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 2004 FISCAL YEAR
NET INCOME OF $13.7 MILLION, UP 37.0%
FOURTH QUARTER NET INCOME ROSE 48.9%
WYOMING, MICH., January 12, 2005 -- Mercantile Bank Corporation (Nasdaq: MBWM)
reported net income for the fiscal year ended December 31, 2004 of $13.7
million, up 37.0 percent from the $10.0 million reported for the fiscal year
ended December 31, 2003. Earnings for 2004 include an $845,000 ($548,000
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 charge, earnings were $14.3 million, a 42.5
percent increase over 2003. Reported diluted earnings per share were $1.87
compared with $1.61 reported for the prior fiscal year, an increase of 16.1
percent. Excluding the one-time charge, earnings per share were $1.94, an
increase of 20.5 percent. Per share results reflect a common stock offering
completed in the fourth quarter of 2003, which increased average fully diluted
shares outstanding by 1.1 million, or 18.3 percent.
For the fourth quarter of 2004, Mercantile reported net income of $4.5 million,
up 48.9 percent from the $3.0 million reported in the fourth quarter of 2003.
Reported diluted earnings per share were $0.61 compared with the $0.42 reported
for the prior-year period, a 45.2 percent increase.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "2004 was another record
year for Mercantile. Our company's strong performance continues to be driven by
commercial loan growth; we have been uniquely successful lending to small and
mid-sized businesses attracted by our lending expertise and high service levels.
West Michigan is well-known for its entrepreneurial environment, as is
Mercantile Bank of West Michigan. We have structured our product line, hired our
staff, and built an infrastructure to provide our small
business leaders with the best in banking. Our earnings and profitability growth
reflect our success at this strategy.
"We passed the $1.5 billion mark in assets during the fourth quarter of 2004. In
anticipation of our continuing growth needs, we added an additional $16.0
million in trust preferred securities to our capital base, and we strengthened
our physical infrastructure through the investment in a new headquarters
building and Holland branch facility. The Holland facility opened in November,
2004 and the headquarters building is scheduled to be completed by May, 2005.
These moves should position us for a strong business environment in 2005."
Total revenue, comprised of net interest income and non-interest income, was
$46.7 million for the 2004 fiscal year, an increase of 31.0 percent over the
$35.7 million earned during 2003. Mr. Johnson noted, "Effective management of
our net interest margin allowed us to benefit from the more favorable interest
rate environment, although strong loan growth continues to be the main driver of
our revenue growth." Net interest income increased 35.7 percent to $42.4
million, reflecting a combination of 31.6 percent growth in average earning
assets and an eight basis point improvement in the net interest margin to 3.30
percent. Non-interest income for 2004 was $4.3 million, slightly below the $4.4
million reported for 2003. The $545,000 decline in residential mortgage fees in
2004 was replaced by increased income in virtually all other categories.
Total revenue for the fourth quarter of 2004 was $13.2 million, an increase of
31.4 percent over the $10.0 million earned in the prior-year period. Net
interest income increased 35.2 percent to $12.1 million as a result of a 28.0
percent increase in average earning assets and a 17 basis point increase in the
net interest margin to 3.43 percent. Non-interest income for the fourth quarter
of 2004 was $1.1 million, virtually unchanged from the prior-year level.
Revenue growth continues to outpace expense growth. Non-interest expense for the
2004 fiscal year was $23.2 million, an increase of 28.4 percent over the
prior-year period. Excluding the one-time write-off of trust preferred issuance
costs during the third quarter of 2004, non-interest expense increased 23.7
percent. Salaries and benefits, up 22.7 percent, represented the largest
increase in non-interest expense, and primarily reflected a 20.5 percent
increase in FTE employees. Mercantile's efficiency ratio improved to 49.64
percent for 2004 compared with 50.66 percent for 2003. Excluding the one-time
write-off, its 2004 efficiency ratio was 47.84 percent.
Non-interest expense for the fourth quarter of 2004 was $6.2 million, an
increase of 26.7 percent over the prior-year period. Salaries and benefits, the
largest component of that increase, grew 15.8 percent. Non-interest expense was
increased by $386,000 relating to the purchase of rehabilitation tax credits.
The transaction resulted in a $414,000 reduction in federal income tax expense,
and enabled Mercantile to provide additional support to a valued customer.
Fourth quarter efficiency improved to 47.22 percent compared with 48.98 percent
for the year-ago quarter.
