Mercantile Bank Corporation Announces Strong Fourth Quarter and Full Year 2020 Results

GRAND RAPIDS, Mich., Jan. 19, 2021 /PRNewswire/ -- Mercantile Bank Corporation MBWM ("Mercantile") reported net income of $14.1 million, or $0.87 per diluted share, for the fourth quarter of 2020, compared with net income of $13.3 million, or $0.81 per diluted share, for the respective prior-year period.  For the full year 2020, Mercantile reported net income of $44.1 million, or $2.71 per diluted share, compared with net income of $49.5 million, or $3.01 per diluted share, for the full year 2019.

"We are very pleased to report another year of strong financial performance, especially when considering the unprecedented operating environment posed by the ongoing COVID-19 pandemic," said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile.  "The strategic initiatives we implemented to address the challenges stemming from the pandemic have proven to be effective, and we continue to monitor economic conditions to ensure potential future risks are appropriately managed.  The remarkable efforts of the entire Mercantile team enabled us to continue to effectively assist and support our clients with their banking needs during this period of uncertainty."

Full year highlights include:

  • Solid capital position
  • Continued strong asset quality metrics
  • Paycheck Protection Program loan fundings of approximately $555 million
  • Sustained strength in commercial loan and residential mortgage loan pipelines
  • Significant increase in mortgage banking income and growth in certain other key fee income categories
  • Robust local deposit growth
  • Controlled overhead costs
  • Opened new mortgage lending centers in Midland, Michigan and Cincinnati, Ohio
  • Announced first quarter 2021 regular cash dividend of $0.29 per common share, an increase of 3.6 percent from the regular cash dividend paid during the fourth quarter of 2020

Write-downs of former branch facilities decreased net income during the fourth quarter of 2020 by approximately $1.1 million, or $0.06 per diluted share, and net gains and losses on sales and write-downs of former branch facilities decreased net income during the fourth quarter of 2019 by approximately $0.3 million, or $0.02 per diluted share.  Excluding the impacts of these transactions, diluted earnings per share increased $0.10, or 12.0 percent, during the fourth quarter of 2020 compared to the respective 2019 period.

A combination of a gain on sale and write-downs of former branch facilities decreased net income during 2020 by approximately $1.1 million, or $0.07 per diluted share.  Bank owned life insurance claims and the net impact of gains and losses on sales and write-downs of former branch facilities increased net income during 2019 by approximately $2.7 million, or $0.16 per diluted share.  Excluding the impacts of these transactions, diluted earnings per share decreased $0.07, or 2.5 percent, during 2020 compared to 2019.

Operating Results

Total revenue, which consists of net interest income and noninterest income, was $46.2 million during the fourth quarter of 2020, up $7.7 million, or 20.0 percent, from the prior-year fourth quarter.  Net interest income during the fourth quarter of 2020 was $31.8 million, up $0.7 million, or 2.2 percent, from the fourth quarter of 2019, reflecting the positive impact of earning asset growth, which more than offset a decreased net interest margin.  Noninterest income totaled $14.3 million during the fourth quarter of 2020, up $7.0 million from the respective 2019 period, mainly due to increased mortgage banking income.  Total revenue was $167 million during the full year 2020, up $15.9 million, or 10.5 percent, from 2019.  Net interest income was $122 million in 2020, down $2.3 million, or 1.8 percent, from the prior year, depicting a reduced net interest margin, which more than offset the positive impact of earning asset growth.  Noninterest income totaled $45.2 million during 2020, up $18.2 million from 2019, mainly due to a higher level of mortgage banking income.

The net interest margin was 3.00 percent in the fourth quarter of 2020, compared to 3.63 percent in the fourth quarter of 2019.  The yield on average earning assets was 3.55 percent during the fourth quarter of 2020, down from 4.61 percent during the prior-year fourth quarter, mainly due to a decreased yield on commercial loans, which equaled 4.41 percent in the current-year fourth quarter compared to 5.12 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 a total of 175 basis points during the fourth quarter of 2019 and first three months of 2020.  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 negatively impacted the yield on average earning assets during the fourth quarter of 2020.  The excess funds are mainly a product of federal government stimulus programs as well as lower business and consumer investing and spending.  Lower yields on interest-earning deposits and securities, reflecting the decreasing interest rate environment, also contributed to the reduced yield on average earning assets.

