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Section 1: 8-K (FORM 8-K)

mbwm20200116_8k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

________________

 

FORM 8-K

 

CURRENT REPORT

 

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (date of earliest event reported): January 21, 2020

____________________

 

Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

 

Michigan 000-26719 38-3360865
(State or other jurisdiction (Commission File (IRS Employer
of incorporation) Number) Identification Number)
     
310 Leonard Street NW, Grand Rapids, Michigan 49504
(Address of principal executive offices) (Zip Code)
   
Registrant's telephone number, including area code 616-406-3000

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock

MBWM

The Nasdaq Stock Market LLC

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).                                                                                                                                                Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 

 

Item 2.02     Results of Operations and Financial Condition.

 

Earnings Release

 

On January 21, 2020, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter and year ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.

 

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

 

Item 9.01     Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit Number

Description

   
99.1 Press release of Mercantile Bank Corporation dated January 21, 2020, reporting financial results and earnings for the quarter and year ended December 31, 2019.

 

2

 

 

Signatures

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

Mercantile Bank Corporation

 

 

 

 

 

 

By:

/s/ Charles E. Christmas

 

 

 

Charles E. Christmas

 

 

 

Executive Vice President, Chief

Financial Officer and Treasurer

 

     

Date: January 21, 2020

 

3

 

 

Exhibit Index

 

 

Exhibit Number

Description

   
99.1 Press release of Mercantile Bank Corporation dated January 21, 2020, reporting financial results and earnings for the quarter and year ended December 31, 2019.

 

(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

ex_169677.htm

 

Exhibit 99.1

 

 

 

Mercantile Bank Corporation Announces Strong Fourth Quarter and Full Year 2019 Results

Improved profitability stemming from increased net interest income and mortgage banking activity income highlight 2019

 

GRAND RAPIDS, Mich., January 21, 2020 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $13.3 million, or $0.81 per diluted share, for the fourth quarter of 2019, compared with net income of $11.6 million, or $0.70 per diluted share, for the respective prior-year period. For the full year 2019, Mercantile reported net income of $49.5 million, or $3.01 per diluted share, compared with net income of $42.0 million, or $2.53 per diluted share, for the full year 2018.

 

Net gains and losses on sales and write-downs of former branch facilities decreased reported net income during the fourth quarter of 2019 by approximately $0.3 million, or $0.02 per diluted share. Interest income related to purchased loan accounting entries increased net income during the fourth quarter of 2019 by $0.2 million, or $0.01 per diluted share, and net income during the fourth quarter of 2018 by $0.5 million, or $0.03 per diluted share. Excluding the impacts of these transactions, diluted earnings per share increased $0.15, or 22.4 percent, during the fourth quarter of 2019 compared to the respective 2018 period.

 

Bank owned life insurance claims and the net impact of gains and losses on sales and write-downs of former branch facilities increased reported net income during 2019 by approximately $2.7 million, or $0.16 per diluted share. Interest income related to purchased loan accounting entries increased net income during 2019 by $1.1 million, or $0.07 per diluted share, and net income during 2018 by $3.2 million, or $0.19 per diluted share. Excluding the impacts of these transactions, diluted earnings per share increased $0.44, or 18.8 percent, during 2019 compared to 2018.

 

Fourth quarter and full year highlights include:

 

 

Strong earnings and capital position

 

Solid growth in key fee income categories

 

Controlled overhead costs

 

Strong asset quality

 

Net loan growth of $104 million, or nearly 4 percent, during the full year

 

Sustained strength in commercial and residential mortgage loan pipelines

 

Announced first quarter 2020 regular cash dividend of $0.28 per common share, an increase of 3.7 percent from the regular cash dividend paid during the fourth quarter of 2019

 

 

 

 

“We are very pleased to report another year of strong operating performance,” said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile. “Our robust financial results during 2019 reflect continued growth in the loan portfolio, increases in certain noninterest income revenue streams, controlled overhead costs, and sound asset quality. Based on our strong capital position and healthy commercial loan and residential mortgage loan pipelines and prospects, we believe that the solid financial performance achieved during 2019 will continue in future periods.”

 

Operating Results

 

Total revenue, which consists of net interest income and noninterest income, was $38.5 million during the fourth quarter of 2019, up $2.3 million, or 6.3 percent, from the prior-year fourth quarter. Reflecting a higher level of earning assets, net interest income of $31.2 million during the fourth quarter of 2019 was up $0.4 million, or 1.1 percent, from the fourth quarter of 2018. Total revenue was $151 million during the full year 2019, up $12.4 million, or 8.9 percent, from 2018. Net interest income was $125 million in 2019, up $4.5 million, or 3.7 percent, from the prior year, reflecting an increase in earning assets.

