Mercantile Bank Corporation Reports Strong First Quarter 2017 Results
The first quarter was highlighted by:
- Robust earnings performance and strong capital position
- Solid net interest margin
- Growth in fee income, most notably mortgage banking activity income
- Lower overhead costs
- Strong asset quality, as depicted by low levels of nonperforming assets and loans in the 30- to 89-days delinquent category
- Annualized loan growth of approximately 11 percent
- New commercial term loan originations of approximately
$130 million - Sustained strength in the commercial loan pipeline
- Expansion of operating area into
Southeast Michigan
"We are very excited to begin 2017 with a healthy quarter that reflects sustained strength in profitability and loan originations," said
Operating Results
Total revenue, which consists of net interest income and noninterest income, was
The net interest margin was 3.73 percent in the first quarter of 2017, up slightly from 3.72 percent in the fourth quarter of 2016 and down from 3.92 percent in the prior-year first quarter. The net interest margin during the current-year first quarter and the linked quarter were virtually the same in light of a relatively stable yield on average earning assets and cost of funds. The yield on average earning assets during the first quarter of 2017 was negatively impacted by a decreased yield on loans, reflecting the ongoing low interest rate environment, competitive pressures, and a lower level of purchased loan discount accretion; however, the negative impact of the lower loan yield was substantially offset by the positive impact of a change in earning asset mix, resulting in the relatively steady yield on average earning assets. The change in earning asset mix primarily reflects loan growth and a reduction in interest-earning deposit balances. Higher-yielding average loans represented 85.6 percent of average earning assets during the first quarter of 2017, up from 83.6 percent during the linked quarter, while lower-yielding average interest-earning deposit balances represented 2.2 percent of average earning assets during the current-year first quarter, down from 4.5 percent during the linked quarter. The decline in the net interest margin in the first quarter of 2017 compared to the respective 2016 period primarily resulted from a decreased yield on loans, reflecting the aforementioned factors. The negative impact of these factors was somewhat mitigated by increased rates on certain variable-rate loans stemming from the
Net interest income and the net interest margin during the first quarter of 2017 and the prior-year first quarter were affected by purchase accounting accretion and amortization entries associated with the fair value measurements recorded effective
Mercantile recorded a
Noninterest income during the first quarter of 2017 was
Noninterest expense totaled
Balance Sheet
As of
Commercial-related real estate loans continue to comprise a majority of Mercantile's loan portfolio, representing approximately 56 percent of total loans as of
As of
Asset Quality
Nonperforming assets at
Capital Position
Shareholders' equity totaled
No shares were repurchased during the first quarter of 2017 as part of the
About
Based in
Forward-Looking Statements
This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that 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; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; 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; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the
