(MERCANTILE BANK CORPORATION(R) LOGO)
FOR FURTHER INFORMATION:
AT MERCANTILE BANK CORPORATION:
Gerald R. Johnson, Jr. Charles Christmas
Chairman & CEO Chief Financial Officer
616-726-1200 616-726-1202
gjohnson@mercbank.com cchristmas@mercbank.com
MERCANTILE BANK CORPORATION ANNOUNCES SECOND QUARTER
NET INCOME OF $5.1 MILLION, UP 9.0%
Grand Rapids, MI - July 12, 2006 -- Mercantile Bank Corporation (Nasdaq: MBWM)
reported net income for the second quarter of 2006 of $5.1 million, an increase
of 9.0 percent from the $4.7 million reported for the second quarter of 2005.
Diluted earnings per share were $0.63 compared with $0.58 reported for the
year-ago quarter, an increase of 8.6 percent. Second quarter performance
reflects a continuation of first quarter trends, with solid loan growth
supported by stable margins and good expense control.
For the first six months of 2006, Mercantile reported net income of $10.0
million, an increase of 10.9 percent from the $9.1 million reported in the
prior-year period. Diluted earnings per share were $1.24, an increase of 10.7
percent from the first six months of 2005.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "We continue to identify
opportunities for quality loan growth in this challenging environment, and we
are particularly pleased with the success we have achieved in Lansing and Ann
Arbor. As we gain recognition for our expertise and dedication to customer
service, we are finding these new markets to be increasingly responsive and
productive in terms of both loan and deposit growth. Our disciplined approach to
balance sheet management continues to make an important contribution to earnings
growth, as does our more normalized level of operating expense."
Total revenue, comprised of net interest income and non-interest income, was
$16.9 million for the second quarter of 2006, an increase of 14.1 percent over
the $14.8 million reported for the prior-year second quarter. Net interest
income increased 15.0 percent over the 2005 period to $15.6 million, reflecting
average earning assets growth of 16.4 percent, offset by a five basis point
decline in net interest margin to 3.47 percent from year-ago levels.
Year-to-date, the margin is unchanged from the prior year, at 3.49 percent,
despite deposit rate pressures and competition for quality loans. Non-interest
income for the second quarter of 2006 was $1.3 million, a 4.7 percent increase
over the second quarter of 2005.
Non-interest expense for the second quarter of 2006 was $8.0 million, an
increase of $0.9 million, or 12.4 percent, over the prior-year period, but
virtually unchanged from the first quarter of 2006. According to Mr. Johnson,
"Our expansion into Lansing and Ann Arbor was executed with a high degree of
efficiency. However, the majority of costs associated with these initiatives did
not occur until the second half of 2005, and the company's move into its new
corporate headquarters did not begin to impact overhead expenses until May,
2005." Mr. Johnson also noted that operating expenses and staffing levels have
remained stable since year-end 2005. The efficiency ratio was 47.5 percent for
the second quarter of 2006, a 70 basis point improvement from the year-ago
quarter. For the six-month 2006 period, the ratio was 48.2 percent compared with
48.8 percent for the prior-year period.
"We remain focused on asset quality," added Mr. Johnson. "Although our
charge-off levels and nonperforming assets were flat relative to the first
quarter of 2006, we are aggressively addressing the uptick in problem assets
since year-end 2005. In our view, this is a short-term situation and not an
indication of a secular trend. Mercantile's credit performance has traditionally
ranked in the top quartile of community banks throughout its eight-year history,
and that is where we want to return as quickly as possible."
Mr. Johnson continued, "We are working diligently to strengthen our
administrative procedures and enhance our credit culture so we can sustain our
responsiveness to customer needs as we grow. Through both strategic attrition as
well as new additions to staff during the second quarter, we have already
implemented positive changes to our credit and lending culture, including the
hiring of a seasoned credit professional with over 30 years of experience to
fill the newly-created position of SVP, Credit Administration."
