8-K
MERCANTILE BANK CORP (MBWM)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 16, 2024
Mercantile Bank Corporation
(Exact name of registrant as specified in its charter)
| Michigan | 000-26719 | 38-3360865 |
|---|---|---|
| (State or other jurisdiction<br><br> <br>of incorporation) | (Commission File<br><br> <br>Number) | (IRS Employer<br><br> <br>Identification Number) |
**** **** ****
| 310 Leonard Street NW, Grand Rapids, Michigan | 49504 |
|---|---|
| (Address of principal executive offices) | (Zip Code) |
| Registrant's telephone number, including area code | 616-406-3000 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
|---|---|---|
| Common Stock | MBWM | The Nasdaq Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Results of Operations and Financial Condition. |
|---|
Earnings Release
On July 16, 2024, Mercantile Bank Corporation (the “Company”) issued a press release announcing earnings and other financial results for the quarter ended June 30, 2024. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.
| Item 7.01 | Regulation FD Disclosure. |
|---|
The Company has prepared presentation materials (the “Conference Call & Webcast Presentation”) that management intends to use during its previously announced Second Quarter 2024 conference call on Tuesday, July 16, 2024 at 10:00 am Eastern Time, and from time to time thereafter in presentations about the Company’s operations and performance. The Company may use the Conference Call & Webcast Presentation, possibly with modifications, in presentations to current and potential investors, analysts, lenders, business partners, acquisition candidates, customers, employees and others with an interest in the Company and its business.
A copy of the Conference Call & Webcast Presentation is furnished as Exhibit 99.2 to this report and incorporated here by reference. The Conference Call & Webcast Presentation is also available on the Company's website at http://ir.mercbank.com. Materials on the Company’s website are not part of or incorporated by reference into this report.
In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
|---|
(d) Exhibits.
Exhibit Number Description
| 99.1 | Press release of Mercantile Bank Corporation dated July 16, 2024, reporting financial results and earnings for the quarter ended June 30, 2024. |
|---|---|
| 99.2 | Mercantile Bank Corporation Conference Call & Webcast Presentation dated July 16, 2024. |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| --- | --- |
2
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Mercantile Bank Corporation | |
|---|---|
| By: | /s/ Charles E. Christmas |
| Charles E. Christmas | |
| Executive Vice President, Chief | |
| Financial Officer and Treasurer |
Date: July 16, 2024
3
Exhibit Index
Exhibit Number Description
| 99.1 | Press release of Mercantile Bank Corporation dated July 16, 2024, reporting financial results and earnings for the quarter ended June 30, 2024. |
|---|---|
| 99.2 | Mercantile Bank Corporation Conference Call & Webcast Presentation dated July 16, 2024. |
| --- | --- |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| --- | --- |
ex_684163.htm
Exhibit 99.1
Mercantile Bank Corporation Announces Solid Second Quarter Results
Strong local deposit and commercial loan growth and ongoing strength in asset quality metrics highlight quarter
GRAND RAPIDS, Mich., July 16, 2024 – Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $18.8 million, or $1.17 per diluted share, for the second quarter of 2024, compared with net income of $20.4 million, or $1.27 per diluted share, for the second quarter of 2023. Net income during the first six months of 2024 totaled $40.3 million, or $2.50 per diluted share, compared with net income of $41.3 million, or $2.58 per diluted share, during the first six months of 2023.
“Our solid second quarter financial performance provides further evidence of our ability to successfully navigate the challenges arising from shifting economic and operating environments,” said Ray Reitsma, President and Chief Executive Officer of Mercantile. “We are very pleased with the levels of local deposit and commercial loan growth during the quarter, which demonstrate our ongoing focus on new client acquisition, meeting the banking needs of existing customers, and relationship banking. Our net interest margin remained healthy during the second quarter, which when coupled with the local deposit and commercial loan expansion and notable increases in several noninterest income categories, provided for strong operating results during the period. As evidenced by the sustained strength in asset quality metrics, we remain committed to growing and administering the loan portfolio in a disciplined manner.”
Second quarter highlights include:
| ● | Strong local deposit growth |
|---|---|
| ● | Robust commercial loan portfolio expansion |
| --- | --- |
| ● | Continuing strength in commercial loan pipeline |
| --- | --- |
| ● | Substantial increases in several noninterest income revenue streams |
| --- | --- |
| ● | Sustained low levels of nonperforming assets, past due loans, and loan charge-offs |
| --- | --- |
| ● | Solid capital position |
| --- | --- |
Operating Results
Net revenue, consisting of net interest income and noninterest income, was $56.8 million during the second quarter of 2024, up $1.6 million, or 2.8 percent, from $55.2 million during the prior-year second quarter. Net interest income during the current-year second quarter was $47.1 million, down $0.5 million, or 1.0 percent, from $47.6 million during the respective 2023 period as higher yields on, along with growth in, earning assets were more than offset by an increased cost of funds. Noninterest income totaled $9.7 million during the second quarter of 2024, up $2.0 million, or 26.6 percent, from $7.7 million during the second quarter of 2023. The increase in noninterest income mainly reflected higher levels of mortgage banking income and service charges on accounts.