|
||||||
CONSOLIDATED BALANCE SHEETS |
||||||
(Unaudited) |
||||||
|
|
|
||||
2017 |
2016 |
2016 |
||||
ASSETS |
||||||
Cash and due from banks |
$ |
40,313,000 |
$ |
50,200,000 |
$ |
38,367,000 |
Interest-earning deposits |
12,663,000 |
133,396,000 |
62,814,000 |
|||
Total cash and cash equivalents |
52,976,000 |
183,596,000 |
101,181,000 |
|||
Securities available for sale |
332,441,000 |
328,060,000 |
343,805,000 |
|||
|
9,236,000 |
8,026,000 |
7,567,000 |
|||
Loans |
2,441,314,000 |
2,378,620,000 |
2,295,668,000 |
|||
Allowance for loan losses |
(18,276,000) |
(17,961,000) |
(16,262,000) |
|||
Loans, net |
2,423,038,000 |
2,360,659,000 |
2,279,406,000 |
|||
Premises and equipment, net |
45,848,000 |
45,456,000 |
45,963,000 |
|||
Bank owned life insurance |
66,211,000 |
67,198,000 |
59,248,000 |
|||
|
49,473,000 |
49,473,000 |
49,473,000 |
|||
Core deposit intangible |
9,321,000 |
9,957,000 |
11,916,000 |
|||
Other assets |
30,375,000 |
30,146,000 |
27,497,000 |
|||
Total assets |
$ |
3,018,919,000 |
$ |
3,082,571,000 |
$ |
2,926,056,000 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Deposits: |
||||||
Noninterest-bearing |
$ |
757,706,000 |
$ |
810,600,000 |
$ |
678,100,000 |
Interest-bearing |
1,520,310,000 |
1,564,385,000 |
1,587,022,000 |
|||
Total deposits |
2,278,016,000 |
2,374,985,000 |
2,265,122,000 |
|||
Securities sold under agreements to repurchase |
126,679,000 |
131,710,000 |
162,312,000 |
|||
|
205,000,000 |
175,000,000 |
98,000,000 |
|||
Subordinated debentures |
45,006,000 |
44,835,000 |
44,324,000 |
|||
Accrued interest and other liabilities |
16,168,000 |
15,230,000 |
17,745,000 |
|||
Total liabilities |
2,670,869,000 |
2,741,760,000 |
2,587,503,000 |
|||
SHAREHOLDERS' EQUITY |
||||||
Common stock |
307,371,000 |
305,488,000 |
302,360,000 |
|||
Retained earnings |
45,596,000 |
40,904,000 |
33,697,000 |
|||
Accumulated other comprehensive income/(loss) |
(4,917,000) |
(5,581,000) |
2,496,000 |
|||
Total shareholders' equity |
348,050,000 |
340,811,000 |
338,553,000 |
|||
Total liabilities and shareholders' equity |
$ |
3,018,919,000 |
$ |
3,082,571,000 |
$ |
2,926,056,000 |
|
||||||||
CONSOLIDATED REPORTS OF INCOME |
||||||||
(Unaudited) |
||||||||
THREE MONTHS ENDED |
THREE MONTHS ENDED |
|||||||
|
|
|||||||
INTEREST INCOME |
||||||||
Loans, including fees |
$ |
26,733,000 |
$ |
26,779,000 |
||||
Investment securities |
1,828,000 |
2,053,000 |
||||||
Other interest-earning assets |
143,000 |
57,000 |
||||||
Total interest income |
28,704,000 |
28,889,000 |
||||||
INTEREST EXPENSE |
||||||||
Deposits |
1,868,000 |
1,866,000 |
||||||
Short-term borrowings |
51,000 |
44,000 |
||||||
|
655,000 |
350,000 |
||||||
Other borrowed money |
621,000 |
747,000 |
||||||
Total interest expense |
3,195,000 |
3,007,000 |
||||||
Net interest income |
25,509,000 |
25,882,000 |
||||||
Provision for loan losses |
600,000 |
600,000 |
||||||
Net interest income after |
||||||||
provision for loan losses |
24,909,000 |
25,282,000 |
||||||
NONINTEREST INCOME |
||||||||
Service charges on accounts |
1,018,000 |
948,000 |
||||||
Credit and debit card income |
1,106,000 |
1,015,000 |
||||||
Mortgage banking income |
1,123,000 |
598,000 |
||||||
Earnings on bank owned life insurance |
1,738,000 |
286,000 |
||||||
Other income |
866,000 |
4,239,000 |
||||||
Total noninterest income |