Asset quality continues to be excellent. Mr. Johnson commented, "As a West
Michigan-based community bank, we excel in our knowledge of our local customers
and our
marketplace. Superb credit administration and lending expertise are core
competencies at Mercantile and an integral component of our commercial lending
strategy. Our low level of loan losses continues to contribute to our growing
profitability levels." Net charge-offs for 2004 were $1.2 million, or 0.10
percent of average loans. Non-performing assets were 0.19 percent of total
assets at December 31, 2004, compared with 0.20 percent at September 30, 2004,
and 0.15 percent at December 31, 2003. Loan and lease loss reserves were $17.8
million, or 1.35 percent of total loans and leases at December 31, 2004.
Total assets were $1.5 billion at December 31, 2004, an increase of $332.8
million, or 27.7 percent, from last year. Loans rose $281.2 million, or 27.1
percent, during the same time period, primarily funded by a $256.3 million, or
28.4 percent, increase in deposits. Non-interest bearing deposits rose 32.9
percent, to $101.7 million.
Shareholders' equity at December 31, 2004 was $141.6 million, a twelve-month
increase of $11.4 million, or 8.8 percent. Total shares outstanding at quarter
end were 7,192,461. Mercantile's total risk-based capital ratio at quarter-end
was 13.03 percent. Mr. Johnson concluded, "Our business model, with its focus on
commercial lending and quality service delivered efficiently, has worked
exceptionally well in the Western Michigan market. We look forward to a
continuation of that success in 2005."
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, earnings per
share 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
in this release, 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
Fourth Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2004 2003 2002
---- ---- ----
(Unaudited) (Unaudited) (Unaudited)
ASSETS
Cash and due from banks $ 20,662,000 $ 16,309,000 $ 23,404,000
Short-term investments 149,000 255,000 213,000
Federal funds sold 0 0 4,500,000
--------------- --------------- -------------
Total cash and cash equivalents 20,811,000 16,564,000 28,117,000
Securities available for sale 93,826,000 71,421,000 59,614,000
Securities held to maturity 52,341,000 45,112,000 36,493,000
Federal Home Loan Bank stock 6,798,000 4,977,000 786,000
Total loans and leases 1,317,124,000 1,035,963,000 771,554,000
Allowance for loan and lease losses (17,819,000) (14,379,000) (10,890,000)
--------------- --------------- -------------
Total Loans and leases, net 1,299,305,000 1,021,584,000 760,664,000
Premises and equipment, net 24,572,000 15,305,000 12,174,000
Bank owned life insurance policies 23,750,000 16,441,000 14,876,000
Accrued interest receivable 5,644,000 4,098,000 3,336,000
Other assets 9,072,000 7,835,000 6,300,000
--------------- --------------- -------------
Total assets $ 1,536,119,000 $ 1,203,337,000 $ 922,360,000
=============== =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 101,742,000 $ 76,579,000 $ 62,405,000
Interest-bearing 1,057,439,000 826,313,000 691,708,000
--------------- --------------- -------------
Total deposits 1,159,181,000 902,892,000 754,113,000
Securities sold under agreement to repurchase 56,317,000 49,545,000 50,335,000
Federal funds purchased 15,000,000 6,000,000 0
Federal Home Loan Bank advances 120,000,000 90,000,000 15,000,000
Subordinated debentures 32,990,000 16,495,000 16,495,000
Other borrowed money 1,609,000 1,114,000 576,000
Accrued expenses and other liabilities 9,405,000 7,090,000 6,007,000
--------------- --------------- -------------
Total liabilities 1,394,502,000 1,073,136,000 842,526,000
SHAREHOLDERS' EQUITY
Common stock 131,010,000 118,560,000 75,530,000
Retained earnings 10,475,000 11,421,000 3,250,000
Accumulated other comprehensive income 132,000 220,000 1,054,000
--------------- --------------- -------------
Total shareholders' equity 141,617,000 130,201,000 79,834,000
