GRAND RAPIDS, Mich., Jan. 9, 2008 (GLOBE NEWSWIRE) -- Mercantile Bank Corporation (Nasdaq:MBWM) reported net income for 2007 of $9.0 million, or $1.06 per diluted share, a decline of approximately 55 percent from the $19.8 million, or $2.33 per diluted share, reported for the prior year. For the fourth quarter of 2007, Mercantile reported net income of $0.1 million, a decrease of 97.9 percent from the $4.6 million reported for the fourth quarter of 2006. Diluted earnings per share were $0.01 compared with $0.54 reported for the year-ago period, a decrease of 98.1 percent. Earnings continue to reflect an elevated level of nonperforming assets and a lower net interest margin relative to 2006 and the prior-year fourth quarter.
Chairman and CEO Michael Price commented, "During the fourth quarter, we devoted substantial time and effort to reviewing our loan portfolio for signs of weakness. We wanted to identify and downgrade relationships with significant potential to become problems down the road in light of the continuing weakness in the economy.
"During this process," Mr. Price continued, "we downgraded any credit where we identified signs of current or likely future significant weakness. In fact, of our nonperforming loan total of $29.8 million at year end, $13.1 million was contractually current. Additionally, $5.4 million were less than 90 days past due. We believe this posture was prudent based on the difficult economic environment combined with identified weakness in current or future cash flows.
"As an asset-sensitive bank, with a higher level of earning assets subject to repricing faster than our deposits in the near term, we continue to experience compression of our net interest margin in this current declining interest rate environment," continued Mr. Price. "The 100 basis point cut in the prime rate during the September-December period immediately lowered the yield on our prime-based loans, while deposit costs normally have a longer time horizon before they reflect the declining rate environment. This asset-sensitivity should stabilize once interest rates level off. However, given the uncertainty in our economy further interest rate cuts appear likely."
Operating Results
Total revenue, consisting of net interest income and noninterest income, was $61.4 million for 2007, a decrease of 8.1 percent from the $66.8 million reported for 2006. Net interest income was $55.6 million, down 9.8 percent year over year; the 50 basis point decline in the net interest margin, from 3.37 percent to 2.87 percent, was partially offset by a 6.4 percent increase in 2007 average earning assets. Noninterest income for 2007 was $5.9 million, an increase of $0.61 million, or 11.6 percent over 2006.
The provision for loan and lease losses was $11.1 million for 2007, up $5.3 million from the $5.8 million reported for 2006, principally due to the continuing deterioration in the local real estate market and further downgrades in Mercantile's loan portfolio.
Noninterest expense for 2007 was $38.4 million, an increase of $6.1 million, or 18.9 percent, over the prior-year period. Excluding the $1.2 million one-time pre-tax payment to the former chairman upon his retirement, noninterest expense for 2007 was $37.2 million, an increase of $4.9 million, or 15.2 percent, over the prior-year period. Salaries and benefits were $22.9 million for 2007; excluding the $1.2 million expense, salaries and benefits totaled $21.7 million, up $2.7 million, or 14.2 percent, from the prior year primarily reflecting an increased staffing level. Other noninterest expense for the year was $10.1 million, up $2.0 million or 25.0 percent, in large part from increased expenses associated with the administration and resolution of problem assets and increased FDIC insurance premium assessments. The efficiency ratio for 2007 was 62.4 percent compared with 48.3 percent for the previous year, reflecting lower net interest income and an increased level of noninterest expense.
Balance Sheet
Total assets were $2.12 billion at December 31, 2007, an increase of 2.6 percent over the $2.07 billion reported for the prior year-end. Year over year, total loans grew $54.4 million, or 3.1 percent, reaching $1.8 billion at December 31, 2007. "Our ability to grow our loan portfolio, even at this modest level, is a credit to our lenders; finding high quality loans in a weak economy and a competitive environment has been difficult," commented Mr. Price. Over 70 percent of Mercantile's loan portfolio is supported by real estate. Commercial real estate loans account for approximately half of Mercantile's loan portfolio, with non-real estate commercial loans contributing an additional 25 percent. Construction and development loans account for approximately 16 percent of the loan portfolio, about evenly divided between residential and commercial construction and development.
Deposits totaled $1.6 billion at December 31, 2007, a 3.4 percent decline compared with year-end 2006. Mercantile shifted a portion of its brokered deposits into FHLB advances to take advantage of lower rates; these advances nearly doubled year over year, from $95.0 million at December 31, 2006 to $180.0 million for the current year-end.