The cost of funds declined from 0.98 percent during the fourth quarter of 2019 to 0.55 percent during the current-year fourth quarter, primarily due to lower rates paid on local 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.

The net interest margin was 3.15 percent in 2020, compared to 3.75 percent in 2019.  The yield on average earning assets was 3.82 percent during 2020, down from 4.77 percent during 2019, primarily due to a decreased yield on commercial loans, which equaled 4.35 percent in 2020 compared to 5.21 percent in 2019.  The decreased yield on commercial loans mainly reflected reduced interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee significantly lowering the targeted federal funds rate by a total of 225 basis points during the last six months of 2019 and the first three months of 2020.  A substantial volume of excess on-balance sheet liquidity consisting of low-yielding deposits with the Federal Reserve Bank of Chicago and a correspondent bank negatively impacted the yield on average earning assets during 2020.  The excess funds are primarily a product of federal government stimulus programs as well as lower business and consumer investing and spending.  A lower yield on interest-earning deposits, reflecting the decreasing interest rate environment, also contributed to the reduced yield on average earning assets.  Accelerated discount accretion on called U.S. Government agency bonds totaling $3.0 million was recorded as interest income during 2020.  The accelerated discount accretion positively impacted the net interest margin during 2020 by eight basis points.

The cost of funds equaled 0.67 percent during 2020, down from 1.02 percent during 2019, mainly due to reduced rates paid on local 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 $2.5 million during the fourth quarter of 2020, compared to negative $0.7 million during the fourth quarter of 2019.  During 2020 and 2019, Mercantile recorded provision expense of $14.1 million and $1.8 million, respectively.  Approximately 80 percent of the provision expense recorded during 2020 is reflective of increased allocations associated with qualitative factors, namely economic conditions, loan review and value of underlying collateral dependent commercial loans, as well as the creation of a COVID-19 pandemic environmental factor.  The COVID-19 pandemic environmental factor, developed during the second quarter, is designed 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 fourth quarter of 2020 was fully reflective of increased allocations associated with qualitative factors.  The provision expense recorded during 2020 also reflected the downgrading of certain non-impaired commercial loan relationships, most of which occurred during the third quarter.  The negative provision expense during the prior-year fourth quarter mainly reflected certain commercial loan paydowns and net loan recoveries being recorded during the period.  The provision expense recorded during 2019 primarily reflected ongoing net loan growth.

Noninterest income during the fourth quarter of 2020 was $14.3 million, compared to $7.3 million during the prior-year fourth quarter.  Noninterest income during the fourth quarter of 2019 included a $0.3 million gain on the sale of a former branch facility.  Excluding the aforementioned transaction, noninterest income increased $7.3 million, or approximately 103 percent, during the fourth quarter of 2020 compared to the respective 2019 period.  Noninterest income during 2020 was $45.2 million, compared to $27.0 million during 2019.  Noninterest income during 2019 included bank owned life insurance claims totaling $2.6 million and gains on the sales of former branch facilities totaling $0.8 million.  Excluding these transactions, noninterest income increased $21.7 million, or 92.1 percent, during 2020 compared to 2019.  The improved level of noninterest income in both 2020 periods primarily resulted from increased mortgage banking income stemming from a sizeable upturn in refinance activity spurred by a decrease in residential mortgage loan interest rates, an increase in purchase activity, and the continuing success of strategic initiatives that were implemented to gain market share. Fee income generated from an interest rate swap program that was implemented during the fourth quarter of 2020 and growth in credit and debit card income also contributed to the improved noninterest income during both 2020 periods.  The interest rate swap program provides certain commercial borrowers with a longer-term fixed-rate option and assists Mercantile in managing associated longer-term interest rate risk. In addition, increased payroll processing fees contributed to the higher level of noninterest income during the full year 2020 period.

