Mercantile Bank narrows 1st-quarter loss, but says credit losses likely to continue

Mercantile Bank 1Q loss narrows, beats Street view

GRAND RAPIDS, Mich. — Mercantile Bank Corp. on Tuesday said its first-quarter loss narrowed, but bad loans continued to weigh on its results.

After paying preferred dividends, the bank reported a loss of $3 million, or 35 cents per share, compared with a loss of $4.5 million, or 53 cents per share, in the year-ago period.

Analysts polled by Thomson Reuters, on average, expected a loss of 65 cents per share.

The better-than-expected results drove the bank’s stock higher. Shares gained 79 cents, or 17 percent, to $5.43 in Tuesday trading, on heavier than normal volume.

Net interest income, or earnings from deposits, rose 22 percent to $14.3 million, from $11.8 million last year. The bank ended the quarter with $1.42 billion in deposits, down 14 percent from the prior year.

Non-interest income, or earnings from fees and charges, rose 30 percent to $2.7 million, from $2 million in the 2009 quarter.

Net charge-offs, or loans written off as uncollectable, rose 9.4 percent to $6.2 million, from $5.6 million a year ago.

The quarter ended with $1.5 billion in outstanding loans, down 16 percent from a year earlier.

“The economic environment has been extremely challenging, and will likely remain difficult for at least the next several quarters,” said Chairman and CEO Michael Price in a statement. It’s been difficult to forecast when the performance of its loan portfolio will improve, he said.

“Improvement depends largely on external factors, namely, the health of the Michigan economy and our real estate markets, and unemployment levels,” Price continued. “It appears that a return to a semblance of economic normalcy will take an extended period of time.”