Mercantile Bank's CEO Discusses Q1 2012 Results - Earnings Call Transcript

Mercantile Bank (MBWM)

Q1 2012 Earnings Call

April 17, 2012 10:00 am ET


Karen Keller -

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

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


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

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

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



Good morning, and welcome to the Mercantile Bank Corporation First Quarter 2012 Earnings Results Call and Webcast. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Karen Keller of Lambert, Edwards & Associates. Please go ahead.

Karen Keller

Thank you, Andrew. 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 first quarter 2012. I'm Karen Keller with Lambert, Edwards, Mercantile 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 will 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 forward-looking statements made 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

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

Michael H. Price

Thank you, Karen. And good morning, everyone, and thank you for joining us to discuss our first quarter 2012 results and other recent developments for Mercantile Bank Corporation. On the call today, our CFO, Chuck Christmas, will provide details on our financial results, followed by COO, Bob Kaminski, and his comments regarding asset quality and other operational successes for the quarter.

Hopefully, you've all had a chance to review the announcement of our quarterly results, which continued our string of 5 consecutive quarters of positive earnings and built upon a momentum gain from last year. This quarter was once again highlighted by a substantial increase in net profit, further decline in nonperforming assets and continued expansion in net interest margin. We continue to make progress towards the improvement of our asset quality, and as a result of these diligent efforts, we did not record a provision expense in the first quarter.

In addition to these first quarter 2012 highlights, on April 4, we announced the repurchase of half of the $21 million nonvoting preferred stock issued to the United States Treasury as part of our participation in TARP. This is a milestone in itself, but we are also extremely proud of the fact that we were able to accomplish this through internally-generated cash flow and without the need to access outside capital. This is a testament to how we have managed through the challenges of the Great Recession and our subsequent recovery while maintaining our commitment to protect shareholder value. With the repurchase of half of our outstanding preferred shares under TARP, our Tier 1 leverage capital ratio will be reduced by approximately 75 basis points. But even with this minor reduction, we will remain well capitalized for regulatory purposes. We are also able to shift our focus and to dedicate more of our efforts towards building our franchise and helping our communities prosper.

We entered 2012 well-positioned to continue our success as a major competitor in our markets. We remain convinced our relationship-based approach will aid our efforts to gain market share, remain valued partners to our customers and have long-term value for our shareholders. Our bank continues to grow stronger each quarter as evidenced by our significant improvement and profitability and increased net interest margin. We are pleased with our accomplishments. However, we recognize there is still work to do. Our plan is to continue our work to reduce nonperforming assets, protect our net interest margin and reduce costs, all while maintaining our well-capitalized position.

At this time, I'm going to turn it over to Chuck Christmas.

Charles E. Christmas

Thanks, Mike, and good morning to everybody. As you saw this morning, we announced net income of $2.6 million for the first quarter of this year, a 135% increase over the $1.1 million earned during the first quarter of last year. Our first quarter 2012 income before federal income tax expense was $4.1 million, a 192% increase over the $1.4 million recorded during the first quarter of 2011. As a result of the elimination of the valuation allowance against our net deferred tax asset at year end 2011, starting with the first quarter of this year, we are now recording federal income tax expense. The first quarter operating results reflect continued improvements in many key areas of our financial condition and operating performance. They are a direct result of numerous strategies developed and implemented over the past several years, as well as modestly improved economic conditions. Our dedicated efforts to hone credit underwriting and administration practices have contributed to the significant decline in our nonperforming asset levels and a pruned loan portfolio.

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