Noninterest expense totaled $25.9 million during the fourth quarter of 2020, compared to $23.3 million during the fourth quarter of 2019.  Noninterest expense totaled $98.5 million during 2020, compared to $89.3 million during 2019.  Overhead costs during the fourth quarter of 2020 and full year 2020 included write-downs of former branch facilities totaling $1.4 million, while overhead costs during the prior-year fourth quarter and full year 2019 included a loss on the sale of a former branch facility of $0.5 million and a write-down of a former branch facility of $0.1 million.  Excluding these transactions, noninterest expense increased $1.8 million, or 8.1 percent, during the fourth quarter of 2020 compared to the respective 2019 period, and $8.5 million, or 9.6 percent, during 2020 compared to 2019.  The higher level of expense in both 2020 periods primarily resulted from increased compensation costs, mainly reflecting higher residential mortgage lender commissions and related incentives, annual employee merit pay increases, and an increased bonus accrual.  The higher level of commissions and associated incentives primarily depicted the significant increase in residential mortgage loan originations during the fourth quarter of 2020 and full year 2020, which were up nearly 98 percent and 135 percent compared to the respective 2019 periods.  Occupancy and equipment and furniture costs were up $1.7 million on a combined basis during 2020 compared to 2019, mainly reflecting increased depreciation expense associated with an expansion of Mercantile's main office that was completed during the latter part of 2019.  Federal Deposit Insurance Corporation insurance premiums increased $0.4 million in the fourth quarter of 2020 compared to the fourth quarter of 2019, and $0.9 million in 2020 compared to 2019, mainly as a result of deposit insurance assessment credits being applied against regular assessments during the last three quarters of 2019.

Mr. Kaminski commented, "The record-breaking level of mortgage banking income during 2020 reflects strong residential mortgage loan production and the ongoing success of our strategic initiatives that were designed to boost market share and increase revenue.  We remain focused on positioning ourselves to produce solid mortgage banking income in future periods, as evidenced by the opening of mortgage lending centers in Midland, Michigan and Cincinnati, Ohio during 2020.  We are also continually exploring options to enhance other noninterest income revenue streams, and are pleased with the growth in certain key fee income categories during 2020. We are committed to meeting growth objectives in a cost-conscious, efficient manner and continue to monitor our branch network and associated customer behaviors and preferences, which may have been altered as a result of the COVID-19 pandemic.  As part of a branch network efficiency plan, we closed three branch facilities during the fourth quarter of 2020, which is expected to generate annual pre-tax savings of approximately $0.7 million."

Balance Sheet

As of December 31, 2020, total assets were $4.44 billion, up $804 million, or 22.1 percent, from December 31, 2019.  Total loans increased $360 million during 2020, primarily reflecting Paycheck Protection Program loan originations of $555 million during the second and third quarters.  Paycheck Protection Program loans totaled approximately $365 million as of December 31, 2020, reflecting forgiveness payments received from the Small Business Administration during the fourth quarter.  Commercial lines of credit remained relatively steady during the last six months of 2020 after having declined $109 million during the second quarter of 2020 largely due to the impacts of the COVID-19 pandemic environment and federal government stimulus programs.  As of December 31, 2020, unfunded commitments on commercial construction and development loans totaled approximately $99 million, which are expected to be largely funded over the next 12 to 18 months.  Interest-earning deposits increased $383 million during 2020, mainly resulting from growth in local deposits.

Ray Reitsma, President of Mercantile Bank of Michigan, noted, "Although economic conditions deteriorated as a result of the COVID-19 pandemic, our asset quality metrics remained strong throughout 2020.  The sustained strength in our asset quality metrics reflects our unwavering commitment to sound underwriting, along with the relationships we have forged with solid companies that have strong management teams that are working diligently to enable the entities to successfully navigate through the challenges posed by the pandemic.  Our past due loan and nonperforming asset levels remain low, and virtually all commercial and retail loan customers that were granted loan payment deferrals are now making full contractual loan payments." 

Mr. Reitsma added, "We were very successful in helping customers obtain funds under the Paycheck Protection Program, as depicted by the over 2,000 loans, totaling approximately $555 million, closed during 2020.  The efforts of our team were recognized in the marketplace, providing us with many new loan and deposit relationship opportunities.  Over the past few months, we have been focused on assisting loan recipients in the gathering and submitting of the required information to allow for the rendering of forgiveness determinations by the Small Business Administration.  Although our team devoted a significant amount of time assisting customers in meeting pandemic-related challenges, we remained focused on identifying and attracting new client relationships and meeting the traditional needs of our existing customers.  We are pleased with the ongoing strength of our commercial loan and residential mortgage loan pipelines." 

Excluding the impact of Paycheck Protection Program loan originations, commercial and industrial loans and owner-occupied commercial real estate loans together represented approximately 55 percent of total commercial loans as of December 31, 2020, a level that has remained relatively consistent and in line with internal expectations. 