The net interest margin was 3.63 percent in the second quarter of 2024, down from 4.05 percent in the prior-year second quarter. The yield on average earning assets was 6.07 percent during the current-year second quarter, an increase from 5.61 percent during the respective 2023 period. The higher yield primarily resulted from an increased yield on loans. The yield on loans was 6.64 percent during the second quarter of 2024, up from 6.19 percent during the second quarter of 2023 mainly due to higher interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) raising the targeted federal funds rate in an effort to reduce elevated inflation levels. The FOMC increased the targeted federal funds rate by 75 basis points during the period of March 2023 through July 2023, during which time average variable-rate commercial loans represented approximately 68 percent of average total commercial loans.
The cost of funds was 2.44 percent in the second quarter of 2024, up from 1.56 percent in the second quarter of 2023 primarily due to higher costs of deposits and borrowed funds, reflecting the impact of the rising interest rate environment. A change in funding mix, mainly consisting of a decrease in noninterest-bearing and lower-cost deposits and an increase in higher-cost money market accounts and time deposits stemming from deposit migration and new deposit relationships, also contributed to the increased cost of funds.
Mercantile recorded provisions for credit losses of $3.5 million and $2.0 million during the second quarters of 2024 and 2023, respectively. The provision expense recorded during the current-year second quarter primarily reflected an individual allocation for a nonperforming commercial loan relationship and allocations necessitated by net loan growth. The provision expense recorded during the second quarter of 2023 mainly reflected allocations required by net loan growth and adjustments to historical loss factors to better represent Mercantile’s expectations for future credit losses.
Noninterest income totaled $9.7 million during the second quarter of 2024, up $2.0 million, or 26.6 percent, from $7.7 million during the second quarter of 2023. The growth primarily resulted from increases in mortgage banking income and service charges on accounts, with the latter mainly stemming from enhanced use of cash management products. The higher level of mortgage banking income primarily resulted from an increased loan sold percentage, which rose from approximately 43 percent during the second quarter of 2023 to approximately 75 percent during the second quarter of 2024. Increases in payroll service fees, bank owned life insurance income, and interest rate swap income also contributed to the higher level of noninterest income.
Noninterest expense totaled $29.7 million during the second quarter of 2024, compared to $27.8 million during the prior-year second quarter. The increase in noninterest expense mainly resulted from larger salary costs, reflecting annual merit pay increases, market adjustments, higher residential mortgage lender commissions and incentives, and lower residential mortgage loan deferred salary costs. Higher levels of data processing costs, primarily reflecting increased transaction volume and software support costs, and health insurance claims also contributed to the rise in noninterest expense.
Mr. Reitsma commented, “We are very pleased with the noteworthy increases in mortgage banking income and treasury management fees. The growth in mortgage banking income mainly reflected the success of a strategic initiative to increase the percentage of loans originated with the intent to sell, while the higher level of treasury management fees, which was fueled by increases in service charges on accounts and payroll processing fees, in large part stemmed from the expanded use of products and services. Our net interest margin, while decreasing as anticipated due to a higher cost of funds, remained above historical levels during the second quarter of 2024. We regularly review our operating processes to identify further opportunities to improve efficiency while meeting balance sheet growth objectives and continuing to provide customers with the excellent service that they have become accustomed to. Despite the unique circumstances surrounding a troubled non-real-estate-related commercial loan relationship that necessitated a sizeable reserve allocation, we believe the credit trends associated with our commercial loan portfolio remain solid and steady.”
Balance Sheet
As of June 30, 2024, total assets were $5.60 billion, up $249 million from December 31, 2023. Total loans increased $134 million, or an annualized 6.3 percent, during the first six months of 2024, primarily reflecting commercial loan growth of $118 million, or an annualized 6.9 percent. The commercial loan portfolio growth during the first six months of 2024 occurred despite the full payoffs and partial paydowns of certain larger relationships, which aggregated approximately $76 million during the period. The payoffs and paydowns primarily resulted from customers using excess cash flows generated within their operations to make line of credit and unscheduled term loan principal paydowns, as well as from sales of assets. Residential mortgage loans and other consumer loans grew $12.2 million and $4.3 million, respectively, during the first half of 2024. Interest-earning deposits and securities available for sale increased $75.6 million and $30.8 million, respectively, during the first six months of 2024, with the growth in interest-earning deposits largely reflecting the success of a strategic initiative to enhance on-balance sheet liquidity.
As of June 30, 2024, unfunded commitments on commercial construction and development loans, which are expected to be funded over the next 12 to 18 months, and residential construction loans, which are expected to be largely funded over the next 12 months, totaled approximately $320 million and $37 million, respectively.
Commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately 57 percent of total commercial loans as of June 30, 2024, a level that has remained relatively consistent with prior periods and in line with management’s expectations.
