GRAND RAPIDS — Mercantile Bank Corp.’s net income for 2005 increased more than 30 percent, to $17.9 million, despite significant investments in new markets.
Earnings per share for the year were up 25.5 percent to $2.31, compared with $1.78 the year before.
Net income for the final quarter of fiscal 2005 was $4.55 million, slightly more than 1 percent above the $4.49 million posted in the fourth quarter of 2004. Earnings growth, too, was relatively flat, with earnings per share up only a penny over the corresponding quarter last year, from 58 cents to 59 cents.
Chairman and CEO Gerald Johnson Jr. said 2005 was somewhat of a watershed year for the company because it expanded into the Lansing and Ann Arbor markets.
“It’s important to note that we incurred significant startup costs in our two new markets,” Johnson remarked. “Also, and I think very importantly, we opted to enter these markets fully staffed with sitting presidents, senior lenders, mid-level lenders, mortgage lenders, full service branches … and all the other personnel that ensure that the service levels that have made us so successful in West Michigan were duplicated in our new markets.”
Mercantile has had “great” loan and core deposit growth in both new markets, he added, and the company anticipates those markets will make a considerable contribution to the company’s bottom line this year. He noted that there will be only minimal increases in staffing and other costs this year.
Johnson noted that investors and analysts expressed concerns regarding the banking industry and flattening interest rates in the latter half of 2005.
“Although I’m not making any prognostications, I do suggest that if you have followed Mercantile Bank Corp. for the last five years, you will note that our earnings have increased significantly in each year notwithstanding the direction or lack thereof of interest rates. We are very good at managing interest rate risks.”
CFO Chuck Christmas said Mercantile had very strong local deposit growth in 2005, with local deposits, including purchase agreements, up $84 million, or 19 percent.
On the expense side, overhead costs last year increased $7.6 million over 2004. Approximately 62 percent of the increase, or $4.7 million, was in salaries and benefits for employees hired to work in the bank’s new markets, Christmas said. In the past 12 months that company has added 79 full-time employees to the payroll, increasing its head count to 273.
Total assets were $1.84 billion as of Dec. 31.
President Michael Price said the FDIC deposit market share report for Kent County that was released last quarter showed that in less than seven years Mercantile Bank had captured 12.5 percent in the Kent County market — nearly becoming the second largest bank in the county by that measurement.
“This phenomenal growth and the excellent asset quality has become a hallmark of Mercantile and the blueprint for expansion beyond our West Michigan roots,” Price said. He noted that in 2006 the company plans to “very aggressively” leverage its investments in the Lansing and Ann Arbor markets.
Johnson concluded that 2005 was one of the best years in Mercantile’s eight-year history.
“Notwithstanding the challenges facing all of us in the banking industry, we feel very positive about 2006,” he said.
Mercantile’s board of directors recently declared a first-quarter cash dividend of 12 cents per share on the company’s common stock. The dividend is payable on March 10 to shareholders of record as of the close of business on Feb. 10.