GRAND RAPIDS, Mich., July 2, 2019 – Shares of Mercantile Bank Corporation (NASDAQ: MBWM) inclined 1.50% to $32.58. The stock traded total volume of 75.841 shares lower than the average volume of 27.14K shares.
Mercantile Bank Corporation (MBWM) reported net income of $11.80M, or $0.72 per diluted share, for the first quarter of 2019, contrast with net income of $10.90M, or $0.66 per diluted share, for the respective prior-year period. A bank owned life insurance claim and a gain on the sale of a former branch facility during the first quarter of 2019 increased net income by about $1.80M, or $0.11 per diluted share, while the successful collection of certain commercial loan relationships during the prior-year first quarter increased reported net income by about $1.70M, or $0.10 per diluted share. Excluding the impacts of these specific transactions, diluted earnings per share increased $0.05, or nearly 9 percent, during the current-year first quarter contrast to the prior-year first quarter.
Total revenue, which consists of net interest income and noninterest income, was $37.30M during the first quarter of 2019, up $2.70M, or 7.8 percent, from the prior-year first quarter. Net interest income during the first quarter of 2019 was $30.60M, up $0.40M, or 1.5 percent, from the first quarter of 2018, mainly reflecting a higher level of earning assets.
Mercantile recorded provision expense of $0.90M during the first quarter of 2019, contrast to no provision expense during the respective 2018 period. The provision expense recorded during the current-year first quarter mainly reflected ongoing net loan growth. No provision expense was made during the prior-year first quarter in light of net loan recoveries being recorded during the period.
Noninterest income during the first quarter of 2019 was $6.60M, contrast to $4.40M during the prior-year first quarter. Noninterest income during the first quarter of 2019 included a bank owned life insurance claim of $1.30M and a gain on the sale of a former branch facility of $0.60M. Excluding the impacts of these transactions, noninterest income increased $0.40M, or 8.2 percent, during the current-year first quarter contrast to the respective 2018 period. The higher level of noninterest income mainly reflected increased mortgage banking activity income and credit and debit card income. Increased service charges on accounts and payroll processing fees also contributed to the higher level of noninterest income.
Noninterest expense totaled $21.80M during the first quarter of 2019, up $0.70M, or 3.2 percent, from the prior-year first quarter. The higher level of expense mainly resulted from increased salary costs, mainly reflecting pay increases for all hourly employees that went into effect on April 1, 2018, and annual employee merit pay increases.
As of March 31, 2019, total assets were $3.55B, up $188.0M, or 5.6 percent, from December 31, 2018. Interest-earning deposits and total loans increased $158.0M and $46.60M, respectively, over the same time period. The growth in interest-earning deposits mainly stemmed from certain deposit-gathering programs and a boost in wholesale funds. During the twelve months ended March 31, 2019, total loans were up $248.0M, or 9.7 percent. About $125.0M in commercial term loans to new and existing borrowers were originated during the first quarter of 2019, as ongoing sales and relationship-building efforts resulted in increased lending opportunities. As of March 31, 2019, unfunded commitments on commercial construction and development loans totaled about $147.0M, which are expected to be mostly funded over the next 12 to 18 months.
Total deposits at March 31, 2019 were $2.61B, up $147.0M from December 31, 2018. Local deposits and brokered deposits were up $75.00M and $72.30M, respectively, during the first three months of 2019. The growth in local deposits was mainly driven by a special time deposit campaign that was introduced in mid first quarter and that has since ended, together with a boost in business money market accounts. Wholesale funds were $570.0M, or about 18 percent of total funds, as of March 31, 2019, contrast to $474.0M, or about 16 percent of total funds, as of December 31, 2018. A substantial portion of the growth in wholesale funds during the first quarter of 2019 occurred in January; the monies were used mainly to fund strong loan growth recorded in late 2018 and early 2019 and offset typical and expected seasonal business deposit withdrawals used for bonus and tax payments, as well as to maintain sufficient balance sheet liquidity.
Nonperforming assets at March 31, 2019, were $4.50M, or 0.1 percent of total assets, contrast to $5.00M, or 0.2 percent of total assets, at December 31, 2018, and $8.10M, or 0.3 percent of total assets, at March 31, 2018. The decline in nonperforming assets during the twelve months ended March 31, 2019, mainly reflects successful loan collection efforts and sales of bank-owned properties that were no longer being used or considered for use as bank facilities. The level of past due loans remains nominal and loan relationships on the internal watch list have remained relatively consistent in number and dollar volume.
During the first quarter of 2019, loan charge-offs totaled $0.20M while recoveries of prior period charge-offs equaled $0.10M, providing for net loan charge-offs of $0.10M, or an annualized 0.01 percent of average total loans.
Shareholders’ equity totaled $384.0M as of March 31, 2019, a boost of $8.50M from year-end 2018. The Bank’s capital position remains above “well-capitalized” with a total risk-based capital ratio of 12.4 percent as of March 31, 2019, contrast to 12.3 percent at December 31, 2018. At March 31, 2019, the Bank had about $77.0M in excess of the 10.0 percent minimum regulatory threshold required to be considered a “well-capitalized” institution. Mercantile reported 16,421,025 total shares outstanding at March 31, 2019.
As part of a $20.0M common stock repurchase program declared in January 2015 and later expanded by $15.0M in April 2016, Mercantile repurchased about 119.0K shares for $3.60M, or a weighted average all-in cost per share of $30.23, during the first quarter of 2019. Since the program’s inception, Mercantile repurchased about 1,275.0K shares for $29.00M, or a weighted average all-in cost per share of $22.77. Future share repurchases totaling $6.00M can be made under the program.
MBWM has the market capitalization of $527.14M and its EPS growth ratio for the past five years was 5.30%. The return on assets ratio of the Company was 1.30% while its return on investment ratio stands at 25.90%. Price to sales ratio was 3.62 while 55.30% of the stock was owned by institutional investors.