 

The net interest margin was 3.63 percent in the fourth quarter of 2019. The yield on average earning assets equaled 4.61 percent during the fourth quarter of 2019, down from 4.80 percent during the respective 2018 period mainly due to a change in earning asset mix and a lower interest rate environment. Lower-yielding average interest-earning deposit balances represented 5.2 percent of average earning assets during the current-year fourth quarter, up from 1.0 percent during the prior-year fourth quarter. The elevated level of interest-earning deposits primarily reflected seasonal deposits from municipal customers and several large commercial loan paydowns. A lower commercial loan yield, primarily reflecting the negative impact of reduced interest rates on variable-rate commercial loans stemming from the Federal Open Market Committee’s (“FOMC”) lowering of the targeted federal funds rate by 25 basis points in each of July, September, and October 2019, also contributed to the decreased yield on average earning assets. The cost of funds equaled 0.98 percent during the fourth quarter of 2019, up from 0.82 percent during the prior-year fourth quarter mainly due to a change in funding mix and an increased cost of time deposits. The change in funding mix primarily reflected increased reliance on more costly wholesale funds during the fourth quarter of 2018 and January 2019, which was necessitated by various funding requirements, including ongoing loan growth and seasonal deposit withdrawals by certain business customers for bonus and tax payments.

 

The net interest margin was 3.75 percent in 2019. The yield on average earning assets was 4.77 percent during 2019, up from 4.68 percent during 2018. The higher yield on average earning assets primarily resulted from an increased yield on commercial loans, which equaled 5.21 percent during 2019 compared to 5.11 percent during 2018. The increased yield on commercial loans mainly reflected higher interest rates on variable-rate commercial loans resulting from the FOMC raising the targeted federal funds by 25 basis points in each of March, June, September, and December 2018. The positive impact of these rate increases more than offset the negative impact of decreased interest rates on variable-rate commercial loans stemming from the FOMC lowering the targeted federal funds rate by 25 basis points in each of July, September, and October 2019. The cost of funds equaled 1.02 percent during 2019, up from 0.72 percent during 2018 primarily due to increased costs of time deposits and borrowed funds and a change in funding mix. As noted previously, increased reliance on more costly wholesale funds, most of which occurred during the fourth quarter of 2018 and January 2019, was necessitated by various funding requirements.

 

 

 

 

The collection of certain commercial loan prepayment fees and the recording of accelerated discount accretion on called bonds positively impacted the net interest margin during the fourth quarter of 2019 and full year 2019, while a higher-than-desired level of interest-earning deposits negatively impacted the margin during both periods. Excluding the impacts of these factors, the net interest margin was 3.53 percent and 3.74 percent during the fourth quarter of 2019 and full year 2019, respectively.

 

Net interest income and the net interest margin during the fourth quarters of 2019 and 2018, and full years 2019 and 2018, were affected by purchase accounting accretion and amortization associated with fair value measurements. Increases in interest income on loans totaling $0.3 million and $0.6 million were recorded during the fourth quarters of 2019 and 2018, respectively, and increases of $1.4 million and $4.0 million were recorded during 2019 and 2018, respectively. Purchased loan accretion amounts vary from period to period as a result of periodic cash flow re-estimations, loan payoffs, and payment performance.

 

Mercantile recorded a negative $0.7 million provision for loan losses during the fourth quarter of 2019, primarily reflecting certain commercial loan paydowns and net loan recoveries being recorded during the period. No provision expense was recorded during the fourth quarter of 2018 as the positive impact of net loan recoveries offset increased reserve allocations necessitated by loan growth and changes in certain loan loss reserve environmental factors. During 2019, Mercantile recorded a provision for loan losses of $1.8 million, compared to a provision of $1.1 million during 2018. The provision expense recorded during both 2019 and 2018 mainly reflected ongoing net loan growth; in addition, the provision expense recorded during 2018 depicts increased allocations related to changes in certain environmental factors. The amount of provision expense necessitated by net loan growth during 2018 was partially mitigated by net loan recoveries being recorded during the period.

