GRAND RAPIDS, Mich.,
July 21, 2020 /PRNewswire/ --
Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported
net income of $8.7 million, or
$0.54 per diluted share, for the
second quarter of 2020, compared with net income of $11.7 million, or $0.71 per diluted share, for the respective
prior-year period. Net income during the first six months of
2020 totaled $19.4 million, or
$1.19 per diluted share, compared to
$23.5 million, or $1.43 per diluted share, during the first six
months of 2019.
Proceeds from a bank owned life insurance claim increased net
income in the prior-year second quarter by $1.3 million, or $0.08 per diluted share. Excluding the
impact of this transaction, diluted earnings per share decreased
$0.09, or 14.3 percent, during the
current-year second quarter compared to the respective prior-year
period. Proceeds from bank owned life insurance claims and a
gain on the sale of a former branch facility increased net income
in the first six months of 2019 by $3.1
million, or $0.19 per diluted
share. Excluding the impacts of these transactions, diluted
earnings per share decreased $0.05,
or 4.0 percent, during the first six months of 2020 compared to the
respective prior-year period.
"We are pleased with our financial performance during the second
quarter of 2020, especially when taking into consideration the
unique and persistent challenges presented by the COVID-19
pandemic," said Robert B. Kaminski,
Jr., President and Chief Executive Officer of
Mercantile. "The tremendous efforts of the Mercantile team
allowed us to successfully navigate through these challenges,
including meeting customers' banking needs while working
remotely. We also increased our loan loss reserve during the
quarter to reflect the potential deterioration in our loan
portfolio stemming from the pandemic and associated weakened
economic conditions."
Second quarter highlights include:
- Solid capital position
- Asset quality metrics remained strong
- Paycheck Protection Program loan fundings of approximately
$549 million
- Continued strength in commercial loan and residential mortgage
loan pipelines
- Substantial increase in mortgage banking income
- Controlled overhead costs
Operating Results
Total revenue, which consists of net interest income and
noninterest income, was $41.6 million
during the second quarter of 2020, up $4.1
million, or 11.0 percent, from the prior-year second
quarter. Net interest income during the second quarter of
2020 was $30.6 million, down
$0.5 million, or 1.8 percent,
from the second quarter of 2019, reflecting a decreased net
interest margin, which more than offset the positive impact of
earning asset growth.
The net interest margin was 3.17 percent in the second quarter
of 2020, compared to 3.79 percent in the second quarter of
2019. The yield on average earning assets was 3.85 percent
during the second quarter of 2020, down from 4.85 percent during
the prior-year second quarter, primarily due to a decreased yield
on commercial loans, which equaled 4.20 percent in the current-year
second quarter compared to 5.27 percent in the respective 2019
period. The decreased yield on commercial loans primarily
reflected reduced interest rates on variable-rate commercial loans
resulting from the Federal Open Market Committee significantly
lowering the targeted federal funds rate by 225 basis points during
the second half of 2019 and first three months of 2020.
An improved yield on securities, which equaled 3.37 percent and
2.85 percent in the second quarters of 2020 and 2019, respectively,
partially mitigated the decline in the yield on average earning
assets resulting from the lower yield on commercial loans.
The increased yield on securities mainly reflected the recording of
$0.9 million in accelerated discount
accretion on called U.S. Government agency bonds as interest income
during the second quarter of 2020. No accelerated discount
accretion was recorded during the second quarter of 2019. The
accelerated discount accretion recorded during the second quarter
of 2020 positively impacted the net interest margin by 10 basis
points. As part of Mercantile's interest rate risk management
program, U.S. Government agency bonds are periodically purchased at
discounts during rising interest rate environments; if these bonds
are called during decreasing interest rate environments, the
remaining unaccreted discount amounts are immediately recognized as
interest income.
Negatively impacting the net interest margin during the second
quarter of 2020 was a significant volume of excess on balance sheet
liquidity consisting of low-yielding deposits with the Federal
Reserve Bank of Chicago and a
correspondent bank. The excess funds are primarily a product
of federal government stimulus programs as well as lower business
and consumer investing and spending.
The cost of funds declined from 1.06 percent during the second
quarter of 2019 to 0.68 percent during the current-year second
quarter, primarily due to lower rates paid on deposit accounts and
borrowings, reflecting the declining interest rate
environment. A change in funding mix, consisting of an
increase in lower-costing non-time deposits as a percentage of
total funding sources, also contributed to the decrease in the cost
of funds.
Mercantile recorded provision expense of $7.6 million and $0.9
million during the second quarters of 2020 and 2019,
respectively. The provision expense recorded during the
current-year second quarter was primarily comprised of an
allocation associated with the newly-created COVID-19 pandemic
environmental factor ("COVID-19 factor") and an increased
allocation related to the existing economic conditions
environmental factor. The COVID-19 factor was added to
address the unique challenges and economic uncertainty resulting
from the pandemic and its potential impact on the collectability of
the loan portfolio. The provision expense recorded during the
second quarter of 2019 mainly reflected ongoing net loan
growth.
