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EXHIBIT 99.1
(MERCANTILE(R) BANK CORPORATION LOGO)
FOR FURTHER INFORMATION:
AT MERCANTILE BANK CORPORATION:
<Table>
Gerald R. Johnson, Jr. Charles Christmas
Chairman & CEO Chief Financial Officer
616-726-1200 616-726-1202
gjohnson@mercbank.com cchristmas@mercbank.com
</Table>
MERCANTILE BANK CORPORATION ANNOUNCES THIRD QUARTER NET
INCOME OF $4.3 MILLION, UP 38.1%
Grand Rapids, MI, October 10, 2005 -- Mercantile Bank Corporation (Nasdaq: MBWM)
reported net income for the quarter ended September 30, 2005 of $4.3 million, an
increase of 38.1 percent from the $3.1 million reported for the quarter ended
September 30, 2004. Diluted earnings per share were $0.56 compared with $0.41
reported for the prior-year third quarter, an increase of 36.6 percent. Earnings
for the third quarter of 2004 include an $845,000 ($548,000 after-tax) write-off
associated with the unamortized balance of issuance costs related to the
redemption of a $16.0 million trust preferred offering issued in 1999. Excluding
this one-time expense, net income and diluted earnings per share for the current
period increased 17.4 percent and 16.7 percent, respectively, over earnings for
the prior-year quarter.
For the first nine months of 2005, Mercantile reported net income of $13.4
million, an increase of 44.6 percent from the $9.2 million reported in the
prior-year period. Diluted earnings per share were $1.72, an increase of 43.3
percent from the first nine months of 2004. Excluding the one-time charge
incurred in 2004, net income and diluted earnings per share for the current
nine-month period increased 36.5 percent and 35.4 percent, respectively, over
the prior-year period.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "The third quarter marked
another period of strong organic balance sheet and revenue growth, combined with
excellent asset quality. We now have full-service banking offices in Lansing and
Ann Arbor, Michigan, headed by talented teams of local bankers experienced in
middle-market lending.
The business communities in both cities have welcomed Mercantile for the same
reasons that have contributed to our success in Grand Rapids and Holland:
commercial lending expertise combined with exceptional service. Our bank's new
name -- Mercantile Bank of Michigan -- reflects these expansion initiatives."
Mr. Johnson commented that effective management of Mercantile's balance sheet
has enabled the company to benefit over the past year from the rising interest
rate environment. "Year-to-date," Mr. Johnson continued, "Our 3.48 percent net
interest margin has improved 24 basis points over the same period last year.
Combined with consistently strong loan growth, our momentum continues unabated."
Total revenue, comprised of net interest income and non-interest income, was
$15.4 million for the third quarter of 2005, an increase of 28.2 percent over
the $12.0 million reported for the third quarter of 2004. Net interest income
for the current quarter increased 29.6 percent over the prior-year third quarter
to $14.1 million, reflecting a combination of 20.9 percent growth in average
earning assets and a 23 basis point improvement in the net interest margin to
3.46 percent. Non-interest income was $1.3 million, a 15.1 percent increase over
last year's third quarter.
Non-interest expense for the third quarter of 2005 was $8.3 million, an increase
of $1.9 million or 29.7 percent over the prior-year period, in support of
extensive infrastructure expansion. Excluding the one-time charge incurred in
the third quarter of 2004, non-interest expense increased 49.4 percent. Salaries
and benefits, up $1.4 million or 38.8 percent, represented 73.2 percent of the
dollar increase; Mercantile added 73 full-time equivalent employees (an increase
of 38.4 percent) year-over-year. Occupancy, equipment and furniture expense rose
86.4 percent, also in support of corporate growth, and in particular, from the
investment in the Holland, Lansing and Ann Arbor full-service banking offices
and the recently-opened new headquarters building in Grand Rapids. Other
non-interest expense was $2.1 million for the 2005 third quarter, a decline of
3.5 percent from the year earlier level; excluding the one-time third quarter
2004 charge, this category rose 59.1 percent in 2005, primarily from expenses
associated with the company's increased size. The efficiency ratio was 54.02
percent for the third quarter of 2005, reflecting the many expansion
initiatives, compared with 53.40 percent for the prior-year period, and 46.37
percent excluding the one-time third quarter 2004 charge.