 

Noninterest income during the fourth quarter of 2019 was $7.3 million, which included a $0.3 million gain on the sale of a former branch facility. Noninterest income during the prior-year fourth quarter was $5.4 million, which included a $0.9 million accounting adjustment related to mortgage banking activities in prior years. Excluding the aforementioned transactions, noninterest income increased $2.6 million, or 57.9 percent, during the fourth quarter of 2019 compared to the respective 2018 period. Noninterest income during 2019 was $27.0 million, compared to $19.0 million during 2018. Noninterest income during 2019 included bank owned life insurance claims totaling $2.6 million and gains on the sales of former branch facilities totaling $0.8 million, while noninterest income during 2018 included the previously-mentioned $0.9 million accounting adjustment associated with mortgage banking activities. Excluding these transactions, noninterest income increased $5.4 million, or 29.9 percent, during 2019 compared to 2018. The improved level of noninterest income in both 2019 periods compared to the respective 2018 periods primarily resulted from increased mortgage banking activity income stemming from the success of continuing strategic initiatives designed to increase market presence, along with a higher level of refinance activity resulting from a decrease in residential mortgage loan interest rates and a higher percentage of originated loans being sold. Growth in credit and debit card income, service charges on accounts, and payroll processing fees also contributed to the improved noninterest income in both 2019 periods.

 

Noninterest expense totaled $23.3 million during the fourth quarter of 2019, up $1.4 million, or 6.3 percent, from the prior-year fourth quarter. Noninterest expense during 2019 was $89.3 million, an increase of $3.1 million, or 3.6 percent, from the $86.2 million expensed during 2018. The higher level of expense in the 2019 periods primarily resulted from increased salary costs, mainly reflecting annual employee merit pay increases and higher mortgage loan originator commissions. Increased stock-based compensation also contributed to the higher level of noninterest expense in the current-year fourth quarter compared to the respective 2018 period.

 

 

 

 

“The noteworthy increase in mortgage banking activity income depicts the success of continuing strategic initiatives that were created to enhance market share, an increase in the percentage of originated residential mortgage loans being sold, and a higher level of refinance activity resulting from decreased residential mortgage loan interest rates,” continued Mr. Kaminski. “Based on our current residential mortgage loan pipeline and projections, we believe mortgage banking activity income will be solid during 2020. We are also pleased with the increases in other key fee income categories. Our focus on meeting growth objectives in a cost-conscious manner has not wavered.”

 

Balance Sheet

 

As of December 31, 2019, total assets were $3.63 billion, up $269 million, or 8.0 percent, from December 31, 2018. Interest-earning deposits and total loans increased $170 million and $104 million, respectively, over the same time period. The growth in interest-earning deposits mainly stemmed from certain deposit-gathering initiatives, an increase in wholesale funds, and several large commercial loan paydowns. As of December 31, 2019, unfunded commitments on commercial construction and development loans totaled approximately $105 million, which are expected to be largely funded over the next 12 to 18 months.

 

Ray Reitsma, President of Mercantile Bank of Michigan, noted, “We are pleased with the net loan growth and level of new commercial term loan originations during 2019. Net loan growth during the year depicts increases in both commercial loans and residential mortgage loans. All commercial loan segments, with the exception of the multi-family and residential rental segment, grew during the year. The solid growth in commercial loans reflects our lending staff’s ongoing focus on identifying new lending opportunities in our markets and meeting the needs of existing customers, while growth in residential mortgage loans depicts the success of various strategic initiatives that were implemented to increase our market presence. The net growth in the commercial portfolio during 2019 was achieved despite a contraction of nearly $67 million in the portfolio during the fourth quarter stemming from an unusually high level of payoffs. The payoffs primarily reflected instances in which we remained committed to credit quality and margin preservation, along with a few situations involving larger borrowing relationships that refinanced the underlying real estate with secondary market credit participants that offered long-term, fixed rate non-recourse financing options. Based on our current loan pipelines and additional lending opportunities conveyed by our commercial lenders, we are confident that we can continue to grow the commercial loan and residential loan portfolios in future periods.”

 

As of December 31, 2019, commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately 58 percent of total commercial loans, a level that has remained relatively consistent and in line with internal expectations.

 

Total deposits at December 31, 2019, were $2.69 billion, up $227 million from December 31, 2018. Local deposits and brokered deposits were up $206 million and $20.2 million, respectively, during 2019. The growth in local deposits was mainly driven by a special time deposit campaign that was introduced mid first quarter and ended in early April, along with increases in business money market accounts and noninterest-bearing checking accounts. The growth in noninterest-bearing checking accounts primarily reflected new commercial loan relationships. Wholesale funds were $487 million, or approximately 15 percent of total funds, as of December 31, 2019, compared to $474 million, or approximately 16 percent of total funds, as of December 31, 2018.