Total deposits equaled $4.15 billion as of June 30, 2024, representing an increase of $246 million, or an annualized 12.6 percent, from December 31, 2023. Local deposits were up $261 million, or 14.0 percent annualized, during the first six months of 2024, while brokered deposits decreased $15.2 million during the respective period. The growth in local deposits, which exceeded loan growth by over 6 percent on an annualized basis, provided for a reduction in the loan-to-deposit ratio from 110 percent as of December 31, 2023, to 107 percent as of June 30, 2024. The increase in local deposits during the first six months of 2024, which occurred despite the typical level of seasonal noninterest-bearing deposit withdrawals by customers to make bonus and tax payments and partnership distributions, reflected new deposit relationships and growth in existing deposit relationships. Wholesale funds were $580 million, or approximately 12 percent of total funds, at June 30, 2024, compared to $636 million, or approximately 14 percent of total funds, at December 31, 2023. Noninterest-bearing checking accounts represented approximately 27 percent of total deposits as of June 30, 2024, which is in line with historical levels.
Mr. Reitsma noted, “The significant growth in commercial loans during the first six months of 2024, reflecting increases in all portfolio segments, occurred despite elevated amounts of full and partial payoffs and paydowns. Our lending team has done an exceptional job of meeting existing customers’ credit needs and identifying new lending opportunities, with an emphasis on securing potential clients’ overall banking relationships. In light of our robust commercial loan pipeline and credit availability for commercial construction and development loans, we believe commercial loan growth will be solid in forthcoming periods. We are delighted with the local deposit growth during the year-to-date period, and gaining deposit market share will remain a top priority.”
Asset Quality
Nonperforming assets totaled $9.1 million, or 0.2 percent of total assets, at June 30, 2024, compared to $6.2 million, or 0.1 percent of total assets, at March 31, 2024, and $3.6 million, or less than 0.1 percent of total assets, at December 31, 2023. The increase in nonperforming assets during the first six months of 2024 substantially resulted from the deterioration of two commercial loan relationships, which were placed on nonaccrual and fully reserved for during the period. The level of past due loans remains nominal. During the second quarter of 2024, loan charge-offs were minimal, while recoveries of prior period loan charge-offs equaled $0.3 million, providing for net loan recoveries of $0.3 million, or an annualized 0.02 percent of average total loans. During the first six months of 2024, loan charge-offs totaled less than $0.1 million, while recoveries of prior period loan charge-offs equaled $0.7 million, providing for net loan recoveries of $0.7 million, or an annualized 0.03 percent of average total loans.
Mr. Reitsma remarked, “Our steadfast commitment to employing thorough and disciplined underwriting practices to meet loan portfolio growth objectives is evidenced by our sustained strength in asset quality metrics. Nonperforming assets, while increasing during the first six months of 2024 primarily due to the deterioration of two non-real-estate-related commercial loan relationships, remain at a low level. As reflected by continuing low levels of nonaccrual loans, past due loans, and loan charge-offs, our commercial borrowers have continued to demonstrate resiliency in dealing with the challenges stemming from current operating conditions, including higher interest rates and the associated increase in debt service requirements. We continue to closely monitor our commercial loan portfolio for signs of systemic distress and believe our efforts to identify emerging credit issues as soon as possible will help limit the impact of any such noted issues on our overall financial condition. Our residential mortgage loan and consumer loan portfolios, which have not exhibited signs of systemic credit deterioration, such as higher delinquency levels, have continued to perform well.”
Capital Position
Shareholders’ equity totaled $551 million as of June 30, 2024, up $29.0 million from December 31, 2023. Mercantile Bank maintained “well-capitalized” positions at the end of the second quarter of 2024 and year-end 2023, with total risk-based capital ratios of 13.9 percent and 13.4 percent, respectively. As of June 30, 2024, Mercantile Bank had approximately $204 million in excess of the 10 percent minimum regulatory threshold required to be categorized as a “well-capitalized” institution.
All of Mercantile Bank’s investments are categorized as available-for-sale. As of June 30, 2024, the net unrealized loss on these investments totaled $67.4 million, resulting in an after-tax reduction to equity capital of $53.2 million. Although unrealized gains and losses on investments are excluded from regulatory capital ratio calculations, Mercantile Bank’s excess capital over the minimum regulatory requirement to be considered a “well-capitalized” institution would approximate $151 million on an adjusted basis.
Mercantile reported 16,137,646 total shares outstanding as of June 30, 2024.
Mr. Reitsma concluded, “Our ongoing strong financial performance has allowed us to continue our regular quarterly cash dividend program, and as demonstrated by our announcement of an increased third quarter cash dividend earlier today, we remain committed to providing shareholders with competitive returns on their investments. We believe our robust capital position, asset quality metrics, and operating performance, along with the sustained strength in our commercial loan pipeline, position us to remain a steady and profitable performer and withstand any challenges resulting from the current operating environment and changing economic conditions. The increases in loans and local deposits during the first six months of 2024 reflect the success of our community banking model and associated emphasis on forming mutually beneficial relationships with established and new clients.”
Investor Presentation
Mercantile has prepared presentation materials that management intends to use during its previously announced second quarter 2024 conference call on Tuesday, July 16, 2024, at 10:00 a.m. Eastern Time, and from time to time thereafter in presentations about the company’s operations and performance. These materials, which are available for viewing in the Investor Relations section of Mercantile’s website at www.mercbank.com, have been furnished to the U.S. Securities and Exchange Commission concurrently with this press release.
