<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission File No. 333-33081
MERCANTILE BANK CORPORATION
(Exact name of small business issuer as specified in its charter)
Michigan 38-3360865
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
216 NORTH DIVISION AVENUE, GRAND RAPIDS, MICHIGAN 49503
(Address of principal executive offices)
(616) 242-9000
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
--- ---
At September 30, 1998, there were 2,472,500 shares of Common Stock outstanding
Transitional Small Business Disclosure Format:
Yes No X
--- ---
<PAGE> 2
MERCANTILE BANK CORPORATION
INDEX
- --------------------------------------------------------------------------------
PART 1. Financial Information Page No.
--------------------- --------
Item I. Financial Statements
Condensed Consolidated Balance Sheets -
September 30, 1998 (Unaudited) and December 31, 1997............... 3
Condensed Consolidated Statement of Income -
Three and Nine Months Ended September 30, 1998 (Unaudited)......... 4
Condensed Consolidated Statement of Comprehensive Income -
Three and Nine Months Ended September 30, 1998 (Unaudited)......... 5
Condensed Consolidated Statement of Changes in Shareholders Equity -
September 30, 1998 (Unaudited) and December 31, 1997............... 6
Condensed Consolidated Statement of Cash Flows -
Three and Nine Months Ended September 30, 1998 (Unaudited)......... 7
Notes to Condensed Consolidated Financial Statements (Unaudited)..... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................15
PART II. Other Information
-----------------
Item 1. Legal Proceedings...........................................20
Item 2. Changes in Securities and Use of Proceeds...................20
Item 3. Defaults upon Senior Securities.............................20
Item 4. Submission of Matters to a Vote of Security Stockholders....20
Item 5. Other Information...........................................20
Item 6. Exhibits and Reports on Form 8-K............................20
Signatures...........................................................21
2
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MERCANTILE BANK CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MERCANTILE BANK CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and due from banks $ 7,691,694 $ 153,300
Short-term investments 500,000 3,250,000
Federal funds sold 6,100,000 3,700,000
--------------- ----------------
Total cash and cash equivalents 14,291,694 7,103,300
Securities available for sale 22,657,819 2,997,500
Total loans 140,838,861 12,886,763
Allowance for loan losses (2,135,100) (193,300)
---------------- ----------------
Total loans, net 138,703,761 12,693,463
Premises and equipment - net 1,401,897 953,982
Organizational costs - net 68,308 74,871
Accrued interest receivable 967,572 52,811
Other assets 403,448 233,258
--------------- ----------------
Total assets $ 178,494,499 $ 24,109,185
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing $ 14,542,505 $ 7,207,482
Interest-bearing 121,500,220 2,480,782
--------------- ----------------
Total 136,042,725 9,688,264
Securities sold under agreements to repurchase 15,351,539 655,447
Accrued expenses and other liabilities 514,425 292,204
--------------- ----------------
Total liabilities 151,908,689 10,635,915
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares
authorized, none issued
Common stock, no par value: 9,000,000 shares,
authorized; 2,472,500 shares outstanding
at September 30, 1998, and 1,495,000 shares
outstanding at December 31, 1997 28,181,798 13,880,972
Retained earnings (deficit) (1,724,072) (404,071)
Net unrealized gain (loss) on securities
available for sale 128,084 (3,631)
--------------- ----------------
Total shareholders' equity 26,585,810 13,473,270
--------------- ----------------
Total liabilities and shareholders' equity $ 178,494,499 $ 24,109,185
=============== ================
</TABLE>
3
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MERCANTILE BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
Interest income
Loans, including fees $ 2,711,559 $ 5,712,169
Investment securities 285,197 541,560
Federal funds sold 66,791 183,582
Interest-bearing deposits 6,195 16,109
-------------- ---------------
Total interest income 3,069,742 6,453,420
Interest expense
Deposits 1,549,474 3,295,670
Other 164,412 296,671
-------------- ---------------
Total interest expense 1,713,886 3,592,341
-------------- ---------------
NET INTEREST INCOME 1,355,856 2,861,079
Provision for loan losses 470,000 1,941,800
-------------- ---------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 885,856 919,279
Noninterest income
Other income 176,040 263,303
-------------- ---------------
Total noninterest income 176,040 263,303
Noninterest expense
Salaries and benefits 504,351 1,322,618
Occupancy 78,098 217,023
Furniture and equipment 44,671 116,412
Other expense 318,576 846,530
-------------- ---------------
Total noninterest expenses 945,696 2,502,583
INCOME (LOSS) BEFORE FEDERAL INCOME TAX 116,200 (1,320,001)
Federal income tax expense 0 0
-------------- ---------------
NET INCOME (LOSS) $ 116,200 $ (1,320,001)
============== ===============
Basic and diluted income (loss) per share $ 0.05 $ (0.77)
============== ===============
Average shares outstanding 2,145,435 1,714,194
============== ===============
</TABLE>
4
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MERCANTILE BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
NET INCOME (LOSS) $ 116,200 $ (1,320,001)
Other comprehensive income (loss), net of tax
Change in unrealized gains (losses) on securities 130,456 131,715
------------------ ------------------
COMPREHENSIVE INCOME (LOSS) $ 246,656 $ (1,188,286)