 

 

 

 

Asset Quality

 

Nonperforming assets at December 31, 2019, were $2.7 million, or 0.1 percent of total assets, compared to $5.0 million, or 0.2 percent of total assets, at December 31, 2018. The level of past due loans remains nominal, and loan relationships on the internal watch list declined in number and dollar volume during 2019. During the fourth quarter of 2019, loan charge-offs totaled $0.1 million while recoveries of prior period loan charge-offs equaled $0.3 million, providing for net loan recoveries of $0.2 million, or 0.02 percent of average total loans. During 2019, loan charge-offs totaled $0.9 million while recoveries of prior period loan charge-offs equaled $0.7 million, providing for net loan charge-offs of $0.2 million, or 0.01 percent of average total loans.

 

Capital Position

 

Shareholders’ equity totaled $417 million as of December 31, 2019, an increase of $41.3 million from year-end 2018. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 13.0 percent as of December 31, 2019, compared to 12.3 percent at December 31, 2018. At December 31, 2019, the Bank had approximately $97 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,425,136 total shares outstanding at December 31, 2019.

 

As announced in May 2019, Mercantile instituted a $20 million common stock repurchase program in conjunction with the completion of its existing program that was introduced in January 2015 and later expanded in April 2016. During 2019, Mercantile repurchased approximately 233,000 shares for $7.2 million, or a weighted average all-in cost per share of $30.79, under the former and new programs on a combined basis. During the period of January 2015 through December 31, 2019, Mercantile repurchased approximately 1.4 million shares for $32.6 million, or a weighted average all-in cost per share of $23.47, under the former and new programs on a combined basis.

 

Mr. Kaminski concluded, “Our strong operating performance during 2019 has positioned us to meet growth objectives and further build shareholder value. As depicted by our ongoing cash dividend program, including the announcement of an increased first quarter 2020 regular cash dividend earlier today, we remain focused on providing shareholders with a competitive dividend yield and committed to enhancing shareholder value. Our banking philosophy, which entails developing mutually-beneficial relationships and offering market-leading products and services through efficient delivery channels, has continued to successfully attract new customers and allowed us to retain existing customers. We are excited about Mercantile’s future and look forward to sound financial performance in 2020.”

 

About Mercantile Bank Corporation

 

Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Mercantile provides banking services to businesses, individuals and governmental units, and differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has assets of approximately $3.6 billion and operates 40 banking offices. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select 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 nontraditional competitors; changes in banking regulation or actions by bank regulators; 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 local real estate values; changes in the national and local economies; 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.

 

 

FOR FURTHER INFORMATION:

 

Robert B. Kaminski, Jr. Charles Christmas
President and CEO Executive Vice President and CFO
616-726-1502 616-726-1202
[email protected] [email protected]

 

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

   

DECEMBER 31,

   

DECEMBER 31,

   

DECEMBER 31,

 
   

2019

   

2018

   

2017

 

ASSETS

                       

Cash and due from banks

  $ 53,262,000     $ 64,872,000     $ 55,127,000  

Interest-earning deposits

    180,469,000       10,482,000       144,974,000  

Total cash and cash equivalents

    233,731,000       75,354,000       200,101,000  
                         

Securities available for sale

    334,655,000       337,366,000       335,744,000  

Federal Home Loan Bank stock

    18,002,000       16,022,000       11,036,000  
                         

Loans

    2,856,667,000       2,753,085,000       2,558,552,000  

Allowance for loan losses

    (23,889,000 )     (22,380,000 )     (19,501,000 )

Loans, net

    2,832,778,000       2,730,705,000       2,539,051,000  
                         

Premises and equipment, net

    57,327,000       48,321,000       46,034,000  

Bank owned life insurance

    70,297,000       69,647,000       68,689,000  

Goodwill

    49,473,000       49,473,000       49,473,000  

Core deposit intangible, net

    3,840,000       5,561,000       7,600,000  

Other assets

    32,812,000       31,458,000       28,976,000  
                         

Total assets

  $ 3,632,915,000     $ 3,363,907,000     $ 3,286,704,000  
                         
                         

LIABILITIES AND SHAREHOLDERS' EQUITY

                       

