EXHIBIT 99.1
[MERCANTILE BANK CORPORATION LOGO]
FOR FURTHER INFORMATION:
AT MERCANTILE BANK CORPORATION: FOR MEDIA:
Gerald R. Johnson, Jr. Charles Christmas Linda Margolin
Chairman & CEO Chief Financial Officer Margolin & Associates, Inc.
616-406-3700 616-406-3750 216-765-0953
gjohnson@mercbank.com cchristmas@mercbank.com lmm@margolinIR.com
MERCANTILE BANK CORPORATION ANNOUNCES THIRD QUARTER
NET INCOME OF $3.1 MILLION, UP 39.8%
WYOMING, Mich., October 7, 2004 -- Mercantile Bank Corporation (Nasdaq: MBWM)
reported net income for the third quarter of 2004 of $3.1 million, up 39.8
percent from the $2.2 million reported in the third quarter of 2003. Earnings
for the third quarter of 2004 include an $845,000 ($549,000 after-tax) write-off
associated with the unamortized balance of issuance costs related to the
redemption of the $16.0 million trust preferred offering issued in 1999.
Excluding this one-time expense, earnings were $3.7 million, a 64.4 percent
increase over the prior-year quarter. Reported diluted earnings per share were
$0.43 compared with $0.37 for the prior-year third quarter, an increase of 16.2
percent. Excluding the one-time charge, diluted earnings per share for the third
quarter of 2004 were $0.50. Per share results reflect a common stock offering
completed in the fourth quarter of 2003, which increased average shares
outstanding by 1.4 million, or 23.1 percent.
For the first nine months of 2004, Mercantile reported net income of $9.2
million, up 31.9 percent from the $7.0 million reported in the first nine months
of 2003. Excluding the $845,000 write-off, earnings were $9.8 million, a 39.7
percent increase over the prior-year period. Reported diluted earnings per share
were $1.26 compared with the $1.19 reported for the prior-year period. Excluding
the one-time charge, diluted earnings per share were $1.34. Per share results
reflect the aforementioned common stock offering, which increased average shares
outstanding by 1.5 million, or 24.8 percent.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "Exceptional loan growth is
a recurring theme for us, and we are pleased to continue this performance for
still another quarter, with assets fast approaching the $1.5 billion mark. Our
strong loan growth has been supported by a tradition of excellent asset quality
and disciplined expense management, which has enabled us to achieve another
outstanding earnings quarter."
On September 16, 2004, Mercantile completed a private placement of $16.0 million
of floating rate trust preferred securities. The rate is based on 3-month LIBOR,
plus a specified percentage; the current rate is 4.06 percent, adjusted
quarterly. Proceeds were used to redeem $16.0 million of 9.60% Cumulative
Preferred Securities issued in 1999. For details regarding this transaction,
please refer to the Form 8-K filed with the SEC on September 22, 2004.
Mercantile recognized an $845,000 pre-tax charge in connection with the
redemption, representing the unamortized issuance costs of the securities.
Total revenue, comprised of net interest income and non-interest income, was
$12.0 million in the third quarter of 2004, an increase of 31.8 percent over the
$9.1 million earned during the prior-year third quarter. Mr. Johnson noted, "We
are effectively managing our net interest margin to maintain its stability,
allowing strong loan growth to drive growth in net interest income." Net
interest income increased 34.9 percent to $10.9 million for the 2004 third
quarter, reflecting a combination of 32.3 percent growth in average earning
assets and a four basis point improvement in the net interest margin to 3.23
percent. Non-interest income for the third quarter was $1.2 million, an increase
of 7.9 percent above last year's third quarter; this quarter's non-interest
income was enhanced by gains of $135,000 resulting from the sale of
SBA-guaranteed loans.