Total deposits at December 31, 2020, were $3.41 billion, up $721 million, or 26.8 percent, from December 31, 2019.  Local deposits were up $808 million during 2020, while brokered deposits were down $86.5 million.  The growth in local deposits mainly reflected federal government stimulus payments and reduced business and consumer investing and spending, along with Paycheck Protection Program loan proceeds being deposited into customers' accounts at the time the loans were originated and remaining on deposit as of December 31, 2020.  Wholesale funds were $441 million, or approximately 11 percent of total funds, as of December 31, 2020, compared to $487 million, or approximately 15 percent of total funds, as of December 31, 2019.

Asset Quality

Nonperforming assets at December 31, 2020, were $4.1 million, or 0.1 percent of total assets, compared to $2.7 million, or 0.1 percent of total assets, at December 31, 2019.  During the fourth quarter of 2020, loan charge-offs totaled $0.3 million while recoveries of prior period loan charge-offs equaled $0.2 million, providing for net loan charge-offs of $0.1 million, or 0.01 percent of average total loans.  During 2020, recoveries of prior period loan charge-offs totaling $0.9 million slightly exceeded loan charge-offs, providing for a nominal level of net loan recoveries.

Capital Position

Shareholders' equity totaled $442 million as of December 31, 2020, an increase of $25.0 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 December 31, 2020, compared to 13.0 percent at December 31, 2019.  At December 31, 2020, the Bank had approximately $118 million in excess of the 10.0 percent minimum regulatory threshold required to be considered a "well-capitalized" institution.  Mercantile reported 16,330,476 total shares outstanding at December 31, 2020.

As part of a $20 million common stock repurchase program announced in May 2019, 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.  After electing to temporarily cease stock repurchases in March 2020 to preserve capital for lending and other purposes while management assessed the potential impacts of the COVID-19 pandemic, Mercantile reinstated the buyback program during the fourth quarter of 2020; fourth quarter repurchases totaled about 14,000 shares for $0.3 million, or a weighted average all-in cost per share of $22.05.

Mr. Kaminski concluded, "We are focused on positioning our company to remain a consistent high performer that provides steady and profitable growth and an attractive return to our investors.  Our strong operating performance during 2020 enabled us to continue the cash dividend program and provide our shareholders with a cash return on their investments in spite of the challenges presented by the COVID-19 pandemic and associated weakened economic conditions.  We were pleased to announce earlier today that our Board of Directors declared an increased first quarter 2021 regular cash dividend.  We are passionate about our Environmental, Social, and Governance initiatives and the opportunities that exist in that space going forward.  During 2020, we established new Diversity, Equity, and Inclusion initiatives in light of the racial justice discussions taking place in our country and communities, including ongoing conversations among our staff members, and we look forward to continuing our social awareness efforts in future periods.  We are excited about Mercantile's future and believe we are positioned to produce solid operating results in 2021."

Investor Presentation

Mercantile has prepared presentation materials (the "Conference Call & Webcast Presentation") that management intends to use during its previously announced fourth quarter 2020 conference call on Tuesday, January 19, 2021, at 10:00 a.m. 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 $4.4 billion and operates 44 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; our participation in the Paycheck Protection Program administered by the Small Business Administration; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities; 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 and CEO   

Executive Vice President and CFO

            616-726-1502   

616-726-1202

            rkaminski@mercbank.com  

cchristmas@mercbank.com

 

Mercantile Bank Corporation













Fourth Quarter 2020 Results













MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)



















DECEMBER 31,



DECEMBER 31,



DECEMBER 31,





2020



2019



2018

ASSETS













   Cash and due from banks

$

62,832,000

$

53,262,000

$

64,872,000

   Interest-earning deposits



563,174,000



180,469,000



10,482,000

      Total cash and cash equivalents



626,006,000



233,731,000



75,354,000















   Securities available for sale



387,347,000



334,655,000



337,366,000

   Federal Home Loan Bank stock



18,002,000



18,002,000



16,022,000















   Loans



3,216,358,000



2,856,667,000



2,753,085,000

   Allowance for loan losses



(37,967,000)



(23,889,000)



(22,380,000)

