing willingness to compromise on loan structure and pricing to retain market share, compromises which we have found unacceptable to the extent that we have declined a number of credit requests which we would have otherwise approved under normal circumstances."

Total revenue, comprised of net interest income and non-interest income, was $16.9 million for the third quarter of 2006, an increase of 9.8 percent over the $15.4 million reported for the third quarter of 2005. Net interest income increased 10.5 percent over the prior-year third quarter to $15.6 million, reflecting average earning asset growth of 14.2 percent, offset by a 12 basis point decline in net interest margin to 3.34 percent from year-ago levels. Year-to-date, net interest margin is 3.44 percent, a four basis point decline compared with 3.48 percent for the first nine months of 2005. Mr. Johnson continued, "Although the majority of our loans are tied to prime, this rate was unchanged during the third quarter, while our deposits continued to price upward." Non-interest income for the third quarter of 2006 was $1.4 million, a 2.4 percent increase over the third quarter of 2005.

Overhead expenses remain well-controlled, with operating expenses (annualized) declining quarterly as a percent of average assets throughout 2006, from 1.73 percent in the first quarter to 1.61 percent for the most recent quarter. Mercantile's expansion activities were completed by year-end 2005, and for the past three quarters, non-interest expense has remained extremely stable at $8.0 million per quarter, while total assets increased since year-end at an annualized rate of 13.7 percent. The efficiency ratio was 47.5 percent for the third quarter of 2006 compared with 54.0 percent for the year-ago quarter, and 52.2 percent for fourth quarter 2005. For the first nine months of 2006, the ratio was 48.0 percent compared with 50.6 percent for the prior-year period.

Asset quality has been relatively stable throughout 2006, although quality remains below the exceptional levels reported in prior years. Net loan charge-offs for the third quarter of 2006 were $920,000, equivalent to 0.22 percent of average loans on an annualized basis; this compares with $988,000, or 0.24 percent of average loans in the second quarter of 2006, and $756,000, or 0.19 percent, for the first quarter of this year. Non-performing assets were $9.4 million, or 0.47 percent of total assets at September 30, 2006, compared with $8.7 million, or 0.44 percent, of assets at June 30, 2006, and $8.8 million, or 0.46 percent of assets at March 31, 2006. Loan and lease loss reserves were $21.9 million, or 1.28 percent of total loans and leases at September 30, 2006.

Total assets were $2.03 billion at September 30, 2006, an increase of $230.1 million, or 12.8 percent, from September 30, 2005. Earning asset growth was $220.8 million, or 13.0 percent, during this twelve-month period, with loans up $221.3 million, or 14.9 percent. The composition of the loan portfolio remains basically unchanged from the previous quarter, and from the 2005 third quarter. Growth in earning assets was primarily funded by a $217.4 million, or 15.6 percent, increase in deposits. Local funds currently comprise 35.7 percent of total funds at September 30, 2006 compared to 31.3 percent at September 30, 2005.

Shareholders' equity at September 30, 2006 was $167.5 million, a twelve-month increase of $15.2 million, or 10.0 percent. Total shares outstanding at quarter-end were 8,018,680. Mercantile remains well-capitalized, with a total risk-based capital ratio of 11.6 percent at quarter-end. Mr. Johnson concluded, "We continue to be selective about growth opportunities in this current environment. Our reputation for lending expertise and service excellence has placed us in a preferred position with small- to medium-sized businesses in the communities we serve. We are pleased with our current rate of growth as we address the uncertainties in today's business and banking climate."

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 Global 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       2006       2005       2005
                  3rd Qtr    2nd Qtr    1st Qtr    4th Qtr    3rd Qtr
                ----------  ---------  ---------  ---------  ---------
 EARNINGS
  Net
   interest
   income       $   15,547     15,646     15,099     14,957     14,072
  Provision
   for loan
   and lease
   losses       $    1,350      1,500      1,225      1,270        895
  NonInterest
   income       $    1,362      1,275      1,243      1,903      1,330
  NonInterest
   expense      $    8,028      8,031      8,006      8,802      8,320
  Net income    $    5,202      5,111      4,929      4,549      4,300
  Basic
   earnings
   per share    $     0.65       0.64       0.62       0.57       0.54
  Diluted
   earnings
   per share    $     0.64       0.63       0.61       0.56       0.53
  Average
   shares out-
   standing(a)   8,016,016  8,000,998  7,974,180  7,968,632  7,965,172
  Average
   diluted
   shares out-
   standing(a)   8,118,206  8,119,820  8,102,052  8,102,195  8,115,575