================== ==================
</TABLE>
5
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MERCANTILE BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net Unrealized
Loss on
Securities Total
Common Retained Available Shareholders'
Stock Earnings for Sale Equity
---------------- --------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1998 $ 13,880,972 $ (404,071) $ (3,631) $ 13,473,270
Common stock sale, July 30, 1998
net of issuance expenses 14,300,826 14,300,826
Net loss for the period from
January 1, 1998 through
September 30, 1998 (1,320,001) (1,320,001)
Change in unrealized gain (loss)
on securities available for sale,
net of tax 131,715 131,715
---------------- --------------- ------------- ----------------
BALANCE, SEPTEMBER 30, 1998 $ 28,181,798 $ (1,724,072) $ 128,084 $ 26,585,810
================ =============== ============= ================
</TABLE>
6
<PAGE> 7
MERCANTILE BANK CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
September 30, 1998 September 30, 1998
------------------ ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 116,200 $ (1,320,001)
Adjustments to reconcile net loss
to net cash from operating activities
Depreciation and amortization 71,816 184,472
Provision for loan losses 470,000 1,941,800
Net change in:
Accrued interest receivable (246,522) (914,761)
Other assets 34,556 (191,917)
Accrued expenses and other liabilities 140,657 156,221
--------------- -----------------
Net cash from operating activities 586,707 (144,186)
CASH FLOWS FROM INVESTING ACTIVITIES
Net change in loans (27,432,453) (127,952,098)
Purchase of:
Securities available for sale (10,048,616) (23,577,469)
Premises and equipment, net (57,698) (570,965)
Proceeds from sales and maturities
of securities available for sale 2,081,733 4,081,733
--------------- -----------------
Net cash used in investing activities (35,457,034) (148,018,799)
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from sale of common stock 14,300,826 14,300,826
Net increase in deposits 19,351,539 126,354,461
Net increase in securities sold under agreements
to repurchase 4,796,244 14,696,092
--------------- -----------------
Net cash from financing activities 38,448,609 155,351,379
--------------- -----------------
Net change in cash and cash equivalents 3,578,282 7,188,394
Cash and cash equivalents at beginning of period 10,713,412 7,103,300
--------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,291,694 $ 14,291,694
=============== =================
Supplemental disclosures of cash flow information
Cash paid during the year for
Interest $ 1,584,873 $ 3,207,981
</TABLE>
7
<PAGE> 8
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION:
The unaudited financial statements for the three and nine months ended
September 30, 1998 include the consolidated results of operations of
Mercantile Bank Corporation ("Corporation") and its wholly-owned
subsidiary, Mercantile Bank of West Michigan ("Bank"). These consolidated
financial statements have been prepared in accordance with the Instructions
for Form 10-QSB and Item 310(b) of Regulation S-B and do not include all
disclosures required by generally accepted accounting principles for a
complete presentation of the Corporation's financial condition and results
of operations. In the opinion of management, the information reflects all
adjustments (consisting only of normal recurring adjustments) which are
necessary in order to make the financial statements not misleading and for
a fair presentation of the results of operations for such periods. The
results for the period ended September 30, 1998 should not be considered as
indicative of results for a full year. For further information, refer to
the consolidated financial statements and footnotes included in the
Corporation's annual report on Form 10-KSB for the year ended December 31,
1997.
2. ALLOWANCE FOR LOAN LOSSES
The following is a summary of the activity in the allowance for loan losses
account for the nine months ended September 30, 1998:
Balance at January 1, 1998 $ 193,300
Provision for loan losses charged
to operating expense 1,941,800
--------------
Balance at September 30, 1998 $ 2,135,100
==============
3. LOANS
Total loans at September 30, 1998 were $140.8 million compared to $12.9
million at December 31, 1997, an increase of $127.9 million or 993%. The
components of the outstanding balances and percentage increase in loans
from the end of 1997 to the end of the third quarter 1998 are as follows:
<TABLE>
<CAPTION>
Percent
September 30, 1998 December 31, 1997 Increase/
Balance % Balance % (Decrease)
----------- ----- -------------- --- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consumer loans $ 1,646 1.2% $ 15 0.1% 10,873.3%
Commercial, financial
and other 45,198 32.1 7,433 57.7 508.1
Commercial real estate
construction 8,844 6.3 --- ---- NA
Commercial real estate
mortgages 77,092 54.7 5,421 42.1 1,322.1
Residential real estate
mortgages 8,059 5.7 18 0.1 44,672.2
----------- ----- ----------- ----- ----------
$ 140,839 100.0% $ 12,887 100.0% 992.8%
=========== ===== =========== ===== ==========
</TABLE>
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8
<PAGE> 9
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
4. PREMISES AND EQUIPMENT - NET
Premises and equipment are comprised of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
Leasehold improvements $ 771,942 $ 545,401
Furniture and equipment 753,005 408,581
-------------- ---------------
1,524,947 953,982
Less accumulated depreciation (123,050) ---
-------------- ---------------
$ 1,401,897 $ 953,982
============== ===============
</TABLE>
Depreciation expense for the third quarter 1998 amounted to $44,606.