      Loans, net



3,178,391,000



2,832,778,000



2,730,705,000















   Premises and equipment, net



58,959,000



57,327,000



48,321,000

   Bank owned life insurance



72,131,000



70,297,000



69,647,000

   Goodwill



49,473,000



49,473,000



49,473,000

   Core deposit intangible, net



2,436,000



3,840,000



5,561,000

   Other assets



44,599,000



32,812,000



31,458,000















      Total assets

$

4,437,344,000

$

3,632,915,000

$

3,363,907,000





























LIABILITIES AND SHAREHOLDERS' EQUITY













   Deposits:













      Noninterest-bearing

$

1,433,403,000

$

924,916,000

$

889,784,000

      Interest-bearing



1,978,150,000



1,765,468,000



1,573,924,000

         Total deposits



3,411,553,000



2,690,384,000



2,463,708,000















   Securities sold under agreements to repurchase



118,365,000



102,675,000



103,519,000

   Federal Home Loan Bank advances



394,000,000



354,000,000



350,000,000

   Subordinated debentures



47,563,000



46,881,000



46,199,000

   Accrued interest and other liabilities



24,309,000



22,414,000



25,232,000

         Total liabilities



3,995,790,000



3,216,354,000



2,988,658,000















SHAREHOLDERS' EQUITY













   Common stock



302,029,000



305,035,000



308,005,000

   Retained earnings



134,039,000



107,831,000



75,483,000

   Accumulated other comprehensive income/(loss)



5,486,000



3,695,000



(8,239,000)

      Total shareholders' equity



441,554,000



416,561,000



375,249,000















      Total liabilities and shareholders' equity

$

4,437,344,000

$

3,632,915,000

$

3,363,907,000

 

Mercantile Bank Corporation

























Fourth Quarter 2020 Results

























MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)





























THREE MONTHS ENDED

THREE MONTHS ENDED

TWELVE MONTHS ENDED

TWELVE MONTHS ENDED



December 31, 2020

December 31, 2019

December 31, 2020

December 31, 2019

INTEREST INCOME

























   Loans, including fees

$

35,971,000



$

36,257,000



$

137,399,000



$

145,816,000



   Investment securities



1,484,000





2,563,000





10,038,000





10,150,000



   Other interest-earning assets



165,000





744,000





876,000





2,371,000



      Total interest income



37,620,000





39,564,000





148,313,000





158,337,000





























INTEREST EXPENSE

























   Deposits



3,176,000





5,358,000





14,984,000





21,264,000



   Short-term borrowings



41,000





51,000





173,000





295,000



   Federal Home Loan Bank advances



2,072,000





2,226,000





8,571,000





8,977,000



   Other borrowed money



482,000





761,000





2,339,000





3,267,000



      Total interest expense



5,771,000





8,396,000





26,067,000





33,803,000





























      Net interest income



31,849,000





31,168,000





122,246,000





124,534,000





























Provision for loan losses



2,500,000





(700,000)





14,050,000





1,750,000





























      Net interest income after

























         provision for loan losses



29,349,000





31,868,000





108,196,000





122,784,000





























NONINTEREST INCOME

























   Service charges on accounts



1,177,000





1,178,000





4,578,000





4,584,000



   Mortgage banking income



9,600,000





3,194,000





29,346,000





8,485,000



   Credit and debit card income



1,602,000





1,528,000





5,973,000





5,925,000



   Payroll services



399,000





399,000





1,745,000





1,626,000



   Earnings on bank owned life insurance

281,000





319,000





1,214,000





3,886,000



   Interest rate swap income



932,000





0





932,000





0



   Other income



342,000





694,000





1,384,000





2,450,000



      Total noninterest income



14,333,000





7,312,000





45,172,000





26,956,000





























NONINTEREST EXPENSE

























   Salaries and benefits



15,411,000





13,851,000





59,799,000





53,833,000



   Occupancy



2,006,000





1,972,000





7,950,000





7,061,000



   Furniture and equipment



850,000





698,000





3,350,000





2,583,000



   Data processing costs



2,647,000





2,381,000





10,440,000





9,235,000



   Other expense



5,027,000





4,433,000





16,981,000





16,568,000



      Total noninterest expense



25,941,000





23,335,000





98,520,000





89,280,000





























      Income before federal income

























         tax expense



17,741,000





15,845,000





54,848,000





60,460,000





























Federal income tax expense



3,659,000





2,528,000





10,710,000





11,004,000





























      Net Income

$

14,082,000



$

13,317,000



$

44,138,000



$

49,456,000





























   Basic earnings per share



$0.87





$0.81





$2.71





$3.01



   Diluted earnings per share



$0.87





$0.81





$2.71





$3.01





























   Average basic shares outstanding



16,279,052





16,373,458





16,268,689





16,405,159



   Average diluted shares outstanding



16,279,243





16,375,740





16,269,319





16,409,135



 