Non-interest expense for the third quarter of 2004 was $6.4 million, an increase
of 34.7 percent over the prior-year period. Excluding the write-off of trust
preferred issuance costs, non-interest expense increased 16.9 percent, primarily
reflecting an 18.5 percent increase in salaries and benefits from the addition
of 34 FTEs (a 21.8 percent increase in staff). Mr. Johnson noted that revenue
growth continues to far outpace growth in non-interest expense, indicative of
the Company's ongoing attention to expense control. Mercantile's efficiency
ratio was 53.40 percent for the third quarter of 2004 compared to 52.26 percent
for last year's third quarter. Excluding the one-time write-off, the efficiency
ratio was 46.40 percent.
Commenting on Mercantile's asset quality, Mr. Johnson said, "Our asset quality
remains strong, reflecting the strength of our underwriting and credit
administrative culture." Non-performing assets were $3.0 million at September
30, 2004, or 0.20 percent of total assets, compared with $3.7 million at June
30, 2004, or 0.27 percent of total assets. Annualized net charge-offs for the
quarter were 0.15 percent of average loans, compared with 0.02 percent for the
prior-year period. The loan and lease loss reserve was $17.0 million, or 1.36
percent of total loans and leases at September 30, 2004.
Total assets were $1.47 billion at September 30, 2004, an increase of $320.6
million, or 27.8 percent, from the prior-year third quarter. Loans rose $280.0
million, or 28.8 percent, during the same time period, primarily funded by a
$255.3 million increase in deposits. Non-interest bearing deposits rose 43.4
percent, to $111.0 million.
Shareholders' equity at September 30, 2004 was $137.9 million, a twelve-month
increase of $15.8 million, or 12.9 percent. Total shares outstanding at
quarter-end were 7,176,822. Mercantile's total risk-based capital ratio at
September 30, 2004 was 12.21 percent. Mr. Johnson concluded, "With strong loan
growth and a more favorable rate environment, we are well positioned to continue
the earnings momentum generated through our successful business model."
About Mercantile Bank Corporation
Mercantile Bank Corporation is the bank holding company for Mercantile Bank of
West Michigan. The Bank's primary service area is the Kent and Ottawa County
area of West Michigan, which includes the City of Grand Rapids, the
second-largest city in the State of Michigan. The Bank provides a wide variety
of commercial banking services primarily to businesses, individuals, and
governmental units through its five full-service offices in greater Grand
Rapids, and its Holland, Michigan office located thirty miles southwest of Grand
Rapids. Mercantile Bank Corporation's common stock is listed on the Nasdaq
National Market under the symbol "MBWM."
Non-GAAP Financial Measures
This press release includes disclosure and discussion of earnings, EPS and
efficiency ratio excluding a one-time write-off. These numbers are non-GAAP
financial measures as defined in Securities and Exchange Commission ("SEC")
Regulation G and Item 10 of SEC Regulation S-K. Management believes that these
measures are better indicators of operating performance than the GAAP-based
ratios. A complete reconciliation of the GAAP-based and non-GAAP information
included in this press release has been provided. Non-GAAP information presented
by other companies may not be comparable to that presented herein, since each
company may define non-GAAP measures differently.