 PERFORMANCE
 RATIOS
  Return on
   average
   assets             1.04%      1.06%      1.07%      1.00%      0.98%
  Return on
   average
   common
   equity            12.54%     12.81%     12.74%     11.76%     11.33%
  Net interest
   margin
   (fully tax-
   equivalent)        3.34%      3.47%      3.51%      3.54%      3.46%
  Efficiency
   ratio             47.48%     47.46%     48.99%     52.21%     54.02%
  Full-time
   equivalent
   employees           284        277        275        273        263

 CAPITAL
  Period-
   ending
   equity to
   assets             8.27%      8.21%      8.37%      8.44%      8.48%
  Tier 1
   leverage
   capital
   ratio             10.14%     10.15%     10.29%     10.45%     10.62%
  Tier 1
   risk-based
   capital
   ratio             10.47%     10.52%     10.74%     10.82%     11.07%
  Total
   risk-based
   capital
   ratio             11.61%     11.66%     11.91%     12.00%     12.24%
  Book value
   per share    $    20.89      20.17      19.86      19.42      19.08
  Cash
   dividend
   per share    $     0.13       0.13       0.12       0.11       0.11

 ASSET
 QUALITY
  Gross loan
   charge-offs  $    1,250      1,083        780        350        338
  Net loan
   charge-offs  $      920        988        756        315        181
  Net loan
   charge-offs
   to average
   loans              0.22%      0.24%      0.19%      0.08%      0.05%
  Allowance
   for loan
   and lease
   losses       $   21,938     21,507     20,995     20,527     19,571
  Allowance
   for losses
   to total
   loans              1.28%      1.29%      1.30%      1.31%      1.31%
  Nonper-
   forming
   loans        $    9,017      8,530      8,791      3,995      1,926
  Other real
   estate and
   repossessed
   assets       $      421        150          0          0        195
  Nonper-
   forming
   assets to
   total
   assets             0.47%      0.44%      0.46%      0.22%      0.12%

 END OF PERIOD
 BALANCES
  Loans and
   leases       $1,710,268  1,670,471  1,612,351  1,561,812  1,488,959
  Total
   earning
   assets
   (before
   allowance)   $1,922,051  1,859,411  1,800,909  1,743,971  1,701,275
  Total
   assets       $2,026,834  1,969,429  1,896,974  1,838,210  1,796,770
  Deposits      $1,614,703  1,547,912  1,482,219  1,419,352  1,397,280
  Shareholders'
   equity       $  167,548    161,660    158,910    155,125    152,320

 AVERAGE
 BALANCES
  Loans and
   leases       $1,684,700  1,643,022  1,581,617  1,519,616  1,460,792
  Total
   earning
   assets
   (before
   allowance)   $1,881,873  1,841,666  1,778,694  1,709,612  1,647,294
  Total
   assets       $1,984,199  1,939,413  1,871,945  1,804,067  1,740,203
  Deposits      $1,569,614  1,521,037  1,459,266  1,394,023  1,339,486
  Shareholders'
   equity       $  164,560    160,039    156,901    153,522    150,540

                                                   Year-To-Date
                                            --------------------------
                                                2006          2005
                                            ------------  ------------
 EARNINGS
  Net interest income                       $     46,292       40,335
  Provision for loan and lease losses       $      4,075        2,520
  NonInterest income                        $      3,880        3,758
  NonInterest expense                       $     24,065       22,315
  Net income                                $     15,242       13,352
  Basic earnings per share                  $       1.91         1.68
  Diluted earnings per share                $       1.88         1.64
  Average shares outstanding(a)                7,997,187    7,956,205
  Average diluted shares outstanding(a)        8,117,709    8,134,657

 PERFORMANCE RATIOS
  Return on average assets                          1.05%        1.07%
  Return on average common equity                  12.69%       12.15%
  Net interest margin (fully tax-equivalent)        3.44%        3.48%
  Efficiency ratio                                 47.97%       50.61%
  Full-time equivalent employees                     284          263