5,851,000 |
7,086,000 |
||||||
NONINTEREST EXPENSE |
||||||||
Salaries and benefits |
11,272,000 |
10,995,000 |
||||||
Occupancy |
1,554,000 |
1,604,000 |
||||||
Furniture and equipment |
535,000 |
525,000 |
||||||
Data processing costs |
2,011,000 |
1,992,000 |
||||||
|
210,000 |
392,000 |
||||||
Other expense |
4,194,000 |
4,360,000 |
||||||
Total noninterest expense |
19,776,000 |
19,868,000 |
||||||
Income before federal income |
||||||||
tax expense |
10,984,000 |
12,500,000 |
||||||
Federal income tax expense |
3,369,000 |
3,951,000 |
||||||
Net Income |
$ |
7,615,000 |
$ |
8,549,000 |
||||
Basic earnings per share |
|
|
||||||
Diluted earnings per share |
|
|
||||||
Average basic shares outstanding |
16,434,647 |
16,291,654 |
||||||
Average diluted shares outstanding |
16,449,210 |
16,325,475 |
|
|||||||||||
CONSOLIDATED FINANCIAL HIGHLIGHTS |
|||||||||||
(Unaudited) |
|||||||||||
Quarterly |
|||||||||||
(dollars in thousands except per share data) |
2017 |
2016 |
2016 |
2016 |
2016 |
||||||
1st Qtr |
4th Qtr |
3rd Qtr |
2nd Qtr |
1st Qtr |
|||||||
EARNINGS |
|||||||||||
Net interest income |
$ |
25,509 |
26,435 |
26,450 |
27,100 |
25,882 |
|||||
Provision for loan losses |
$ |
600 |
600 |
600 |
1,100 |
600 |
|||||
Noninterest income |
$ |
5,851 |
4,604 |
5,284 |
4,064 |
7,086 |
|||||
Noninterest expense |
$ |
19,776 |
18,394 |
19,663 |
19,193 |
19,868 |
|||||
Net income before federal income |
|||||||||||
tax expense |
$ |
10,984 |
12,045 |
11,471 |
10,871 |
12,500 |
|||||
Net income |
$ |
7,615 |
8,085 |
7,845 |
7,434 |
8,549 |
|||||
Basic earnings per share |
$ |
0.46 |
0.49 |
0.48 |
0.46 |
0.52 |
|||||
Diluted earnings per share |
$ |
0.46 |
0.49 |
0.48 |
0.46 |
0.52 |
|||||
Average basic shares outstanding |
16,434,647 |
16,352,359 |
16,282,804 |
16,240,966 |
16,291,654 |
||||||
Average diluted shares outstanding |
16,449,210 |
16,374,117 |
16,307,350 |
16,268,839 |
16,325,475 |
||||||
PERFORMANCE RATIOS |
|||||||||||
Return on average assets |
1.02% |
1.05% |
1.02% |
1.01% |
1.19% |
||||||
Return on average equity |
8.99% |
9.35% |
9.00% |
8.79% |
10.18% |
||||||
Net interest margin (fully tax-equivalent) |
3.73% |
3.72% |
3.76% |
4.01% |
3.92% |
||||||
Efficiency ratio |
63.06% |
59.26% |
61.96% |
61.59% |
60.26% |
||||||
Full-time equivalent employees |
617 |
616 |
612 |
633 |
612 |
||||||
YIELD ON ASSETS / COST OF FUNDS |
|||||||||||
Yield on loans |
4.54% |
4.65% |
4.57% |
4.60% |
4.72% |
||||||
Yield on securities |
2.35% |
2.27% |
2.71% |
3.99% |
2.52% |
||||||
Yield on other interest-earning assets |
0.81% |
0.51% |
0.51% |
0.51% |
0.54% |
||||||
Yield on total earning assets |
4.20% |
4.18% |
4.22% |
4.45% |
4.37% |
||||||
Yield on total assets |
3.88% |
3.87% |
3.90% |
4.12% |
4.03% |
||||||
Cost of deposits |
0.33% |
0.33% |
0.33% |
0.32% |
0.33% |
||||||
Cost of borrowed funds |
1.53% |
1.45% |
1.41% |
1.42% |
1.53% |
||||||
Cost of interest-bearing liabilities |
0.68% |
0.68% |
0.66% |
0.64% |
0.64% |
||||||
Cost of funds (total earning assets) |
0.47% |
0.46% |
0.46% |
0.44% |
0.45% |
||||||
Cost of funds (total assets) |
0.43% |
0.42% |
0.42% |
0.41% |
0.42% |
||||||
PURCHASE ACCOUNTING ADJUSTMENTS |
|||||||||||
Loan portfolio - increase interest income |
$ |
832 |
1,672 |
1,002 |
935 |
1,316 |
|||||
Trust preferred - increase interest expense |
$ |
171 |
171 |
171 |
171 |
171 |
|||||
Core deposit intangible - increase overhead |
$ |
636 |
636 |
636 |