Noninterest income during the second quarter of 2020 was
$11.0 million, compared to
$6.3 million during the prior-year
second quarter. Noninterest income during the second quarter
of 2019 included a bank owned life insurance claim of $1.3 million. Excluding the impact of this
transaction, noninterest income increased $5.9 million, or nearly 118 percent, during the
current-year second quarter compared to the respective 2019
period. The higher level of noninterest income primarily
reflected increased mortgage banking income, which more than offset
decreased service charges on accounts and credit and debit card
income. The improved mortgage banking income mainly reflected
a significant increase in refinance activity spurred by a decrease
in residential mortgage loan interest rates, the continuing success
of strategic initiatives that were implemented to increase market
share, and an increase in the percentage of originated loans being
sold. The decline in service charges on accounts primarily
resulted from reduced transaction volume in business accounts,
while the decrease in credit and debit card income mainly reflected
lower card usage. The reduction in both of these revenue
streams largely reflects the impact of COVID-19 related
restrictions, including business shutdowns and stay-at-home
orders.
Noninterest expense totaled $23.2
million during the second quarter of 2020, up $1.1 million, or 5.1 percent, from the prior-year
second quarter. The higher level of expense primarily
resulted from increased compensation costs, mainly reflecting
higher residential mortgage loan originator commissions and
associated incentives. In addition, higher data processing
costs, primarily representing growth in transaction volume and new
product offerings, and occupancy and furniture costs, mainly
reflecting increased depreciation expense associated with an
expansion of Mercantile's main office, contributed to the increased
level of noninterest expense.
Mr. Kaminski commented, "A substantial increase in refinance
activity stemming from the decreased interest rate environment,
coupled with the ongoing success of strategic initiatives that were
designed to expand market penetration, resulted in a record
breaking level of mortgage banking income during the second quarter
of 2020. The level of purchase mortgage applications has
increased in light of certain COVID-19 restrictions being lifted
and is at an all-time high, and recent application activity
suggests that refinance opportunities persist. Based on the
current pipeline and application volume, we believe that solid
mortgage banking income can be recorded in future periods. We
expect service charges on accounts and credit and debit card
income, which both declined in the second quarter of 2020 compared
to the prior-year second quarter largely as a result of COVID-19
restrictions being put in place, to rebound as certain restrictions
are relaxed. We remain committed to meeting growth objectives
in a cost conscious manner and are continually reviewing our branch
system, product delivery channels, and treasury management
solutions in an effort to identify opportunities to operate more
efficiently."
Balance Sheet
As of June 30, 2020, total assets
were $4.31 billion, up $681 million, or 18.8 percent, from December 31, 2019. Total loans increased
$476 million during the first six
months of 2020, primarily reflecting Paycheck Protection Program
loan originations of $549 million
during the second quarter. Commercial lines of credit
declined $109 million during the
second quarter of 2020, in large part reflecting the negative
impact of stay-at-home orders on certain customers' sales volumes
and the resulting reduction in borrowing needs. As of
June 30, 2020, unfunded commitments
on commercial construction and development loans totaled
approximately $78 million, which are
expected to be largely funded over the next 12 to 18 months.
Interest-earning deposits increased $206
million during the first six months of 2020, mainly
resulting from growth in certain local deposit account categories
and sweep accounts.
Ray Reitsma, President of
Mercantile Bank of Michigan,
noted, "As evidenced by the over 2,000 loans, totaling almost
$550 million, being booked during the
second quarter, our team was extremely successful in assisting
customers to obtain funds under the Paycheck Protection
Program. In fact, the efficient efforts of our team were
noticed in the marketplace, resulting in numerous new relationship
opportunities from businesses that experienced difficulties in
working with their current banks to apply for Paycheck Protection
Program loans. These businesses approached us directly or
were referred to us by third parties. Our team members' focus
is now shifting to assist loan recipients in the gathering and
submitting of the required information to allow for the rendering
of a forgiveness determination by the Small Business Administration
once details of the forgiveness phase of the program are
known."
Mr. Reitsma concluded, "In
addition to processing Paycheck Protection Program loans, our team
members processed commercial and retail loan payment deferrals
under internally developed programs designed to provide customers
with needed cash flow relief. Our asset quality metrics
remained strong as of June 30, 2020,
and we have continued to closely monitor the performance of our
entire loan portfolio for any signs of stress brought on by the
COVID-19 pandemic. We have identified certain segments of the
commercial loan portfolio, none of which exceed five percent of
total commercial loans, that we believe are more susceptible to the
risks presented by the pandemic and are being subjected to more
stringent monitoring procedures. Although we have spent a
considerable amount of time helping customers navigate through the
challenges facing them as a result of the pandemic, we have
continued to allocate resources to identify and attract new client
relationships and meet the conventional credit needs of our
existing customers. Our current pipeline remains strong,
leading us to believe that additional commercial loans will be
funded in future periods."
Excluding the impact of Paycheck Protection Program loan
originations, commercial and industrial loans and owner-occupied
commercial real estate loans together represented approximately 56
percent of total commercial loans as of June
30, 2020, a level that has remained relatively consistent
and in line with internal expectations.
Total deposits at June 30, 2020,
were $3.26 billion, up $572 million, or 21.3 percent, from December 31, 2019. Local deposits were up
$629 million during the first six
months of 2020, while brokered deposits were down $56.8 million during the same time period.
The growth in local deposits mainly reflected Paycheck Protection
Program loan proceeds being deposited into customers' accounts at
the time the loans were originated and remaining on deposit as of
June 30, 2020. Wholesale funds
were $471 million, or approximately
12 percent of total funds, as of June 30,
2020, compared to $487
million, or approximately 15 percent of total funds, as of
December 31, 2019.