Mr. Johnson continued, "We have never compromised on asset quality despite our
traditionally robust level of loan growth -- another indication of the caliber
of our lenders and our credit controls." Net charge-offs for the third quarter
of 2005 were $181,000, or 0.05 percent of average loans on an annualized basis,
compared with $140,000 or 0.04 percent for the preceding quarter and $467,000,
or 0.15 percent for the prior-year third quarter. Non-performing assets were
$2.1 million, or 0.12 percent of total assets at September 30, 2005, compared
with $3.7 million, or 0.22 percent at June 30, 2005, and $3.0 million, or 0.20
percent twelve months ago. Loan and lease loss reserves were $19.6 million, or
1.31 percent of total loans and leases, at September 30, 2005.
Total assets were $1.80 billion at September 30, 2005, an increase of $321.8
million, or 21.8 percent, from last year's third quarter-end. Loan growth,
virtually all of which was
commercial, was $235.2 million, or 18.8 percent, during the same 12-month
period; the increase was funded by a $252.4 million, or 22.0 percent, increase
in deposits.
Shareholders' equity at September 30, 2005 was $152.3 million, a twelve-month
increase of $14.4 million, or 10.4 percent. Total shares outstanding at
quarter-end were 7,587,365. Mercantile's total risk-based capital ratio at
quarter-end was 12.2 percent. Mr. Johnson concluded, "The Lansing and Ann Arbor
markets have been receptive to our arrival, giving us much optimism regarding
additional growth opportunities going forward."
About Mercantile Bank Corporation
Mercantile Bank Corporation is the bank holding company for Mercantile Bank of
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 banking offices in greater Grand Rapids, and its
full-service banking offices in Holland, Lansing, and Ann Arbor, Michigan.
Mercantile Bank Corporation's common stock is listed on the NASDAQ National
Market under the symbol "MBWM."
Forward-Looking Statements
This news release contains comments or information that constitute
forward-looking statements (within the meaning of the Private Securities
Litigation Reform Act of 1995) that are based on current expectations that
involve a number of risks and uncertainties. Actual results may differ
materially from the results expressed in forward-looking statements. Factors
that might cause such a difference include changes in interest rates and
interest rate relationships; demand for products and services; the degree of
competition by traditional and non-traditional competitors; changes in banking
regulation; changes in tax laws; changes in prices, levies, and assessments; the
impact of technological advances; governmental and regulatory policy changes;
the outcomes of contingencies; trends in customer behavior as well as their
ability to repay loans; changes in the national and local economy; and other
factors, including risk factors, 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 2005 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2005 2004 2004
---------------- ---------------- ----------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due from banks $ 38,894,000 $ 20,662,000 $ 35,304,000
Short-term investments 392,000 149,000 327,000
Federal funds sold 33,800,000 0 5,500,000
---------------- ---------------- ----------------
Total cash and cash equivalents 73,086,000 20,811,000 41,131,000
Securities available for sale 109,966,000 93,826,000 87,625,000