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, referred to 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
Third Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2004 2003 2003
---- ---- ----
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due from banks $ 35,304,000 $ 16,309,000 $ 32,600,000
Short-term investments 327,000 255,000 230,000
Federal funds sold 5,500,000 0 11,800,000
----------------- ----------------- -----------------
Total cash and cash equivalents 41,131,000 16,564,000 44,630,000
Securities available for sale 87,625,000 71,421,000 61,579,000
Securities held to maturity 50,668,000 45,112,000 42,444,000
Federal Home Loan Bank stock 6,726,000 4,977,000 3,927,000
Total loans and leases 1,252,161,000 1,035,963,000 972,191,000
Allowance for loan and lease losses (17,045,000) (14,379,000) (13,482,000)
----------------- ----------------- -----------------
Total Loans and leases, net 1,235,116,000 1,021,584,000 958,709,000
Premises and equipment, net 21,319,000 15,305,000 15,229,000
Bank owned life insurance policies 16,966,000 16,441,000 16,013,000
Accrued interest receivable 5,638,000 4,098,000 4,142,000
Other assets 9,760,000 7,835,000 7,715,000
----------------- ----------------- -----------------
Total assets $ 1,474,949,000 $ 1,203,337,000 $ 1,154,388,000
================= ================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 111,042,000 $ 76,579,000 $ 77,448,000
Interest-bearing 1,033,815,000 826,313,000 812,133,000
----------------- ----------------- -----------------
Total deposits 1,144,857,000 902,892,000 889,581,000
Securities sold under agreement to repurchase 46,691,000 49,545,000 48,310,000
Federal funds purchased 0 6,000,000 0
Federal Home Loan Bank advances 120,000,000 90,000,000 70,000,000
Subordinated debentures 16,495,000 16,495,000 16,495,000
Other borrowed money 1,508,000 1,114,000 1,012,000
Accrued expenses and other liabilities 7,463,000 7,090,000 6,833,000
----------------- ----------------- -----------------
Total liabilities 1,337,014,000 1,073,136,000 1,032,231,000
SHAREHOLDERS' EQUITY
Common stock 130,935,000 118,560,000 113,118,000
Retained earnings 6,635,000 11,421,000 8,951,000
Accumulated other comprehensive income 365,000 220,000 88,000
----------------- ----------------- -----------------
Total shareholders' equity 137,935,000 130,201,000 122,157,000
Total liabilities and shareholders' equity $ 1,474,949,000 $ 1,203,337,000 $ 1,154,388,000
================= ================= =================
\
Mercantile Bank Corporation
Third Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $ 16,193,000 $ 12,679,000 $ 44,823,000 $ 36,345,000
Investment securities 1,598,000 1,164,000 4,424,000 3,566,000
Federal funds sold 26,000 11,000 53,000 50,000
Short-term investments 2,000 0 3,000 1,000
--------------- -------------- --------------- ---------------
Total interest income 17,819,000 13,854,000 49,303,000 39,962,000
INTEREST EXPENSE
Deposits 5,706,000 4,952,000 15,385,000 15,353,000
Short-term borrowings 220,000 168,000 576,000 512,000
Federal Home Loan Bank advances 652,000 274,000 1,778,000 531,000
Long-term borrowings 385,000 415,000 1,219,000 1,240,000
--------------- -------------- --------------- ---------------
Total interest expense 6,963,000 5,809,000 18,958,000 17,636,000
--------------- -------------- --------------- ---------------
Net interest income 10,856,000 8,045,000 30,345,000 22,326,000
Provision for loan and lease losses 1,200,000 1,380,000 3,674,000 2,850,000
--------------- -------------- --------------- ---------------
Net interest income after provision
for loan and lease losses 9,656,000 6,665,000 26,671,000 19,476,000
NON INTEREST INCOME
Service charges on accounts 319,000 303,000 930,000 852,000