Asset Quality
Nonperforming assets at June 30,
2020, were $3.4 million, or
0.1 percent of total assets, compared to $2.7 million, or 0.1 percent of total assets, at
December 31, 2019, and $4.0 million, or 0.1 percent of total assets, at
June 30, 2019. During the
second quarter of 2020, loan charge-offs totaled $0.3 million, while recoveries of prior period
loan charge-offs equaled $0.1
million, providing for net loan charge-offs of $0.2 million, or an annualized 0.02 percent of
average total loans.
Capital Position
Shareholders' equity totaled $425
million as of June 30, 2020,
an increase of $8.7 million from
year-end 2019. The Bank's capital position remains above
"well-capitalized" with a total risk-based capital ratio of 13.5
percent as of June 30, 2020, compared
to 13.0 percent at December 31,
2019. At June 30, 2020, the
Bank had approximately $113 million
in excess of the 10.0 percent minimum regulatory threshold required
to be considered a "well-capitalized" institution. Mercantile
reported 16,230,649 total shares outstanding at June 30, 2020.
As part of a $20 million common
stock repurchase program announced in May
2019 and instituted in conjunction with the completion of
its existing program that was introduced in January 2015 and later expanded in April 2016, Mercantile repurchased approximately
222,000 shares for $6.3 million, or a
weighted average all-in cost per share of $28.25, during the first quarter of 2020; no
shares were repurchased during the second quarter of 2020.
Mercantile has elected to temporarily cease stock repurchases to
preserve capital for lending and other purposes while management
assesses the potential impacts of the COVID-19 pandemic.
Management has the ability to reinstate the buyback program as
circumstances warrant.
Mr. Kaminski concluded, "We believe our COVID-19 pandemic
response plan has effectively protected our employees and
customers, while allowing us to continue to meet our clients'
banking needs. The response plan remains fluid and will be
updated as necessary to reflect new information and guidance
provided by government agencies and health officials. As
announced earlier today, we continued our cash dividend program and
provided shareholders a cash return on their investment. We
are pleased that our strong financial position enabled us to
continue the program during the ongoing unique and challenging
environment."
Investor Presentation
Mercantile has prepared presentation materials (the "Investor
Presentation") that management intends to use during its previously
announced second quarter 2020 conference call on Tuesday, July 21, 2020, at 10:00 Eastern Time, and from time to time
thereafter in presentations about the Company's operations and
performance. The Investor Presentation also contains more
detailed information relating to Mercantile's COVID-19 pandemic
response plan. These materials have been furnished to the
U.S. Securities and Exchange Commission concurrently with this
press release, and are also available on Mercantile's website at
www.mercbank.com.
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 $4.3 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 may
constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Any such
comments 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, including the significant disruption to financial market
and other economic activity caused by the outbreak of COVID-19; 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 &
CEO
|
Executive Vice
President & CFO
|
616-726-1502
|
616-726-1202
|
rkaminski@mercbank.com
|
cchristmas@mercbank.com
|
Mercantile Bank
Corporation
|
|
|
|
|
|
|
Second Quarter 2020
Results
|
|
|
|
|
|
|
MERCANTILE BANK
CORPORATION
|
CONSOLIDATED BALANCE
SHEETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
JUNE 30,
|
|
DECEMBER
31,
|
|
JUNE 30,
|
|
|
2020
|
|
2019
|
|
2019
|
ASSETS
|
|
|
|
|
|
|
