GRAND RAPIDS, Mich., Jan. 19, 2010 (GLOBE NEWSWIRE) -- Mercantile Bank Corporation (Nasdaq:MBWM) ("Mercantile") reported a fourth quarter 2009 net loss attributable to common shares of $26.4 million, or ($3.11) per diluted share, compared with net income of $0.3 million, or $0.04 per diluted share, for the fourth quarter of 2008. For the twelve months ended December 31, 2009, Mercantile reported a net loss attributable to common shares of $42.9 million, or ($5.05) per diluted share, compared to a net loss of $5.0 million, or ($0.59) per diluted share, for the prior year.
Fourth quarter results include a one-time non-cash charge to federal income tax expense of $19.7 million to establish a valuation allowance on its net deferred tax assets. Excluding the impact of this one-time charge, the fourth quarter net loss attributable to common shares was $6.66 million, or ($0.78) per diluted share. Mercantile’s banking subsidiary, Mercantile Bank of Michigan, continues to maintain capital levels well in excess of regulatory minimums for well-capitalized banks. Michael Price, Chairman and CEO of Mercantile Bank Corporation, commented on this charge. "We expect to reduce and ultimately eliminate the deferred tax asset valuation allowance in future periods when we return to profitability.”
Similar to most banking companies, Mercantile has a net deferred tax asset for expected future tax deductions. The deferred tax valuation allowance was established against the entire balance of net deferred tax assets and was due primarily to Mercantile’s recent losses resulting from the distressed operating environment currently confronting banks. The creation of the valuation allowance is a non-cash charge and does not affect the Company’s liquidity position. Although Mercantile was already excluding the net deferred tax asset from its regulatory capital ratios, the increased net deferred tax asset balance resulting from 2009 operations further impacted regulatory capital ratios at year-end 2009. The valuation allowance will continue to be analyzed quarterly and will be adjusted in accordance with the accounting rules.
In addition to the $19.7 million tax charge to establish a valuation allowance for the net deferred tax assets, 2009 full-year results include a $1.3 million charge relating to Mercantile’s consolidation of its mid- and eastern-Michigan banking regions and a $0.9 million charge for the industry-wide FDIC special assessment.
Mercantile’s 2009 operating performance has been impacted by the distressed Michigan and national economies and their negative impact on real estate values and the financial strength of its borrowers. The level of problem assets and costs associated with their administration and disposition increased substantially during the course of the year; Mercantile responded aggressively to address its problem assets as expeditiously as circumstances would allow while also continuing to build its loan and lease loss reserve. Notwithstanding the increased loan and lease loss provision expense and problem asset administration costs, improvements were achieved throughout 2009 in key areas including an expanded net interest margin, increased regulatory capital levels, a continued shift to local funding sources and reduced controllable overhead expenses.
Mr. Price continued, “We have made substantial progress over the course of this past year, which is not entirely reflected in our financial statements. We have become well-versed with challenges presented by the recessionary environment and have been able to respond more vigorously – and more effectively – to achieve control over our problem assets. However, the costs associated with the aggressive management of problem assets have been sizeable, but necessary, despite their substantial negative impact on our bottom line. A return to strong asset quality remains our number one priority, which we believe includes proactive identification of potential problem loans and aggressive resolution of existing problem assets.
“As the economy deteriorated over the past two years, the various strategies we’ve employed to manage our loan portfolio have provided us with numerous options for the timely resolution of problem assets. The partnerships we developed with our borrowers initially are still in place to foster a positive environment for loan resolution and increased repayments. We continue to work through Michigan’s prolonged foreclosure process and have recently been able to accelerate the disposition of foreclosed real estate. This past quarter alone, paydowns and proceeds from the liquidation of nonperforming assets totaled $12 million, whereas for the entire year payments and proceeds totaled $26 million. So we are seeing more activity in our markets, and we are participating in it.
“Operating efficiency has been an important element of our strategy from Mercantile’s earliest days. However, market conditions have caused certain credit-related expenses to escalate disproportionately. To offset this negative impact, we regularly review our banking activities to identify additional revenue enhancements and opportunities to reduce operating costs without sacrificing quality service. Through incremental improvements in virtually every revenue and expense category, we have made substantial progress over the past year.”