Securities held to maturity 60,271,000 52,341,000 50,668,000
Federal Home Loan Bank stock 7,887,000 6,798,000 6,726,000
Total loans and leases 1,488,959,000 1,317,124,000 1,253,713,000
Allowance for loan and lease losses (19,571,000) (17,819,000) (17,045,000)
---------------- ---------------- ----------------
Total Loans and leases, net 1,469,388,000 1,299,305,000 1,236,668,000
Premises and equipment, net 30,791,000 24,572,000 21,319,000
Bank owned life insurance policies 26,075,000 23,750,000 16,966,000
Accrued interest receivable 8,039,000 5,644,000 5,638,000
Other assets 11,267,000 9,072,000 8,208,000
---------------- ---------------- ----------------
Total assets $ 1,796,770,000 $ 1,536,119,000 $ 1,474,949,000
================ ================ ================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 116,107,000 $ 101,742,000 $ 111,042,000
Interest-bearing 1,281,173,000 1,057,439,000 1,033,815,000
---------------- ---------------- ----------------
Total deposits 1,397,280,000 1,159,181,000 1,144,857,000
Securities sold under agreement to repurchase 62,994,000 56,317,000 46,691,000
Federal funds purchased 0 15,000,000 0
Federal Home Loan Bank advances 135,000,000 120,000,000 120,000,000
Subordinated debentures 32,990,000 32,990,000 16,495,000
Other borrowed money 2,211,000 1,609,000 1,508,000
Accrued expenses and other liabilities 13,975,000 9,405,000 7,463,000
---------------- ---------------- ----------------
Total liabilities 1,644,450,000 1,394,502,000 1,337,014,000
SHAREHOLDERS' EQUITY
Common stock 148,472,000 131,010,000 130,935,000
Retained earnings 4,287,000 10,475,000 6,635,000
Accumulated other comprehensive income (loss) (439,000) 132,000 365,000
---------------- ---------------- ----------------
Total shareholders' equity 152,320,000 141,617,000 137,935,000
Total liabilities and shareholders' equity $ 1,796,770,000 $ 1,536,119,000 $ 1,474,949,000
================ ================ ================
</Table>
Mercantile Bank Corporation
Third Quarter 2005 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
<Table>
<Caption>
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $ 24,570,000 $ 16,193,000 $ 66,592,000 $ 44,823,000
Investment securities 2,113,000 1,598,000 6,036,000 4,424,000
Federal funds sold 76,000 26,000 176,000 53,000
Short-term investments 5,000 2,000 11,000 3,000
-------------- -------------- -------------- --------------
Total interest income 26,764,000 17,819,000 72,815,000 49,303,000
INTEREST EXPENSE
Deposits 10,554,000 5,706,000 26,886,000 15,385,000
Short-term borrowings 475,000 220,000 1,188,000 576,000
Federal Home Loan Bank advances 1,148,000 652,000 3,011,000 1,778,000
Long-term borrowings 515,000 385,000 1,395,000 1,219,000
-------------- -------------- -------------- --------------
Total interest expense 12,692,000 6,963,000 32,480,000 18,958,000
-------------- -------------- -------------- --------------
Net interest income 14,072,000 10,856,000 40,335,000 30,345,000
Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000
-------------- -------------- -------------- --------------
Net interest income after provision
for loan and lease losses 13,177,000 9,656,000 37,815,000 26,671,000
NON INTEREST INCOME
Service charges on accounts 369,000 319,000 1,048,000 930,000
Net gain on sales of securities 0 0 0 78,000
Net gain on sales of loans 56,000 135,000 84,000 175,000
Other income 905,000 702,000 2,626,000 2,013,000