Mercantile Bank Corporation





























Fourth Quarter 2020 Results





























MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)



































Quarterly



Year-To-Date

(dollars in thousands except per share data)

2020



2020



2020



2020



2019













4th Qtr



3rd Qtr



2nd Qtr



1st Qtr



4th Qtr



2020



2019

EARNINGS





























   Net interest income

$

31,849



29,509



30,571



30,317



31,168



122,246



124,534

   Provision for loan losses

$

2,500



3,200



7,600



750



(700)



14,050



1,750

   Noninterest income

$

14,333



13,307



10,984



6,550



7,312



45,172



26,956

   Noninterest expense

$

25,941



26,423



23,216



22,940



23,335



98,520



89,280

   Net income before federal income





























      tax expense

$

17,741



13,193



10,739



13,177



15,845



54,848



60,460

   Net income

$

14,082



10,686



8,698



10,673



13,317



44,138



49,456

   Basic earnings per share

$

0.87



0.66



0.54



0.65



0.81



2.71



3.01

   Diluted earnings per share

$

0.87



0.66



0.54



0.65



0.81



2.71



3.01

   Average basic shares outstanding



16,279,052



16,233,196



16,212,500



16,350,281



16,373,458



16,268,689



16,405,159

   Average diluted shares outstanding



16,279,243



16,233,666



16,213,264



16,351,559



16,375,740



16,269,319



16,409,135































PERFORMANCE RATIOS





























   Return on average assets



1.25%



0.98%



0.85%



1.19%



1.45%



1.07%



1.39%

   Return on average equity



12.75%



9.86%



8.26%



10.20%



12.87%



10.32%



12.52%

   Net interest margin (fully tax-equivalent)

3.00%



2.86%



3.17%



3.63%



3.63%



3.15%



3.75%

   Efficiency ratio



56.17%



61.71%



55.87%



62.22%



60.64%



58.85%



58.93%

   Full-time equivalent employees



621



618



637



626



619



621



619































YIELD ON ASSETS / COST OF FUNDS





























   Yield on loans



4.34%



4.03%



4.18%



4.69%



5.01%



4.31%



5.11%

   Yield on securities



1.69%



2.26%



3.37%



4.73%



2.90%



3.00%



2.89%

   Yield on other interest-earning assets

0.12%



0.12%



0.15%



1.22%



1.65%



0.25%



2.07%

   Yield on total earning assets



3.55%



3.45%



3.85%



4.54%



4.61%



3.82%



4.77%

   Yield on total assets



3.35%



3.25%



3.62%



4.23%



4.31%



3.59%



4.45%

   Cost of deposits



0.37%



0.41%



0.48%



0.70%



0.79%



0.48%



0.81%

   Cost of borrowed funds



1.75%



1.78%



1.91%



2.31%



2.36%



1.93%



2.39%

   Cost of interest-bearing liabilities



0.91%



0.99%



1.11%



1.36%



1.47%



1.09%



1.50%

   Cost of funds (total earning assets)



0.55%



0.59%



0.68%



0.91%



0.98%



0.67%



1.02%

   Cost of funds (total assets)