5. DEPOSITS
Total deposits at September 30, 1998 were $136.0 million compared to $9.7
million at December 31, 1997, an increase of $126.3 million or 1,304%. The
components of the outstanding balances and percentage increase in deposits
from the end of 1997 to the end of the third quarter 1998 are as follows:
<TABLE>
<CAPTION>
Percent
September 30, 1998 December 31, 1997 Increase/
Balance % Balance % (Decrease)
---------- ----- --------- ----- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
Noninterest-bearing
Demand $ 14,543 10.7% $ 7,208 74.4% 101.8%
Interest-bearing
Checking 5,549 4.1 213 2.2 2,505.2
Money market 1,964 1.4 --- --- NA
Savings 22,485 16.5 2,089 21.6 976.4
Time, under
$100,000 58,911 43.3 178 1.8 32,996.1
Time, $100,000
and over 32,591 24.0 --- --- NA
---------- ----- --------- ----- ----------
$ 136,043 100.0% $ 9,688 100.0% 1,304.2%
========== ===== ========= ===== ==========
</TABLE>
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9
<PAGE> 10
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
6. BORROWINGS
Information relating to securities sold under agreements to repurchase
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
-------------- -------------
<S> <C> <C>
Outstanding balance $ 15,351,539 $ 655,447
Average interest rate 4.70% 4.70%
Average balance $ 8,191,223 $ 3,853
Average interest rate 4.70% 4.70%
Maximum outstanding at any month end $ 15,351,539 $ 655,447
</TABLE>
Securities sold under agreements to repurchase (repurchase agreements)
generally have original maturities of less than one year. Repurchase
agreements are treated as financings and the obligations to repurchase
securities sold are reflected as liabilities. Securities involved with the
agreements are recorded as assets of the Bank and are primarily held in
safekeeping by correspondent banks. Repurchase agreements are offered
principally to certain large deposit customers as deposit equivalent
investments.
7. EMPLOYEE BENEFIT PLANS
The Corporation established a 401(k) plan effective January 1, 1998,
covering substantially all its employees. The Corporation's third quarter
1998 matching 401(k) contribution charged to expense was $15,173. The
percent of the Corporation's matching contributions to the 401(k) is
determined annually by the Board of Directors.
- --------------------------------------------------------------------------------
10
<PAGE> 11
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
8. COMMITMENTS AND OFF-BALANCE-SHEET RISK
Some financial instruments are used to meet financing needs and to reduce
exposure to interest rate changes. These financial instruments include
commitments to extend credit and standby letters of credit. These involve,
to varying degrees, credit and interest-rate risk in excess of the amount
reported in the financial statements.
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the commitment,
and generally have fixed expiration dates. Standby letters of credit are
conditional commitments to guarantee a customer's performance to a third
party. Exposure to credit loss if the other party does not perform is
represented by the contractual amount for commitments to extend credit and
standby letters of credit. Collateral or other security is normally not
obtained for these financial instruments prior to their use, and many of
the commitments are expected to expire without being used.
A summary of the notional or contractual amounts of financial instruments
with off-balance-sheet risk at September 30, 1998 and December 31, 1997
follows:
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
--------------- ---------------
<S> <C> <C>
Commitments to make loans $ 2,473,358 $ 7,198,584
Commercial unused lines of credit 57,382,926 3,701,272
Standby letters of credit 12,580,983 ---
Consumer unused lines of credit 6,212,563 64,356
</TABLE>
Commitments to make loans generally have remaining termination dates of one
year or less and may require a fee if funded. Since many of the above
commitments expire without being used, the above amounts do not necessarily
represent future cash commitments.
9. REGULATORY MATTERS
The Corporation and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and
prompt corrective action regulations involve quantitative measures of
assets, liabilities, and certain off-balance-sheet items calculated under
regulatory accounting practices. Capital amounts and classifications are
also subject to qualitative judgments by regulators about components, risk
weightings, and other factors, and the regulators can lower classifications
in certain cases. Failure to meet various capital requirements can initiate
regulatory action that could have a direct material effect on the financial
statements.