Asset Quality
"Our residential real estate market continues to deteriorate, with lower sales prices and a growing inventory of houses," commented Mr. Price. "The composition of our nonperforming assets reflects the weakness in this sector; nonperforming residential construction and land development loans and related foreclosed properties totaled $14.9 million of our $150 million residential construction portfolio at year-end 2007. In contrast, nonperforming commercial loans, including commercial real estate loans, commercial construction and land development loans, commercial and industrial loans and related foreclosed assets, totaled $20.8 million of our $1.5 billion commercial portfolio."
Nonperforming assets were $35.7 million, or 1.68 percent of total assets at December 31, 2007, compared with $25.9 million, or 1.23 percent of total assets at September 30, 2007, and $9.6 million, or 0.46 percent of total assets at December 31, 2006. This includes $5.9 million of foreclosed real estate and repossessed assets at year-end 2007 compared with $1.0 million for the prior year-end.
Net loan charge-offs for 2007 were $6.7 million, equivalent to 0.38 percent of average loans, compared with $4.9 million, or 0.29 percent of average loans reported for 2006; $3.9 million of total net charge-offs were taken in the fourth quarter. Loan and lease loss reserves were $25.8 million at 2007 year-end, or 1.43 percent of total loans and leases, compared with 1.38 percent and 1.23 percent of total loans for the 2007 third quarter-end and for the prior year-end, respectively.
Shareholders' equity at December 31, 2007 was $178.2 million, an increase of $6.2 million, or 3.6 percent from December 31, 2006. Total shares outstanding at year-end 2007 were 8,527,197. Total risk-based capital ratio was 11.4 percent at December 31, 2007, virtually unchanged from a year-ago.
"Real estate problems, especially in a depressed economy such as in Michigan, are not easily or quickly resolved," commented Mr. Price. "At Mercantile, we are taking the initiative to address signs of weakness as they appear. However, we cannot predict the future of our local real estate market or of our economy. Despite this uncertainty, we continue to move forward -- hiring talented bankers, looking for high-quality lending relationships and managing our portfolio proactively -- just as we have always done."
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, Ann Arbor and Oakland County, 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 nontraditional 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 local real estate values; 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
------------------------------------------------------
2007 2007 2007 2007 2006
4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr
---------- --------- --------- --------- ---------
EARNINGS
Net interest
income $ 13,074 14,051 13,948 14,484 15,295
Provision for
loan and
lease losses $ 4,900 2,800 2,350 1,020 1,700
Noninterest
income $ 1,534 1,507 1,421 1,408 1,381
Noninterest
expense $ 10,008 9,570 10,039 8,739 8,197
Net income $ 95 2,367 2,221 4,283 4,605
Basic earnings
per share $ 0.01 0.28 0.26 0.51 0.55
Diluted
earnings per
share $ 0.01 0.28 0.26 0.50 0.54
Average
shares
outstanding* 8,462,260 8,458,601 8,455,891 8,436,933 8,421,318
Average
diluted
shares
outstanding* 8,485,035 8,491,612 8,503,138 8,518,791 8,523,314
PERFORMANCE
RATIOS
Return on
average
assets 0.02% 0.45% 0.43% 0.84% 0.89%
Return on
average
common equity 0.21% 5.32% 5.08% 10.04% 10.78%
Net interest
margin
(fully tax-
equivalent) 2.64% 2.86% 2.91% 3.07% 3.19%
Efficiency
ratio 68.51% 61.51% 65.32% 54.99% 49.15%
Full-time
equivalent
employees 306 302 305 295 291
CAPITAL
Period-ending
equity to
assets 8.40% 8.44% 8.30% 8.40% 8.32%
Tier 1
leverage
capital ratio 9.97% 10.06% 10.10% 10.12% 10.04%
Tier 1 risk-
based capital
ratio 10.14% 10.19% 10.26% 10.44% 10.37%
Total risk-
based capital
ratio 11.39% 11.40% 11.37% 11.52% 11.45%
Book value
per share $ 21.05 21.00 20.64 20.70 20.36
Cash dividends
per share $ 0.14 0.14 0.14 0.13 0.12
ASSET QUALITY
Gross loan
charge-offs $ 3,988 795 1,358 1,134 2,276
Net loan
charge-offs $ 3,943 743 1,204 777 2,227