Total liabilities and shareholders' equity $ 1,536,119,000 $ 1,203,337,000 $ 922,360,000
=============== =============== =============
Mercantile Bank Corporation
Fourth Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED TWELVE MONTHS ENDED TWELVE MONTHS ENDED
December 31, 2004 December 31, 2003 December 31, 2004 December 31, 2003
------------------ ------------------ ------------------- -------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $17,968,000 $13,355,000 $62,791,000 $49,700,000
Investment securities 1,728,000 1,334,000 6,152,000 4,900,000
Federal funds sold 22,000 7,000 75,000 57,000
Short-term investments 1,000 0 4,000 1,000
----------- ----------- ----------- -----------
Total interest income 19,719,000 14,696,000 69,022,000 54,658,000
INTEREST EXPENSE
Deposits 6,401,000 4,754,000 21,786,000 20,107,000
Short-term borrowings 301,000 200,000 877,000 712,000
Federal Home Loan Bank advances 693,000 390,000 2,471,000 921,000
Long-term borrowings 242,000 415,000 1,461,000 1,655,000
----------- ----------- ----------- -----------
Total interest expense 7,637,000 5,759,000 26,595,000 23,395,000
----------- ----------- ----------- -----------
Net interest income 12,082,000 8,937,000 42,427,000 31,263,000
Provision for loan and lease losses 1,000,000 950,000 4,674,000 3,800,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan and lease losses 11,082,000 7,987,000 37,753,000 27,463,000
NON INTEREST INCOME
Service charges on accounts 325,000 326,000 1,255,000 1,178,000
Net gain on sales of securities 0 50,000 78,000 321,000
Net gain on sales of loans 50,000 0 225,000 0
Other income 731,000 726,000 2,744,000 2,910,000
----------- ----------- ----------- -----------
Total non interest income 1,106,000 1,102,000 4,302,000 4,409,000
NON INTEREST EXPENSE
Salaries and benefits 3,574,000 3,086,000 13,956,000 11,371,000
Occupancy 418,000 354,000 1,588,000 1,386,000
Furniture and equipment 276,000 271,000 1,093,000 1,009,000
Other expense 1,960,000 1,206,000 6,561,000 4,305,000
----------- ----------- ----------- -----------
Total non interest expense 6,228,000 4,917,000 23,198,000 18,071,000
----------- ----------- ----------- -----------
Income before federal income
tax expense 5,960,000 4,172,000 18,857,000 13,801,000
Federal income tax expense 1,472,000 1,157,000 5,136,000 3,785,000
----------- ----------- ----------- -----------
Net income $ 4,488,000 $ 3,015,000 $13,721,000 $10,016,000
=========== =========== =========== ===========
Basic earnings per share $ 0.62 $ 0.42 $ 1.91 $ 1.65
Diluted earnings per share $ 0.61 $ 0.42 $ 1.87 $ 1.61
Average shares outstanding * 7,189,575 7,102,196 7,174,320 6,070,648
Average diluted shares outstanding * 7,350,178 7,260,163 7,354,013 6,215,658
* - Adjusted for 5% stock dividend paid on May 3, 2004
Mercantile Bank Corporation
Fourth Quarter 2004 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
QUARTERLY YEAR-TO-DATE
----------------------------------------------------------- ---------------------
2004 2004 2004 2004 2003
(dollars in thousands except per share data) 4TH QTR 3RD QTR 2ND QTR 1ST QTR 4TH QTR 2004 2003
---------- --------- ---------- --------- --------- --------- ---------
EARNINGS
Net interest income $ 12,082 10,856 10,000 9,489 8,937 42,427 31,263
Provision for loan and lease losses $ 1,000 1,200 1,230 1,244 950 4,674 3,800
NonInterest income $ 1,106 1,156 1,001 1,039 1,102 4,302 4,409
NonInterest expense $ 6,228 6,415 5,400 5,155 4,917 23,198 18,071
Net income $ 4,488 3,114 3,146 2,973 3,015 13,721 10,016
Basic earnings per share $ 0.62 0.43 0.44 0.42 0.42 1.91 1.65
Diluted earnings per share $ 0.61 0.43 0.43 0.41 0.42 1.87 1.61
Average shares outstanding * 7,189,575 7,176,032 7,172,633 7,158,970 7,102,196 7,174,320 6,070,648
Average diluted shares outstanding * 7,350,178 7,318,345 7,322,474 7,314,126 7,260,163 7,354,013 6,215,658
PERFORMANCE RATIOS
Return on average assets 1.18% 0.86% 0.95% 0.96% 1.02% 0.99% 0.96%