Net gain on sales of securities 0 59,000 78,000 271,000
Net gain on sales of loans 135,000 0 175,000 0
Other income 702,000 709,000 2,013,000 2,184,000
--------------- -------------- --------------- ---------------
Total non interest income 1,156,000 1,071,000 3,196,000 3,307,000
NON INTEREST EXPENSE
Salaries and benefits 3,589,000 3,029,000 10,382,000 8,285,000
Occupancy 401,000 353,000 1,170,000 1,032,000
Furniture and equipment 277,000 272,000 817,000 738,000
Other expense 2,148,000 1,110,000 4,601,000 3,099,000
--------------- -------------- --------------- ---------------
Total non interest expense 6,415,000 4,764,000 16,970,000 13,154,000
--------------- -------------- --------------- ---------------
Income before federal income tax expense 4,397,000 2,972,000 12,897,000 9,629,000
Federal income tax expense 1,283,000 744,000 3,664,000 2,628,000
--------------- -------------- --------------- ---------------
Net income $ 3,114,000 $ 2,228,000 $ 9,233,000 $ 7,001,000
=============== ============== =============== ===============
Basic earnings per share $0.43 $0.38 $1.29 $1.22
Diluted earnings per share $0.43 $0.37 $1.26 $1.19
Average shares outstanding * 7,176,032 5,792,537 7,169,198 5,723,020
Average diluted shares outstanding * 7,318,345 5,945,459 7,316,510 5,862,644
* - Adjusted for 5% stock dividend paid on May 3, 2004
Mercantile Bank Corporation
Third Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
QUARTERLY YEAR-TO-DATE
--------------------------------------------------------------- -----------------------
2004 2004 2004 2003 2003
(dollars in thousands except per
share data) 3RD QTR 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2004 2003
---------- ---------- ---------- ---------- ---------- ---------- ----------
EARNINGS
Net interest income $ 10,856 10,000 9,489 8,939 8,045 30,345 22,326
Provision for loan and
lease losses $ 1,200 1,230 1,244 950 1,380 3,674 2,850
NonInterest income $ 1,156 1,001 1,039 1,100 1,071 3,196 3,307
NonInterest expense $ 6,415 5,400 5,155 4,917 4,764 16,970 13,154
Net income $ 3,114 3,146 2,973 3,015 2,228 9,233 7,001
Basic earnings per share $ 0.43 0.44 0.42 0.42 0.38 1.29 1.22
Diluted earnings per share $ 0.43 0.43 0.41 0.42 0.37 1.26 1.19
Average shares outstanding * 7,176,032 7,172,633 7,158,970 7,102,196 5,792,537 7,169,198 5,723,020
Average diluted shares
outstanding * 7,318,345 7,322,474 7,314,126 7,260,163 5,945,459 7,316,510 5,862,644
PERFORMANCE RATIOS
Return on average assets 0.86% 0.95% 0.96% 1.02% 0.82% 0.92% 0.93%
Return on average common equity 9.06% 9.50% 9.10% 9.38% 10.22% 9.23% 11.25%
Net interest margin (fully
tax-equivalent) 3.23% 3.24% 3.26% 3.26% 3.19% 3.24% 3.20%
Efficiency ratio 53.40% 49.09% 48.96% 48.98% 52.26% 50.60% 51.32%
Full-time equivalent employees 190 183 167 161 156 190 156
CAPITAL
Average equity to average assets 9.54% 10.01% 10.50% 10.91% 7.99% 9.99% 8.25%
Tier 1 leverage capital ratio 10.75% 11.35% 11.87% 12.49% 12.75% 10.75% 12.75%
Tier 1 risk-based capital ratio 10.99% 11.50% 11.99% 12.60% 12.69% 10.99% 12.69%
Total risk-based capital ratio 12.21% 12.74% 13.23% 13.84% 13.93% 12.21% 13.93%
Book value per share $ 19.22 18.71 18.52 18.17 17.52 19.22 17.52
Cash dividend per share $ 0.09 0.09 0.09 0.08 0.08 0.27 0.24
ASSET QUALITY
Gross loan charge-offs $ 581 263 299 72 95 1,143 524
Net loan charge-offs $ 467 255 286 53 56 1,008 258
Net loan charge-offs to
average loans 0.15% 0.09% 0.11% 0.02% 0.02% 0.12% 0.04%
Allowance for loan and
lease losses $ 17,045 16,312 15,337 14,379 13,482 17,045 13,482
Allowance for losses to
total loans 1.36% 1.38% 1.38% 1.39% 1.39% 1.36% 1.39%
Nonperforming loans $ 1,433 3,731 3,122 1,785 287 1,433 287
Other real estate and
repossessed assets $ 1,552 0 0 0 0 1,552 0
Nonperforming assets to
