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Mercantile Bank Corp. Reports Operating Results (10-Q)

November 06, 2009 | About:

Mercantile Bank Corp. (NASDAQ:MBWM) filed Quarterly Report for the period ended 2009-09-30.

Mercantile Bank Corporation serves businesses and consumers across Grand Rapids and Kent County with a full range of mortgage lending deposit and checking products and services in a friendly hometown banking environment. Mercantile Bank Corp. has a market cap of $29.9 million; its shares were traded at around $3.49 with and P/S ratio of 0.2. The dividend yield of Mercantile Bank Corp. stocks is 1.2%. Mercantile Bank Corp. had an annual average earning growth of 12.5% over the past 5 years.

Highlight of Business Operations:

During the first nine months of 2009, our total assets decreased from $2,208.0 million on December 31, 2008, to $2,017.4 million on September 30, 2009. This represents a decrease in total assets of $190.6 million, or 8.6%. The decline in total assets was comprised primarily of a $242.7 million decrease in total loans and leases and a reduction of $4.3 million in securities, partially offset by a $40.9 million increase in cash and cash equivalents. The reduction in total assets provided for a $148.6 million decline in deposits and a decrease of $45.0 million in Federal Home Loan Bank advances, partially offset by an $8.4 million increase in securities sold under agreements to repurchase (repurchase agreements).

As of December 31, 2007, nonperforming assets totaled $35.7 million, or 1.68% of total assets, an increase from the $9.6 million, or 0.46% of total assets, as of December 31, 2006. As of December 31, 2007, nonperforming loans secured by real estate, combined with foreclosed properties, totaled $28.6 million, or about 80% of total nonperforming assets. Nonperforming loans and foreclosed properties associated with the development of residential real estate totaled $11.1 million, with another $3.2 million in nonperforming loans secured by, and foreclosed properties consisting of, residential properties. Net loan and lease charge-offs during 2007 totaled $6.7 million, or 0.38% of average total loans and leases. Net loan and lease charge-offs during the fourth quarter of 2007 totaled $3.9 million, or about 58%, of the total net loan and lease charge-offs for all of 2007. During 2006, net loan and lease charge-offs totaled $4.9 million, or 0.29% of average total loans and leases.

As of September 30, 2009, nonperforming assets totaled $110.8 million, or 5.5% of total assets, an increase from the $57.4 million, or 2.6% of total assets, as of December 31, 2008, and from the $47.8 million, or 2.2% of total assets, as of September 30, 2008. As of September 30, 2009, nonperforming loans secured by CRE, combined with foreclosed properties, totaled $62.8 million. Nonperforming loans and foreclosed properties associated with the development of residential real estate totaled $26.7 million, with another $6.8 million in nonperforming loans secured by, and foreclosed properties consisting of, residential properties. Nonperforming C&I loans and repossessed assets totaled $14.5 million. Net loan and lease charge-offs during the first nine months of 2009 totaled $27.4 million, or an annualized 2.1% of average total loans and leases, compared to $13.5 million, or an annualized 1.0% of average total loans and leases, during the first nine months of 2008.

Securities decreased $4.3 million during the first nine months of 2009, totaling $238.5 million as of September 30, 2009. Proceeds from called U.S. Government Agency bonds totaled $26.6 million during the first nine months of 2009, with another $13.2 million received from principal paydowns on mortgage-backed securities. In addition, $3.5 million was received from the matured and called tax-exempt municipal general obligation bonds. A majority of the proceeds were invested back into the securities portfolio, with $35.8 million invested in U.S. Government Agency bonds, $3.9 million invested in mortgage-backed securities and $1.0 million invested in tax-exempt municipal general obligation bonds. At September 30, 2009, the securities portfolio was comprised of U.S. Government Agency bonds (30%), U.S. Government Agency issued or guaranteed mortgage-backed securities (28%), tax-exempt municipal general obligations and revenue bonds (26%), Michigan Strategic Fund bonds (9%), Federal Home Loan Bank stock (7%) and mutual funds (less than 1%).

Deposits decreased $148.6 million during the first nine months of 2009, totaling $1,451.0 million at September 30, 2009. Local deposits increased $185.7 million, while out-of-area deposits decreased $334.3 million. As a percent of total deposits, local deposits equaled 45.2% on September 30, 2009, an increase from 29.4% as of December 31, 2008. Noninterest-bearing demand deposits, comprising 7.5% of total deposits, decreased $2.2 million during the first nine months of 2009. Savings deposits (2.9% of total deposits) decreased $8.4 million, interest-bearing checking deposits (4.6% of total deposits) increased $16.8 million and money market deposit accounts (2.1% of total deposits) increased $6.3 million during the first nine months of 2009. Local certificates of deposit, comprising 28.1% of total deposits, increased $173.2 million during the first nine months of 2009.

We recorded a net loss attributable to common shares for the third quarter of 2009 of $5.6 million ($0.66 per basic and diluted share), compared with net income of $1.1 million ($0.13 per basic and diluted share) recorded during the third quarter of 2008. We recorded a net loss attributable to common shares for the first nine months of 2009 of $16.5 million ($1.94 per basic and diluted share), compared with a net loss of $5.3 million ($0.62 per basic and diluted share) recorded during the first nine months of 2008. The net losses attributable to common shares for the third quarter of 2009 and the f

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