Mercantile Bank's CEO Discusses Q3 2011 Results - Earnings Call Transcript

Mercantile Bank (MBWM)

Q3 2011 Earnings Call

October 18, 2011 10:00 am ET

Executives

Michael H. Price - Chairman, Chief Executive Officer, President, Chairman of Mercantile Bank of Michigan and Chief Executive Officer of Mercantile Bank of Michigan

Robert B. Kaminski - Chief Operating Officer, Executive Vice President, Secretary, President of Mercantile Bank of Michigan, Chief Operating Officer Mercantile Bank of Michigan and Secretary of Mercantile Bank of West Michigan

Charles E. Christmas - Chief Financial Officer, Principal Accounting Officer, Senior Vice President, Treasurer, Chief Financial Officer of Mercantile Bank of Michigan, Senior Vice President of Mercantile Bank of Michigan and Treasurer of Mercantile Bank of Michigan

Karen Keller -

Analysts

John Barber - Keefe, Bruyette, & Woods, Inc., Research Division

Stephen Geyen - Stifel, Nicolaus & Co., Inc., Research Division

Daniel E. Cardenas - Raymond James & Associates, Inc., Research Division

Terence J. McEvoy - Oppenheimer & Co. Inc., Research Division

Presentation

Operator

Good morning, and welcome to Mercantile Bank Corporation's Third Quarter 2011 Earnings Conference Call. [Operator Instructions] Today's call is being recorded at the request of Mercantile Bank Corporation. If anyone has objections, you may disconnect at this time. I would now like to turn the conference call over to Ms. Karen Keller. Ms. Keller, you may proceed.

Karen Keller

Thanks, Jaime. Good morning, everyone, and thank you for joining Mercantile Bank Corporation's conference call and webcast to discuss the company's financial results for the third quarter ended September 30, 2011.

I'm Karen Keller with Lambert, Edwards, Mercantile's Investor Relations firm. And joining me are members of their management team, including Michael Price, Chairman, President and Chief Executive Officer; Robert Kaminski, Executive Vice President and Chief Operating Officer; and Chuck Christmas, Senior Vice President and Chief Financial Officer.

We'll begin the call with management's prepared remarks and then open the call up to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of revenue, earnings and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from the forward-looking statements made today due to the important factors described in the company's latest Securities and Exchange Commission filings. The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the press release issued by Mercantile today, you can access it at the company's website at www.mercbank.com.

At this time, I would like to turn the call over to Mercantile's CEO, Mike Price. Mike?

Michael H. Price

Thank you, Karen. Good morning, everyone, and thank you for joining us today. Earlier this morning, we released our third quarter operating results, and I'm pleased to note that we continue our recovery from the effects of the Great Recession.

Mercantile has developed strong, sustainable momentum as the years progressed. Net profit has increased substantially, nonperforming assets continued to decrease, and our bank continues to grow stronger by the quarter. We are making continued improvements in core operating earnings and limiting controllable expenses while strengthening our capital ratios.

As a result of the improving conditions of our business, we also announced our planned payment of the dividends on our preferred stock and distributions on our trust preferred securities. While this cannot be taken as an indicator of the potential for future repayments, we are encouraged that today Mercantile is a revitalized bank focused on gaining market share and engaging our customers with new and innovative products and providing value to our relationship approach to banking. We continue to be grateful for our strong team of associates and loyal customers, and we look forward to a strong finish to 2011.

On the call today are Chief Financial Officer, Chuck Christmas, who will provide some of the details of our financial results, followed by Chief Operating Officer, Bob Kaminski, and his comments regarding asset quality and other operational successes for the quarter. At this time, I'll turn it over to Chuck.

Charles E. Christmas

Thanks, Mike. Good morning, everybody. Now this morning, we announced that we recorded net income of $2.7 million or $0.30 per diluted share during the third quarter of 2011, compared to a net loss of $5.7 million or $0.67 per diluted share during the third quarter of 2010. This $8.4 million improvement expands to $9.1 million if we exclude the federal income tax benefit recorded during the third quarter of last year. Net income totaled $6.2 million during the first 9 months of this year, compared to a net loss of $9.3 million during the first 9 months of last year. This $15.5 million improvement expands to $18.2 million if we exclude the federal income tax benefit recorded during the first 9 months of last year, as well as the one-time investment and loan sales gains recorded during the first quarter of last year.

The improved operating results reflect improvements in many key areas of our financial condition and operating performance but especially reflect a significant lower provision expense and improved net interest margin. We are, of course, pleased to be able to report a net profit for the third quarter of 2011, our third consecutive profitable quarter after 2 years of quarterly losses. These positive results are reflection of the somewhat improved economic conditions, combined with the positive impact of numerous strategies developed and implemented over the past several years.

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