Net loan
charge-offs
to average
loans 0.87% 0.17% 0.28% 0.18% 0.51%
Allowance for
loan and
lease losses $ 25,814 24,857 22,800 21,654 21,411
Allowance for
losses to
total loans 1.43% 1.38% 1.28% 1.24% 1.23%
Nonperforming
loans $ 29,809 23,070 20,595 10,018 8,571
Other real
estate and
repossessed
assets $ 5,895 2,820 3,369 2,540 986
Nonperforming
assets to
total assets 1.68% 1.23% 1.14% 0.60% 0.46%
END OF PERIOD
BALANCES
Loans and
leases $1,799,880 1,796,962 1,776,026 1,748,838 1,745,478
Total earning
assets
(before
allowance) $2,011,908 2,005,136 1,980,722 1,967,733 1,948,179
Total assets $2,121,403 2,106,427 2,103,520 2,089,577 2,067,268
Deposits $1,591,181 1,640,984 1,639,010 1,686,157 1,646,903
Shareholders'
equity $ 178,155 177,724 174,531 175,477 171,915
AVERAGE
BALANCES
Loans and
leases $1,791,510 1,773,151 1,755,033 1,741,531 1,729,899
Total earning
assets
(before
allowance) $2,006,940 1,992,075 1,965,345 1,953,416 1,938,499
Total assets $2,104,212 2,096,597 2,075,217 2,058,718 2,042,037
Deposits $1,618,825 1,632,153 1,643,522 1,647,000 1,628,233
Shareholders'
equity $ 178,583 176,482 175,434 173,028 169,452
Year-To-Date
-----------------------
2007 2006
----------- ---------
EARNINGS
Net interest income $ 55,557 61,587
Provision for loan and lease losses $ 11,070 5,775
Noninterest income $ 5,870 5,261
Noninterest expense $ 38,356 32,262
Net income $ 8,966 19,847
Basic earnings per share $ 1.06 2.36
Diluted earnings per share $ 1.06 2.33
Average shares outstanding* 8,453,483 8,403,163
Average diluted shares outstanding* 8,497,509 8,517,972
PERFORMANCE RATIOS
Return on average assets 0.43% 1.01%
Return on average common equity 5.10% 12.19%
Net interest margin (fully tax-equivalent) 2.87% 3.37%
Efficiency ratio 62.44% 48.26%
Full-time equivalent employees 306 291
CAPITAL
Period-ending equity to assets 8.40% 8.32%
Tier 1 leverage capital ratio 9.97% 10.04%
Tier 1 risk-based capital ratio 10.14% 10.37%
Total risk-based capital ratio 11.39% 11.45%
Book value per share $ 21.05 20.36
Cash dividends per share $ 0.55 0.47
ASSET QUALITY
Gross loan charge-offs $ 7,275 5,389
Net loan charge-offs $ 6,667 4,891
Net loan charge-offs to average loans 0.38% 0.29%
Allowance for loan and lease losses $ 25,814 21,411
Allowance for losses to total loans 1.43% 1.23%
Nonperforming loans $ 29,809 8,571
Other real estate and repossessed assets $ 5,895 986
Nonperforming assets to total assets 1.68% 0.46%
END OF PERIOD BALANCES
Loans and leases $ 1,799,880 1,745,478
Total earning assets (before allowance) $ 2,011,908 1,948,179
Total assets $ 2,121,403 2,067,268
Deposits $ 1,591,181 1,646,903
Shareholders' equity $ 178,155 171,915
AVERAGE BALANCES
Loans and leases $ 1,765,465 1,660,284
Total earning assets (before allowance) $ 1,979,625 1,860,680
Total assets $ 2,083,846 1,959,933
Deposits $ 1,635,289 1,545,069
Shareholders' equity $ 175,898 162,781
* - Adjusted for 5% stock dividend paid on May 4, 2007
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS THREE MONTHS TWELVE MONTHS TWELVE MONTHS
ENDED ENDED ENDED ENDED
December 31, December 31, December 31, December 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Audited)
INTEREST INCOME
Loans and
leases,
including
fees $ 32,674,000 $ 34,178,000 $133,685,000 $127,470,000
Investment
securities 2,535,000 2,425,000 10,056,000 9,296,000
Federal funds
sold 77,000 135,000 420,000 482,000
Short-term
investments 7,000 2,000 20,000 12,000
------------ ------------ ------------ ------------
Total interest
income 35,293,000 36,740,000 144,181,000 137,260,000
INTEREST EXPENSE
Deposits 18,860,000 18,644,000 76,221,000 64,755,000
Short-term
borrowings 896,000 839,000 3,493,000 2,867,000
Federal Home
Loan Bank
advances 1,756,000 1,257,000 6,100,000 5,393,000
Long-term
borrowings 707,000 705,000 2,810,000 2,658,000
------------ ------------ ------------ ------------
Total interest
expense 22,219,000 21,445,000 88,624,000 75,673,000
------------ ------------ ------------ ------------
Net interest
income 13,074,000 15,295,000 55,557,000 61,587,000
Provision for
loan and
lease losses 4,900,000 1,700,000 11,070,000 5,775,000
------------ ------------ ------------ ------------
Net interest
income after
provision for