Deposits:

                       

Noninterest-bearing

  $ 924,916,000     $ 889,784,000     $ 866,380,000  

Interest-bearing

    1,765,468,000       1,573,924,000       1,655,985,000  

Total deposits

    2,690,384,000       2,463,708,000       2,522,365,000  
                         

Securities sold under agreements to repurchase

    102,675,000       103,519,000       118,748,000  

Federal Home Loan Bank advances

    354,000,000       350,000,000       220,000,000  

Subordinated debentures

    46,881,000       46,199,000       45,517,000  

Accrued interest and other liabilities

    22,414,000       25,232,000       14,204,000  

Total liabilities

    3,216,354,000       2,988,658,000       2,920,834,000  
                         

SHAREHOLDERS' EQUITY

                       

Common stock

    305,035,000       308,005,000       309,772,000  

Retained earnings

    107,831,000       75,483,000       60,132,000  

Accumulated other comprehensive income/(loss)

    3,695,000       (8,239,000 )     (4,034,000 )

Total shareholders' equity

    416,561,000       375,249,000       365,870,000  
                         

Total liabilities and shareholders' equity

  $ 3,632,915,000     $ 3,363,907,000     $ 3,286,704,000  

 

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)

 

   

THREE MONTHS ENDED

   

THREE MONTHS ENDED

   

TWELVE MONTHS ENDED

   

TWELVE MONTHS ENDED

 
   

December 31, 2019

   

December 31, 2018

   

December 31, 2019

   

December 31, 2018

 

INTEREST INCOME

                               

Loans, including fees

  $ 36,257,000     $ 34,676,000     $ 145,816,000     $ 131,763,000  

Investment securities

    2,563,000       2,347,000       10,150,000       8,975,000  

Other interest-earning assets

    744,000       172,000       2,371,000       1,243,000  

Total interest income

    39,564,000       37,195,000       158,337,000       141,981,000  
                                 

INTEREST EXPENSE

                               

Deposits

    5,358,000       3,949,000       21,264,000       13,869,000  

Short-term borrowings

    51,000       92,000       295,000       273,000  

Federal Home Loan Bank advances

    2,226,000       1,513,000       8,977,000       4,647,000  

Other borrowed money

    761,000       823,000       3,267,000       3,110,000  

Total interest expense

    8,396,000       6,377,000       33,803,000       21,899,000  
                                 

Net interest income

    31,168,000       30,818,000       124,534,000       120,082,000  
                                 

Provision for loan losses

    (700,000 )     0       1,750,000       1,100,000  
                                 

Net interest income after provision for loan losses

    31,868,000       30,818,000       122,784,000       118,982,000  
                                 

NONINTEREST INCOME

                               

Service charges on accounts

    1,178,000       1,099,000       4,584,000       4,358,000  

Credit and debit card income

    1,528,000       1,399,000       5,925,000       5,354,000  

Mortgage banking income

    3,194,000       994,000       8,485,000       4,109,000  

Payroll services

    399,000       335,000       1,626,000       1,462,000  

Earnings on bank owned life insurance

    319,000       318,000       3,886,000       1,287,000  

Other income

    694,000       1,225,000       2,450,000       2,440,000  

Total noninterest income

    7,312,000       5,370,000       26,956,000       19,010,000  
                                 

NONINTEREST EXPENSE

                               

Salaries and benefits

    13,851,000       12,884,000       53,833,000       50,910,000  

Occupancy

    1,972,000       1,662,000       7,061,000       6,711,000  

Furniture and equipment

    698,000       681,000       2,583,000       2,470,000  

Data processing costs

    2,381,000       2,141,000       9,235,000       8,557,000  

Other expense

    4,433,000       4,590,000       16,568,000       17,522,000  

Total noninterest expense

    23,335,000       21,958,000       89,280,000       86,170,000  
                                 

Income before federal income tax expense

    15,845,000       14,230,000       60,460,000       51,822,000  
                                 

Federal income tax expense

    2,528,000       2,657,000       11,004,000       9,798,000  
                                 

Net Income

  $ 13,317,000     $ 11,573,000     $ 49,456,000     $ 42,024,000  
                                 

Basic earnings per share

  $ 0.81     $ 0.70     $ 3.01     $ 2.53  

Diluted earnings per share

  $ 0.81     $ 0.70     $ 3.01     $ 2.53  
                                 

Average basic shares outstanding

    16,373,458       16,594,412       16,405,159       16,600,612  

Average diluted shares outstanding

    16,375,740       16,600,108       16,409,135       16,606,416  

 

