GRAND RAPIDS, Mich., April 11, 2007 (PRIME NEWSWIRE) -- Mercantile Bank Corporation (Nasdaq:MBWM) reported net income for the first quarter of 2007 of $4.3 million, a decrease of 13.1 percent from the $4.9 million reported for the first quarter of 2006. Diluted earnings per share were $0.53 compared with $0.61 reported for the year-ago quarter, a decrease of 13.1 percent. Net interest margin pressures and slower asset growth continue to impact earnings.
Gerald R. Johnson, Jr., Mercantile's Chairman and CEO, stated, "The new year presents us -- and the banking industry as a whole -- with a continuation of the same challenges that we experienced in 2006. The difficult interest rate environment remains unchanged, and the economy is showing increasing signs of stress in our markets. Our goal is to maintain the loyalty of our banking relationships in the face of an increasingly competitive lending environment. We prefer to slow our growth, strengthen our infrastructure, and focus on fewer, but higher quality, opportunities where our combination of lending expertise and outstanding service are valued."
Total revenue, comprised of net interest income and non-interest income, was $15.9 million for the first quarter of 2007, a decrease of 2.8 percent from the $16.3 million reported for the prior-year first quarter. Net interest income decreased 4.1 percent compared with the year-ago quarter, to $14.5 million, reflecting 9.8 percent growth in average earning assets offset by a 44 basis point decline in the net interest margin to 3.07 percent. Non-interest income for the first quarter of 2007 was $1.4 million, a 13.3 percent increase over the first quarter of 2006.
Operating expenses continue to be well-controlled. Non-interest expense was $8.7 million for the first quarter of 2007, up $733,000 or 9.2 percent over the prior-year period. Salaries and benefits grew $619,000 or 13.0 percent over the year-ago period, primarily due to the addition of twenty employees over the past twelve months, as well as merit raises for officers and a partial bonus accrual re-implemented this quarter after a one-year hiatus. Occupancy, equipment and furniture expense decreased by $92,000, or 6.8 percent year-over-year. The efficiency ratio was 55.0 percent for the current quarter compared with 49.0 percent reported for the year-ago quarter, primarily reflecting the decline in the net interest margin and increased operating costs. Mr. Johnson explained, "In the absence of net interest income growth, we have been successful controlling our operating expenses, which have modestly declined year-over-year as a percent of total assets."
Net loan charge-offs for the first quarter were $777,000, or 0.18 percent of average loans (annualized), relatively unchanged from the year-ago first quarter net loan charge-offs of $756,000, or 0.19 percent annualized, but significantly improved from the fourth quarter of 2006, where Mercantile charged off $2.2 million, or 0.51 percent of average loans (annualized). Mr. Johnson commented, "The majority of our loans are supported by real property, but valuations are changing, and the collection process has been protracted. We are seeing a higher level of recoveries, which is a positive sign reflecting our proactive management of problem credits." Non-performing assets, including $2.5 million of foreclosed real estate, totaled $12.6 million, or 0.60 percent of total assets, at March 31, 2007, compared with $9.6 million, or 0.46 percent of total assets, at December 31, 2006, and $8.8 million, or 0.46 percent of total assets, at March 31, 2006. Loan and lease loss reserves were $21.7 million, or 1.24 percent of total loans and leases at March 31, 2007.
Total assets reached $2.09 billion at March 31, 2007, an increase of $192.6 million, or 10.2 percent, from March 31, 2006; first quarter 2007 asset growth was $22.3 million, or 1.1 percent. "We continue to be selective in a highly competitive market environment." Loans grew $136.5 million, or 8.5 percent, year-over-year, but increased only $3.4 million since year-end 2006. Asset growth over the past twelve months was primarily funded by a $203.9 million, or 13.8 percent, increase in deposits.