Operating Results
Total revenue for 2009, consisting of net interest income and noninterest income, was $58.9 million, up 10.1 percent from the $53.5 million reported for 2008. Net interest income was $51.3 million in 2009 compared to $46.2 million for the prior year, up $5.1 million, or 11.1 percent; the increase was primarily the result of a 32 basis point, or 13.9 percent, expansion of the net interest margin, from 2.30 percent for 2008 to 2.62 percent for 2009, partially offset by a $56.0 million, or 2.7 percent, decline in average earning assets year over year. Lower funding costs accounted for the entire margin improvement in 2009. Despite the substantial increase in nonaccrual loans during the course of the past year, the asset yield remained virtually unchanged as loan pricing initiatives offset foregone interest income.
Fourth quarter 2009 net interest income was $13.5 million, a $1.0 million, or 8.0 percent increase from the $12.5 million generated in the year-ago fourth quarter. The net interest margin for the 2009 fourth quarter was 2.93 percent, up 53 basis points, or 22.1 percent, from the year-ago fourth quarter. Average earning assets declined by $241.8 million, or 11.4 percent, from the year-ago quarter.
Noninterest income for 2009 was $7.6 million, up $0.3 million from the $7.3 million generated in 2008, primarily from increased levels of mortgage banking income and rental income from foreclosed properties. For the fourth quarter of 2009, noninterest income was $2.0 million, up 14.2 percent and 7.4 percent, respectively, from the third quarter of 2009 and the fourth quarter of 2008.
The provision for loan and lease losses totaled $49.0 million for 2009, with $15.3 million recorded in the fourth quarter. This compares with a 2008 provision expense of $21.2 million for the entire year, including $4.0 million in the fourth quarter. The increased 2009 provision expense reflects a higher level of net loan and lease charge-offs as well as additions to reserves to provide for potential losses in the existing loan and lease portfolio. The allowance for loan and lease losses was 2.46 percent of total loans and leases as of December 31, 2009, compared to 2.07 percent and 1.46 percent, respectively, at third quarter-end and the 2008 fourth quarter-end.
Noninterest expense for 2009 was $46.5 million. Excluding the $1.3 million of one-time expenses associated with the consolidation of Mercantile’s mid- and eastern banking regions and the $0.9 million charge related to the industry-wide FDIC special assessment, noninterest expense for 2009 was $44.2 million, up $2.1 million, or 5.1 percent, from the $42.1 million recorded in 2008. The year-over-year growth in noninterest expense resulted from higher costs associated with the administration and disposition of nonperforming assets (namely, legal expenses, property tax payments, appraisal costs, and write-downs on foreclosed properties) and increased FDIC insurance premiums. For 2009, costs related to nonperforming assets and standard FDIC premiums more than doubled: $11.2 million for 2009 compared to $5.2 million in 2008. Mercantile partially offset growth of credit administration costs and FDIC premiums through disciplined management of overhead expenses. Salaries and benefits, occupancy, furniture and equipment, and other operating expenses decreased by $3.9 million, or 10.6 percent, from 2008 levels.
Balance Sheet
Total assets as of December 31, 2009, were $1.92 billion, down $292 million, or 13.2 percent, from the $2.21 billion reported as of December 31, 2008. Loans and leases declined $317 million, or 17.1 percent, to $1.54 billion during the same twelve-month period. Importantly, commercial real estate (“CRE”) loans declined by $66.1 million, or 7.1 percent, to $862 million at December 31, 2009, while over the same twelve-month period, construction and land development (“C&D”) loans, including both residential and commercial projects, declined by $85.2 million, or 33.0 percent, to $173 million. Commercial and industrial ("C&I”) loans accounted for most of the remaining decline in loan outstandings – primarily due to the economic slowdown which lowered usage of lines of credit by $138 million.