Cash and
due from banks
|
$
|
84,516,000
|
$
|
53,262,000
|
$
|
57,675,000
|
Interest-earning deposits
|
|
386,711,000
|
|
180,469,000
|
|
92,750,000
|
Total cash and cash
equivalents
|
|
471,227,000
|
|
233,731,000
|
|
150,425,000
|
|
|
|
|
|
|
|
Securities available for sale
|
|
307,661,000
|
|
334,655,000
|
|
347,924,000
|
Federal
Home Loan Bank stock
|
|
18,002,000
|
|
18,002,000
|
|
18,002,000
|
|
|
|
|
|
|
|
Loans
|
|
3,333,056,000
|
|
2,856,667,000
|
|
2,881,493,000
|
Allowance for loan losses
|
|
(32,246,000)
|
|
(23,889,000)
|
|
(24,053,000)
|
Loans, net
|
|
3,300,810,000
|
|
2,832,778,000
|
|
2,857,440,000
|
|
|
|
|
|
|
|
Premises
and equipment, net
|
|
59,155,000
|
|
57,327,000
|
|
51,823,000
|
Bank
owned life insurance
|
|
70,900,000
|
|
70,297,000
|
|
67,678,000
|
Goodwill
|
|
49,473,000
|
|
49,473,000
|
|
49,473,000
|
Core
deposit intangible, net
|
|
3,072,000
|
|
3,840,000
|
|
4,634,000
|
Other
assets
|
|
34,079,000
|
|
32,812,000
|
|
28,740,000
|
|
|
|
|
|
|
|
Total
assets
|
$
|
4,314,379,000
|
$
|
3,632,915,000
|
$
|
3,576,139,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
Deposits:
|
|
|
|
|
|
|
Noninterest-bearing
|
$
|
1,445,620,000
|
$
|
924,916,000
|
$
|
918,581,000
|
Interest-bearing
|
|
1,816,660,000
|
|
1,765,468,000
|
|
1,700,628,000
|
Total deposits
|
|
3,262,280,000
|
|
2,690,384,000
|
|
2,619,209,000
|
|
|
|
|
|
|
|
Securities sold under agreements to repurchase
|
|
167,527,000
|
|
102,675,000
|
|
119,669,000
|
Federal
Home Loan Bank advances
|
|
394,000,000
|
|
354,000,000
|
|
374,000,000
|
Subordinated debentures
|
|
47,222,000
|
|
46,881,000
|
|
46,540,000
|
Accrued
interest and other liabilities
|
|
18,129,000
|
|
22,414,000
|
|
16,604,000
|
Total liabilities
|
|
3,889,158,000
|
|
3,216,354,000
|
|
3,176,022,000
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Common
stock
|
|
300,897,000
|
|
305,035,000
|
|
306,669,000
|
Retained
earnings
|
|
118,239,000
|
|
107,831,000
|
|
90,618,000
|
Accumulated other comprehensive income/(loss)
|
|
6,085,000
|
|
3,695,000
|
|
2,830,000
|
Total shareholders'
equity
|
|
425,221,000
|
|
416,561,000
|
|
400,117,000
|
|
|
|
|
|
|
|
Total liabilities and
shareholders' equity
|
$
|
4,314,379,000
|
$
|
3,632,915,000
|
$
|
3,576,139,000
|
Mercantile Bank
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCANTILE BANK
CORPORATION
|
CONSOLIDATED REPORTS
OF INCOME
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THREE MONTHS
ENDED
|
|
THREE MONTHS
ENDED
|
SIX MONTHS
ENDED
|
SIX MONTHS
ENDED
|
|
June 30,
2020
|
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
INTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans,
including fees
|
$
|
34,322,000
|
|
|
$
|
36,765,000
|
|
$
|
67,764,000
|
|
$
|
72,555,000
|
|
Investment securities
|
|
2,749,000
|
|
|
|
2,485,000
|
|
|
6,766,000
|
|
|
4,926,000
|
|
Other
interest-earning assets
|
|
93,000
|
|
|
|
569,000
|
|
|
568,000
|
|
|
976,000
|
|
Total interest
income
|
|
37,164,000
|
|
|
|
39,819,000
|
|
|
75,098,000
|
|
|
78,457,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits
|
|
3,700,000
|
|
|
|
5,529,000
|
|
|
8,342,000
|
|
|
10,334,000
|
|
Short-term borrowings
|
|
55,000
|
|
|
|
68,000
|
|
|
94,000
|
|
|
173,000
|
|
Federal
Home Loan Bank advances
|
|
2,214,000
|
|
|
|
2,261,000
|
|
|
4,427,000
|
|
|
4,494,000
|
|
Other
borrowed money
|
|
624,000
|
|
|
|
845,000
|
|
|
1,348,000
|
|
|
1,695,000
|
|
Total interest
expense
|
|
6,593,000
|
|
|
|
8,703,000
|
|
|
14,211,000
|
|
|
16,696,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
income
|
|
30,571,000
|
|
|
|
31,116,000
|
|
|
60,887,000
|
|
|
61,761,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for loan
losses
|
|
7,600,000
|
|
|
|
900,000
|
|
|
8,350,000
|
|
|
1,750,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income
after
|
|
|
|
|
|
|
|
|
|
|
|
|
|
provision for loan losses
|
|
22,971,000
|
|
|
|
30,216,000
|
|