0.51%



0.56%



0.64%



0.85%



0.91%



0.63%



0.95%































PURCHASE ACCOUNTING ADJUSTMENTS

























   Loan portfolio - increase interest income

$

158



332



169



285



316



944



1,423

   Trust preferred - increase interest expense

$

171



171



171



171



171



684



684

   Core deposit intangible - increase overhead

$

318



318



371



397



397



1,404



1,721































MORTGAGE BANKING ACTIVITY





























   Total mortgage loans originated

$

218,904



237,195



275,486



132,859



110,611



864,444



368,600

   Purchase mortgage loans originated

$

99,490



93,068



58,015



46,538



49,407



297,111



183,123

   Refinance mortgage loans originated

$

119,414



144,127



217,471



86,321



61,204



567,333



185,477

   Mortgage loans originated to sell

$

159,942



191,318



225,665



95,327



81,590



672,252



257,378

   Net gain on sale of mortgage loans

$

9,476



10,199



7,760



2,086



3,062



29,521



8,065































CAPITAL





























   Tangible equity to tangible assets



8.89%



8.69%



8.74%



10.14%



10.15%



8.89%



10.15%

   Tier 1 leverage capital ratio



9.77%



9.80%



10.21%



11.47%



11.28%



9.77%



11.28%

   Common equity risk-based capital ratio

11.34%



11.37%



11.34%



10.92%



11.00%



11.34%



11.00%

   Tier 1 risk-based capital ratio



12.68%



12.74%



12.74%



12.28%



12.36%



12.68%



12.36%

   Total risk-based capital ratio



13.80%



13.82%



13.73%



13.03%



13.09%



13.80%



13.09%

   Tier 1 capital

$

430,146



420,225



412,526



406,445



405,148



430,146



405,148

   Tier 1 plus tier 2 capital

$

468,113



455,797



444,772



431,273



429,038



468,113



429,038

   Total risk-weighted assets

$

3,391,563



3,298,047



3,238,444



3,309,336



3,276,754



3,391,563



3,276,754

   Book value per common share

$

27.04



26.59



26.20



25.82



25.36



27.04



25.36

   Tangible book value per common share

$

23.86



23.37



22.96



22.55



22.12



23.86



22.12

   Cash dividend per common share

$

0.28



0.28



0.28



0.28



0.27



1.12



1.06































ASSET QUALITY





























   Gross loan charge-offs

$

340



124



335



40



112



839



883

   Recoveries

$

234



250



153



229



287



866



642

   Net loan charge-offs (recoveries)

$

106



(126)



182



(189)



(175)



(27)



241

   Net loan charge-offs to average loans

0.01%



(0.02%)



0.02%



(0.03%)



(0.02%)



(0.01%)



0.01%

   Allowance for loan losses

$

37,967



35,572



32,246



24,828



23,889



37,967



23,889

   Allowance to loans



1.18%



1.06%



0.97%



0.86%



0.84%



1.18%



0.84%

   Allowance to loans excluding PPP loans

1.33%



1.27%



1.16%



0.86%



0.84%



1.33%



0.84%

   Nonperforming loans

$

3,384



4,141



3,212



3,469



2,284



3,384



2,284

   Other real estate/repossessed assets

$

701



512



198



271



452



701



452

   Nonperforming loans to total loans



0.11%



0.12%



0.10%



0.12%



0.08%



0.11%



0.08%

   Nonperforming assets to total assets



0.09%



0.11%



0.08%



0.10%



0.08%



0.09%



0.08%































NONPERFORMING ASSETS - COMPOSITION

























   Residential real estate:





























      Land development

$

35



36



36



37



34



35



34

      Construction

$

0



198



198



283



0



0



0

      Owner occupied / rental

$

2,607



2,597



2,750



2,922



2,364



2,607



2,364

   Commercial real estate:





























      Land development

$

0



0



0



43



0



0



0

      Construction

$

0



0



0



0



0



0



0

      Owner occupied  

$

1,232



1,576



275



287



326



1,232



326

      Non-owner occupied

$

22



23



25



0



0



22



0

   Non-real estate:





























      Commercial assets

$

172



198



98



156



0



172



0

      Consumer assets

$

17



25



28



12



12



17



12

   Total nonperforming assets



4,085



4,653



3,410



3,740



2,736



4,085



2,736































NONPERFORMING ASSETS - RECON





























   Beginning balance

$

4,653



3,410



3,740



2,736



2,887



2,736



4,952

   Additions

$

972



1,615



220



1,344



30



4,151



934

   Other activity

$

0



0



0



(31)



135



(31)



226

   Return to performing status

$

0



(72)



(26)



(7)



0



(105)



(126)

   Principal payments

$

(1,064)



(249)



(278)



(110)



(232)



(1,701)



(2,140)

   Sale proceeds

$

(245)



0



(49)



(192)



(36)



(486)



(792)

   Loan charge-offs

$

(231)



(51)



(173)



0



(48)



(455)



(289)

   Valuation write-downs

$

0



0



(24)



