Exhibit 99.1
(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 CORP. REPORTS THIRD QUARTER 2006 EPS OF $0.64, UP 20.8%
ASSETS SURPASS $2 BILLION
Grand Rapids, MI - October 11, 2006 -- Mercantile Bank Corporation (Nasdaq:
MBWM) reported net income for the third quarter of 2006 of $5.2 million, an
increase of 21.0 percent from the $4.3 million reported for the third quarter of
2005. Diluted earnings per share were $0.64 compared with $0.53 reported for the
year-ago quarter, an increase of 20.8 percent. Results reflect solid growth in
earning assets and disciplined control of expenses, partially offset by the
impact of rising funding costs and higher provision expense.
For the first nine months of 2006, Mercantile reported net income of $15.2
million, an increase of 14.2 percent from the $13.4 million reported in the
prior-year period. Diluted earnings per share were $1.88, an increase of 14.6
percent from the first nine months of 2005.
Gerald R. Johnson, Jr., Chairman and CEO, commented, "Our Company continues to
expand at a dynamic pace, despite the extremely competitive environment in which
we operate. This quarter, we surpassed the $2.0 billion milestone in total
assets. All of our growth since we opened for business late in 1997 has been
organic. We reached the $1.0 billion asset mark in June 2003, and our annual
compound asset growth rate since that time has been approximately 26 percent.
More recently, our growth has moderated somewhat as our competition has
demonstrated an increasing willingness to compromise on loan structure and
pricing to retain market share, compromises which we have found unacceptable to
the extent that we have declined a number of credit requests which we would have
otherwise approved under normal circumstances.
Total revenue, comprised of net interest income and non-interest income, was
$16.9 million for the third quarter of 2006, an increase of 9.8 percent over the
$15.4 million reported for the third quarter of 2005. Net interest income
increased 10.5 percent over the prior-year third quarter to $15.6 million,
reflecting average earning asset growth of 14.2 percent, offset by a 12 basis
point decline in net interest margin to 3.34 percent from year-ago levels.
Year-to-date, net interest margin is 3.44 percent, a four basis point decline
compared with 3.48 percent for the first nine months of 2005. Mr. Johnson
continued, "Although the majority of our loans are tied to prime, this rate was
unchanged during the third quarter, while our deposits continued to price
upward." Non-interest income for the third quarter of 2006 was $1.4 million, a
2.4 percent increase over the third quarter of 2005.
Overhead expenses remain well controlled, with operating expenses (annualized)
declining quarterly as a percent of average assets throughout 2006, from 1.73
percent in the first quarter to 1.61 percent for the most recent quarter.
Mercantile's expansion activities were completed by year-end 2005, and for the
past three quarters, non-interest expense has remained extremely stable at $8.0
million per quarter, while total assets increased since year-end at an
annualized rate of 13.7 percent. The efficiency ratio was 47.5 percent for the
third quarter of 2006 compared with 54.0 percent for the year-ago quarter, and
52.2 percent for fourth quarter 2005. For the first nine months of 2006, the
ratio was 48.0 percent compared with 50.6 percent for the prior-year period.
Asset quality has been relatively stable throughout 2006, although quality
remains below the exceptional levels reported in prior years. Net loan
charge-offs for the third quarter of 2006 were $920,000, equivalent to 0.22
percent of average loans on an annualized basis; this compares with $988,000 or
0.24 percent of average loans in the second quarter of 2006, and $756,000 or
0.19 percent for the first quarter of this year. Non-performing assets were $9.4
million, or 0.47 percent of total assets at September 30, 2006, compared with
$8.7 million, or 0.44 percent of assets at June 30, 2006, and $8.8 million or
0.46 percent of assets at March 31, 2006. Loan and lease loss reserves were
$21.9 million, or 1.28 percent of total loans and leases at September 30, 2006.
Total assets were $2.03 billion at September 30, 2006, an increase of $230.1
million, or 12.8 percent, from September 30, 2005. Earning asset growth was
$220.8 million, or 13.0 percent, during this twelve-month period, with loans up
$221.3 million, or 14.9 percent. The composition of the loan portfolio remains
basically unchanged from the previous quarter, and from the 2005 third quarter.
Growth in earning assets was primarily funded by a $217.4 million, or 15.6
percent, increase in deposits. Local funds currently comprise 35.7 percent of
total funds at September 30, 2006 compared to 31.3 percent at September 30,
2005.
Shareholders' equity at September 30, 2006 was $167.5 million, a twelve-month
increase of $15.2 million, or 10.0 percent. Total shares outstanding at
quarter-end were 8,018,680. Mercantile remains well-capitalized, with a total
risk-based capital ratio of 11.6 percent at quarter-end. Mr. Johnson concluded,
"We continue to be selective about growth opportunities in this current
environment. Our reputation for lending expertise and service excellence has
placed us in a preferred position with small- to medium-sized businesses in
the communities we serve. We are pleased with our current rate of growth as we
address the uncertainties in today's business and banking climate."
