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Wednesday, 28 January 2015 23:56

Mercantile eyes growth as it nears completion of merger integration

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With the integration of the former Firstbank Corp. nearly complete following the acquisition last summer, Mercantile Bank Corp. moved into 2015 targeting loan and revenue growth across a far broader market.

The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) expects continuous loan growth in the mid to upper single digits in the year ahead, generating net loan growth of $180 million to $200 million.

The “most significant opportunities” will come in Grand Rapids, Kalamazoo and Lansing, with “meaningful growth” in Mount Pleasant and Cadillac, said Chief Operating Officer Robert Kaminski.

“While competition remains quite intense in these and all of our markets, we continue to be encouraged and our staff was energized by the response to our client outreach efforts,” Kaminski said in a conference call to discuss Mercantile Bank’s fourth quarter results.

After completing a “significant part” of the integration and transition process following the deal, Mercantile Bank in the new year embarked on what Kaminski called “some major revenue enhancement and expense mitigation and efficiency initiatives.”

The initiatives include introducing treasury management products to commercial clients in the Firstbank footprint across the state and stepping up retail mortgage lending, particularly in the Grand Rapids area; generating new sources of non-interest income through the bank’s fee structure with a “special focus on relationship-based pricing on various products;” and “exploring new customer sales opportunities resulting from customer dislocation as some of our competitor banks have been recently acquired in our markets.”

Operationally, Mercantile Bank has an internal initiative that focuses on “gained efficiencies in all areas of our organization, including revisiting processes and procedures, vendor relationships and supply procurement as well as facility maintenance issues,” Kaminski said.

The fourth quarter was just the second three-month operating period following the June 1 merger between Firstbank and Mercantile Bank, which has 53 offices in western and central Michigan.

Mercantile Bank reported net income of $6.3 million, or 37 cents per share, for the fourth quarter of 2014. That compares with pre-merger net income of $5.2 million, or 59 cents per share, in the fourth quarter a year earlier.

Annual net income totaled $17.3 million, or $1.28 per diluted share, versus $17.0 million, or $1.95 per diluted share, in 2013. The full-year results for 2014 included $5.4 million in pre-tax costs related to the merger. The company said $500,000 of the pre-tax merger-related costs came in the fourth quarter.

“We expect no further significant merger-related cost in future periods,” said Chief Financial Officer Chuck Christmas.

Mercantile Bank should achieve all of the targeted $5.5 million annual operating cost savings from the merger in the first quarter of 2015, and the company realized a “vast majority” of the target in the fourth quarter of 2014, Christmas said.

Through the first quarter, cost savings from the merger “were on target and bode well for 2015 profitability,” said President and CEO Mike Price. The fourth quarterly results “completed a truly transformational year for our company,” he said.

Earnings are expected to increase in 2015. In a consensus estimate, brokerage analysts expect Mercantile Bank to record net income of $1.71 per share for 2015, according to Yahoo Finance.

“Looking forward to 2015, we see opportunity to participate in a continuing economic recovery of Michigan,” Price said. “Our business activity levels reflect the overall continued gains and employment and business expansion that are being reported for Western Michigan and particularly the Grand Rapids market.

“Our expanded market area as a result of the merger also provides us with new opportunities over the coming year.”

Mercantile Bank ended 2014 with assets of $2.89 billion and total loans of $2.09 billion.

The bank funded more than $90 million in loans to new and existing customers during the fourth quarter, Kaminski said. Loans came in a “fairly balanced fashion,” including for real estate and for commercial and industrial lending, he said.

Mercantile Bank “should benefit with a good tailwind for construction funding” this year after entering 2015 holding $115 million in loan commitments, Kaminski said 

Read 2919 times Last modified on Monday, 08 June 2015 11:14

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