total assets 0.20% 0.27% 0.24% 0.15% 0.02% 0.20% 0.02%
END OF PERIOD BALANCES
Loans and leases $1,252,161 1,185,363 1,111,152 1,035,963 972,191 1,252,161 972,191
Total earning assets
(before allowance) $1,403,007 1,311,191 1,234,158 1,157,728 1,092,171 1,403,007 1,092,171
Total assets $1,474,949 1,378,626 1,293,935 1,203,337 1,154,388 1,474,949 1,154,388
Deposits $1,144,857 1,046,069 995,334 902,892 889,581 1,144,857 889,581
Shareholders' equity $ 137,935 134,272 133,075 130,201 122,157 137,935 122,157
AVERAGE BALANCES
Loans and leases $1,219,325 1,144,758 1,067,710 999,618 918,966 1,144,206 849,733
Total earning assets
(before allowance) $1,361,985 1,269,300 1,196,936 1,115,960 1,029,203 1,276,387 959,072
Total assets $1,429,059 1,330,507 1,250,733 1,169,521 1,083,389 1,337,686 1,008,775
Deposits $1,094,166 1,004,651 946,562 886,299 867,291 1,015,415 817,709
Shareholders' equity $ 136,290 133,211 131,361 127,511 86,510 133,629 83,192
* - Adjusted for 5% stock dividend paid on May 3, 2004
Mercantile Bank Corporation
Third Quarter 2004 Results
MERCANTILE BANK CORPORATION
Reconciliation of GAAP-Based Operating Performance Measures
and Adjusted Operating Performance Measures
The following schedule reflects the adjustment of GAAP-based operating results
and certain performance measures for the one-time charge associated with the
unamortized balance of issuance costs of trust preferred securities that were
redeemed during the third quarter of 2004. Management believes excluding the
impact of the one-time charge from 2004 operating results and performance
measures allows a more meaningful comparison of 2004 results to 2003 results.
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 2004 September 30, 2003 September 30, 2004 September 30, 2003
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GAAP-BASED OPERATING PERFORMANCE MEASURES
Net interest income $10,856,000 $ 8,045,000 $30,345,000 $22,326,000
Provision for loan and lease losses 1,200,000 1,380,000 3,674,000 2,850,000
Noninterest income 1,156,000 1,071,000 3,196,000 3,307,000
Noninterest expense 6,415,000 4,764,000 16,970,000 13,154,000
----------- ----------- ----------- -----------
Income before federal income tax expense 4,397,000 2,972,000 12,897,000 9,629,000
Federal income tax expense 1,283,000 744,000 3,664,000 2,628,000
----------- ----------- ----------- -----------
Net income 3,114,000 2,228,000 9,233,000 7,001,000
Basic earnings per share $ 0.43 $ 0.38 $ 1.29 $ 1.22
Diluted earnings per share 0.43 0.37 1.26 1.19
Return on average assets 0.86% 0.82% 0.92% 0.93%
Return on average equity 9.06% 10.22% 9.23% 11.25%
Net interest margin 3.23% 3.19% 3.24% 3.20%
Efficiency ratio 53.40% 52.26% 50.60% 51.32%
ADJUSTED OPERATING PERFORMANCE MEASURES
Net interest income $10,856,000 $ 8,045,000 $30,345,000 $22,326,000
Provision for loan and lease losses 1,200,000 1,380,000 3,674,000 2,850,000
Noninterest income 1,156,000 1,071,000 3,196,000 3,307,000
Noninterest expense 6,415,000 4,764,000 16,970,000 13,154,000
Elimination of one-time charge associated
with redemption of trust preferred securities 845,000 0 845,000 0
----------- ----------- ----------- -----------
Income before federal income tax expense 5,242,000 2,972,000 13,742,000 9,629,000
Federal income tax expense 1,283,000 744,000 3,664,000 2,628,000
Increase in federal income tax expense due to
elimination of one-time charge 297,000 0 297,000 0
----------- ----------- ----------- -----------
Net income 3,662,000 2,228,000 9,781,000 7,001,000
Basic earnings per share $ 0.51 $ 0.38 $ 1.36 $ 1.22
Diluted earnings per share 0.50 0.37 1.34 1.19
Return on average assets 1.02% 0.82% 0.98% 0.93%
Return on average equity 10.66% 10.22% 9.78% 11.25%
Net interest margin 3.23% 3.19% 3.24% 3.20%
Efficiency ratio 46.37% 52.26% 48.08% 51.32%