Banking & Finance

Mercantile Bank reports 'strong' 4Q and year-end earnings

January 15, 2013
| By Pete Daly |
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Mercantile Bank Corp. (Nasdaq: MBWM) in Grand Rapids announced its year-end results, showing $18.2 million in income for FY2012 on a pre-tax basis, compared to $10.1 million last year.

When looked at on an after-tax basis, the results look different, due to a net deferred tax asset valuation allowance last year that resulted in a federal income tax benefit of $27.4 million in the fourth quarter. That pushed the net income attributable to common shares in 2011 to $36.1 million, or $4.07 per diluted share. For 2012, the net income per share totaled $1.30, after taxes.

In addition to pre-tax earnings performance, 2012 was marked by improved asset quality at Mercantile.

“2012 marked the 15th anniversary of Mercantile Bank, and we are very pleased to recognize this milestone during a year filled with many successes and accomplishments,” said Michael Price, chairman and CEO. “Throughout the year, we remained focused on improving asset quality, increasing core profitability, protecting our net interest margin and further strengthening our balance sheet. Because of our success in all these areas, we exited the TARP program by repurchasing our preferred stock and common stock warrant entirely with internally-generated funds, and reinstated our quarterly cash dividend. As a result of our strengthened position, we feel very confident about the opportunities available to us in the coming year.”

The company outlined other good news from 2012, including:

  • Nonperforming assets declined 57 percent from a year ago; currently less than 2 percent of total assets.
  • Level of loans in the 30- to 89-days delinquent category were virtually zero throughout 2012.
  • New loan originations of approximately $64 million during the fourth quarter and $176 million during the full year.
  • Net interest margin remained relatively steady and well above historical average level.
  • Regulatory capital ratios remained significantly above minimum requirements for “well-capitalized” institutions.

As of Dec. 31, total assets at Mercantile were $1.42 billion, down $10.3 million from a year ago. Total loans decreased $31.2 million, or 2.9 percent, to $1.04 billion.

The bank said that while its efforts continue to reduce certain segments of its commercial real estate portfolio continue, total loans increased $5.9 million during the fourth quarter of 2012.

Real estate loans comprise a majority of Mercantile’s loan portfolio. On Dec. 31, real estate loans, excluding residential mortgage loans representing permanent financing of owner-occupied dwellings and home equity lines of credit, were $677 million or approximately 65 percent of total loans. That was a decline of $45.9 million, or 6.3 percent, from $723 million, or 67.4 percent of total loans a year prior.

Non-owner-occupied commercial real estate loans totaled $354 million as of Dec. 31, or 34 percent of total loans, a decline of $22.7 million over the past 12 months. Owner-occupied CRE loans were $262 million at the end of 2012, a decrease of $6.4 million from a year ago.

The commercial and industrial segment of the loan portfolio was $285 million on Dec. 31, an increase of approximately $18 million over the year. The average balance of commercial lines of credit has remained relatively stable since early 2011.

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