| COMMERCIAL LOANS SECURED BY REAL ESTATE | ||||||
| 12/31/09 | 9/30/09 | 6/30/09 | 3/31/09 | 12/31/08 | ||
| Residential-Related: | ||||||
| Vacant Land | 19,465,000 | 20,630,000 | 21,400,000 | 22,244,000 | 21,374,000 | |
| Land Development | 34,027,000 | 33,862,000 | 42,053,000 | 50,402,000 | 54,055,000 | |
| Construction | 7,199,000 | 9,446,000 | 11,157,000 | 14,646,000 | 16,839,000 | |
| Subtotal | 60,691,000 | 63,938,000 | 74,610,000 | 87,292,000 | 92,268,000 | |
| Comm'l Non-Owner Occupied: | ||||||
| Vacant Land | 25,549,000 | 25,564,000 | 29,005,000 | 28,775,000 | 29,269,000 | |
| Land Development | 19,402,000 | 22,412,000 | 23,469,000 | 24,636,000 | 24,629,000 | |
| Construction | 65,697,000 | 79,339,000 | 94,225,000 | 93,322,000 | 102,464,000 | |
| Commercial Buildings | 537,891,000 | 528,727,000 | 545,501,000 | 556,280,000 | 558,360,000 | |
| Subtotal | 648,539,000 | 656,042,000 | 692,200,000 | 703,013,000 | 714,722,000 | |
| Comm'l Owner Occupied: | ||||||
| Construction | 1,404,000 | 5,456,000 | 7,407,000 | 9,290,000 | 9,344,000 | |
| Commercial Buildings | 324,451,000 | 349,335,000 | 359,610,000 | 365,250,000 | 370,099,000 | |
| Subtotal | 325,855,000 | 354,791,000 | 367,017,000 | 374,540,000 | 379,443,000 | |
| Total | 1,035,085,000 | 1,074,771,000 | 1,133,827,000 | 1,164,845,000 | 1,186,433,000 | |
| Note --- Excludes residential mortgage loans representing permanent financing of owner occupied dwellings and home equity lines of credit. | ||||||
Total deposits at December 31, 2009 were $1.40 billion, down $198 million, or 12.4 percent, from December 31, 2008. Local deposits, primarily NOW accounts and time deposits, increased by $209 million over the past twelve months to $679 million, while total wholesale funds declined by $472 million to $943 million over the same twelve-month period. Total wholesale funds accounted for 54.7 percent of total funds as of December 31, 2009, down from 71.5 percent at year-end 2008.
Asset Quality
Nonperforming assets at December 31, 2009, were $112 million, or 5.8 percent of total assets, compared to $111 million (5.5 percent of total assets) and $57.4 million (2.6 percent of total assets), respectively, at September 30, 2009 and December 31, 2008. Over the past twelve months, nonperforming assets increased by $54.2 million.
Robert B. Kaminski Jr., Executive Vice President and Chief Operating Officer of Mercantile Bank Corporation, addressed Mercantile’s progress with asset quality issues over the past year. “We remain aggressive in problem asset resolution. Our net charge-offs for the year exceeded two percent of our average loans and leases. We continue to recognize problem loans at early stages of weakness and have not hesitated to place loans on nonaccrual if we believe the likelihood of full repayment may be compromised. At year-end 2009, over 40 percent of our nonperforming loans were contractually current. As of December 31, 2009, our 30-89 day delinquencies were under $1 million, the lowest level since year-end 2005. We consider this to be an encouraging sign of the progress we are making.”
Commercial real estate assets, excluding land development and construction assets, accounted for the majority of the $112 million of nonperforming assets at December 31, 2009 -- $58.3 million, or about 52 percent, up $37.8 million since the beginning of 2009. Non-owner occupied properties comprised approximately 66 percent of nonperforming CRE assets. Meanwhile, nonperforming C&D assets were up $8.5 million, or 30.9 percent, from $27.5 million at the prior year-end to $36.1 million (32.3 percent of total nonperforming assets) at December 31, 2009. Nonperforming C&I loans and repossessed assets were $9.8 million compared to $5.2 million at December 2008 year-end, while nonperforming owner-occupied and rental residential loans totaled $7.5 million, up from $4.2 million at December 31, 2008.