 CAPITAL
  Period-ending equity to assets                    8.27%        8.48%
  Tier 1 leverage capital ratio                    10.14%       10.62%
  Tier 1 risk-based capital ratio                  10.47%       11.07%
  Total risk-based capital ratio                   11.61%       12.24%
  Book value per share                       $     20.89        19.08
  Cash dividend per share                    $      0.38         0.32

 ASSET QUALITY
  Gross loan charge-offs                     $     3,113        1,042
  Net loan charge-offs                       $     2,664          768
  Net loan charge-offs to average loans             0.22%        0.07%
  Allowance for loan and lease losses        $    21,938       19,571
  Allowance for losses to total loans               1.28%        1.31%
  Nonperforming loans                        $     9,017        1,926
  Other real estate and repossessed assets   $       421          195
  Nonperforming assets to total assets              0.47%        0.12%

 END OF PERIOD BALANCES
  Loans and leases                           $ 1,710,268    1,488,959
  Total earning assets (before allowance)    $ 1,922,051    1,701,275
  Total assets                               $ 2,026,834    1,796,770
  Deposits                                   $ 1,614,703    1,397,280
  Shareholders' equity                       $   167,548      152,320

 AVERAGE BALANCES
  Loans and leases                           $ 1,636,824    1,403,289
  Total earning assets (before allowance)    $ 1,834,455    1,581,042
  Total assets                               $ 1,932,264    1,667,600
  Deposits                                   $ 1,517,043    1,279,132
  Shareholders' equity                       $   160,533      146,926

 (a) - Adjusted for 5% stock dividend paid on May 16, 2006

                      MERCANTILE BANK CORPORATION
                    CONSOLIDATED REPORTS OF INCOME

                        THREE MONTHS ENDED        NINE MONTHS ENDED
                           September 30,            September 30,
                         2006        2005         2006         2005
                     -----------  -----------  -----------  -----------
                     (Unaudited)  (Unaudited)  (Unaudited)  (Unaudited)
 INTEREST INCOME
  Loans and leases,
   including fees    $33,261,000  $24,570,000  $93,292,000  $66,592,000
  Investment
   securities          2,335,000    2,113,000    6,871,000    6,036,000
  Federal funds sold      76,000       76,000      347,000      176,000
  Short-term
   investments             3,000        5,000       10,000       11,000
                     -----------  -----------  -----------  -----------
   Total interest
    income            35,675,000   26,764,000  100,520,000   72,815,000

 INTEREST EXPENSE
  Deposits            17,268,000   10,554,000   46,111,000   26,886,000
  Short-term
   borrowings            707,000      475,000    2,028,000    1,188,000
  Federal Home Loan
   Bank advances       1,452,000    1,148,000    4,136,000    3,011,000
  Long-term
   borrowings            701,000      515,000    1,953,000    1,395,000
                     -----------  -----------  -----------  -----------
   Total interest
    expense           20,128,000   12,692,000   54,228,000   32,480,000
                     -----------  -----------  -----------  -----------

  Net interest
   income             15,547,000   14,072,000   46,292,000   40,335,000

 Provision for loan
  and lease losses     1,350,000      895,000    4,075,000    2,520,000
                     -----------  -----------  -----------  -----------
  Net interest income
   after provision
   for loan and
   lease losses       14,197,000   13,177,000   42,217,000   37,815,000

 NON INTEREST INCOME
  Service charges on
   accounts              361,000      369,000    1,006,000    1,048,000
  Net gain on sales
   of commercial
   loans                       0       56,000       29,000       84,000
  Other income         1,001,000      905,000    2,845,000    2,626,000
                     -----------  -----------  -----------  -----------
   Total non interest
    income             1,362,000    1,330,000    3,880,000    3,758,000

 NON INTEREST EXPENSE
  Salaries and
   benefits            4,731,000    4,983,000   14,179,000   13,547,000
  Occupancy              802,000      805,000    2,404,000    1,889,000
  Furniture and
   equipment             513,000      459,000    1,550,000    1,109,000
  Other expense        1,982,000    2,073,000    5,932,000    5,770,000
                     -----------  -----------  -----------  -----------
   Total non interest
    expense            8,028,000    8,320,000   24,065,000   22,315,000
                     -----------  -----------  -----------  -----------
   Income before
    federal income
    tax expense        7,531,000    6,187,000   22,032,000   19,258,000