About Mercantile Bank Corporation
Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank. Mercantile provides financial products and services in a professional and personalized manner designed to make banking easier for businesses, individuals, and governmental units. Distinguished by exceptional service, a knowledgeable staff, and a commitment to the communities it serves, Mercantile is one of the largest Michigan-based banks with assets of approximately $5.6 billion. Mercantile Bank Corporation's common stock is listed on the NASDAQ Global Select Market under the symbol "MBWM." For more information about Mercantile, visit www.mercbank.com, and follow us on Facebook, Instagram, X (formerly Twitter) @MercBank, and LinkedIn @merc-bank.
Forward-Looking Statements
This news release contains statements or information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and similar references to future periods. Any such statements 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; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; 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 existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; the transition from LIBOR to SOFR; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the COVID-19 pandemic or similar public health threats, and measures implemented to combat them; and other factors, including those expressed as 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. Investors are cautioned not to place undue reliance on any forward-looking statements contained herein
FOR FURTHER INFORMATION:
| Ray Reitsma | Charles Christmas |
|---|---|
| President and CEO | Executive Vice President and CFO |
| 616-233-2349 | 616-726-1202 |
| rreitsma@mercbank.com | cchristmas@mercbank.com |
| Mercantile Bank Corporation | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| Second Quarter 2024 Results | |||||||||
| MERCANTILE BANK CORPORATION | |||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||
| (Unaudited) | |||||||||
| (dollars in thousands) | JUNE 30, | DECEMBER 31, | JUNE 30, | ||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| 2024 | 2023 | 2023 | |||||||
| ASSETS | **** | **** | **** | ||||||
| Cash and due from banks | $ | 61,863 | $ | 70,408 | $ | 69,133 | |||
| Interest-earning deposits | 135,766 | 60,125 | 138,663 | ||||||
| Total cash and cash equivalents | 197,629 | 130,533 | 207,796 | ||||||
| Securities available for sale | 647,907 | 617,092 | 608,972 | ||||||
| Federal Home Loan Bank stock | 21,513 | 21,513 | 21,513 | ||||||
| Mortgage loans held for sale | 22,126 | 18,607 | 11,942 | ||||||
| Loans | 4,438,245 | 4,303,758 | 4,051,843 | ||||||
| Allowance for credit losses | (55,408 | ) | (49,914 | ) | (44,721 | ) | |||
| Loans, net | 4,382,837 | 4,253,844 | 4,007,122 | ||||||
| Premises and equipment, net | 50,158 | 50,928 | 52,291 | ||||||
| Bank owned life insurance | 86,001 | 85,668 | 81,500 | ||||||
| Goodwill | 49,473 | 49,473 | 49,473 | ||||||
| Other assets | 144,744 | 125,566 | 96,978 | ||||||
| Total assets | $ | 5,602,388 | $ | 5,353,224 | $ | 5,137,587 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | **** | **** | **** | ||||||
| Deposits: | |||||||||
| Noninterest-bearing | $ | 1,119,888 | $ | 1,247,640 | $ | 1,371,633 | |||
| Interest-bearing | 3,026,686 | 2,653,278 | 2,385,156 | ||||||
| Total deposits | 4,146,574 | 3,900,918 | 3,756,789 | ||||||
| Securities sold under agreements to repurchase | 221,898 | 229,734 | 219,457 | ||||||
| Federal Home Loan Bank advances | 427,083 | 467,910 | 467,910 | ||||||
| Subordinated debentures | 49,987 | 49,644 | 49,301 | ||||||
| Subordinated notes | 89,143 | 88,971 | 88,800 | ||||||
| Accrued interest and other liabilities | 116,552 | 93,902 | 76,628 | ||||||
| Total liabilities | 5,051,237 | 4,831,079 | 4,658,885 | ||||||
| SHAREHOLDERS' EQUITY | **** | **** | **** | ||||||
| Common stock | 297,591 | 295,106 | 292,906 | ||||||
| Retained earnings | 306,804 | 277,526 | 247,313 | ||||||