 

 

 

MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

   

Quarterly

   

Year-To-Date

 

(dollars in thousands except per share data)

2019    

2019

   

2019

   

2019

    2018    

 

         
   

4th Qtr

   

3rd Qtr

   

2nd Qtr

   

1st Qtr

   

4th Qtr

   

2019

   

2018

 

EARNINGS

                                                       

Net interest income

  $ 31,168       31,605       31,116       30,645       30,818       124,534       120,082  

Provision for loan losses

  $ (700 )     700       900       850       0       1,750       1,100  

Noninterest income

  $ 7,312       6,676       6,334       6,632       5,370       26,956       19,010  

Noninterest expense

  $ 23,335       22,027       22,087       21,830       21,958       89,280       86,170  

Net income before federal income tax expense

  $ 15,845       15,554       14,463       14,597       14,230       60,460       51,822  

Net income

  $ 13,317       12,600       11,715       11,824       11,573       49,456       42,024  

Basic earnings per share

  $ 0.81       0.77       0.71       0.72       0.70       3.01       2.53  

Diluted earnings per share

  $ 0.81       0.77       0.71       0.72       0.70       3.01       2.53  

Average basic shares outstanding

    16,373,458       16,390,203       16,428,187       16,429,571       16,594,412       16,405,159       16,600,612  

Average diluted shares outstanding

    16,375,740       16,393,078       16,434,714       16,435,176       16,600,108       16,409,135       16,606,416  
                                                         

PERFORMANCE RATIOS

                                                       

Return on average assets

    1.45 %     1.38 %     1.33 %     1.39 %     1.39 %     1.39 %     1.28 %

Return on average equity

    12.87 %     12.39 %     12.08 %     12.75 %     12.40 %     12.52 %     11.33 %

Net interest margin (fully tax-equivalent)

    3.63 %     3.71 %     3.79 %     3.88 %     3.98 %     3.75 %     3.96 %

Efficiency ratio

    60.64 %     57.54 %     58.98 %     58.56 %     60.68 %     58.93 %     61.95 %

Full-time equivalent employees

    619       624       652       631       630       619       630  
                                                         

YIELD ON ASSETS / COST OF FUNDS

                                                       

Yield on loans

    5.01 %     5.06 %     5.18 %     5.21 %     5.08 %     5.11 %     5.01 %

Yield on securities

    2.90 %     2.99 %     2.85 %     2.82 %     2.80 %     2.89 %     2.69 %

Yield on other interest-earning assets

    1.65 %     2.15 %     2.38 %     2.40 %     2.20 %     2.07 %     1.79 %

Yield on total earning assets

    4.61 %     4.73 %     4.85 %     4.89 %     4.80 %     4.77 %     4.68 %

Yield on total assets

    4.31 %     4.42 %     4.53 %     4.56 %     4.46 %     4.45 %     4.35 %

Cost of deposits

    0.79 %     0.83 %     0.85 %     0.77 %     0.63 %     0.81 %     0.56 %

Cost of borrowed funds

    2.36 %     2.35 %     2.40 %     2.43 %     2.22 %     2.39 %     2.06 %

Cost of interest-bearing liabilities

    1.47 %     1.52 %     1.55 %     1.47 %     1.26 %     1.50 %     1.08 %

Cost of funds (total earning assets)

    0.98 %     1.02 %     1.06 %     1.01 %     0.82 %     1.02 %     0.72 %

Cost of funds (total assets)

    0.91 %     0.95 %     0.99 %     0.94 %     0.76 %     0.95 %     0.67 %
                                                         

PURCHASE ACCOUNTING ADJUSTMENTS

                                                 

Loan portfolio - increase interest income

  $ 316       327       569       211       603       1,423       4,037  

Trust preferred - increase interest expense

  $ 171       171       171       171       171       684       684  

Core deposit intangible - increase overhead

  $ 397       397       450       477       477       1,721       2,040  
                                                         

MORTGAGE BANKING ACTIVITY

                                                       

Total mortgage loans originated

  $ 110,611       132,852       80,205       44,932       44,448       368,600       214,246  

Purchase mortgage loans originated

  $ 49,407       61,839       41,986       29,891       29,729       183,123       143,809  

Refinance mortgage loans originated

  $ 61,204       71,013       38,219       15,041       14,719       185,477       70,437  