Return on average common equity 12.74% 9.06% 9.50% 9.10% 9.38% 10.16% 10.61%
Net interest margin (fully tax-equivalent) 3.43% 3.23% 3.24% 3.26% 3.26% 3.30% 3.22%
Efficiency ratio 47.22% 53.40% 49.09% 48.96% 48.98% 49.64% 50.66%
Full-time equivalent employees 194 190 183 167 161 194 161
CAPITAL
Average equity to average assets 9.29% 9.54% 10.01% 10.50% 10.91% 9.79% 9.00%
Tier 1 leverage capital ratio 11.53% 10.75% 11.35% 11.87% 12.49% 11.53% 12.49%
Tier 1 risk-based capital ratio 11.82% 10.99% 11.50% 11.99% 12.60% 11.82% 12.60%
Total risk-based capital ratio 13.03% 12.21% 12.74% 13.23% 13.84% 13.03% 13.84%
Book value per share $ 19.69 19.22 18.71 18.52 18.17 19.69 18.17
Cash dividend per share $ 0.09 0.09 0.09 0.09 0.08 0.36 0.32
ASSET QUALITY
Gross loan charge-offs $ 262 581 263 299 72 1,405 596
Net loan charge-offs $ 226 467 255 286 53 1,234 311
Net loan charge-offs to average loans 0.07% 0.15% 0.09% 0.11% 0.02% 0.10% 0.04%
Allowance for loan and lease losses $ 17,819 17,045 16,312 15,337 14,379 17,819 14,379
Allowance for losses to total loans 1.35% 1.36% 1.38% 1.38% 1.39% 1.35% 1.39%
Nonperforming loans $ 2,842 2,985 3,731 3,122 1,785 2,842 1,785
Other real estate and repossessed assets $ 0 0 0 0 0 0 0
Nonperforming assets to total assets 0.19% 0.20% 0.27% 0.24% 0.15% 0.19% 0.15%
END OF PERIOD BALANCES
Loans and leases $1,317,124 1,253,713 1,185,363 1,111,152 1,035,963 1,317,124 1,035,963
Total earning assets (before allowance) $1,470,238 1,404,559 1,311,191 1,234,158 1,157,728 1,470,238 1,157,728
Total assets $1,536,119 1,474,949 1,378,626 1,293,935 1,203,337 1,536,119 1,203,337
Deposits $1,159,181 1,144,857 1,046,069 995,334 902,892 1,159,181 902,892
Shareholders' equity $ 141,617 137,935 134,272 133,075 130,201 141,617 130,201
AVERAGE BALANCES
Loans and leases $1,276,913 1,219,325 1,144,758 1,067,710 999,618 1,177,568 887,512
Total earning assets (before allowance) $1,428,121 1,361,985 1,269,300 1,196,936 1,115,960 1,314,532 998,616
Total assets $1,504,526 1,429,059 1,330,507 1,250,733 1,169,521 1,379,178 1,048,692
Deposits $1,150,606 1,094,166 1,004,651 946,562 886,299 1,049,397 834,998
Shareholders' equity $ 139,744 136,290 133,211 131,361 127,511 135,002 94,366
* - Adjusted for 5% stock dividend paid on May 3, 2004
Mercantile Bank Corporation
Fourth 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.
TWELVE MONTHS ENDED TWELVE MONTHS ENDED
December 31, 2004 December 31, 2003
------------------- -------------------
(Unaudited) (Unaudited)
GAAP-BASED OPERATING PERFORMANCE MEASURES
Net interest income $42,427,000 $31,263,000
Provision for loan and lease losses 4,674,000 3,800,000
Noninterest income 4,302,000 4,409,000
Noninterest expense 23,198,000 18,071,000
----------- -----------
Income before federal income tax expense 18,857,000 13,801,000
Federal income tax expense 5,136,000 3,785,000
----------- -----------
Net income 13,721,000 10,016,000
Basic earnings per share $ 1.91 $ 1.65
Diluted earnings per share 1.87 1.61
Return on average assets 0.99% 0.96%
Return on average equity 10.16% 10.61%
Net interest margin 3.30% 3.22%
Efficiency ratio 49.64% 50.66%
ADJUSTED OPERATING PERFORMANCE MEASURES
Net interest income $42,427,000 $31,263,000
Provision for loan and lease losses 4,674,000 3,800,000
Noninterest income 4,302,000 4,409,000
Noninterest expense 23,198,000 18,071,000
Elimination of one-time charge associated
with redemption of trust preferred securities 845,000 0
----------- -----------
Income before federal income tax expense 19,702,000 13,801,000
Federal income tax expense 5,136,000 3,785,000
Increase in federal income tax expense due to
elimination of one-time charge 297,000 0
----------- -----------
Net income 14,269,000 10,016,000
Basic earnings per share $ 1.99 $ 1.65
Diluted earnings per share 1.94 1.61
Return on average assets 1.03% 0.96%
Return on average equity 10.57% 10.61%
Net interest margin 3.30% 3.22%
Efficiency ratio 47.84% 50.66%