Mercantiles Earnings Decline

July 11, 2007
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GRAND RAPIDS — Mercantile Bank Corp. reported second quarter earnings of $2.2 million, or 26 cents per diluted share, down 56.5 percent from the $5.1 million, or 60 cents per diluted share, reported for the second quarter of 2006.

For the first six months of this year, Mercantile reported net income of $6.5 million, or 77 cents per diluted share, a decrease of 35.2 percent and 34.7 percent, respectively, from the $10 million, or $1.18 per share reported in the year-ago quarter.

The company attributed the decline in earnings to an increase in non-performing assets, which nearly doubled in the just-passed quarter and negatively impacted all major areas of the bank's performance. Earnings also dipped as a result of a one-time expense associated with the retirement of Mercantile's former Chairman and CEO Gerald Johnson Jr.

"We are currently in the midst of a difficult economic period in Michigan, which has depressed our real estate market to levels beyond our expectations," said Michael Price, Mercantile's new chairman and CEO. "This has affected not only asset quality, but also loan growth. We believe we are taking every step possible to identify problem loans and proactively address the issues involved. We believe we are approaching a peak in non-performing assets and should see improvement going forward."

Price said the bank has been "extremely diligent" in reviewing its loan portfolio. He said the majority of the recent increase in non-performing loans can be attributed to two loans totaling $8 million that Mercantile placed on non-accrual status this quarter.

"Over 90 percent of non-performing loans are collateralized by real estate; although resolution of real estate loans is a lengthy process, we believe we are adequately reserved as present market conditions stand," Price added.

Price noted that loan originations have picked up.

Total assets were $2.10 billion at June 30, an increase of $134 million, or 6.8 percent from June 30, 2006

The Mercantile Bank Corp. board of directors declared a third quarter cash dividend of 14 cents per share on the company's common stock, which is payable on Sept. 10 to shareholders of record as of the close of business on Aug. 10.    

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