|
52,537,000
|
|
|
60,011,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
charges on accounts
|
|
1,045,000
|
|
|
|
1,143,000
|
|
|
2,267,000
|
|
|
2,220,000
|
|
Mortgage
banking income
|
|
7,640,000
|
|
|
|
1,345,000
|
|
|
10,267,000
|
|
|
2,402,000
|
|
Credit
and debit card income
|
|
1,374,000
|
|
|
|
1,513,000
|
|
|
2,735,000
|
|
|
2,850,000
|
|
Payroll
services
|
|
370,000
|
|
|
|
355,000
|
|
|
947,000
|
|
|
860,000
|
|
Earnings
on bank owned life insurance
|
|
307,000
|
|
|
|
1,608,000
|
|
|
643,000
|
|
|
3,238,000
|
|
Other
income
|
|
248,000
|
|
|
|
370,000
|
|
|
675,000
|
|
|
1,397,000
|
|
Total noninterest
income
|
|
10,984,000
|
|
|
|
6,334,000
|
|
|
17,534,000
|
|
|
12,967,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONINTEREST
EXPENSE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries
and benefits
|
|
14,126,000
|
|
|
|
13,286,000
|
|
|
27,654,000
|
|
|
26,302,000
|
|
Occupancy
|
|
1,862,000
|
|
|
|
1,629,000
|
|
|
3,921,000
|
|
|
3,391,000
|
|
Furniture and equipment
|
|
851,000
|
|
|
|
621,000
|
|
|
1,629,000
|
|
|
1,257,000
|
|
Data
processing costs
|
|
2,633,000
|
|
|
|
2,295,000
|
|
|
5,117,000
|
|
|
4,511,000
|
|
Other
expense
|
|
3,744,000
|
|
|
|
4,256,000
|
|
|
7,835,000
|
|
|
8,456,000
|
|
Total noninterest
expense
|
|
23,216,000
|
|
|
|
22,087,000
|
|
|
46,156,000
|
|
|
43,917,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before
federal income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tax expense
|
|
10,739,000
|
|
|
|
14,463,000
|
|
|
23,915,000
|
|
|
29,061,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal income tax
expense
|
|
2,041,000
|
|
|
|
2,748,000
|
|
|
4,545,000
|
|
|
5,522,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income
|
$
|
8,698,000
|
|
|
$
|
11,715,000
|
|
$
|
19,370,000
|
|
$
|
23,539,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
|
$0.54
|
|
|
|
$0.71
|
|
|
$1.19
|
|
|
$1.43
|
|
Diluted
earnings per share
|
|
$0.54
|
|
|
|
$0.71
|
|
|
$1.19
|
|
|
$1.43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
basic shares outstanding
|
|
16,212,500
|
|
|
|
16,428,187
|
|
|
16,281,391
|
|
|
16,428,875
|
|
Average
diluted shares outstanding
|
|
16,213,264
|
|
|
|
16,434,714
|
|
|
16,282,341
|
|
|
16,434,941
|
|
Mercantile Bank
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter 2020
Results
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MERCANTILE BANK
CORPORATION
|
CONSOLIDATED
FINANCIAL HIGHLIGHTS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarterly
|
|
Year-To-Date
|
(dollars in
thousands except per share data)
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
|
|
|
|
|
2nd
Qtr
|
|
1st
Qtr
|
|
4th
Qtr
|
|
3rd
Qtr
|
|
2nd
Qtr
|
|
2020
|
|
2019
|
EARNINGS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
interest income
|
$
|
30,571
|
|
30,317
|
|
31,168
|
|
31,605
|
|
31,116
|
|
60,887
|
|
61,761
|
Provision for loan losses
|
$
|
7,600
|
|
750
|
|
(700)
|
|
700
|
|
900
|
|
8,350
|
|
1,750
|
Noninterest income
|
$
|
10,984
|
|
6,550
|
|
7,312
|
|
6,676
|
|
6,334
|
|
17,534
|
|
12,967
|
Noninterest expense
|
$
|
23,216
|
|
22,940
|
|
23,335
|
|
22,027
|
|
22,087
|
|
46,156
|
|
43,917
|
Net
income before federal income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
tax expense
|
$
|
10,739
|
|
13,177
|
|
15,845
|
|
15,554
|
|
14,463
|
|
23,915
|
|
29,061
|
Net
income
|
$
|
8,698
|
|
10,673
|
|
13,317
|
|
12,600
|
|
11,715
|
|
19,370
|
|
23,539
|
Basic
earnings per share
|
$
|
0.54
|
|
0.65
|
|
0.81
|
|
0.77
|
|
0.71
|
|
1.19
|
|
1.43
|
Diluted
earnings per share
|
$
|
0.54
|
|
0.65
|
|
0.81
|
|
0.77
|
|
0.71
|
|
1.19
|
|
1.43
|
Average
basic shares outstanding
|
|
16,212,500
|
|
16,350,281
|
|
16,373,458
|
|
16,390,203
|
|
16,428,187
|
|
16,281,391
|
|
16,428,875
|
Average
diluted shares outstanding
|
|
16,213,264
|
|
16,351,559
|
|
16,375,740
|
|
16,393,078
|
|
16,434,714
|
|
16,282,341
|
|
