Mercantile Bank Corporation Announces Solid Second Quarter Results

About this update from Mercantile Bank Corporation

Strong local deposit and commercial loan growth and ongoing strength in asset quality metrics highlight quarter GRAND RAPIDS, Mich. , July 16, 2024 /PRNewswire/ -- 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 nonreal-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 nonreal-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, 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. Mercantile Bank Corporation Second Quarter 2024 Results MERCANTILE BANK CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) JUNE 30 , DECEMBER 31 , JUNE 30 , 2024 2023 2023 ASSETS Cash and due from banks $ 61,863,000 $ 70,408,000 $ 69,133,000 Interest-earning deposits 135,766,000 60,125,000 138,663,000 Total cash and cash equivalents 197,629,000 130,533,000 207,796,000 Securities available for sale 647,907,000 617,092,000 608,972,000 Federal Home Loan Bank stock 21,513,000 21,513,000 21,513,000 Mortgage loans held for sale 22,126,000 18,607,000 11,942,000 Loans 4,438,245,000 4,303,758,000 4,051,843,000 Allowance for credit losses (55,408,000) (49,914,000) (44,721,000) Loans, net 4,382,837,000 4,253,844,000 4,007,122,000 Premises and equipment, net 50,158,000 50,928,000 52,291,000 Bank owned life insurance 86,001,000 85,668,000 81,500,000 Goodwill 49,473,000 49,473,000 49,473,000 Other assets 144,744,000 125,566,000 96,978,000 Total assets $ 5,602,388,000 $ 5,353,224,000 $ 5,137,587,000 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-bearing $ 1,119,888,000 $ 1,247,640,000 $ 1,371,633,000 Interest-bearing 3,026,686,000 2,653,278,000 2,385,156,000 Total deposits 4,146,574,000 3,900,918,000 3,756,789,000 Securities sold under agreements to repurchase 221,898,000 229,734,000 219,457,000 Federal Home Loan Bank advances 427,083,000 467,910,000 467,910,000 Subordinated debentures 49,987,000 49,644,000 49,301,000 Subordinated notes 89,143,000 88,971,000 88,800,000 Accrued interest and other liabilities 116,552,000 93,902,000 76,628,000 Total liabilities 5,051,237,000 4,831,079,000 4,658,885,000 SHAREHOLDERS' EQUITY Common stock 297,591,000 295,106,000 292,906,000 Retained earnings 306,804,000 277,526,000 247,313,000 Accumulated other comprehensive income/(loss) (53,244,000) (50,487,000) (61,517,000) Total shareholders' equity 551,151,000 522,145,000 478,702,000 Total liabilities and shareholders' equity $ 5,602,388,000 $ 5,353,224,000 $ 5,137,587,000 Mercantile Bank Corporation Second Quarter 2024 Results MERCANTILE BANK CORPORATION CONSOLIDATED REPORTS OF INCOME (Unaudited) 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 $ 72,819,000 $ 62,006,000 $ 144,089,000 $ 119,159,000 Investment securities 3,624,000 3,111,000 7,046,000 6,118,000 Interest-earning deposits 2,436,000 801,000 4,469,000 1,125,000 Total interest income 78,879,000 65,918,000 155,604,000 126,402,000 INTEREST EXPENSE Deposits 24,710,000 12,379,000 46,934,000 20,286,000 Short-term borrowings 1,757,000 914,000 3,412,000 1,373,000 Federal Home Loan Bank advances 3,252,000 3,051,000 6,651,000 4,845,000 Other borrowed money 2,088,000 2,023,000 4,173,000 3,963,000 Total interest expense 31,807,000 18,367,000 61,170,000 30,467,000 Net interest income 47,072,000 47,551,000 94,434,000 95,935,000 Provision for credit losses 3,500,000 2,000,000 4,800,000 2,600,000 Net interest income after provision for credit losses 43,572,000 45,551,000 89,634,000 93,335,000 NONINTEREST INCOME Service charges on accounts 1,692,000 1,064,000 3,224,000 2,041,000 Mortgage banking income 3,023,000 1,835,000 5,365,000 3,050,000 Credit and debit card income 2,266,000 2,426,000 4,387,000 4,485,000 Interest rate swap income 766,000 748,000 2,104,000 1,785,000 Payroll services 686,000 572,000 1,582,000 1,317,000 Earnings on bank owned life insurance 437,000 402,000 1,609,000 802,000 Other income 811,000 598,000 2,277,000 1,117,000 Total noninterest income 9,681,000 7,645,000 20,548,000 14,597,000 NONINTEREST EXPENSE Salaries and benefits 17,913,000 16,461,000 36,150,000 33,143,000 Occupancy 2,220,000 2,098,000 4,509,000 4,387,000 Furniture and equipment 923,000 878,000 1,852,000 1,700,000 Data processing costs 3,415,000 2,881,000 6,704,000 6,043,000 Charitable foundation contributions 4,000 2,000 707,000 12,000 Other expense 5,262,000 5,509,000 9,758,000 11,144,000 Total noninterest expense 29,737,000 27,829,000 59,680,000 56,429,000 Income before federal income tax expense 23,516,000 25,367,000 50,502,000 51,503,000 Federal income tax expense 4,730,000 5,010,000 10,154,000 10,171,000 Net Income $ 18,786,000 $ 20,357,000 $ 40,348,000 $ 41,332,000 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 other interest-earning assets 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 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 %) 0.02 % (0.03 %) 0.01 % Allowance for credit losses $ 55,408 51,638 49,914 48,006 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 & home equity $ 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 $ 904,967 892,364 888,460 866,739 845,866 904,967 845,866 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 View original content to download multimedia: https://www.prnewswire.com/news-releases/mercantile-bank-corporation-announces-solid-second-quarter-results-302197286.html SOURCE Mercantile Bank Corporation

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