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 Global 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
Third Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
September 30, 2006 September 30, 2005 September 30, 2006 September 30, 2005
------------------ ------------------ ------------------ ------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans and leases, including fees $33,261,000 $24,570,000 $ 93,292,000 $66,592,000
Investment securities 2,335,000 2,113,000 6,871,000 6,036,000
Federal funds sold 76,000 76,000 347,000 176,000
Short-term investments 3,000 5,000 10,000 11,000
----------- ----------- ------------ -----------
Total interest income 35,675,000 26,764,000 100,520,000 72,815,000
INTEREST EXPENSE
Deposits 17,268,000 10,554,000 46,111,000 26,886,000
Short-term borrowings 707,000 475,000 2,028,000 1,188,000
Federal Home Loan Bank advances 1,452,000 1,148,000 4,136,000 3,011,000
Long-term borrowings 701,000 515,000 1,953,000 1,395,000
----------- ----------- ------------ -----------
Total interest expense 20,128,000 12,692,000 54,228,000 32,480,000
----------- ----------- ------------ -----------
Net interest income 15,547,000 14,072,000 46,292,000 40,335,000
Provision for loan and lease losses 1,350,000 895,000 4,075,000 2,520,000
----------- ----------- ------------ -----------
Net interest income after provision
for loan and lease losses 14,197,000 13,177,000 42,217,000 37,815,000
NON INTEREST INCOME
Service charges on accounts 361,000 369,000 1,006,000 1,048,000
Net gain on sales of commercial loans 0 56,000 29,000 84,000
Other income 1,001,000 905,000 2,845,000 2,626,000
----------- ----------- ------------ -----------
Total non interest income 1,362,000 1,330,000 3,880,000 3,758,000
NON INTEREST EXPENSE
Salaries and benefits 4,731,000 4,983,000 14,179,000 13,547,000
Occupancy 802,000 805,000 2,404,000 1,889,000
Furniture and equipment 513,000 459,000 1,550,000 1,109,000
Other expense 1,982,000 2,073,000 5,932,000 5,770,000
----------- ----------- ------------ -----------
Total non interest expense 8,028,000 8,320,000 24,065,000 22,315,000
----------- ----------- ------------ -----------
Income before federal income tax
expense 7,531,000 6,187,000 22,032,000 19,258,000
Federal income tax expense 2,329,000 1,887,000 6,790,000 5,906,000
----------- ----------- ------------ -----------
Net income $ 5,202,000 $ 4,300,000 $ 15,242,000 $13,352,000
=========== =========== ============ ===========
Basic earnings per share $ 0.65 $ 0.54 $ 1.91 $ 1.68
Diluted earnings per share $ 0.64 $ 0.53 $ 1.88 $ 1.64
Average shares outstanding * 8,016,016 7,965,172 7,997,187 7,956,205
Average diluted shares outstanding * 8,118,206 8,115,575 8,117,709 8,134,657
* - Adjusted for 5% stock dividend paid on May 16, 2006
Mercantile Bank Corporation
Third Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, SEPTEMBER 30,
2006 2005 2005
-------------- -------------- --------------
(Unaudited) (Audited) (Unaudited)
ASSETS
Cash and due from banks $ 39,100,000 $ 36,208,000 $ 38,894,000
Short-term investments 176,000 545,000 392,000
Federal funds sold 16,000,000 0 33,800,000
-------------- -------------- --------------
Total cash and cash equivalents 55,276,000 36,753,000 73,086,000
Securities available for sale 125,746,000 112,961,000 109,966,000
Securities held to maturity 62,097,000 60,766,000 60,271,000
Federal Home Loan Bank stock 7,764,000 7,887,000 7,887,000
Total loans and leases 1,710,268,000 1,561,812,000 1,488,959,000
Allowance for loan and lease losses (21,938,000) (20,527,000) (19,571,000)
-------------- -------------- --------------
Total Loans and leases, net 1,688,330,000 1,541,285,000 1,469,388,000
Premises and equipment, net 32,309,000 30,206,000 30,791,000
Bank owned life insurance policies 30,150,000 28,071,000 26,075,000
Accrued interest receivable 10,438,000 8,274,000 8,039,000
Other assets 14,724,000 12,007,000 11,267,000
-------------- -------------- --------------
Total assets $2,026,834,000 $1,838,210,000 $1,796,770,000
============== ============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 115,269,000 $ 120,828,000 $ 116,107,000
Interest-bearing 1,499,434,000 1,298,524,000 1,281,173,000
-------------- -------------- --------------
Total deposits 1,614,703,000 1,419,352,000 1,397,280,000