0



0



(24)



(29)

   Ending balance

$

4,085



4,653



3,410



3,740



2,736



4,085



2,736































LOAN PORTFOLIO COMPOSITION





























   Commercial:





























      Commercial & industrial

$

1,145,423



1,321,419



1,307,456



873,679



846,551



1,145,423



846,551

      Land development & construction

$

55,055



50,941



52,984



62,908



56,118



55,055



56,118

      Owner occupied comm'l R/E

$

529,953



549,364



567,621



579,229



579,004



529,953



579,004

      Non-owner occupied comm'l R/E

$

917,436



878,897



841,145



823,366



835,345



917,436



835,345

      Multi-family & residential rental

$

146,095



137,740



132,047



133,148



124,526



146,095



124,526

         Total commercial

$

2,793,962



2,938,361



2,901,253



2,472,330



2,441,544



2,793,962



2,441,544

   Retail:





























      1-4 family mortgages

$

360,776



348,460



367,060



356,338



339,749



360,776



339,749

      Home equity & other consumer

$

61,620



63,723



64,743



72,875



75,374



61,620



75,374

         Total retail

$

422,396



412,183



431,803



429,213



415,123



422,396



415,123

         Total loans

$

3,216,358



3,350,544



3,333,056



2,901,543



2,856,667



3,216,358



2,856,667































END OF PERIOD BALANCES





























   Loans

$

3,216,358



3,350,544



3,333,056



2,901,543



2,856,667



3,216,358



2,856,667

   Securities

$

405,349



330,426



325,663



330,149



352,657



405,349



352,657

   Other interest-earning assets

$

563,174



495,308



386,711



186,938



180,469



563,174



180,469

   Total earning assets (before allowance)

$

4,184,881



4,176,278



4,045,430



3,418,630



3,389,793



4,184,881



3,389,793

   Total assets

$

4,437,344



4,420,610



4,314,379



3,657,387



3,632,915



4,437,344



3,632,915

   Noninterest-bearing deposits

$

1,433,403



1,449,879



1,445,620



956,290



924,916



1,433,403



924,916

   Interest-bearing deposits

$

1,978,150



1,922,155



1,816,660



1,689,126



1,765,468



1,978,150



1,765,468

   Total deposits

$

3,411,553



3,372,034



3,262,280



2,645,416



2,690,384



3,411,553



2,690,384

   Total borrowed funds

$

562,360



600,892



611,298



576,996



506,301



562,360



506,301

   Total interest-bearing liabilities

$

2,540,510



2,523,047



2,427,958



2,266,122



2,271,769



2,540,510



2,271,769

   Shareholders' equity

$

441,554



431,900



425,221



418,389



416,561



441,554



416,561































AVERAGE BALANCES





























   Loans

$

3,288,845



3,315,741



3,294,883



2,861,047



2,871,674



3,190,742



2,853,021

   Securities

$

365,631



327,668



333,843



344,906



362,347



343,032



359,512

   Other interest-earning assets

$

559,593



457,598



251,833



153,638



176,034



356,501



114,527

   Total earning assets (before allowance)

$

4,214,069



4,101,007



3,880,559



3,359,591



3,410,055



3,890,275



3,327,060

   Total assets

$

4,459,370



4,346,624



4,119,573



3,602,784



3,650,087



4,133,568



3,561,645

   Noninterest-bearing deposits

$

1,478,616



1,454,887



1,304,986



923,827



948,602



1,291,542



902,180

   Interest-bearing deposits

$

1,936,069



1,863,302



1,767,985



1,724,030



1,759,377



1,823,266



1,722,535

   Total deposits

$

3,414,685



3,318,189



3,072,971



2,647,957



2,707,979



3,114,808



2,624,715

   Total borrowed funds

$

588,100



583,994



607,074



517,961



509,932



574,347



525,745

   Total interest-bearing liabilities

$

2,524,169



2,447,296



2,375,059



2,241,991



2,269,309



2,397,613



2,248,280

   Shareholders' equity

$

438,171



429,865



422,230



419,612



410,593



427,505



394,913

 

MBWM-ER

Cision View original content:http://www.prnewswire.com/news-releases/mercantile-bank-corporation-announces-strong-fourth-quarter-and-full-year-2020-results-301210424.html

SOURCE Mercantile Bank of Michigan

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