| NONPERFORMING ASSETS BY LOAN CATEGORY | ||||||
| 12/31/09 | 9/30/09 | 6/30/09 | 3/31/09 | 12/31/08 | ||
| Residential Real Estate: | ||||||
| Land Development | 19,722,000 | 13,645,000 | 10,422,000 | 12,646,000 | 14,273,000 | |
| Construction | 12,103,000 | 13,021,000 | 12,882,000 | 13,538,000 | 11,040,000 | |
| Owner Occupied / Rental | 7,493,000 | 6,830,000 | 4,910,000 | 4,877,000 | 4,160,000 | |
| Subtotal | 39,318,000 | 33,496,000 | 28,214,000 | 31,061,000 | 29,473,000 | |
| Commercial Real Estate: | ||||||
| Land Development | 2,971,000 | 4,621,000 | 2,292,000 | 2,383,000 | 2,234,000 | |
| Construction | 1,268,000 | 228,000 | 0 | 0 | 0 | |
| Owner Occupied | 19,918,000 | 21,429,000 | 17,378,000 | 8,753,000 | 6,495,000 | |
| Non-Owner Occupied | 38,417,000 | 36,473,000 | 28,110,000 | 28,364,000 | 14,055,000 | |
| Subtotal | 62,574,000 | 62,751,000 | 47,780,000 | 39,500,000 | 22,784,000 | |
| Non-Real Estate: | ||||||
| Commercial Assets | 9,758,000 | 14,510,000 | 10,629,000 | 13,155,000 | 5,134,000 | |
| Consumer Assets | 8,000 | 8,000 | 8,000 | 31,000 | 30,000 | |
| Subtotal | 9,766,000 | 14,518,000 | 10,637,000 | 13,186,000 | 5,164,000 | |
| Total | 111,658,000 | 110,765,000 | 86,631,000 | 83,747,000 | 57,421,000 | |
During the course of 2009, Mercantile added $113 million of nonperforming assets to its problem portfolio and successfully disposed of $58.4 million of nonperforming assets by year-end. The Company utilized a combination of workout strategies to accomplish its objectives: asset sales, principal paydowns and a return to performing status accounted for $27.2 million of the reduction; charge-offs were $27.4 million; and OREO valuation write-downs were $3.7 million. Nonperforming asset totals remained virtually unchanged from the third quarter of 2009 to year-end, up only $0.9 million.
| NONPERFORMING ASSETS RECONCILIATION | ||||||
| 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | Whole Year | ||
| 2009 | 2009 | 2009 | 2009 | 2009 | ||
| Beginning Balance | 110,765,000 | 86,631,000 | 83,747,000 | 57,421,000 | 57,421,000 | |
| Additions | 22,308,000 | 39,815,000 | 18,768,000 | 31,745,000 | 112,636,000 | |
| Returns to Performing Status | 0 | (47,000) | 0 | (1,156,000) | (1,203,000) | |
| Principal Payments | (8,652,000) | (3,707,000) | (5,438,000) | (1,318,000) | (19,115,000) | |
| Sale Proceeds | (3,353,000) | (1,630,000) | (1,484,000) | (451,000) | (6,918,000) | |
| Charge-Offs | (7,862,000) | (8,578,000) | (8,785,000) | (2,209,000) | (27,434,000) | |
| Valuation Write-Downs | (1,548,000) | (1,719,000) | (177,000) | (285,000) | (3,729,000) | |
| Ending Balance | 111,658,000 | 110,765,000 | 86,631,000 | 83,747,000 | 111,658,000 | |
Reflecting Mercantile’s conservative identification and administration of problem assets, approximately 40 percent of nonperforming loans and leases were contractually current at December 31, 2009, while loans in the 30-89 day past due category totaled less than $1.0 million. OREO and repossessed assets were $26.6 million at year-end, up $18.5 million from the $8.1 million at December 31, 2008. The net increase was anticipated, since Mercantile continues to gain ownership of properties through the foreclosure process which generally includes a six-to-twelve month redemption period.
| NONPERFORMING ASSETS BY TYPE | ||||||
| 12/31/09 | 9/30/09 | 6/30/09 | 3/31/09 | 12/31/08 | ||
| Past Due Over 90 Days & Accruing | 243,000 | 3,040,000 | 48,000 | 2,426,000 | 1,358,000 | |
| Nonaccrual Loans - Current | 34,377,000 | 36,069,000 | 28,323,000 | 32,328,000 | 11,208,000 | |
| Nonaccrual Loans - Past Due | 47,441,000 | 51,121,000 | 45,300,000 | 39,615,000 | 36,737,000 | |
| Troubled Debt Restructurings | 2,989,000 | 1,012,000 | 0 | 0 | 0 | |
| Foreclosed & Repossessed Assets | 26,608,000 | 19,523,000 | 12,960,000 | 9,378,000 | 8,118,000 | |
| Total | 111,658,000 | 110,765,000 | 86,631,000 | 83,747,000 | 57,421,000 | |
Net loan and lease charge-offs for 2009 were $38.2 million, or 2.24 percent of average loans and leases, compared to $19.9 million, or 1.09 percent of average loans and leases for 2008. For the fourth quarter of 2009, net loan and lease charge-offs were $10.9 million, or 2.72 percent annualized of average loans and leases, compared with $11.0 million (2.61 percent annualized) and $6.4 million (1.37 percent annualized) for the 2009 third quarter and fourth quarter of 2008, respectively.