688 |
715 |
|||||
MORTGAGE BANKING ACTIVITY |
|||||||||||
Total mortgage loans originated |
$ |
38,365 |
46,727 |
52,340 |
39,559 |
24,446 |
|||||
Purchase mortgage loans originated |
$ |
21,523 |
21,962 |
25,542 |
21,995 |
8,752 |
|||||
Refinance mortgage loans originated |
$ |
16,842 |
24,765 |
26,798 |
17,564 |
15,694 |
|||||
Total mortgage loans sold |
$ |
18,463 |
30,081 |
35,826 |
26,229 |
18,922 |
|||||
Net gain on sale of mortgage loans |
$ |
867 |
1,236 |
1,173 |
746 |
543 |
|||||
CAPITAL |
|||||||||||
Tangible equity to tangible assets |
9.77% |
9.31% |
9.63% |
9.66% |
9.68% |
||||||
Tier 1 leverage capital ratio |
11.53% |
11.17% |
11.28% |
11.41% |
11.43% |
||||||
Common equity risk-based capital ratio |
10.83% |
10.88% |
10.83% |
10.73% |
10.86% |
||||||
Tier 1 risk-based capital ratio |
12.39% |
12.47% |
12.40% |
12.31% |
12.49% |
||||||
Total risk-based capital ratio |
13.05% |
13.13% |
13.05% |
12.95% |
13.12% |
||||||
Tier 1 capital |
$ |
341,708 |
336,316 |
337,054 |
330,710 |
324,296 |
|||||
Tier 1 plus tier 2 capital |
$ |
359,984 |
354,278 |
354,580 |
347,819 |
340,557 |
|||||
Total risk-weighted assets |
$ |
2,757,616 |
2,697,727 |
2,718,012 |
2,685,823 |
2,596,517 |
|||||
Book value per common share |
$ |
21.13 |
20.76 |
21.44 |
21.18 |
20.86 |
|||||
Tangible book value per common share |
$ |
17.56 |
17.14 |
17.76 |
17.45 |
17.07 |
|||||
Cash dividend per common share |
$ |
0.18 |
0.67 |
0.17 |
0.16 |
0.16 |
|||||
ASSET QUALITY |
|||||||||||
Gross loan charge-offs |
$ |
456 |
970 |
363 |
397 |
475 |
|||||
Recoveries |
$ |
171 |
805 |
179 |
145 |
456 |
|||||
Net loan charge-offs (recoveries) |
$ |
285 |
165 |
184 |
252 |
19 |
|||||
Net loan charge-offs (recoveries) to average loans |
0.05% |
0.03% |
0.03% |
0.04% |
< 0.01% |
||||||
Allowance for loan losses |
$ |
18,276 |
17,961 |
17,526 |
17,110 |
16,262 |
|||||
Allowance to originated loans |
0.92% |
0.95% |
0.93% |
0.94% |
0.94% |
||||||
Nonperforming loans |
$ |
7,292 |
5,939 |
4,669 |
5,168 |
4,842 |
|||||
Other real estate/repossessed assets |
$ |
495 |
469 |
790 |
815 |
1,478 |
|||||
Nonperforming loans to total loans |
0.30% |
0.25% |
0.19% |
0.22% |
0.21% |
||||||
Nonperforming assets to total assets |
0.26% |
0.21% |
0.18% |
0.20% |
0.22% |
||||||
NONPERFORMING ASSETS - COMPOSITION |
|||||||||||
Residential real estate: |
|||||||||||
Land development |
$ |
0 |
16 |
23 |
42 |
30 |
|||||
Construction |
$ |
0 |
0 |
0 |
319 |
0 |
|||||
Owner occupied / rental |
$ |
2,972 |
2,883 |
2,945 |
2,893 |
2,955 |
|||||
Commercial real estate: |
|||||||||||
Land development |
$ |
80 |
95 |
110 |
125 |
140 |
|||||
Construction |
$ |
0 |
0 |
0 |
0 |
0 |
|||||
Owner occupied |
$ |
1,221 |
610 |
1,597 |
2,263 |
2,877 |
|||||
Non-owner occupied |
$ |
421 |
488 |
691 |
134 |
151 |
|||||
Non-real estate: |
|||||||||||
Commercial assets |
$ |
3,076 |
2,293 |
65 |
165 |
137 |
|||||
Consumer assets |
$ |
17 |
23 |
28 |
42 |
30 |
|||||
Total nonperforming assets |
$ |
7,787 |
6,408 |
5,459 |
5,983 |
6,320 |
|||||
NONPERFORMING ASSETS - RECON |
|||||||||||
Beginning balance |
$ |
6,408 |
5,459 |
5,983 |
6,320 |
6,737 |
|||||
Additions - originated loans & former branches |
$ |
2,987 |
2,953 |
1,172 |
1,096 |
1,123 |
|||||
Merger-related activity |
$ |
0 |
33 |
0 |
0 |
0 |
|||||
Return to performing status |
$ |
(113) |
(13) |
0 |
0 |
0 |
|||||
Principal payments |
$ |
(1,289) |
(1,386) |
(1,509) |
(495) |
(774) |
|||||