16,434,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PERFORMANCE
RATIOS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Return
on average assets
|
|
0.85%
|
|
1.19%
|
|
1.45%
|
|
1.38%
|
|
1.33%
|
|
1.01%
|
|
1.36%
|
Return
on average equity
|
|
8.26%
|
|
10.20%
|
|
12.87%
|
|
12.39%
|
|
12.08%
|
|
9.23%
|
|
12.41%
|
Net
interest margin (fully tax-equivalent)
|
|
3.17%
|
|
3.63%
|
|
3.63%
|
|
3.71%
|
|
3.79%
|
|
3.38%
|
|
3.83%
|
Efficiency ratio
|
|
55.87%
|
|
62.22%
|
|
60.64%
|
|
57.54%
|
|
58.98%
|
|
58.86%
|
|
58.77%
|
Full-time equivalent employees
|
|
637
|
|
626
|
|
619
|
|
624
|
|
652
|
|
637
|
|
652
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
YIELD ON ASSETS /
COST OF FUNDS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Yield on
loans
|
|
4.18%
|
|
4.69%
|
|
5.01%
|
|
5.06%
|
|
5.18%
|
|
4.42%
|
|
5.19%
|
Yield on
securities
|
|
3.37%
|
|
4.73%
|
|
2.90%
|
|
2.99%
|
|
2.85%
|
|
4.06%
|
|
2.83%
|
Yield on
other interest-earning assets
|
|
0.15%
|
|
1.22%
|
|
1.65%
|
|
2.15%
|
|
2.38%
|
|
0.55%
|
|
2.42%
|
Yield on
total earning assets
|
|
3.85%
|
|
4.54%
|
|
4.61%
|
|
4.73%
|
|
4.85%
|
|
4.17%
|
|
4.87%
|
Yield on
total assets
|
|
3.62%
|
|
4.23%
|
|
4.31%
|
|
4.42%
|
|
4.53%
|
|
3.91%
|
|
4.55%
|
Cost of
deposits
|
|
0.48%
|
|
0.70%
|
|
0.79%
|
|
0.83%
|
|
0.85%
|
|
0.58%
|
|
0.82%
|
Cost of
borrowed funds
|
|
1.91%
|
|
2.31%
|
|
2.36%
|
|
2.35%
|
|
2.40%
|
|
2.09%
|
|
2.41%
|
Cost of
interest-bearing liabilities
|
|
1.11%
|
|
1.36%
|
|
1.47%
|
|
1.52%
|
|
1.55%
|
|
1.23%
|
|
1.51%
|
Cost of
funds (total earning assets)
|
|
0.68%
|
|
0.91%
|
|
0.98%
|
|
1.02%
|
|
1.06%
|
|
0.79%
|
|
1.04%
|
Cost of
funds (total assets)
|
|
0.64%
|
|
0.85%
|
|
0.91%
|
|
0.95%
|
|
0.99%
|
|
0.74%
|
|
0.97%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PURCHASE
ACCOUNTING ADJUSTMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan
portfolio - increase interest income
|
$
|
169
|
|
285
|
|
316
|
|
327
|
|
569
|
|
454
|
|
780
|
Trust
preferred - increase interest expense
|
$
|
171
|
|
171
|
|
171
|
|
171
|
|
171
|
|
342
|
|
342
|
Core
deposit intangible - increase overhead
|
$
|
371
|
|
397
|
|
397
|
|
397
|
|
450
|
|
768
|
|
927
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MORTGAGE BANKING
ACTIVITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
mortgage loans originated
|
$
|
275,486
|
|
132,859
|
|
110,611
|
|
132,852
|
|
80,205
|
|
408,345
|
|
125,137
|
Purchase
mortgage loans originated
|
$
|
58,015
|
|
46,538
|
|
49,407
|
|
61,839
|
|
41,986
|
|
104,553
|
|
71,877
|
Refinance mortgage loans originated
|
$
|
217,471
|
|
86,321
|
|
61,204
|
|
71,013
|
|
38,219
|
|
303,792
|
|
53,260
|
Total
saleable mortgage loans
|
$
|
225,665
|
|
95,327
|
|
81,590
|
|
104,890
|
|
49,396
|
|
320,992
|
|
70,898
|
Income
on sale of mortgage loans
|
$
|
7,760
|
|
2,086
|
|
3,062
|
|
2,886
|
|
1,419
|
|
9,846
|
|
2,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CAPITAL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tangible
equity to tangible assets
|
|
8.74%
|
|
10.14%
|
|
10.15%
|
|
9.67%
|
|
9.82%
|
|
8.74%
|
|
9.82%
|
Tier 1
leverage capital ratio
|
|
10.21%
|
|
11.47%
|
|
11.28%
|
|
11.08%
|
|
11.17%
|
|
10.21%
|
|
11.17%
|
Common
equity risk-based capital ratio
|
|
11.34%
|
|
10.92%
|
|
11.00%
|
|
10.53%
|
|
10.47%
|
|
11.34%
|
|
10.47%
|
Tier 1
risk-based capital ratio
|
|
12.74%
|
|
12.28%
|
|
12.36%
|
|
11.87%
|
|
11.82%
|
|
12.74%
|
|
11.82%
|
Total
risk-based capital ratio
|
|
13.73%
|
|
13.03%
|
|
13.09%
|
|
12.60%
|
|
12.55%
|
|
13.73%
|
|
12.55%
|
Tier 1
capital
|
$
|
412,526
|
|
406,445
|
|
405,148
|
|
395,010
|
|
388,788
|
|
412,526
|
|
388,788
|
Tier 1
plus tier 2 capital
|
$
|
444,772
|
|
431,273
|
|
429,038
|
|
419,424
|
|
412,841
|
|
444,772
|
|
412,841
|
Total
risk-weighted assets
|
$
|
3,238,444
|
|
3,309,336
|
|
3,276,754
|
|
3,327,723
|
|
3,289,958
|
|
3,238,444
|
|
3,289,958