| Accumulated other comprehensive income/(loss) | (53,244 | ) | (50,487 | ) | (61,517 | ) | |||
| Total shareholders' equity | 551,151 | 522,145 | 478,702 | ||||||
| Total liabilities and shareholders' equity | $ | 5,602,388 | $ | 5,353,224 | $ | 5,137,587 |
| Mercantile Bank Corporation | ||||||||
|---|---|---|---|---|---|---|---|---|
| Second Quarter 2024 Results | ||||||||
| MERCANTILE BANK CORPORATION | ||||||||
| CONSOLIDATED REPORTS OF INCOME | ||||||||
| (Unaudited) | ||||||||
| (dollars in thousands except per share data) | THREE MONTHS ENDED | THREE MONTHS ENDED | SIX MONTHS ENDED | SIX MONTHS ENDED | ||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| June 30, 2024 | June 30, 2023 | June 30, 2024 | June 30, 2023 | |||||
| INTEREST INCOME | ||||||||
| Loans, including fees | $ | 72,819 | $ | 62,006 | $ | 144,089 | $ | 119,159 |
| Investment securities | 3,624 | 3,111 | 7,046 | 6,118 | ||||
| Interest-earning deposits | 2,436 | 801 | 4,469 | 1,125 | ||||
| Total interest income | 78,879 | 65,918 | 155,604 | 126,402 | ||||
| INTEREST EXPENSE | ||||||||
| Deposits | 24,710 | 12,379 | 46,934 | 20,286 | ||||
| Short-term borrowings | 1,757 | 914 | 3,412 | 1,373 | ||||
| Federal Home Loan Bank advances | 3,252 | 3,051 | 6,651 | 4,845 | ||||
| Other borrowed money | 2,088 | 2,023 | 4,173 | 3,963 | ||||
| Total interest expense | 31,807 | 18,367 | 61,170 | 30,467 | ||||
| Net interest income | 47,072 | 47,551 | 94,434 | 95,935 | ||||
| Provision for credit losses | 3,500 | 2,000 | 4,800 | 2,600 | ||||
| Net interest income after provision for credit losses | 43,572 | 45,551 | 89,634 | 93,335 | ||||
| NONINTEREST INCOME | ||||||||
| Service charges on accounts | 1,692 | 1,064 | 3,224 | 2,041 | ||||
| Mortgage banking income | 3,023 | 1,835 | 5,365 | 3,050 | ||||
| Credit and debit card income | 2,266 | 2,426 | 4,387 | 4,485 | ||||
| Interest rate swap income | 766 | 748 | 2,104 | 1,785 | ||||
| Payroll services | 686 | 572 | 1,582 | 1,317 | ||||
| Earnings on bank owned life insurance | 437 | 402 | 1,609 | 802 | ||||
| Other income | 811 | 598 | 2,277 | 1,117 | ||||
| Total noninterest income | 9,681 | 7,645 | 20,548 | 14,597 | ||||
| NONINTEREST EXPENSE | ||||||||
| Salaries and benefits | 17,913 | 16,461 | 36,150 | 33,143 | ||||
| Occupancy | 2,220 | 2,098 | 4,509 | 4,387 | ||||
| Furniture and equipment | 923 | 878 | 1,852 | 1,700 | ||||
| Data processing costs | 3,415 | 2,881 | 6,704 | 6,043 | ||||
| Charitable foundation contributions | 4 | 2 | 707 | 12 | ||||
| Other expense | 5,262 | 5,509 | 9,758 | 11,144 | ||||
| Total noninterest expense | 29,737 | 27,829 | 59,680 | 56,429 | ||||
| Income before federal income tax expense | 23,516 | 25,367 | 50,502 | 51,503 | ||||
| Federal income tax expense | 4,730 | 5,010 | 10,154 | 10,171 | ||||
| Net Income | $ | 18,786 | $ | 20,357 | $ | 40,348 | $ | 41,332 |
| Basic earnings per share | $ | 1.17 | $ | 1.27 | $ | 2.50 | $ | 2.58 |
| Diluted earnings per share | $ | 1.17 | $ | 1.27 | $ | 2.50 | $ | 2.58 |
| Average basic shares outstanding | 16,122,813 | 16,003,372 | 16,120,836 | 15,999,775 | ||||
| Average diluted shares outstanding | 16,122,813 | 16,003,372 | 16,120,836 | 15,999,775 |
| Mercantile Bank Corporation | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Second Quarter 2024 Results | |||||||||||||||||||||
| MERCANTILE BANK CORPORATION | |||||||||||||||||||||
| CONSOLIDATED FINANCIAL HIGHLIGHTS | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Quarterly | Year-To-Date | ||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| (dollars in thousands except per share data) | 2024 | 2024 | 2023 | 2023 | 2023 | **** | **** | ||||||||||||||
| 2nd Qtr | 1st Qtr | 4th Qtr | 3rd Qtr | 2nd Qtr | 2024 | 2023 | |||||||||||||||
| EARNINGS | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Net interest income | $ | 47,072 | 47,361 | 48,649 | 48,961 | 47,551 | 94,434 | 95,935 | |||||||||||||
| Provision for credit losses | $ | 3,500 | 1,300 | 1,800 | 3,300 | 2,000 | 4,800 | 2,600 | |||||||||||||