Net loan charge-offs for the second quarter of 2006 were $1.0 million,
equivalent to 0.24 percent of average loans on an annualized basis, compared
with $0.8 million or 0.19 percent of annualized average loans in the first
quarter of 2006, and $0.1 million or 0.04 percent for the second quarter of
2005. Non-performing assets were $8.7 million, or 0.44 percent of total assets
at June 30, 2006, compared with $8.8 million, or 0.46 percent of assets at March
31, 2006, and $3.7 million or 0.22 percent of assets at June 30, 2005. Loan and
lease loss reserves were $21.5 million, or 1.29 percent of total loans and
leases at June 30, 2006.
Total assets were $1.97 billion at June 30, 2006, an increase of $260.3 million,
or 15.2 percent, from June 30, 2005. Earning asset growth was $238.8 million, or
14.7 percent, during this twelve-month period, with loans up $246.0 million, or
17.3 percent. The increase in earning assets was primarily funded by a $226.1
million, or 17.1 percent, increase in deposits.
Shareholders' equity at June 30, 2006 was $161.7 million, a twelve-month
increase of $12.5 million, or 8.4 percent. Total shares outstanding at
quarter-end were 8,014,044. Mercantile's total risk-based capital ratio was 11.7
percent at quarter-end.
ABOUT MERCANTILE BANK CORPORATION
Mercantile Bank Corporation is the bank holding company for Mercantile Bank of
Michigan. Headquartered in Grand Rapids, the Bank provides a wide variety of
commercial banking services through its five full-service banking offices in
greater Grand Rapids, and its full-service banking offices in Holland, Lansing,
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, 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
Second Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, JUNE 30,
2006 2005 2005
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due from banks $ 47,142,000 $ 36,208,000 $ 35,462,000
Short-term investments 271,000 545,000 597,000
Federal funds sold 0 0 21,400,000
-------------- -------------- --------------
Total cash and cash equivalents 47,413,000 36,753,000 57,459,000
Securities available for sale 119,023,000 112,961,000 107,896,000
Securities held to maturity 61,759,000 60,766,000 58,851,000
Federal Home Loan Bank stock 7,887,000 7,887,000 7,425,000
Total loans and leases 1,670,471,000 1,561,812,000 1,424,463,000
Allowance for loan and lease losses (21,507,000) (20,527,000) (18,856,000)
-------------- -------------- --------------
Total Loans and leases, net 1,648,964,000 1,541,285,000 1,405,607,000
Premises and equipment, net 30,824,000 30,206,000 29,118,000
Bank owned life insurance policies 29,852,000 28,071,000 24,669,000
Accrued interest receivable 9,047,000 8,274,000 6,550,000
Other assets 14,660,000 12,007,000 11,578,000
-------------- -------------- --------------
Total assets $1,969,429,000 $1,838,210,000 $1,709,153,000
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 129,483,000 $ 120,828,000 $ 136,830,000
Interest-bearing 1,418,429,000 1,298,524,000 1,185,014,000
-------------- -------------- --------------
Total deposits 1,547,912,000 1,419,352,000 1,321,844,000
Securities sold under agreement to repurchase 64,431,000 72,201,000 56,034,000
Federal funds purchased 11,400,000 9,600,000 0
Federal Home Loan Bank advances 130,000,000 130,000,000 135,000,000
Subordinated debentures 32,990,000 32,990,000 32,990,000