loan and
lease losses 8,174,000 13,595,000 44,487,000 55,812,000
NONINTEREST
INCOME
Service charges
on accounts 425,000 380,000 1,610,000 1,386,000
Other income 1,109,000 1,001,000 4,260,000 3,875,000
------------ ------------ ------------ ------------
Total
noninterest
income 1,534,000 1,381,000 5,870,000 5,261,000
NONINTEREST
EXPENSE
Salaries and
benefits 5,546,000 4,804,000 22,876,000 18,983,000
Occupancy 837,000 732,000 3,300,000 3,136,000
Furniture and
equipment 540,000 500,000 2,063,000 2,050,000
Other expense 3,085,000 2,161,000 10,117,000 8,093,000
------------ ------------ ------------ ------------
Total
noninterest
expense 10,008,000 8,197,000 38,356,000 32,262,000
------------ ------------ ------------ ------------
Income (loss)
before
federal
income tax
expense (300,000) 6,779,000 12,001,000 28,811,000
Federal income
tax expense
(benefit) (395,000) 2,174,000 3,035,000 8,964,000
------------ ------------ ------------ ------------
Net income $ 95,000 $ 4,605,000 $ 8,966,000 $ 19,847,000
============ ============ ============ ============
Basic earnings
per share $0.01 $0.55 $1.06 $2.36
Diluted
earnings per
share $0.01 $0.54 $1.06 $2.33
Average shares
outstanding* 8,462,260 8,421,318 8,453,483 8,403,163
Average diluted
shares
outstanding* 8,485,035 8,523,314 8,497,509 8,517,972
* - Adjusted for 5% stock dividend paid on May 4, 2007
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2007 2006 2005
---- ---- ----
(Unaudited) (Audited) (Audited)
ASSETS
Cash and due from
banks $ 29,138,000 $ 51,098,000 $ 36,208,000
Short-term
investments 292,000 282,000 545,000
-------------- -------------- --------------
Total cash and cash
equivalents 29,430,000 51,380,000 36,753,000
Securities available
for sale 136,673,000 130,967,000 112,961,000
Securities held to
maturity 65,330,000 63,943,000 60,766,000
Federal Home Loan
Bank stock 9,733,000 7,509,000 7,887,000
Total loans and
leases 1,799,880,000 1,745,478,000 1,561,812,000
Allowance for loan
and lease losses (25,814,000) (21,411,000) (20,527,000)
-------------- -------------- --------------
Total Loans and
leases, net 1,774,066,000 1,724,067,000 1,541,285,000
Premises and equipment
net 34,351,000 33,539,000 30,206,000
Bank owned life
insurance policies 39,118,000 30,858,000 28,071,000
Accrued interest
receivable 9,957,000 10,287,000 8,274,000
Other assets 22,745,000 14,718,000 12,007,000
-------------- -------------- --------------
Total assets $2,121,403,000 $2,067,268,000 $1,838,210,000
============== ============== ==============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 133,056,000 $ 133,197,000 $ 120,828,000
Interest-bearing 1,458,125,000 1,513,706,000 1,298,524,000
-------------- -------------- --------------
Total deposits 1,591,181,000 1,646,903,000 1,419,352,000
Securities sold under
agreements to
repurchase 97,465,000 85,472,000 72,201,000
Federal funds
purchased 13,800,000 9,800,000 9,600,000
Federal Home Loan
Bank advances 180,000,000 95,000,000 130,000,000
Subordinated
debentures 32,990,000 32,990,000 32,990,000
Other borrowed money 4,013,000 3,316,000 2,347,000
Accrued expenses and
other liabilities 23,799,000 21,872,000 16,595,000
-------------- -------------- --------------
Total liabilities 1,943,248,000 1,895,353,000 1,683,085,000
SHAREHOLDERS' EQUITY
Common stock 176,755,000 161,223,000 148,533,000
Retained earnings 1,131,000 11,794,000 8,000,000
Accumulated other
comprehensive income
(loss) 269,000 (1,102,000) (1,408,000)
-------------- -------------- --------------
Total shareholders'
equity 178,155,000 171,915,000 155,125,000
-------------- -------------- --------------
Total liabilities
and shareholders'
equity $2,121,403,000 $2,067,268,000 $1,838,210,000
============== ============== ==============
CONTACT: Mercantile Bank Corporation
Michael Price, Chairman & CEO
616-726-1600
mprice@mercbank.com
Charles Christmas, Chief Financial Officer
616-726-1202
cchristmas@mercbank.com
|
| Symbol: |
MBWM |
| Last Trade: |
3.51
(11:45 ET)
|
| Change: |
+0.07
(+2.0349%)
|
| Day's Range: |
3.46 -
3.51 |
| Open: |
3.50 |
| Previous Close: |
3.44 |
| TSO: |
8,593,000 |
| Market Cap: |
30.16M |
| Day's Volume: |
2,100 |
|
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