|
NET LOAN CHARGE-OFFS
|
||||||
| 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | Whole Year | ||
| 2009 | 2009 | 2009 | 2009 | 2009 | ||
| Residential Real Estate: | ||||||
| Land Development | 2,204,000 | 467,000 | 1,060,000 | 624,000 | 4,355,000 | |
| Construction | 733,000 | 3,208,000 | 1,023,000 | 86,000 | 5,050,000 | |
| Owner Occupied / Rental | 946,000 | 530,000 | 729,000 | 1,442,000 | 3,647,000 | |
| Subtotal | 3,883,000 | 4,205,000 | 2,812,000 | 2,152,000 | 13,052,000 | |
| Commercial Real Estate: | ||||||
| Land Development | 45,000 | 0 | 74,000 | 0 | 119,000 | |
| Construction | 0 | 0 | 0 | 0 | 0 | |
| Owner Occupied | 1,140,000 | 1,254,000 | 593,000 | 75,000 | 3,062,000 | |
| Non-Owner Occupied | 3,009,000 | 3,265,000 | 2,347,000 | 786,000 | 9,407,000 | |
| Subtotal | 4,194,000 | 4,519,000 | 3,014,000 | 861,000 | 12,588,000 | |
| Non-Real Estate: | ||||||
| Commercial Assets | 2,788,000 | 2,232,000 | 4,918,000 | 2,475,000 | 12,413,000 | |
| Consumer Assets | (1,000) | 7,000 | 35,000 | 136,000 | 177,000 | |
| Subtotal | 2,787,000 | 2,239,000 | 4,953,000 | 2,611,000 | 12,590,000 | |
| Total | 10,864,000 | 10,963,000 | 10,779,000 | 5,624,000 | 38,230,000 | |
Capital Position
Shareholders’ equity totaled $150.1 million at December 31, 2009, a decrease of $24.3 million, or 13.9 percent, from December 31, 2008. Approximately $19.7 million of the decline resulted from the non-cash valuation allowance established this quarter on Mercantile’s deferred tax assets. The Bank remains “well-capitalized,” with a total risk-based capital ratio of 11.6 percent as of December 31, 2009 compared to 10.8 percent at December 31, 2008. The Bank’s total regulatory capital as of December 31, 2009 was $201.1 million, approximately $27.6 million in excess of the minimum 10 percent required to be categorized as “well-capitalized”. Mercantile’s total shares outstanding at fourth quarter-end were 8,592,514.
Mr. Price concluded, “During this critical period, we continue to take the necessary actions to enhance Mercantile’s operating performance, strengthen our balance sheet and maintain our capital in excess of “well-capitalized” levels. While these improvements are not yet sufficient to offset the costs associated with our current level of problem assets, we anticipate increasingly positive contributions to future quarterly results.”
About Mercantile Bank Corporation
Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Founded in 1997 to provide banking services to businesses, individuals, and governmental units, the Bank differentiates itself on the basis of service quality and its banking staff expertise. Mercantile has seven full-service banking offices in Grand Rapids, Holland and Lansing, 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 economies; 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) | ||||||||
|
Quarterly |
Year-To-Date | |||||||
| 2009 | 2009 | 2009 | 2009 | 2008 | ||||
| (dollars in thousands except per share data) | 4th Qtr | 3rd Qtr | 2nd Qtr | 1st Qtr | 4th Qtr | 2009 | 2008 | |
| EARNINGS | ||||||||
| Net interest income | $ | 13,511 | 13,567 | 12,450 | 11,805 | 12,505 | 51,333 | 46,209 |
| Provision for loan and lease losses | $ | 15,300 | 11,800 | 11,500 | 10,400 | 4,000 | 49,000 | 21,200 |