Other borrowed money 2,957,000 2,347,000 2,069,000
Accrued expenses and other liabilities 18,079,000 16,595,000 12,016,000
-------------- -------------- --------------
Total liabilities 1,807,769,000 1,683,085,000 1,559,953,000
SHAREHOLDERS' EQUITY
Common stock 160,872,000 148,533,000 148,373,000
Retained earnings 4,070,000 8,000,000 821,000
Accumulated other comprehensive income (loss) (3,282,000) (1,408,000) 6,000
-------------- -------------- --------------
Total shareholders' equity 161,660,000 155,125,000 149,200,000
Total liabilities and shareholders' equity $1,969,429,000 $1,838,210,000 $1,709,153,000
============== ============== ==============
Mercantile Bank Corporation
Second Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED SIX MONTHS ENDED SIX MONTHS ENDED
June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
------------------ ------------------ ---------------- ----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $31,304,000 $22,250,000 $60,031,000 $42,022,000
Investment securities 2,299,000 2,036,000 4,536,000 3,923,000
Federal funds sold 139,000 56,000 271,000 100,000
Short-term investments 4,000 4,000 7,000 6,000
----------- ----------- ----------- -----------
Total interest income 33,746,000 24,346,000 64,845,000 46,051,000
INTEREST EXPENSE
Deposits 15,358,000 8,892,000 28,843,000 16,332,000
Short-term borrowings 720,000 375,000 1,321,000 713,000
Federal Home Loan Bank advances 1,369,000 1,006,000 2,684,000 1,863,000
Long-term borrowings 653,000 465,000 1,252,000 880,000
----------- ----------- ----------- -----------
Total interest expense 18,100,000 10,738,000 34,100,000 19,788,000
----------- ----------- ----------- -----------
Net interest income 15,646,000 13,608,000 30,745,000 26,263,000
Provision for loan and lease losses 1,500,000 900,000 2,725,000 1,625,000
----------- ----------- ----------- -----------
Net interest income after provision
for loan and lease losses 14,146,000 12,708,000 28,020,000 24,638,000
NON INTEREST INCOME
Service charges on accounts 329,000 341,000 645,000 679,000
Net gain on sales of commercial loans 0 28,000 29,000 28,000
Other income 946,000 849,000 1,844,000 1,721,000
----------- ----------- ----------- -----------
Total non interest income 1,275,000 1,218,000 2,518,000 2,428,000
NON INTEREST EXPENSE
Salaries and benefits 4,683,000 4,405,000 9,448,000 8,564,000
Occupancy 772,000 566,000 1,602,000 1,084,000
Furniture and equipment 515,000 362,000 1,037,000 650,000
Other expense 2,061,000 1,812,000 3,950,000 3,697,000
----------- ----------- ----------- -----------
Total non interest expense 8,031,000 7,145,000 16,037,000 13,995,000
----------- ----------- ----------- -----------
Income before federal income tax expense 7,390,000 6,781,000 14,501,000 13,071,000
Federal income tax expense 2,279,000 2,091,000 4,461,000 4,019,000
----------- ----------- ----------- -----------
Net income $ 5,111,000 $ 4,690,000 $10,040,000 $ 9,052,000
=========== =========== =========== ===========
Basic earnings per share $ 0.64 $ 0.59 $ 1.26 $ 1.14
Diluted earnings per share $ 0.63 $ 0.58 $ 1.24 $ 1.12
Average shares outstanding * 8,000,998 7,958,408 7,987,616 7,951,726
Average diluted shares outstanding * 8,119,820 8,099,740 8,111,449 8,094,716
* - Adjusted for 5% stock dividend paid on May 16, 2006
Mercantile Bank Corporation
Second Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