 Federal income tax
  expense              2,329,000    1,887,000    6,790,000    5,906,000
                     -----------  -----------  -----------  -----------
   Net income        $ 5,202,000  $ 4,300,000  $15,242,000  $13,352,000
                     -----------  -----------  -----------  -----------
 Basic earnings
  per share          $      0.65  $      0.54  $      1.91  $      1.68

 Diluted earnings
  per share          $      0.64  $      0.53  $      1.88  $      1.64

 Average shares
  outstanding(a)       8,016,016    7,965,172    7,997,187    7,956,205

 Average diluted
  shares
  outstanding(a)       8,118,206    8,115,575    8,117,709    8,134,657

 (a) - Adjusted for 5% stock dividend paid on May 16, 2006

                      MERCANTILE BANK CORPORATION
                      CONSOLIDATED BALANCE SHEETS

                         SEPTEMBER 30,   DECEMBER 31,    SEPTEMBER 30,
                             2006            2005            2005
                        --------------  --------------  --------------
 ASSETS                   (Unaudited)      (Audited)      (Unaudited)

 Cash and due
  from banks            $   39,100,000  $   36,208,000  $   38,894,000
 Short-term investments        176,000         545,000         392,000
 Federal funds sold         16,000,000               0      33,800,000
                        --------------  --------------  --------------
  Total cash and cash
   equivalents              55,276,000      36,753,000      73,086,000

 Securities available
  for sale                 125,746,000     112,961,000     109,966,000
 Securities held to
  maturity                  62,097,000      60,766,000      60,271,000
 Federal Home Loan Bank
  stock                      7,764,000       7,887,000       7,887,000

 Total loans and leases  1,710,268,000   1,561,812,000   1,488,959,000
 Allowance for loan and
  lease losses             (21,938,000)    (20,527,000)    (19,571,000)
                        --------------  --------------  --------------
  Total Loans and
   leases, net           1,688,330,000   1,541,285,000   1,469,388,000

 Premises and
  equipment, net            32,309,000      30,206,000      30,791,000
 Bank owned life
  insurance policies        30,150,000      28,071,000      26,075,000
 Accrued interest
  receivable                10,438,000       8,274,000       8,039,000
 Other assets               14,724,000      12,007,000      11,267,000
                        --------------  --------------  --------------
  Total assets          $2,026,834,000  $1,838,210,000  $1,796,770,000
                        --------------  --------------  --------------
 LIABILITIES AND
 STOCKHOLDERS' EQUITY

 Deposits:
  Noninterest-bearing   $  115,269,000  $  120,828,000  $  116,107,000
  Interest-bearing       1,499,434,000   1,298,524,000   1,281,173,000
                        --------------  --------------  --------------
   Total deposits        1,614,703,000   1,419,352,000   1,397,280,000

 Securities sold under
  agreement to
  repurchase                74,111,000      72,201,000      62,994,000
 Federal funds
  purchased                          0       9,600,000               0
 Federal Home Loan
  Bank advances            115,000,000     130,000,000     135,000,000
 Subordinated
  debentures                32,990,000      32,990,000      32,990,000
 Other borrowed money        3,147,000       2,347,000       2,211,000
 Accrued expenses and
  other liabilities         19,335,000      16,595,000      13,975,000
                        --------------  --------------  --------------
   Total liabilities     1,859,286,000   1,683,085,000   1,644,450,000

 SHAREHOLDERS' EQUITY

 Common stock              161,045,000     148,533,000     148,472,000
 Retained earnings           8,230,000       8,000,000       4,287,000
 Accumulated other
  comprehensive
  income (loss)             (1,727,000)     (1,408,000)       (439,000)
                        --------------  --------------  --------------
  Total shareholders'
   equity                  167,548,000     155,125,000     152,320,000

  Total liabilities
   and shareholders'
   equity               $2,026,834,000  $1,838,210,000  $1,796,770,000
                        --------------  --------------  --------------


            

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