|
Book
value per common share
|
$
|
26.20
|
|
25.82
|
|
25.36
|
|
24.93
|
|
24.34
|
|
26.20
|
|
24.34
|
Tangible
book value per common share
|
$
|
22.96
|
|
22.55
|
|
22.12
|
|
21.64
|
|
21.05
|
|
22.96
|
|
21.05
|
Cash
dividend per common share
|
$
|
0.28
|
|
0.28
|
|
0.27
|
|
0.27
|
|
0.26
|
|
0.56
|
|
0.52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSET
QUALITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
loan charge-offs
|
$
|
335
|
|
40
|
|
112
|
|
519
|
|
78
|
|
375
|
|
252
|
Recoveries
|
$
|
153
|
|
229
|
|
287
|
|
180
|
|
96
|
|
382
|
|
175
|
Net loan
charge-offs (recoveries)
|
$
|
182
|
|
(189)
|
|
(175)
|
|
339
|
|
(18)
|
|
(7)
|
|
77
|
Net loan
charge-offs to average loans
|
|
0.02%
|
|
(0.03%)
|
|
(0.02%)
|
|
0.05%
|
|
(0.01%)
|
|
<
(0.01%)
|
|
0.01%
|
Allowance for loan losses
|
$
|
32,246
|
|
24,828
|
|
23,889
|
|
24,414
|
|
24,053
|
|
32,246
|
|
24,053
|
Allowance to loans
|
|
0.97%
|
|
0.86%
|
|
0.89%
|
|
0.88%
|
|
0.89%
|
|
0.97%
|
|
0.89%
|
Allowance to loans excluding PPP loans
|
|
1.16%
|
|
0.86%
|
|
0.89%
|
|
0.88%
|
|
0.89%
|
|
1.16%
|
|
0.89%
|
Nonperforming loans
|
$
|
3,212
|
|
3,469
|
|
2,284
|
|
2,644
|
|
3,505
|
|
3,212
|
|
3,505
|
Other
real estate/repossessed assets
|
$
|
198
|
|
271
|
|
452
|
|
243
|
|
446
|
|
198
|
|
446
|
Nonperforming loans to total loans
|
|
0.10%
|
|
0.12%
|
|
0.08%
|
|
0.09%
|
|
0.12%
|
|
0.10%
|
|
0.12%
|
Nonperforming assets to total assets
|
|
0.08%
|
|
0.10%
|
|
0.08%
|
|
0.08%
|
|
0.11%
|
|
0.08%
|
|
0.11%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONPERFORMING
ASSETS - COMPOSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
development
|
$
|
36
|
|
37
|
|
34
|
|
32
|
|
33
|
|
36
|
|
33
|
Construction
|
$
|
198
|
|
283
|
|
0
|
|
0
|
|
0
|
|
198
|
|
0
|
Owner occupied /
rental
|
$
|
2,750
|
|
2,922
|
|
2,364
|
|
2,576
|
|
3,225
|
|
2,750
|
|
3,225
|
Commercial real estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land
development
|
$
|
0
|
|
43
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Construction
|
$
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
|
0
|
Owner
occupied
|
$
|
275
|
|
287
|
|
326
|
|
240
|
|
642
|
|
275
|
|
642
|
Non-owner
occupied
|
$
|
25
|
|
0
|
|
0
|
|
26
|
|
26
|
|
25
|
|
26
|
Non-real
estate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial
assets
|
$
|
98
|
|
156
|
|
0
|
|
0
|
|
2
|
|
98
|
|
2
|
Consumer
assets
|
$
|
28
|
|
12
|
|
12
|
|
13
|
|
23
|
|
28
|
|
23
|
Total
nonperforming assets
|
|
3,410
|
|
3,740
|
|
2,736
|
|
2,887
|
|
3,951
|
|
3,410
|
|
3,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NONPERFORMING
ASSETS - RECON
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning balance
|
$
|
3,740
|
|
2,736
|
|
2,887
|
|
3,951
|
|
4,534
|
|
2,736
|
|
4,952
|
Additions - originated loans/former branch
|
$
|
220
|
|
1,344
|
|
30
|
|
339
|
|
26
|
|
1,564
|
|
565
|
Other
activity
|
$
|
0
|
|
(31)
|
|
135
|
|
57
|
|
34
|
|
(31)
|
|
34
|
Return
to performing status
|
$
|
(26)
|
|
(7)
|
|
0
|
|
(126)
|
|
0
|
|
(33)
|
|
0
|
Principal payments
|
$
|
(278)
|
|
(110)
|
|
(232)
|
|
(1,014)
|
|
(512)
|
|
(388)
|
|
(894)
|
Sale
proceeds
|
$
|
(49)
|
|
(192)
|
|
(36)
|
|
(253)
|
|
(74)
|
|
(241)
|
|
(503)
|
Loan
charge-offs
|
$
|
(173)
|
|
0
|
|
(48)
|
|
(59)
|
|
(36)
|
|
(173)
|
|
(182)
|
Valuation write-downs
|
$
|
(24)
|
|
0
|
|
0
|
|
(8)
|
|
(21)
|
|
(24)
|
|
(21)
|
Ending
balance
|
$
|
3,410
|
|
3,740
|
|
2,736
|
|
2,887
|
|
3,951
|
|
3,410
|
|
3,951
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOAN PORTFOLIO
COMPOSITION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commercial &
industrial
|
$
|
1,307,456
|
|
873,679
|
|
846,551
|
|
882,747
|
|
881,196
|
|
1,307,456
|
|
881,196
|
Land development &
construction
|
$
|
52,984
|
|
62,908
|
|
56,118
|
|
48,418
|
|
45,158
|
|
52,984
|
|
45,158
|
Owner occupied comm'l
R/E
|
$
|
567,621
|
|
579,229
|
|
579,004
|
|
567,267