Shareholders' equity at March 31, 2007 was $175.5 million, a twelve-month increase of $16.6 million, or 10.5 percent. Total shares outstanding at quarter-end were 8,053,067. Mercantile's total risk-based capital ratio was 11.5 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 Global Select 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
2007 2006 2006 2006 2006
---------- ---------- ---------- ---------- ----------
EARNINGS
Net interest
income $ 14,484 15,295 15,547 15,646 15,099
Provision for
loan and lease
losses $ 1,020 1,700 1,350 1,500 1,225
NonInterest
income $ 1,408 1,381 1,362 1,275 1,243
NonInterest
expense $ 8,739 8,197 8,028 8,031 8,006
Net income $ 4,283 4,605 5,202 5,111 4,929
Basic earnings
per share $ 0.53 0.57 0.65 0.64 0.62
Diluted
earnings
per share $ 0.53 0.57 0.64 0.63 0.61
Average
shares
outstanding 8,035,175 8,020,303 8,016,016 8,000,998 7,974,180
Average diluted
shares
outstanding 8,113,135 8,117,442 8,118,206 8,119,820 8,102,052
PERFORMANCE
RATIOS
Return on
average assets 0.84% 0.89% 1.04% 1.06% 1.07%
Return on
average
common equity 10.04% 10.78% 12.54% 12.81% 12.74%
Net interest
margin (fully
tax-equivalent) 3.07% 3.19% 3.34% 3.47% 3.51%
Efficiency ratio 54.99% 49.15% 47.48% 47.46% 48.99%
Full-time
equivalent
employees 295 291 284 277 275
CAPITAL
Period-ending
equity to
assets 8.40% 8.32% 8.27% 8.21% 8.37%
Tier 1 leverage
capital ratio 10.12% 10.04% 10.14% 10.15% 10.29%
Tier 1 risk-
based capital
ratio 10.44% 10.37% 10.47% 10.52% 10.74%
Total risk-
based capital
ratio 11.52% 11.45% 11.61% 11.66% 11.91%
Book value
per share $ 21.79 21.43 20.89 20.17 19.86
Cash dividend
per share $ 0.14 0.13 0.13 0.13 0.12
ASSET QUALITY
Gross loan
charge-offs $ 1,134 2,276 1,250 1,083 780
Net loan
charge-offs $ 777 2,227 920 988 756
Net loan
charge-offs to
average loans 0.18% 0.51% 0.22% 0.24% 0.19%
Allowance for
loan and lease
losses $ 21,654 21,411 21,938 21,507 20,995
Allowance for
loan losses to
total loans 1.24% 1.23% 1.28% 1.29% 1.30%
Nonperforming
loans $ 10,018 8,571 9,017 8,530 8,791
Other real
estate and
repossessed
assets $ 2,540 986 421 150 0
Nonperforming
assets to
total assets 0.60% 0.46% 0.47% 0.44% 0.46%
END OF PERIOD
BALANCES
Loans and
leases $1,748,838 1,745,478 1,710,268 1,670,471 1,612,351
Total earning
assets
(before
allowance) $1,967,733 1,948,179 1,922,051 1,859,411 1,800,909
Total assets $2,089,581 2,067,268 2,026,834 1,969,429 1,896,974
Deposits $1,686,157 1,646,903 1,614,703 1,547,912 1,482,219
Shareholder's
equity $ 175,481 171,915 167,548 161,660 158,910
AVERAGE BALANCES
Loans and
leases $1,741,531 1,729,899 1,684,700 1,643,022 1,581,617
Total earning
assets
(before
allowance) $1,953,416 1,938,499 1,881,873 1,841,666 1,778,694
Total assets $2,058,718 2,042,037 1,984,199 1,939,413 1,871,945
Deposits $1,647,000 1,628,233 1,569,614 1,521,037 1,459,266
Shareholder's
equity $ 173,028 169,452 164,560 160,039 156,901
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED
March 31, March 31,
2007 2006
----------- -----------
(Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $33,422,000 $28,727,000
Investment securities 2,506,000 2,237,000
Federal funds sold 93,000 132,000
Short-term investments 4,000 3,000
----------- -----------
Total interest income 36,025,000 31,099,000
INTEREST EXPENSE
Deposits 18,825,000 13,485,000
Short-term borrowings 832,000 601,000
Federal Home Loan Bank advances 1,194,000 1,315,000
Long-term borrowings 690,000 599,000
----------- -----------
Total interest expense 21,541,000 16,000,000