-------------- -------------- -------------- --------------
Total non interest income 1,330,000 1,156,000 3,758,000 3,196,000
NON INTEREST EXPENSE
Salaries and benefits 4,983,000 3,589,000 13,547,000 10,382,000
Occupancy 805,000 401,000 1,889,000 1,170,000
Furniture and equipment 459,000 277,000 1,109,000 817,000
Other expense 2,073,000 2,148,000 5,770,000 4,601,000
-------------- -------------- -------------- --------------
Total non interest expense 8,320,000 6,415,000 22,315,000 16,970,000
-------------- -------------- -------------- --------------
Income before federal income tax expense 6,187,000 4,397,000 19,258,000 12,897,000
Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000
-------------- -------------- -------------- --------------
Net income $ 4,300,000 $ 3,114,000 $ 13,352,000 $ 9,233,000
============== ============== ============== ==============
Basic earnings per share $ 0.57 $ 0.41 $ 1.76 $ 1.23
Diluted earnings per share $ 0.56 $ 0.41 $ 1.72 $ 1.20
Average shares outstanding * 7,585,879 7,534,833 7,577,339 7,527,657
Average diluted shares outstanding * 7,732,872 7,684,262 7,747,293 7,682,335
</Table>
Mercantile Bank Corporation
Third Quarter 2005 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
<Table>
<Caption>
QUARTERLY YEAR-TO-DATE
-------------------------------------------------------------- -----------------------
2005 2005 2005 2004 2004
(dollars in thousands except per share data) 3RD QTR 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2005 2004
---------- ---------- ---------- ---------- ---------- ---------- ----------
EARNINGS
Net interest income $ 14,072 13,608 12,655 12,082 10,856 40,335 30,345
Provision for loan and lease losses $ 895 900 725 1,000 1,200 2,520 3,674
NonInterest income $ 1,330 1,218 1,210 1,106 1,156 3,758 3,196
NonInterest expense $ 8,320 7,145 6,850 6,228 6,415 22,315 16,970
Net income $ 4,300 4,690 4,362 4,488 3,114 13,352 9,233
Basic earnings per share $ 0.57 0.62 0.58 0.59 0.41 1.76 1.23
Diluted earnings per share $ 0.56 0.61 0.57 0.58 0.41 1.72 1.20
Average shares outstanding 7,585,879 7,579,437 7,566,638 7,549,053 7,534,833 7,577,339 7,527,657
Average diluted shares outstanding 7,732,872 7,720,821 7,712,820 7,717,686 7,684,262 7,747,293 7,682,335
PERFORMANCE RATIOS
Return on average assets 0.98% 1.13% 1.11% 1.18% 0.86% 1.07% 0.92%
Return on average common equity 11.33% 12.80% 12.36% 12.74% 9.06% 12.15% 9.23%
Net interest margin (fully tax-equivalent) 3.46% 3.52% 3.46% 3.43% 3.23% 3.48% 3.24%
Efficiency ratio 54.02% 48.19% 49.41% 47.22% 53.40% 50.61% 50.60%
Full-time equivalent employees 263 237 212 194 190 263 190
CAPITAL
Average equity to average assets 8.65% 8.81% 8.99% 9.29% 9.54% 8.81% 9.99%
Tier 1 leverage capital ratio 10.62% 10.86% 11.13% 11.53% 10.75% 10.62% 10.75%
Tier 1 risk-based capital ratio 11.07% 11.40% 11.53% 11.82% 10.99% 11.07% 10.99%
Total risk-based capital ratio 12.24% 12.58% 12.71% 13.03% 12.21% 12.24% 12.21%
Book value per share $ 20.08 19.63 19.04 18.71 18.26 20.08 18.26
Cash dividend per share $ 0.11 0.11 0.10 0.09 0.09 0.32 0.27
ASSET QUALITY
Gross loan charge-offs $ 338 211 493 262 581 1,042 1,143
Net loan charge-offs $ 181 140 447 226 467 768 1,008
Net loan charge-offs to average loans 0.05% 0.04% 0.13% 0.07% 0.15% 0.07% 0.12%
Allowance for loan and lease losses $ 19,571 18,856 18,097 17,819 17,045 19,571 17,045
Allowance for losses to total loans 1.31% 1.32% 1.32% 1.35% 1.36% 1.31% 1.36%
Nonperforming loans $ 1,926 2,535 4,016 2,842 2,985 1,926 2,985