Securities sold under agreement to repurchase 74,111,000 72,201,000 62,994,000
Federal funds purchased 0 9,600,000 0
Federal Home Loan Bank advances 115,000,000 130,000,000 135,000,000
Subordinated debentures 32,990,000 32,990,000 32,990,000
Other borrowed money 3,147,000 2,347,000 2,211,000
Accrued expenses and other liabilities 19,335,000 16,595,000 13,975,000
-------------- -------------- --------------
Total liabilities 1,859,286,000 1,683,085,000 1,644,450,000
SHAREHOLDERS' EQUITY
Common stock 161,045,000 148,533,000 148,472,000
Retained earnings 8,230,000 8,000,000 4,287,000
Accumulated other comprehensive income (loss) (1,727,000) (1,408,000) (439,000)
-------------- -------------- --------------
Total shareholders' equity 167,548,000 155,125,000 152,320,000
Total liabilities and shareholders' equity $2,026,834,000 $1,838,210,000 $1,796,770,000
============== ============== ==============
Mercantile Bank Corporation
Third Quarter 2006 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
QUARTERLY YEAR-TO-DATE
---------------------------------------------------------- ---------------------
(dollars in thousands except per share 2006 2006 2006 2005 2005
data) 3RD QTR 2ND QTR 1ST QTR 4TH QTR 3RD QTR 2006 2005
---------- --------- --------- --------- --------- --------- ---------
EARNINGS
Net interest income $ 15,547 15,646 15,099 14,957 14,072 46,292 40,335
Provision for loan and lease losses $ 1,350 1,500 1,225 1,270 895 4,075 2,520
NonInterest income $ 1,362 1,275 1,243 1,903 1,330 3,880 3,758
NonInterest expense $ 8,028 8,031 8,006 8,802 8,320 24,065 22,315
Net income $ 5,202 5,111 4,929 4,549 4,300 15,242 13,352
Basic earnings per share $ 0.65 0.64 0.62 0.57 0.54 1.91 1.68
Diluted earnings per share $ 0.64 0.63 0.61 0.56 0.53 1.88 1.64
Average shares outstanding * 8,016,016 8,000,998 7,974,180 7,968,632 7,965,172 7,997,187 7,956,205
Average diluted shares outstanding * 8,118,206 8,119,820 8,102,052 8,102,195 8,115,575 8,117,709 8,134,657
PERFORMANCE RATIOS
Return on average assets 1.04% 1.06% 1.07% 1.00% 0.98% 1.05% 1.07%
Return on average common equity 12.54% 12.81% 12.74% 11.76% 11.33% 12.69% 12.15%
Net interest margin (fully
tax-equivalent) 3.34% 3.47% 3.51% 3.54% 3.46% 3.44% 3.48%
Efficiency ratio 47.48% 47.46% 48.99% 52.21% 54.02% 47.97% 50.61%
Full-time equivalent employees 284 277 275 273 263 284 263
CAPITAL
Period-ending equity to assets 8.27% 8.21% 8.37% 8.44% 8.48% 8.27% 8.48%
Tier 1 leverage capital ratio 10.14% 10.15% 10.29% 10.45% 10.62% 10.14% 10.62%
Tier 1 risk-based capital ratio 10.47% 10.52% 10.74% 10.82% 11.07% 10.47% 11.07%
Total risk-based capital ratio 11.61% 11.66% 11.91% 12.00% 12.24% 11.61% 12.24%
Book value per share $ 20.89 20.17 19.86 19.42 19.08 20.89 19.08
Cash dividend per share $ 0.13 0.13 0.12 0.11 0.11 0.38 0.32
ASSET QUALITY
Gross loan charge-offs $ 1,250 1,083 780 350 338 3,113 1,042
Net loan charge-offs $ 920 988 756 315 181 2,664 768
Net loan charge-offs to average loans 0.22% 0.24% 0.19% 0.08% 0.05% 0.22% 0.07%
Allowance for loan and lease losses $ 21,938 21,507 20,995 20,527 19,571 21,938 19,571
Allowance for losses to total loans 1.28% 1.29% 1.30% 1.31% 1.31% 1.28% 1.31%
Nonperforming loans $ 9,017 8,530 8,791 3,995 1,926 9,017 1,926
Other real estate and repossessed
assets $ 421 150 0 0 195 421 195
Nonperforming assets to total assets 0.47% 0.44% 0.46% 0.22% 0.12% 0.47% 0.12%
END OF PERIOD BALANCES
Loans and leases $1,710,268 1,670,471 1,612,351 1,561,812 1,488,959 1,710,268 1,488,959
Total earning assets (before
allowance) $1,922,051 1,859,411 1,800,909 1,743,971 1,701,275 1,922,051 1,701,275
Total assets $2,026,834 1,969,429 1,896,974 1,838,210 1,796,770 2,026,834 1,796,770
Deposits $1,614,703 1,547,912 1,482,219 1,419,352 1,397,280 1,614,703 1,397,280
Shareholders' equity $ 167,548 161,660 158,910 155,125 152,320 167,548 152,320
AVERAGE BALANCES
Loans and leases $1,684,700 1,643,022 1,581,617 1,519,616 1,460,792 1,636,824 1,403,289
Total earning assets (before
allowance) $1,881,873 1,841,666 1,778,694 1,709,612 1,647,294 1,834,455 1,581,042
Total assets $1,984,199 1,939,413 1,871,945 1,804,067 1,740,203 1,932,264 1,667,600
Deposits $1,569,614 1,521,037 1,459,266 1,394,023 1,339,486 1,517,043 1,279,132
Shareholders' equity $ 164,560 160,039 156,901 153,522 150,540 160,533 146,926
* - Adjusted for 5% stock dividend paid on May 16, 2006