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

May 10, 2010 | About:
10qk

10qk

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Mercantile Bank Corp. (MBWM) filed Quarterly Report for the period ended 2010-03-31.

Mercantile Bank Corp. has a market cap of $50.17 million; its shares were traded at around $5.84 with and P/S ratio of 0.45. The dividend yield of Mercantile Bank Corp. stocks is 0.68%.MBWM is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

During the first three months of 2010, our total assets decreased $3.3 million, and totaled $1.90 billion as of March 31, 2010. The decline in total assets was comprised primarily of a $42.2 million reduction in total loans and leases and a $28.8 million decrease in securities, more than offsetting a $74.7 million increase in cash and cash equivalents. Total deposits increased $18.6 million, while Federal Home Loan Bank (FHLB) advances decreased $15.0 million.

Commercial loans and leases declined by $37.6 million during the first three months of 2010, and at March 31, 2010 totaled $1.37 billion, or 91.6% of the total loan and lease portfolio. The decline in outstanding balances primarily reflects the slowdown in business activity in our markets and the impact of a concerted effort on our part to reduce exposure to certain non-owner occupied commercial real estate (CRE) and automotive-related businesses. The largest decline occurred in the commercial and industrial (C&I) loan portfolio, where total outstanding balances were reduced by about $19.0 million, in large part reflecting the slowdown in business activity and a corresponding reduction in accounts receivable and inventory financings. We would expect to see an increase in commercial line of credit usage when economic conditions improve. During the first three months of 2010, commercial loans collateralized by non-owner occupied real estate declined by about $16.0 million. Our systematic approach to reducing our exposure to certain CRE lending will be pro-longed, given the nature of CRE lending and the current depressed economic conditions; however, we believe that such a reduction is in our best interest when taking into account the increased inherent credit risk, relatively low loan rates and nominal deposit balances associated with targeted borrowing relationships.

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. Nonperforming loans and leases totaled $29.8 million and foreclosed properties/repossessed assets equaled $5.9 million at year-end 2007, compared to $8.6 million and $1.0 million, respectively, at year-end 2006. As of December 31, 2007, nonperforming loans secured by real estate, combined with all 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. During 2006, net loan and lease charge-offs totaled $4.9 million, or 0.29% of average total loans and leases.

As of December 31, 2008, nonperforming assets totaled $57.4 million, or 2.60% of total assets. Nonperforming loans and leases totaled $49.3 million and foreclosed properties/repossessed assets equaled $8.1 million at year-end 2008, compared to $29.8 million and $5.9 million, respectively, at year-end 2007. As of December 31, 2008, nonperforming loans secured by real estate, combined with all foreclosed properties, totaled $52.3 million, or about 91% of total nonperforming assets. Nonperforming loans and foreclosed properties associated with the development of residential real estate totaled $25.3 million, with another $4.2 million in nonperforming loans secured by, and foreclosed properties consisting of, residential properties. Net loan and lease charge-offs during 2008 totaled $19.9 million, or 1.09% of average total loans and leases. The increase in net loan and lease charge-offs during 2008 over prior periods primarily reflects a combination of a higher level of nonperforming loans and leases and the significant decline in property values.

As of December 31, 2009, nonperforming assets totaled $111.7 million, or 5.86% of total assets. Nonperforming loans and leases totaled $85.1 million and foreclosed properties/repossessed assets equaled $26.6 million at year-end 2009. As of December 31, 2009, nonperforming loans secured by CRE, combined with all foreclosed properties, totaled $62.6 million. Nonperforming loans and foreclosed properties associated with the development of residential-related real estate totaled $31.8 million, with another $7.5 million in nonperforming loans secured by, and foreclosed properties consisting of, residential properties. Nonperforming C&I loans and repossessed assets totaled $9.8 million. Net loan and lease charge-offs during 2009 totaled $38.2 million, or 2.24% of average total loans and leases. The increase in net loan and lease charge-offs during 2009 over prior periods primarily reflects a combination of a higher level of nonperforming loans and leases and the continued significant decline in property values.

As of March 31, 2010, nonperforming assets totaled $117.6 million, or 6.18% of total assets. Nonperforming loans and leases totaled $94.5 million and foreclosed properties/repossessed assets equaled $23.1 million. As of March 31, 2010, nonperforming loans secured by CRE, combined with all foreclosed properties, totaled $68.1 million. Nonperforming loans and foreclosed properties associated with the development of residential-related real estate totaled $34.2 million, with another $5.9 million in nonperforming loans secured by, and foreclosed properties consisting of, residential properties. Nonperforming C&I loans and repossessed assets totaled $9.3 million. Net loan and lease charge-offs during the first quarter of 2010 totaled $6.2 million, or an annualized 1.64% of average total loans and leases. Although lower than the level (as a percent of average total loans and leases) charged-off throughout 2009, net loan and lease charge-offs during 2010 are expected to remain elevated compared to historical averages due to a higher volume of nonperforming loans and leases and significant declines in property values.

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10qk
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