Sale proceeds |
$ |
(56) |
(308) |
(76) |
(642) |
(402) |
|||||
Loan charge-offs |
$ |
(135) |
(263) |
(101) |
(261) |
(356) |
|||||
Valuation write-downs |
$ |
(15) |
(67) |
(10) |
(35) |
(8) |
|||||
Ending balance |
$ |
7,787 |
6,408 |
5,459 |
5,983 |
6,320 |
|||||
LOAN PORTFOLIO COMPOSITION |
|||||||||||
Commercial: |
|||||||||||
Commercial & industrial |
$ |
757,219 |
713,903 |
750,330 |
750,136 |
714,612 |
|||||
Land development & construction |
$ |
31,924 |
34,828 |
37,455 |
40,529 |
39,630 |
|||||
Owner occupied comm'l R/E |
$ |
452,382 |
450,464 |
440,705 |
438,798 |
441,662 |
|||||
Non-owner occupied comm'l R/E |
$ |
768,565 |
748,269 |
741,443 |
716,930 |
666,013 |
|||||
Multi-family & residential rental |
$ |
113,257 |
117,883 |
118,103 |
113,361 |
112,533 |
|||||
Total commercial |
$ |
2,123,347 |
2,065,347 |
2,088,036 |
2,059,754 |
1,974,450 |
|||||
Retail: |
|||||||||||
1-4 family mortgages |
$ |
205,850 |
195,226 |
190,715 |
189,119 |
185,535 |
|||||
Home equity & other consumer |
$ |
112,117 |
118,047 |
127,626 |
131,067 |
135,683 |
|||||
Total retail |
$ |
317,967 |
313,273 |
318,341 |
320,186 |
321,218 |
|||||
Total loans |
$ |
2,441,314 |
2,378,620 |
2,406,377 |
2,379,940 |
2,295,668 |
|||||
END OF PERIOD BALANCES |
|||||||||||
Loans |
$ |
2,441,314 |
2,378,620 |
2,406,377 |
2,379,940 |
2,295,668 |
|||||
Securities |
$ |
341,677 |
336,086 |
333,469 |
331,478 |
351,372 |
|||||
Other interest-earning assets |
$ |
12,663 |
133,396 |
85,848 |
46,896 |
62,814 |
|||||
Total earning assets (before allowance) |
$ |
2,795,654 |
2,848,102 |
2,825,694 |
2,758,314 |
2,709,854 |
|||||
Total assets |
$ |
3,018,919 |
3,082,571 |
3,063,964 |
2,999,936 |
2,926,056 |
|||||
Noninterest-bearing deposits |
$ |
757,706 |
810,600 |
731,663 |
733,573 |
678,100 |
|||||
Interest-bearing deposits |
$ |
1,520,310 |
1,564,385 |
1,597,774 |
1,546,145 |
1,587,022 |
|||||
Total deposits |
$ |
2,278,016 |
2,374,985 |
2,329,437 |
2,279,718 |
2,265,122 |
|||||
Total borrowed funds |
$ |
380,009 |
354,902 |
372,917 |
362,665 |
308,148 |
|||||
Total interest-bearing liabilities |
$ |
1,900,319 |
1,919,287 |
1,970,691 |
1,908,810 |
1,895,170 |
|||||
Shareholders' equity |
$ |
348,050 |
340,811 |
349,471 |
344,577 |
338,553 |
|||||
AVERAGE BALANCES |
|||||||||||
Loans |
$ |
2,390,030 |
2,372,510 |
2,391,620 |
2,342,333 |
2,273,960 |
|||||
Securities |
$ |
339,537 |
336,493 |
328,993 |
340,866 |
354,499 |
|||||
Other interest-earning assets |
$ |
61,376 |
127,790 |
91,590 |
49,365 |
42,008 |
|||||
Total earning assets (before allowance) |
$ |
2,790,943 |
2,836,793 |
2,812,203 |
2,732,564 |
2,670,467 |
|||||
Total assets |
$ |
3,016,871 |
3,064,974 |
3,040,324 |
2,952,184 |
2,892,229 |
|||||
Noninterest-bearing deposits |
$ |
766,031 |
773,137 |
733,600 |
702,293 |
652,338 |
|||||
Interest-bearing deposits |
$ |
1,542,078 |
1,561,539 |
1,572,424 |
1,548,509 |
1,588,930 |
|||||
Total deposits |
$ |
2,308,109 |
2,334,676 |
2,306,024 |
2,250,802 |
2,241,268 |
|||||
Total borrowed funds |
$ |
352,614 |
366,905 |
373,973 |
347,191 |
299,956 |
|||||
Total interest-bearing liabilities |
$ |
1,894,692 |
1,928,444 |
1,946,397 |
1,895,700 |
1,888,886 |
|||||
Shareholders' equity |
$ |
343,344 |
343,122 |
345,944 |
339,357 |
336,870 |
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/mercantile-bank-corporation-reports-strong-first-quarter-2017-results-300440341.html
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