Other real estate and repossessed assets $ 195 1,177 1,177 0 0 195 0
Nonperforming assets to total assets 0.12% 0.22% 0.31% 0.19% 0.20% 0.12% 0.20%
END OF PERIOD BALANCES
Loans and leases $1,488,959 1,424,463 1,374,577 1,317,124 1,253,713 1,488,959 1,253,713
Total earning assets (before allowance) $1,701,275 1,620,632 1,575,697 1,470,238 1,404,559 1,701,275 1,404,559
Total assets $1,796,770 1,709,153 1,664,876 1,536,119 1,474,949 1,796,770 1,474,949
Deposits $1,397,280 1,321,844 1,290,017 1,159,181 1,144,857 1,397,280 1,144,857
Shareholders' equity $ 152,320 149,200 144,501 141,617 137,935 152,320 137,935
AVERAGE BALANCES
Loans and leases $1,460,792 1,402,469 1,345,336 1,276,913 1,219,325 1,403,289 1,144,206
Total earning assets (before allowance) $1,647,294 1,582,453 1,511,891 1,428,121 1,361,985 1,581,042 1,276,387
Total assets $1,740,203 1,669,202 1,591,764 1,504,526 1,429,059 1,667,600 1,337,686
Deposits $1,339,486 1,281,652 1,214,890 1,150,606 1,094,166 1,279,132 1,015,415
Shareholders' equity $ 150,540 146,997 143,169 139,744 136,290 146,926 133,629
</Table>
Mercantile Bank Corporation
Third Quarter 2005 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 2005 results to 2004 results.
<Table>
<Caption>
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 2005 September 30, 2004 September 30, 2005 September 30, 2004
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
GAAP-BASED OPERATING PERFORMANCE MEASURES
Net interest income $ 14,072,000 $ 10,856,000 $ 40,335,000 $ 30,345,000
Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000
Noninterest income 1,330,000 1,156,000 3,758,000 3,196,000
Noninterest expense 8,320,000 6,415,000 22,315,000 16,970,000
-------------- -------------- -------------- --------------
Income before federal income tax expense 6,187,000 4,397,000 19,258,000 12,897,000
Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000
-------------- -------------- -------------- --------------
Net income 4,300,000 3,114,000 13,352,000 9,233,000
Basic earnings per share $ 0.57 $ 0.41 $ 1.76 $ 1.23
Diluted earnings per share 0.56 0.41 1.72 1.20
Return on average assets 0.98% 0.86% 1.07% 0.92%
Return on average equity 11.33% 9.06% 12.15% 9.23%
Net interest margin 3.46% 3.23% 3.48% 3.24%
Efficiency ratio 54.02% 53.40% 50.61% 50.60%
ADJUSTED OPERATING PERFORMANCE MEASURES
Net interest income $ 14,072,000 $ 10,856,000 $ 40,335,000 $ 30,345,000
Provision for loan and lease losses 895,000 1,200,000 2,520,000 3,674,000
Noninterest income 1,330,000 1,156,000 3,758,000 3,196,000
Noninterest expense 8,320,000 6,415,000 22,315,000 16,970,000
Elimination of one-time charge associated
with redemption of trust preferred securities 0 845,000 0 845,000
-------------- -------------- -------------- --------------
Income before federal income tax expense 6,187,000 5,242,000 19,258,000 13,742,000
Federal income tax expense 1,887,000 1,283,000 5,906,000 3,664,000
Increase in federal income tax expense due to
elimination of one-time charge 0 297,000 0 297,000
-------------- -------------- -------------- --------------
Net income 4,300,000 3,662,000 13,352,000 9,781,000
Basic earnings per share $ 0.57 $ 0.49 $ 1.76 $ 1.30
Diluted earnings per share 0.56 0.48 1.72 1.27
Return on average assets 0.98% 1.02% 1.07% 0.98%
Return on average equity 11.33% 10.66% 12.15% 9.78%
Net interest margin 3.46% 3.23% 3.48% 3.24%
Efficiency ratio 54.02% 46.37% 50.61% 48.08%
</Table>