----------- -----------
Net interest income 14,484,000 15,099,000
Provision for loan and lease losses 1,020,000 1,225,000
----------- -----------
Net interest income after provision
for loan and lease losses 13,464,000 13,874,000
NON INTEREST INCOME
Service charges on accounts 389,000 316,000
Net gain on sales of commercial loans 0 29,000
Other income 1,019,000 898,000
----------- -----------
Total non interest income 1,408,000 1,243,000
NON INTEREST EXPENSE
Salaries and benefits 5,384,000 4,765,000
Occupancy 767,000 830,000
Furniture and equipment 493,000 522,000
Other expense 2,095,000 1,889,000
----------- -----------
Total non interest expense 8,739,000 8,006,000
----------- -----------
Income before federal income tax 6,133,000 7,111,000
Federal income tax expense 1,850,000 2,182,000
----------- -----------
Net income $ 4,283,000 $ 4,929,000
----------- -----------
Basic earnings per share $ 0.53 $ 0.62
Diluted earnings per share $ 0.53 $ 0.61
Average shares outstanding 8,035,175 7,974,180
Average diluted shares outstanding 8,113,135 8,102,052
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, MARCH 31,
2007 2006 2006
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due
from banks $ 52,102,000 $ 51,098,000 $ 38,251,000
Short-term
investments 268,000 282,000 389,000
Federal funds sold 13,400,000 0 0
-------------- -------------- --------------
Total cash and cash
equivalents 65,770,000 51,380,000 38,640,000
Securities available
for sale 133,346,000 130,967,000 118,103,000
Securities held to
maturity 64,372,000 63,943,000 62,179,000
Federal Home Loan
Bank stock 7,509,000 7,509,000 7,887,000
Total loans and
leases 1,748,838,000 1,745,478,000 1,612,351,000
Allowance for loan
and lease losses (21,654,000) (21,411,000) (20,995,000)
-------------- -------------- --------------
Total loans and
leases, net 1,727,184,000 1,724,067,000 1,591,356,000
Premises and
equipment, net 34,294,000 33,539,000 29,885,000
Bank owned life
insurance policies 31,155,000 30,858,000 28,360,000
Accrued interest
receivable 10,997,000 10,287,000 9,374,000
Other assets 14,954,000 14,718,000 11,194,000
-------------- -------------- --------------
Total assets $2,089,581,000 $2,067,268,000 $1,896,978,000
-------------- -------------- --------------
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest-
bearing $ 130,857,000 $ 133,197,000 $ 114,880,000
Interest-bearing 1,555,300,000 1,513,706,000 1,367,339,000
-------------- -------------- --------------
Total deposits 1,686,157,000 1,646,903,000 1,482,219,000
Securities sold under
agreements to
repurchase 78,045,000 85,472,000 67,956,000
Federal funds
purchased 0 9,800,000 6,600,000
Federal Home Loan
Bank advances 90,000,000 95,000,000 130,000,000
Subordinated
debentures 32,990,000 32,990,000 32,990,000
Other borrowed money 3,480,000 3,316,000 2,791,000
Accrued expenses and
other liabilities 23,428,000 21,872,000 15,559,000
-------------- -------------- --------------
Total liabilities 1,914,100,000 1,895,353,000 1,738,115,000
SHAREHOLDERS' EQUITY
Common stock 161,384,000 161,223,000 148,583,000
Retained earnings 14,952,000 11,794,000 12,018,000
Accumulated other
comprehensive
income (loss) (855,000) (1,102,000) (1,738,000)
-------------- -------------- --------------
Total shareholders'
equity 175,481,000 171,915,000 158,863,000
-------------- -------------- --------------
Total liabilities
and shareholders'
equity $2,089,581,000 $2,067,268,000 $1,896,978,000
-------------- -------------- --------------