| Noninterest income | $ | 9,681 | 10,868 | 8,300 | 9,246 | 7,645 | 20,548 | 14,597 | |||||||||||||
| Noninterest expense | $ | 29,737 | 29,944 | 29,940 | 28,920 | 27,829 | 59,680 | 56,429 | |||||||||||||
| Net income before federal income | |||||||||||||||||||||
| tax expense | $ | 23,516 | 26,985 | 25,209 | 25,987 | 25,367 | 50,502 | 51,503 | |||||||||||||
| Net income | $ | 18,786 | 21,562 | 20,030 | 20,855 | 20,357 | 40,348 | 41,332 | |||||||||||||
| Basic earnings per share | $ | 1.17 | 1.34 | 1.25 | 1.30 | 1.27 | 2.50 | 2.58 | |||||||||||||
| Diluted earnings per share | $ | 1.17 | 1.34 | 1.25 | 1.30 | 1.27 | 2.50 | 2.58 | |||||||||||||
| Average basic shares outstanding | 16,122,813 | 16,118,858 | 16,044,223 | 16,018,419 | 16,003,372 | 16,120,836 | 15,999,775 | ||||||||||||||
| Average diluted shares outstanding | 16,122,813 | 16,118,858 | 16,044,223 | 16,018,419 | 16,003,372 | 16,120,836 | 15,999,775 | ||||||||||||||
| PERFORMANCE RATIOS | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Return on average assets | 1.36 | % | 1.61 | % | 1.52 | % | 1.60 | % | 1.64 | % | 1.48 | % | 1.69 | % | |||||||
| Return on average equity | 13.93 | % | 16.41 | % | 16.04 | % | 17.07 | % | 17.23 | % | 15.15 | % | 17.97 | % | |||||||
| Net interest margin (fully tax-equivalent) | 3.63 | % | 3.74 | % | 3.92 | % | 3.98 | % | 4.05 | % | 3.68 | % | 4.16 | % | |||||||
| Efficiency ratio | 52.40 | % | 51.42 | % | 52.57 | % | 49.68 | % | 50.42 | % | 51.90 | % | 51.05 | % | |||||||
| Full-time equivalent employees | 670 | 642 | 651 | 643 | 665 | 670 | 665 | ||||||||||||||
| YIELD ON ASSETS / COST OF FUNDS | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Yield on loans | 6.64 | % | 6.65 | % | 6.53 | % | 6.37 | % | 6.19 | % | 6.65 | % | 6.05 | % | |||||||
| Yield on securities | 2.30 | % | 2.20 | % | 2.18 | % | 2.13 | % | 2.00 | % | 2.25 | % | 1.98 | % | |||||||
| Yield on interest-earning deposits | 5.28 | % | 5.35 | % | 5.31 | % | 5.26 | % | 4.88 | % | 5.31 | % | 4.65 | % | |||||||
| Yield on total earning assets | 6.07 | % | 6.06 | % | 5.95 | % | 5.78 | % | 5.61 | % | 6.06 | % | 5.48 | % | |||||||
| Yield on total assets | 5.72 | % | 5.72 | % | 5.61 | % | 5.45 | % | 5.30 | % | 5.72 | % | 5.18 | % | |||||||
| Cost of deposits | 2.42 | % | 2.25 | % | 1.94 | % | 1.67 | % | 1.36 | % | 2.33 | % | 1.12 | % | |||||||
| Cost of borrowed funds | 3.56 | % | 3.51 | % | 3.15 | % | 2.98 | % | 2.90 | % | 3.53 | % | 2.73 | % | |||||||
| Cost of interest-bearing liabilities | 3.40 | % | 3.27 | % | 2.96 | % | 2.69 | % | 2.37 | % | 3.33 | % | 2.06 | % | |||||||
| Cost of funds (total earning assets) | 2.44 | % | 2.32 | % | 2.03 | % | 1.80 | % | 1.56 | % | 2.38 | % | 1.32 | % | |||||||
| Cost of funds (total assets) | 2.31 | % | 2.19 | % | 1.91 | % | 1.70 | % | 1.48 | % | 2.25 | % | 1.25 | % | |||||||
| MORTGAGE BANKING ACTIVITY | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Total mortgage loans originated | $ | 122,728 | 79,930 | 88,187 | 108,602 | 117,563 | 202,658 | 189,554 | |||||||||||||
| Purchase/construction mortgage loans originated | $ | 103,939 | 57,668 | 75,365 | 93,520 | 100,941 | 161,607 | 157,669 | |||||||||||||
| Refinance mortgage loans originated | $ | 18,789 | 22,262 | 12,822 | 15,082 | 16,622 | 41,051 | 31,885 | |||||||||||||
| Mortgage loans originated with intent to sell | $ | 91,490 | 59,280 | 59,135 | 69,305 | 50,734 | 150,770 | 75,638 | |||||||||||||
| Income on sale of mortgage loans | $ | 2,487 | 2,064 | 1,487 | 2,386 | 1,570 | 4,551 | 2,520 | |||||||||||||
| CAPITAL | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Tangible equity to tangible assets | 9.03 | % | 8.99 | % | 8.91 | % | 8.33 | % | 8.43 | % | 9.03 | % | 8.43 | % | |||||||
| Tier 1 leverage capital ratio | 10.85 | % | 10.88 | % | 10.84 | % | 10.64 | % | 10.73 | % | 10.85 | % | 10.73 | % | |||||||
| Common equity risk-based capital ratio | 10.46 | % | 10.41 | % | 10.07 | % | 10.41 | % | 10.25 | % | 10.46 | % | 10.25 | % | |||||||
| Tier 1 risk-based capital ratio | 11.36 | % | 11.33 | % | 10.99 | % | 11.38 | % | 11.24 | % | 11.36 | % | 11.24 | % | |||||||