| Noninterest income | $ | 1,953 | 1,710 | 1,863 | 2,032 | 1,818 | 7,558 | 7,282 |
| Noninterest expense | $ | 10,835 | 12,517 | 12,364 | 10,772 | 10,506 | 46,488 | 42,126 |
| Net income (loss) | $ | (26,087) | (5,286) | (6,225) | (4,489) | 313 | (42,087) | (4,959) |
| Net income (loss) common shareholders | $ | (26,406) | (5,606) | (6,388) | (4,489) | 313 | (42,889) | (4,959) |
| Basic earnings (loss) per share | $ | (3.11) | (0.66) | (0.75) | (0.53) | 0.04 | (5.05) | (0.59) |
| Diluted earnings (loss) per share | $ | (3.11) | (0.66) | (0.75) | (0.53) | 0.04 | (5.05) | (0.59) |
| Average basic shares outstanding | 8,496,555 | 8,492,946 | 8,487,747 | 8,481,265 | 8,476,119 | 8,489,679 | 8,470,795 | |
| Average diluted shares outstanding | 8,496,555 | 8,492,946 | 8,487,747 | 8,481,265 | 8,532,153 | 8,489,679 | 8,470,795 | |
| PERFORMANCE RATIOS | ||||||||
| Return on average assets | (5.28%) | (1.09%) | (1.19%) | (0.81%) | 0.06% | (2.04%) | (0.23%) | |
| Return on average common equity | (59.46%) | (12.26%) | (14.54%) | (10.50%) | 0.72% | (24.26%) | (2.87%) | |
| Net interest margin (fully tax-equivalent) | 2.93% | 2.85% | 2.50% | 2.28% | 2.40% | 2.62% | 2.30% | |
| Efficiency ratio | 70.07% | 81.93% | 86.38% | 77.85% | 73.35% | 78.94% | 78.75% | |
| Full-time equivalent employees | 257 | 265 | 278 | 298 | 303 | 257 | 303 | |
| CAPITAL | ||||||||
| Period-ending equity to assets | 7.83% | 8.79% | 8.77% | 7.56% | 7.90% | 7.83% | 7.90% | |
| Tier 1 leverage capital ratio | 9.14% | 9.70% | 9.46% | 8.49% | 9.17% | 9.14% | 9.17% | |
| Tier 1 risk-based capital ratio | 10.43% | 10.72% | 10.48% | 9.38% | 9.68% | 10.43% | 9.68% | |
| Total risk-based capital ratio | 11.70% | 11.98% | 11.74% | 10.63% | 10.93% | 11.70% | 10.93% | |
| Book value per common share | $ | 15.01 | 18.19 | 18.71 | 19.70 | 20.29 | 15.01 | 20.29 |
| Cash dividend per common share | $ | 0.01 | 0.01 | 0.01 | 0.04 | 0.04 | 0.07 | 0.31 |
| ASSET QUALITY | ||||||||
| Gross loan charge-offs | $ | 11,225 | 11,545 | 11,111 | 5,740 | 6,564 | 39,621 | 20,594 |
| Net loan charge-offs | $ | 10,864 | 10,963 | 10,779 | 5,624 | 6,403 | 38,230 | 19,906 |
| Net loan charge-offs to average loans | 2.72% | 2.61% | 2.47% | 1.25% | 1.37% | 2.24% | 1.09% | |
| Allowance for loan and lease losses | $ | 37,878 | 33,443 | 32,605 | 31,884 | 27,108 | 37,878 | 27,108 |
| Allowance for losses to total loans | 2.46% | 2.07% | 1.91% | 1.79% | 1.46% | 2.46% | 1.46% | |
| Nonperforming loans | $ | 85,050 | 91,242 | 73,671 | 74,369 | 49,303 | 85,050 | 49,303 |
| Other real estate and repossessed assets | $ | 26,608 | 19,523 | 12,960 | 9,378 | 8,118 | 26,608 | 8,118 |
| Nonperforming assets to total assets | 5.83% | 5.49% | 4.18% | 3.74% | 2.60% | 5.83% | 2.60% | |
| END OF PERIOD BALANCES | ||||||||
| Loans and leases | $ | 1,539,818 | 1,614,226 | 1,708,524 | 1,778,057 | 1,856,915 | 1,539,818 | 1,856,915 |
| Total earning assets (before allowance) | $ | 1,800,041 | 1,904,944 | 1,968,436 | 2,140,804 | 2,108,752 | 1,800,041 | 2,108,752 |
| Total assets | $ | 1,916,208 | 2,017,350 | 2,071,372 | 2,239,764 | 2,208,010 | 1,916,208 | 2,208,010 |
| Deposits | $ | 1,401,627 | 1,450,968 | 1,478,633 | 1,651,283 | 1,599,575 | 1,401,627 | 1,599,575 |
| Shareholders' equity | $ | 150,104 | 177,291 | 181,692 | 169,345 | 174,372 | 150,104 | 174,372 |