Total mortgage loans sold

  $ 81,590       104,890       49,396       21,502       21,805       257,378       96,445  

Net gain on sale of mortgage loans

  $ 3,062       2,886       1,419       698       829       8,065       3,525  
                                                         

CAPITAL

                                                       

Tangible equity to tangible assets

    10.15 %     9.67 %     9.82 %     9.41 %     9.68 %     10.15 %     9.68 %

Tier 1 leverage capital ratio

    11.28 %     11.08 %     11.17 %     11.16 %     11.41 %     11.28 %     11.41 %

Common equity risk-based capital ratio

    11.00 %     10.53 %     10.47 %     10.46 %     10.41 %     11.00 %     10.41 %

Tier 1 risk-based capital ratio

    12.36 %     11.87 %     11.82 %     11.84 %     11.80 %     12.36 %     11.80 %

Total risk-based capital ratio

    13.09 %     12.60 %     12.55 %     12.56 %     12.50 %     13.09 %     12.50 %

Tier 1 capital

  $ 405,148       395,010       388,788       379,334       373,721       405,148       373,721  

Tier 1 plus tier 2 capital

  $ 429,038       419,424       412,841       402,469       396,102       429,038       396,102  

Total risk-weighted assets

  $ 3,276,754       3,327,723       3,289,958       3,204,295       3,167,655       3,276,754       3,167,655  

Book value per common share

  $ 25.36       24.93       24.34       23.37       22.70       25.36       22.70  

Tangible book value per common share

  $ 22.12       21.64       21.05       20.05       19.37       22.12       19.37  

Cash dividend per common share

  $ 0.27       0.27       0.26       0.26       1.00       1.06       1.68  
                                                         

ASSET QUALITY

                                                       

Gross loan charge-offs

  $ 112       519       78       174       354       883       1,450  

Recoveries

  $ 287       180       96       79       1,042       642       3,229  

Net loan charge-offs (recoveries)

  $ (175 )     339       (18 )     95       (688 )     241       (1,779 )

Net loan charge-offs to average loans

    (0.02 %)     0.05 %     (0.01 %)     0.01 %     (0.10 %)     0.01 %     (0.07 %)

Allowance for loan losses

  $ 23,889       24,414       24,053       23,135       22,380       23,889       22,380  

Allowance to originated loans

    0.89 %     0.88 %     0.89 %     0.89 %     0.88 %     0.89 %     0.88 %

Nonperforming loans

  $ 2,284       2,644       3,505       4,138       4,141       2,284       4,141  

Other real estate/repossessed assets

  $ 452       243       446       396       811       452       811  

Nonperforming loans to total loans

    0.08 %     0.09 %     0.12 %     0.15 %     0.15 %     0.08 %     0.15 %

Nonperforming assets to total assets

    0.08 %     0.08 %     0.11 %     0.13 %     0.15 %     0.08 %     0.15 %
                                                         

NONPERFORMING ASSETS - COMPOSITION

                                                 

Residential real estate:

                                                       

Land development

  $ 34       32       33       45       0       34       0  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied / rental

  $ 2,364       2,576       3,225       3,404       3,555       2,364       3,555  

Commercial real estate:

                                                       

Land development

  $ 0       0       0       0       0       0       0  

Construction

  $ 0       0       0       0       0       0       0  

Owner occupied

  $ 326       240       642       791       1,363       326       1,363  

Non-owner occupied

  $ 0       26       26       62       0       0       0  

Non-real estate:

                                                       

Commercial assets

  $ 0       0       2       207       17       0       17  

Consumer assets

  $ 12       13       23       25       17       12       17  

Total nonperforming assets

    2,736       2,887       3,951       4,534       4,952       2,736       4,952  
                                                         

NONPERFORMING ASSETS - RECON

                                                       

Beginning balance

  $ 2,887       3,951       4,534       4,952       5,800       4,952       9,403  

Additions - originated loans

  $ 30       339       26       539       1,247       934       3,972  

Other activity

  $ 135       57       34       0       0       226       51  

Return to performing status

  $ 0       (126 )     0       0       0       (126 )     (175 )

Principal payments

  $ (232 )     (1,014 )     (512 )     (382 )     (1,836 )     (2,140 )     (5,028 )

Sale proceeds

  $ (36 )     (253 )     (74 )     (429 )     (128 )     (792 )     (2,381 )