| Total risk-based capital ratio | 14.10 | % | 14.05 | % | 13.69 | % | 14.21 | % | 14.03 | % | 14.10 | % | 14.03 | % | |||||||
| Tier 1 capital | $ | 602,835 | 587,888 | 570,730 | 554,634 | 537,802 | 602,835 | 537,802 | |||||||||||||
| Tier 1 plus tier 2 capital | $ | 748,097 | 729,410 | 710,905 | 692,252 | 671,323 | 748,097 | 671,323 | |||||||||||||
| Total risk-weighted assets | $ | 5,306,911 | 5,190,106 | 5,192,970 | 4,872,424 | 4,784,428 | 5,306,911 | 4,784,428 | |||||||||||||
| Book value per common share | $ | 34.15 | 33.29 | 32.38 | 30.16 | 29.89 | 34.15 | 29.89 | |||||||||||||
| Tangible book value per common share | $ | 31.09 | 30.22 | 29.31 | 27.06 | 26.78 | 31.09 | 26.78 | |||||||||||||
| Cash dividend per common share | $ | 0.35 | 0.35 | 0.34 | 0.34 | 0.33 | 0.70 | 0.66 | |||||||||||||
| ASSET QUALITY | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Gross loan charge-offs | $ | 26 | 15 | 53 | 243 | 461 | 41 | 567 | |||||||||||||
| Recoveries | $ | 296 | 439 | 160 | 230 | 305 | 735 | 442 | |||||||||||||
| Net loan charge-offs (recoveries) | $ | (270 | ) | (424 | ) | (107 | ) | 13 | 156 | $ | (694 | ) | 125 | ||||||||
| Net loan charge-offs to average loans | (0.02 | %) | (0.04 | %) | (0.01 | %) | < 0.01% | 0.02 | % | (0.03 | %) | 0.01 | % | ||||||||
| Allowance for credit losses | $ | 55,408 | 51,638 | 49,914 | 48,008 | 44,721 | 55,408 | 44,721 | |||||||||||||
| Allowance to loans | 1.25 | % | 1.19 | % | 1.16 | % | 1.17 | % | 1.10 | % | 1.25 | % | 1.10 | % | |||||||
| Nonperforming loans | $ | 9,129 | 6,040 | 3,415 | 5,889 | 2,099 | 9,129 | 2,099 | |||||||||||||
| Other real estate/repossessed assets | $ | 0 | 200 | 200 | 51 | 661 | 0 | 661 | |||||||||||||
| Nonperforming loans to total loans | 0.21 | % | 0.14 | % | 0.08 | % | 0.14 | % | 0.05 | % | 0.21 | % | 0.05 | % | |||||||
| Nonperforming assets to total assets | 0.16 | % | 0.11 | % | 0.07 | % | 0.11 | % | 0.05 | % | 0.16 | % | 0.05 | % | |||||||
| NONPERFORMING ASSETS - COMPOSITION | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Residential real estate: | |||||||||||||||||||||
| Land development | $ | 1 | 1 | 1 | 1 | 2 | 1 | 2 | |||||||||||||
| Construction | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Owner occupied / rental | $ | 2,288 | 3,370 | 3,095 | 1,913 | 1,793 | 2,288 | 1,793 | |||||||||||||
| Commercial real estate: | |||||||||||||||||||||
| Land development | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Construction | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Owner occupied | $ | 0 | 200 | 270 | 738 | 716 | 0 | 716 | |||||||||||||
| Non-owner occupied | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Non-real estate: | |||||||||||||||||||||
| Commercial assets | $ | 6,840 | 2,669 | 249 | 3,288 | 249 | 6,840 | 249 | |||||||||||||
| Consumer assets | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Total nonperforming assets | $ | 9,129 | 6,240 | 3,615 | 5,940 | 2,760 | 9,129 | 2,760 | |||||||||||||
| NONPERFORMING ASSETS - RECON | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Beginning balance | $ | 6,240 | 3,615 | 5,940 | 2,760 | 8,443 | 3,615 | 7,728 | |||||||||||||
| Additions | $ | 4,570 | 2,802 | 2,166 | 4,163 | 273 | 7,372 | 1,596 | |||||||||||||
| Return to performing status | $ | 0 | 0 | 0 | 0 | 0 | 0 | (31 | ) | ||||||||||||
| Principal payments | $ | (1,481 | ) | (177 | ) | (4,402 | ) | (166 | ) | (5,526 | ) | (1,658 | ) | (6,041 | ) | ||||||
| Sale proceeds | $ | (200 | ) | 0 | (51 | ) | (661 | ) | 0 | (200 | ) | 0 | |||||||||
| Loan charge-offs | $ | 0 | 0 | (38 | ) | (156 | ) | (430 | ) | 0 | (492 | ) | |||||||||
| Valuation write-downs | $ | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||||||||||||
| Ending balance | $ | 9,129 | 6,240 | 3,615 | 5,940 | 2,760 | 9,129 | 2,760 | |||||||||||||
| LOAN PORTFOLIO COMPOSITION | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Commercial: | |||||||||||||||||||||
| Commercial & industrial | $ | 1,275,745 | 1,222,638 | 1,254,586 | 1,184,993 | 1,229,588 | 1,275,745 | 1,229,588 | |||||||||||||