| AVERAGE BALANCES | ||||||||
| Loans and leases | $ | 1,585,523 | 1,663,510 | 1,749,919 | 1,821,428 | 1,858,701 | 1,704,335 | 1,829,686 |
| Total earning assets (before allowance) | $ | 1,874,752 | 1,935,637 | 2,050,071 | 2,155,278 | 2,116,540 | 2,002,979 | 2,058,957 |
| Total assets | $ | 1,983,111 | 2,042,355 | 2,146,593 | 2,254,307 | 2,214,412 | 2,105,673 | 2,157,322 |
| Deposits | $ | 1,421,850 | 1,469,264 | 1,558,206 | 1,658,323 | 1,588,615 | 1,526,105 | 1,562,429 |
| Shareholders' equity | $ | 176,196 | 181,400 | 176,189 | 173,414 | 172,374 | 176,820 | 172,777 |
| MERCANTILE BANK CORPORATION | ||||||||
| CONSOLIDATED REPORTS OF INCOME | ||||||||
| THREE MONTHS ENDED | THREE MONTHS ENDED | TWELVE MONTHS ENDED | TWELVE MONTHS ENDED | |||||
| December 31, 2009 | December 31, 2008 | December 31, 2009 | December 31, 2008 | |||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||
| Interest income | ||||||||
| Loans and leases, including fees | $ | 21,453,000 | $ | 27,306,000 | $ | 93,903,000 | $ | 110,013,000 |
| Investment securities | 2,644,000 | 2,781,000 | 10,849,000 | 10,848,000 | ||||
| Federal funds sold | 28,000 | 47,000 | 136,000 | 204,000 | ||||
| Short-term investments | 4,000 | 0 | 21,000 | 7,000 | ||||
| Total interest income | 24,129,000 | 30,134,000 | 104,909,000 | 121,072,000 | ||||
| Interest expense | ||||||||
| Deposits | 7,850,000 | 13,668,000 | 41,269,000 | 59,812,000 | ||||
| Short-term borrowings | 460,000 | 515,000 | 1,845,000 | 2,021,000 | ||||
| Federal Home Loan Bank advances | 1,948,000 | 2,720,000 | 8,808,000 | 10,554,000 | ||||
| Other borrowings | 360,000 | 726,000 | 1,654,000 | 2,476,000 | ||||
| Total interest expense | 10,618,000 | 17,629,000 | 53,576,000 | 74,863,000 | ||||
| Net interest income | 13,511,000 | 12,505,000 | 51,333,000 | 46,209,000 | ||||
| Provision for loan and lease losses | 15,300,000 | 4,000,000 | 49,000,000 | 21,200,000 | ||||
| Net interest income after provision | ||||||||
| for loan and lease losses | (1,789,000) | 8,505,000 | 2,333,000 | 25,009,000 | ||||
| Noninterest income | ||||||||
| Service charges on accounts | 523,000 | 522,000 | 2,023,000 | 1,994,000 | ||||
| Other income | 1,430,000 | 1,296,000 | 5,535,000 | 5,288,000 | ||||
| Total noninterest income | 1,953,000 | 1,818,000 | 7,558,000 | 7,282,000 | ||||
| Noninterest expense | ||||||||
| Salaries and benefits | 4,734,000 | 5,462,000 | 20,331,000 | 22,493,000 | ||||
| Occupancy | 718,000 | 927,000 | 3,377,000 | 3,826,000 | ||||
| Furniture and equipment | 452,000 | 478,000 | 1,871,000 | 1,980,000 | ||||
| Nonperforming asset costs | 2,289,000 | 921,000 | 7,294,000 | 3,266,000 | ||||
| FDIC insurance costs | 1,202,000 | 850,000 | 4,852,000 | 1,890,000 | ||||
| Branch consolidation costs | 0 | 0 | 1,308,000 | 0 | ||||
| Other expense | 1,440,000 | 1,868,000 | 7,455,000 | 8,671,000 | ||||
| Total noninterest expense | 10,835,000 | 10,506,000 | 46,488,000 | 42,126,000 | ||||
| Income (loss) before federal income | ||||||||
| tax expense (benefit) | (10,671,000) | (183,000) | (36,597,000) | (9,835,000) | ||||
| Federal income tax expense (benefit) | 15,416,000 | (496,000) | 5,490,000 | (4,876,000) | ||||
| Net income (loss) | (26,087,000) | 313,000 | (42,087,000) | (4,959,000) | ||||
