Mercantile Reports Net Loss

July 17, 2008
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GRANDRAPIDS — Mercantile Bank Corp. posted a second quarter 2008 net loss of $2.6 million, or 31 cents per diluted share, compared with net income of $2.2 million, or 26 cents per share, for the second quarter of 2007.

The company indicated that its 2008 profit performance continues to be affected by net interest margin compression resulting from the decline in interest rates that began late in the third quarter of last year.

Chairman and CEO Michael Price said the company is disappointed with its second quarter financial results but said there is no fast or easy solution to the current ills of the Michigan economy and its real estate markets. He said the financial condition of some of Mercantile’s borrowers has become increasingly strained as real estate remains unsold and liquid sources of debt repayment are exhausted.

“We continue to proactively address weaknesses within our loan portfolio, with approximately 40 percent of our nonperforming loans contractually current on payments,” Price said. “Although our nonperforming assets increased $6 million during the second quarter, loans 30 to 89 days past delinquency are now at their lowest level in several years and the total balance of our internal watch list has remained relatively unchanged over the past several months, which are positive signs that we may be nearing the peak in asset quality challenges.”

The provision for loan and lease losses was $15.3 million during the first six months, including 6.2 million expensed in the last quarter. That compares with a $3.4 million provision expensed during the first six months of 2007, of which $2.4 million was recognized in the second quarter. According to Mercantile, the larger 2008 provision reflects a higher level of net loan and lease charge-offs and loan and lease growth during 2008.

Second quarter total revenue — net interest income plus non-interest income — was $12.4 million, a 19.6 percent decrease from the prior year’s second quarter.    

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