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Mercantile's Net Income Plummets
GRAND RAPIDS — Mercantile Bank Corp. reported a 55 percent decline in net income, from $19.8 million, or $2.33 per diluted share, in the prior year to $9 million, or $1.06 per diluted share, at year end 2007.
Mercantile’s net income for the fourth quarter was $0.1 million, representing a steep 98.1 percent decline in income from the $4.6 million reported for the fourth quarter of 2006. Diluted earnings per share for the quarter were $0.1, compared with 54 cents for the year-ago period, reflecting a decrease if 98.1 percent. Total revenue for 2007 was $61.4 million, down 8.1 percent from the $66.8 million reported for 2006.
According to the company, earnings continue to reflect an elevated level of nonperforming assets and lower net interest margin relative to 2006 and the prior-year fourth quarter. The provision for loan and lease losses was $11.1 million for 2007, up $5.3 million from the $5.8 million reported for 2006, due primarily to the continuing deterioration in the local real estate market and further downgrades in Mercantile’s loan portfolio.
Chairman and CEO Michael Price said that during the fourth quarter Mercantile devoted substantial time and effort to reviewing its loan portfolio for signs of weakness so it could identify and downgrade relationships that had significant potential to become problems. During the process the company downgraded any credit where it detected signs of current or likely future significant weakness, Price said. Nonperforming loans totaled $29.8 million at year end, of which $13.1 million was contractually current, he noted.
“As an asset-sensitive bank, with a higher level of earning assets subject to re-pricing faster than our deposits in the near term, we continue to experience compression of our net interest margin in this current declining interest rate environment,” Price said.
Total assets were $2.12 billion at Dec. 31, 2007, an increase of 2.6 percent over the $2.07 billion reported for the prior year end. Year over year, total loans grew $54.4 million, or 3.1 percent, reaching $1.8 billion at Dec. 31. More than 70 percent of Mercantile’s loan portfolio is supported by real estate. Deposits totaled $1.6 billion at Dec. 31, marking a 3.4 percent decline compared with year end 2006.
Despite the bad news, Mercantile’s board of directors declared a first quarter cash dividend of 15 cents per share on the company’s common stock, payable March 10 to shareholders of record as of the close of business on Feb. 8.