GRAND RAPIDS — Mercantile Bank Corp. ended 2020 with higher quarterly earnings despite the ongoing costs and economic turbulence from the COVID-19 pandemic.
The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) this morning reported $14 million in net income for the fourth quarter, or 87 cents per diluted share. That compares to $13.3 million, or 81 cents per diluted share, in net income for the same period a year earlier.
The fourth quarter included a significantly higher $2.5 million loan-loss provision, which compares to $750,000 a year earlier. Most of the larger loan-loss provision resulted from the pandemic “and its impact on the economic environment,” said CFO Chuck Christmas.
The “strong” quarterly results came during what President and CEO Robert Kaminski Jr. called an “unprecedented and challenging operating environment” from the pandemic that generated “many unique challenges.” The bank twice closed branch offices to customers for in-person banking, most recently in November, and adapted to alternative ways to bank.
“While uncertainty has remained that may impact Mercantile’s financial condition and operating performance in future periods, we know we entered this stressed environment with strong asset quality and a solid capital position,” Christmas said in a conference call with brokerage analysts to discuss quarterly results. “We are pleased with our fourth quarter and full-year 2020 operating results and financial condition as of year-end 2020 and believe we are well positioned to continue to navigate through the unprecedented environment created by the coronavirus pandemic and other events.”
Mercantile Bank also recorded record mortgage loans for the year and opened new mortgage offices in Midland as well as in Cincinnati, Ohio, in the fourth quarter.
The pandemic that hit back in March provided an opportunity to Mercantile Bank with small businesses that needed help submitting a loan application through the federal Paycheck Protection Program.
“The efficient efforts of our lending group have been recognized across the marketplace, helping to create a new loan and deposit customer relationship opportunity with numerous businesses within our communities that faced challenges in the application process through incumbent banks,” Kaminski said. “Having met the PPP needs of new clients in the application process, we are now in a position to capitalize on these efforts to grow those relationships.”
Mercantile Bank wrote more than 2,000 PPP loans totaling about $555 million. The bank ended 2020 with $365 million in PPP loans on its balance sheet after securing forgiveness for borrowers of $190 million during the fourth quarter, President Ray Reitsma said.
Commercial and industrial loan activity outside of PPP grew but “remains similar to pre-pandemic levels as we continue to add targeted new commercial relationships around our PPP activity and by serving existing relationships,” Reitsma said. Mercantile Bank ended the fourth quarter with a “solid” pipeline of $99 million in new commercial construction and development loans that it expects to fund within 12 to 18 months, he said.
For the full year, Mercantile Bank recorded lower net income of $44.1 million for 2020, or $2.71 per diluted share, which compares to $49.4 million, or $3.01 per diluted share, in 2019. The year included a $14.1 million loan-loss provision for all of 2020, versus $1.8 million in 2019.
Mercantile has assets of approximately $4.4 billion and operates 44 banking offices across the Lower Peninsula.