QUARTERLY
------------------------------------------------------ YEAR-TO-DATE
2006 2006 2005 2005 2005 --------------------
(dollars in thousands except per share data) 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2ND QTR 2006 2005
---------- --------- --------- --------- --------- --------- ---------
EARNINGS
Net interest income $ 15,646 15,099 14,957 14,072 13,608 30,745 26,263
Provision for loan and lease losses $ 1,500 1,225 1,270 895 900 2,725 1,625
NonInterest income $ 1,275 1,243 1,903 1,330 1,218 2,518 2,428
NonInterest expense $ 8,031 8,006 8,802 8,320 7,145 16,037 13,995
Net income $ 5,111 4,929 4,549 4,300 4,690 10,040 9,052
Basic earnings per share $ 0.64 0.62 0.57 0.54 0.59 1.26 1.14
Diluted earnings per share $ 0.63 0.61 0.56 0.53 0.58 1.24 1.12
Average shares outstanding * 8,000,998 7,974,180 7,968,632 7,965,172 7,958,408 7,987,616 7,951,726
Average diluted shares outstanding * 8,119,820 8,102,052 8,102,195 8,115,575 8,099,740 8,111,449 8,094,716
PERFORMANCE RATIOS
Return on average assets 1.06% 1.07% 1.00% 0.98% 1.13% 1.06% 1.12%
Return on average common equity 12.81% 12.74% 11.76% 11.33% 12.80% 12.77% 12.58%
Net interest margin (fully tax-equivalent) 3.47% 3.51% 3.54% 3.46% 3.52% 3.49% 3.49%
Efficiency ratio 47.46% 48.99% 52.21% 54.02% 48.19% 48.21% 48.78%
Full-time equivalent employees 277 275 273 263 237 277 237
CAPITAL
Period-ending equity to assets 8.21% 8.37% 8.44% 8.48% 8.73% 8.21% 8.73%
Tier 1 leverage capital ratio 10.15% 10.29% 10.45% 10.62% 10.86% 10.15% 10.86%
Tier 1 risk-based capital ratio 10.52% 10.74% 10.82% 11.07% 11.40% 10.52% 11.40%
Total risk-based capital ratio 11.66% 11.91% 12.00% 12.24% 12.58% 11.66% 12.58%
Book value per share $ 20.17 19.86 19.42 19.08 18.65 20.17 18.65
Cash dividend per share $ 0.13 0.12 0.11 0.11 0.11 0.25 0.21
ASSET QUALITY
Gross loan charge-offs $ 1,083 780 350 338 211 1,863 704
Net loan charge-offs $ 988 756 315 181 140 1,744 587
Net loan charge-offs to average loans 0.24% 0.19% 0.08% 0.05% 0.04% 0.22% 0.09%
Allowance for loan and lease losses $ 21,507 20,995 20,527 19,571 18,856 21,507 18,856
Allowance for losses to total loans 1.29% 1.30% 1.31% 1.31% 1.32% 1.29% 1.32%
Nonperforming loans $ 8,530 8,791 3,995 1,926 2,535 8,528 2,535
Other real estate and repossessed assets $ 150 0 0 195 1,177 150 1,177
Nonperforming assets to total assets 0.44% 0.46% 0.22% 0.12% 0.22% 0.44% 0.22%
END OF PERIOD BALANCES
Loans and leases $1,670,471 1,612,351 1,561,812 1,488,959 1,424,463 1,670,471 1,424,463
Total earning assets (before allowance) $1,859,411 1,800,909 1,743,971 1,701,275 1,620,632 1,859,411 1,620,632
Total assets $1,969,429 1,896,974 1,838,210 1,796,770 1,709,153 1,969,429 1,709,153
Deposits $1,547,912 1,482,219 1,419,352 1,397,280 1,321,844 1,547,912 1,321,844
Shareholders' equity $ 161,660 158,910 155,125 152,320 149,200 161,660 149,200
AVERAGE BALANCES
Loans and leases $1,643,022 1,581,617 1,519,616 1,460,792 1,402,469 1,612,489 1,374,061
Total earning assets (before allowance) $1,841,666 1,778,694 1,709,612 1,647,294 1,582,453 1,810,354 1,547,367
Total assets $1,939,413 1,871,945 1,804,067 1,740,203 1,669,202 1,905,865 1,630,697
Deposits $1,521,037 1,459,266 1,394,023 1,339,486 1,281,652 1,490,322 1,248,455
Shareholders' equity $ 160,039 156,901 153,522 150,540 146,997 158,487 145,093
* - Adjusted for 5% stock dividend paid on May 16, 2006