|
|
556,868
|
|
567,621
|
|
556,868
|
Non-owner occupied
comm'l R/E
|
$
|
841,145
|
|
823,366
|
|
835,345
|
|
883,079
|
|
852,844
|
|
841,145
|
|
852,844
|
Multi-family &
residential rental
|
$
|
132,047
|
|
133,148
|
|
124,526
|
|
126,855
|
|
128,489
|
|
132,047
|
|
128,489
|
Total commercial
|
$
|
2,901,253
|
|
2,472,330
|
|
2,441,544
|
|
2,508,366
|
|
2,464,555
|
|
2,901,253
|
|
2,464,555
|
Retail:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-4 family
mortgages
|
$
|
367,060
|
|
356,338
|
|
339,749
|
|
346,095
|
|
335,618
|
|
367,060
|
|
335,618
|
Home equity &
other consumer
|
$
|
64,743
|
|
72,875
|
|
75,374
|
|
78,552
|
|
81,320
|
|
64,743
|
|
81,320
|
Total retail
|
$
|
431,803
|
|
429,213
|
|
415,123
|
|
424,647
|
|
416,938
|
|
431,803
|
|
416,938
|
Total loans
|
$
|
3,333,056
|
|
2,901,543
|
|
2,856,667
|
|
2,933,013
|
|
2,881,493
|
|
3,333,056
|
|
2,881,493
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
END OF PERIOD
BALANCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
3,333,056
|
|
2,901,543
|
|
2,856,667
|
|
2,933,013
|
|
2,881,493
|
|
3,333,056
|
|
2,881,493
|
Securities
|
$
|
325,663
|
|
330,149
|
|
352,657
|
|
363,535
|
|
365,926
|
|
325,663
|
|
365,926
|
Other
interest-earning assets
|
$
|
386,711
|
|
186,938
|
|
180,469
|
|
144,263
|
|
92,750
|
|
386,711
|
|
92,750
|
Total
earning assets (before allowance)
|
$
|
4,045,430
|
|
3,418,630
|
|
3,389,793
|
|
3,440,811
|
|
3,340,169
|
|
4,045,430
|
|
3,340,169
|
Total
assets
|
$
|
4,314,379
|
|
3,657,387
|
|
3,632,915
|
|
3,710,380
|
|
3,576,139
|
|
4,314,379
|
|
3,576,139
|
Noninterest-bearing deposits
|
$
|
1,445,620
|
|
956,290
|
|
924,916
|
|
967,189
|
|
918,581
|
|
1,445,620
|
|
918,581
|
Interest-bearing deposits
|
$
|
1,816,660
|
|
1,689,126
|
|
1,765,468
|
|
1,799,902
|
|
1,700,628
|
|
1,816,660
|
|
1,700,628
|
Total
deposits
|
$
|
3,262,280
|
|
2,645,416
|
|
2,690,384
|
|
2,767,091
|
|
2,619,209
|
|
3,262,280
|
|
2,619,209
|
Total
borrowed funds
|
$
|
611,298
|
|
576,996
|
|
506,301
|
|
517,523
|
|
543,098
|
|
611,298
|
|
543,098
|
Total
interest-bearing liabilities
|
$
|
2,427,958
|
|
2,266,122
|
|
2,271,769
|
|
2,317,425
|
|
2,243,726
|
|
2,427,958
|
|
2,243,726
|
Shareholders' equity
|
$
|
425,221
|
|
418,389
|
|
416,561
|
|
407,200
|
|
400,117
|
|
425,221
|
|
400,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AVERAGE
BALANCES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
$
|
3,294,883
|
|
2,861,047
|
|
2,871,674
|
|
2,903,161
|
|
2,848,343
|
|
3,077,965
|
|
2,818,055
|
Securities
|
$
|
333,843
|
|
344,906
|
|
362,347
|
|
363,394
|
|
357,718
|
|
339,374
|
|
356,098
|
Other
interest-earning assets
|
$
|
251,833
|
|
153,638
|
|
176,034
|
|
118,314
|
|
94,616
|
|
202,735
|
|
81,339
|
Total
earning assets (before allowance)
|
$
|
3,880,559
|
|
3,359,591
|
|
3,410,055
|
|
3,384,869
|
|
3,300,677
|
|
3,620,074
|
|
3,255,492
|
Total
assets
|
$
|
4,119,573
|
|
3,602,784
|
|
3,650,087
|
|
3,622,168
|
|
3,529,598
|
|
3,861,179
|
|
3,485,929
|
Noninterest-bearing deposits
|
$
|
1,304,986
|
|
923,827
|
|
948,602
|
|
930,851
|
|
875,645
|
|
1,114,406
|
|
864,011
|
Interest-bearing deposits
|
$
|
1,767,985
|
|
1,724,030
|
|
1,759,377
|
|
1,741,563
|
|
1,719,433
|
|
1,746,008
|
|
1,694,138
|
Total
deposits
|
$
|
3,072,971
|
|
2,647,857
|
|
2,707,979
|
|
2,672,414
|
|
2,595,078
|
|
2,860,414
|
|
2,558,149
|
Total
borrowed funds
|
$
|
607,074
|
|
517,961
|
|
509,932
|
|
529,590
|
|
530,802
|
|
562,518
|
|
531,827
|
Total
interest-bearing liabilities
|
$
|
2,375,059
|
|
2,241,991
|
|
2,269,309
|
|
2,271,153
|
|
2,250,235
|
|
2,308,526
|
|
2,225,965
|
Shareholders' equity
|
$
|
422,230
|
|
419,612
|
|
410,593
|
|
403,350
|
|
389,133
|
|
420,921
|
|
382,654
|
View original
content:http://www.prnewswire.com/news-releases/mercantile-bank-corporation-reports-second-quarter-2020-results-301096644.html
SOURCE Mercantile Bank Corporation