| Land development & construction | $ | 76,247 | 75,091 | 74,752 | 72,921 | 72,682 | 76,247 | 72,682 | |||||||||||||
| Owner occupied comm'l R/E | $ | 732,844 | 719,338 | 717,667 | 671,083 | 659,201 | 732,844 | 659,201 | |||||||||||||
| Non-owner occupied comm'l R/E | $ | 1,059,052 | 1,045,614 | 1,035,684 | 1,000,411 | 957,221 | 1,059,052 | 957,221 | |||||||||||||
| Multi-family & residential rental | $ | 389,390 | 366,961 | 332,609 | 308,229 | 287,285 | 389,390 | 287,285 | |||||||||||||
| Total commercial | $ | 3,533,278 | 3,429,642 | 3,415,298 | 3,237,637 | 3,205,977 | 3,533,278 | 3,205,977 | |||||||||||||
| Retail: | |||||||||||||||||||||
| 1-4 family mortgages | $ | 849,626 | 840,653 | 837,407 | 816,849 | 795,661 | 849,626 | 795,661 | |||||||||||||
| Other consumer | $ | 55,341 | 51,711 | 51,053 | 49,890 | 50,205 | 55,341 | 50,205 | |||||||||||||
| Total retail | $ | 904,967 | 829,364 | 888,460 | 866,739 | 845,866 | 904,967 | 845,866 | |||||||||||||
| Total loans | $ | 4,438,245 | 4,322,006 | 4,303,758 | 4,104,376 | 4,051,843 | 4,438,245 | 4,051,843 | |||||||||||||
| END OF PERIOD BALANCES | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Loans | $ | 4,438,245 | 4,322,006 | 4,303,758 | 4,104,376 | 4,051,843 | 4,438,245 | 4,051,843 | |||||||||||||
| Securities | $ | 669,420 | 630,666 | 638,605 | 613,818 | 630,485 | 669,420 | 630,485 | |||||||||||||
| Interest-earning deposits | $ | 135,766 | 184,625 | 60,125 | 201,436 | 138,663 | 135,766 | 138,663 | |||||||||||||
| Total earning assets (before allowance) | $ | 5,243,431 | 5,137,297 | 5,002,488 | 4,919,630 | 4,820,991 | 5,243,431 | 4,820,991 | |||||||||||||
| Total assets | $ | 5,602,388 | 5,465,953 | 5,353,224 | 5,251,012 | 5,137,587 | 5,602,388 | 5,137,587 | |||||||||||||
| Noninterest-bearing deposits | $ | 1,119,888 | 1,134,995 | 1,247,640 | 1,309,672 | 1,371,633 | 1,119,888 | 1,371,633 | |||||||||||||
| Interest-bearing deposits | $ | 3,026,686 | 2,872,815 | 2,653,278 | 2,591,063 | 2,385,156 | 3,026,686 | 2,385,156 | |||||||||||||
| Total deposits | $ | 4,146,574 | 4,007,810 | 3,900,918 | 3,900,735 | 3,756,789 | 4,146,574 | 3,756,789 | |||||||||||||
| Total borrowed funds | $ | 789,327 | 815,744 | 837,335 | 761,431 | 826,558 | 789,327 | 826,558 | |||||||||||||
| Total interest-bearing liabilities | $ | 3,816,013 | 3,688,559 | 3,490,613 | 3,352,494 | 3,211,714 | 3,816,013 | 3,211,714 | |||||||||||||
| Shareholders' equity | $ | 551,151 | 536,644 | 522,145 | 483,211 | 478,702 | 551,151 | 478,702 | |||||||||||||
| AVERAGE BALANCES | **** | **** | **** | **** | **** | **** | **** | ||||||||||||||
| Loans | $ | 4,396,475 | 4,299,163 | 4,184,070 | 4,054,279 | 4,017,690 | 4,347,819 | 3,973,256 | |||||||||||||
| Securities | $ | 640,627 | 634,099 | 618,517 | 626,714 | 634,607 | 637,363 | 631,137 | |||||||||||||
| Interest-earning deposits | $ | 182,636 | 150,234 | 118,996 | 208,932 | 64,958 | 166,435 | 48,113 | |||||||||||||
| Total earning assets (before allowance) | $ | 5,219,738 | 5,083,496 | 4,921,583 | 4,889,925 | 4,717,255 | 5,151,617 | 4,652,506 | |||||||||||||
| Total assets | $ | 5,533,262 | 5,384,675 | 5,224,238 | 5,180,847 | 4,988,413 | 5,458,969 | 4,922,511 | |||||||||||||
| Noninterest-bearing deposits | $ | 1,139,887 | 1,175,884 | 1,281,201 | 1,359,238 | 1,361,901 | 1,157,886 | 1,426,331 | |||||||||||||
| Interest-bearing deposits | $ | 2,957,011 | 2,790,308 | 2,600,703 | 2,466,834 | 2,278,877 | 2,873,659 | 2,231,902 | |||||||||||||
| Total deposits | $ | 4,096,898 | 3,966,192 | 3,881,904 | 3,826,072 | 3,640,778 | 4,031,545 | 3,658,233 | |||||||||||||
| Total borrowed funds | $ | 800,577 | 816,848 | 773,491 | 806,376 | 827,105 | 808,713 | 752,330 | |||||||||||||
| Total interest-bearing liabilities | $ | 3,757,588 | 3,607,156 | 3,374,194 | 3,273,210 | 3,105,982 | 3,682,372 | 2,984,232 | |||||||||||||
| Shareholders' equity | $ | 540,868 | 527,180 | 495,431 | 484,624 | 473,983 | 534,024 | 483,810 |
Image Exhibit
Exhibit 99.2