| Preferred stock dividends and accretion | 319,000 | 0 | 802,000 | 0 | ||||
| Net income (loss) attributable to | ||||||||
| common shareholders | $ | (26,406,000) | $ | 313,000 | $ | (42,889,000) | $ | (4,959,000) |
| Basic earnings (loss) per share | ($3.11) | $0.04 | ($5.05) | ($0.59) | ||||
| Diluted earnings (loss) per share | ($3.11) | $0.04 | ($5.05) | ($0.59) | ||||
| Average basic shares outstanding | 8,496,555 | 8,476,119 | 8,489,679 | 8,470,795 | ||||
| Average diluted shares outstanding | 8,496,555 | 8,532,153 | 8,489,679 | 8,470,795 | ||||
|
MERCANTILE BANK CORPORATION |
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|
CONSOLIDATED BALANCE SHEETS |
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| DECEMBER 31, | DECEMBER 31, | DECEMBER 31, | |
| 2009 | 2008 | 2007 | |
| (Unaudited) | (Audited) | (Audited) | |
| ASSETS | |||
| Cash and due from banks | $18,896,000 | $16,754,000 | $29,138,000 |
| Short-term investments | 1,471,000 | 100,000 | 292,000 |
| Federal funds sold | 1,368,000 | 8,950,000 | 0 |
| Total cash and cash equivalents | 21,735,000 | 25,804,000 | 29,430,000 |
| Securities available for sale | 182,491,000 | 162,669,000 | 136,673,000 |
| Securities held to maturity | 59,212,000 | 64,437,000 | 65,330,000 |
| Federal Home Loan Bank stock | 15,681,000 | 15,681,000 | 9,733,000 |
| Loans and leases | 1,539,818,000 | 1,856,915,000 | 1,799,880,000 |
| Allowance for loan and lease losses | (37,878,000) | (27,108,000) | (25,814,000) |
| Loans and leases, net | 1,501,940,000 | 1,829,807,000 | 1,774,066,000 |
| Premises and equipment, net | 29,684,000 | 32,334,000 | 34,351,000 |
| Bank owned life insurance policies | 45,024,000 | 42,462,000 | 39,118,000 |
| Accrued interest receivable | 7,088,000 | 8,513,000 | 9,957,000 |
| Other real estate owned and repossessed assets | 26,608,000 | 8,118,000 | 5,895,000 |
| Other assets | 26,745,000 | 18,185,000 | 16,850,000 |
| Total assets | $1,916,208,000 | $2,208,010,000 | $2,121,403,000 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Deposits: | |||
| Noninterest-bearing | $121,157,000 | $110,712,000 | $133,056,000 |
| Interest-bearing | 1,280,470,000 | 1,488,863,000 | 1,458,125,000 |
| Total deposits | 1,401,627,000 | 1,599,575,000 | 1,591,181,000 |
| Securities sold under agreements to repurchase | 99,755,000 | 94,413,000 | 97,465,000 |
| Federal funds purchased | 2,600,000 | 0 | 13,800,000 |
| Federal Home Loan Bank advances | 205,000,000 | 270,000,000 | 180,000,000 |
| Subordinated debentures | 32,990,000 | 32,990,000 | 32,990,000 |
| Other borrowed money | 16,890,000 | 19,528,000 | 4,013,000 |
| Accrued interest and other liabilities | 7,242,000 | 17,132,000 | 23,799,000 |
| Total liabilities | 1,766,104,000 | 2,033,638,000 | 1,943,248,000 |
| SHAREHOLDERS' EQUITY | |||
| Preferred stock, net of discount | 19,839,000 | 0 | 0 |
| Common stock | 173,576,000 | 172,353,000 | 172,938,000 |
| Retained earnings (deficit) | (44,170,000) | (1,281,000) | 4,948,000 |
| Accumulated other comprehensive income | 859,000 | 3,300,000 | 269,000 |
| Total shareholders' equity | 150,104,000 | 174,372,000 | 178,155,000 |
| Total liabilities and shareholders' equity | $1,916,208,000 | $2,208,010,000 | $2,121,403,000 |
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