Loan charge-offs

  $ (48 )     (59 )     (36 )     (146 )     (57 )     (289 )     (707 )

Valuation write-downs

  $ 0       (8 )     (21 )     0       (74 )     (29 )     (183 )

Ending balance

  $ 2,736       2,887       3,951       4,534       4,952       2,736       4,952  
                                                         

LOAN PORTFOLIO COMPOSITION

                                                       

Commercial:

                                                       

Commercial & industrial

  $ 846,551       882,747       881,196       839,207       822,723       846,551       822,723  

Land development & construction

  $ 56,118       48,418       45,158       45,892       44,885       56,118       44,885  

Owner occupied comm'l R/E

  $ 579,004       567,267       556,868       551,517       548,619       579,004       548,619  

Non-owner occupied comm'l R/E

  $ 835,345       883,079       852,844       835,679       816,282       835,345       816,282  

Multi-family & residential rental

  $ 124,526       126,855       128,489       127,903       127,597       124,526       127,597  

Total commercial

  $ 2,441,544       2,508,366       2,464,555       2,400,198       2,360,106       2,441,544       2,360,106  

Retail:

                                                       

1-4 family mortgages

  $ 339,749       346,095       335,618       316,315       307,540       339,749       307,540  

Home equity & other consumer

  $ 75,374       78,552       81,320       83,126       85,439       75,374       85,439  

Total retail

  $ 415,123       424,647       416,938       399,441       392,979       415,123       392,979  

Total loans

  $ 2,856,667       2,933,013       2,881,493       2,799,639       2,753,085       2,856,667       2,753,085  
                                                         

END OF PERIOD BALANCES

                                                       

Loans

  $ 2,856,667       2,933,013       2,881,493       2,799,639       2,753,085       2,856,667       2,753,085  

Securities

  $ 352,657       363,535       365,926       355,878       353,388       352,657       353,388  

Other interest-earning assets

  $ 180,469       144,263       92,750       168,572       10,482       180,469       10,482  

Total earning assets (before allowance)

  $ 3,389,793       3,440,811       3,340,169       3,324,089       3,116,955       3,389,793       3,116,955  

Total assets

  $ 3,632,915       3,710,380       3,576,139       3,551,754       3,363,907       3,632,915       3,363,907  

Noninterest-bearing deposits

  $ 924,916       967,189       918,581       857,734       889,784       924,916       889,784  

Interest-bearing deposits

  $ 1,765,468       1,799,902       1,700,628       1,753,240       1,573,924       1,765,468       1,573,924  

Total deposits

  $ 2,690,384       2,767,091       2,619,209       2,610,974       2,463,708       2,690,384       2,463,708  

Total borrowed funds

  $ 506,301       517,523       543,098       544,566       513,220       506,301       513,220  

Total interest-bearing liabilities

  $ 2,271,769       2,317,425       2,243,726       2,297,806       2,087,144       2,271,769       2,087,144  

Shareholders' equity

  $ 416,561       407,200       400,117       383,729       375,249       416,561       375,249  
                                                         

AVERAGE BALANCES

                                                       

Loans

  $ 2,871,674       2,903,161       2,848,343       2,787,430       2,706,617       2,853,021       2,628,907  

Securities

  $ 362,347       363,394       357,718       354,459       343,597       359,512       343,886  

Other interest-earning assets

  $ 176,034       118,314       94,616       67,915       30,564       114,527       69,559  

Total earning assets (before allowance)

  $ 3,410,055       3,384,869       3,300,677       3,209,804       3,080,778       3,327,060       3,042,352  

Total assets

  $ 3,650,087       3,622,168       3,529,598       3,441,774       3,312,648       3,561,645       3,272,637  

Noninterest-bearing deposits

  $ 948,602       930,851       875,645       852,247       905,065       902,180       863,384  

Interest-bearing deposits

  $ 1,759,377       1,741,563       1,719,433       1,668,563       1,579,632       1,722,535       1,633,150  

Total deposits

  $ 2,707,979       2,672,414       2,595,078       2,520,810       2,484,697       2,624,715       2,496,534  

Total borrowed funds

  $ 509,932       529,590       530,802       532,864       434,365       525,745       390,193  

Total interest-bearing liabilities

  $ 2,269,309       2,271,153       2,250,235       2,201,427       2,013,997       2,248,280       2,023,343  

Shareholders' equity

  $ 410,593       403,350       389,133       376,103       370,175       394,913       370,796  

 

 

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