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11
<PAGE> 12
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although
these terms are not used to represent overall financial condition. If
adequately capitalized, regulatory approval is required to accept brokered
deposits. If undercapitalized, capital distributions are limited, as is
asset growth and expansion, and plans for capital restoration are required.
The minimum requirements are:
Capital to Risk-
Weighted Assets
--------------- Tier 1 Capital
Total Tier 1 to Average Assets
----- ------ -----------------
Well capitalized 10% 6% 5%
Adequately capitalized 8 4 4
Undercapitalized <8 <4 <4
Actual capital levels (in thousands) and minimum required levels for the
Corporation and the Bank were:
<TABLE>
<CAPTION>
Minimum Required
to be Well
Minimum Required Capitalized Under
for Capital Prompt Corrective
Actual Adequacy Purposes Action Regulations
------ ----------------- ------------------
Amount Ratio Amount Ratio Amount Ratio
----------- ----- ----------- ----- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
September 30, 1998
Total capital (to risk
weighted assets)
Consolidated $ 28,488 16.2% $ 12,988 8.0% $ 16,235 10.0%
Bank 27,434 15.6 12,980 8.0 16,226 10.0
Tier 1 capital (to risk
weighted assets)
Consolidated 26,458 15.0 6,498 4.0 9,747 6.0
Bank 25,403 14.4 6,495 4.0 9,742 6.0
Tier 1 capital (to
average assets)
Consolidated 26,458 17.0 6,234 4.0 7,792 5.0
Bank 25,403 16.3 6,221 4.0 7,776 5.0
December 31, 1997
Total capital (to risk
weighted assets)
Consolidated $ 13,595 78.1% $ 1,392 8.0% $ 1,740 10.0%
Bank 13,056 75.6 1,382 8.0 1,728 10.0
Tier 1 capital (to risk
weighted assets)
Consolidated 13,402 77.0 696 4.0 1,044 6.0
Bank 12,863 74.5 691 4.0 1,037 6.0
Tier 1 capital (to
average assets)
Consolidated 13,402 69.7 769 4.0 961 5.0
Bank 12,863 69.3 743 4.0 928 5.0
</TABLE>
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12
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MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
The Corporation and Bank were categorized as well capitalized at September
30, 1998 and year end 1997.
10. SALE OF COMMON STOCK
During the third quarter the Corporation completed a secondary common stock
offering, selling 977,500 shares. Net of issuance expenses the common stock
sale raised $14.3 million. Substantially all of the net proceeds were
contributed to the Bank, which will be used to support the anticipated
growth in assets, fund investments in loans and securities, and for general
corporate purposes.
11. YEAR 2000 ISSUE
The approach of the year 2000 presents potential problems to businesses
that utilize computers in their daily operations. Some computer systems may
not be able to properly interpret dates after December 31, 1999, because
they use only two digits to indicate the year in the date. Therefore, a
date using "00" as the year may recognize the year as 1900 rather than the
year 2000.
The Corporation has formed a Year 2000 Working Group to address the
potential problems associated with the Year 2000 computer issue. The Year
2000 Working Group, consisting of senior officers and employees, meets on a
regular basis and provides regular reports to the Board of Directors
detailing progress with the Year 2000 issue.
As with any organization that depends on technology, particularly computer
systems and software, a Year 2000 related failure poses a significant
threat to continued business operations. While the Corporation has
developed a plan to ensure Year 2000 readiness, we recognize that the
success of our third party providers is vital to our success. Vendors of
particular concern include, but are not limited to, our computer service
providers, electronic banking vendors, correspondent banks, and utility and
telecommunications companies. Additional risks include the Bank's lending
and deposit relationships, as well as security and heating, ventilation,
and air conditioning systems. The Corporation does not utilize any in-house
programmed software.
Management believes that all significant vendors have been identified and
contacted regarding their Year 2000 readiness. These vendors have indicated
that either their products are currently Year 2000 compliant or will be by
December 31, 1999. For computer-based systems that are considered vital to
operations, such as data and transaction processing, actual testing has
been or will be conducted prior to December 31, 1999, to ensure Year 2000
readiness. In addition, a Year 2000 questionnaire has been sent to all
commercial loan customers (comprising 92% of the loan portfolio) requesting
information concerning their Year 2000 readiness. Responses are currently
being followed-up by the lending staff.
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13
<PAGE> 14
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
Costs to the Corporation related to the Year 2000 issue are estimated to be
between $10,000 and $15,000. These costs include testing of the data
processing equipment and programs, equipment upgrades, and
employee/customer education. It is impossible to predict the exact expenses
associated with the Year 2000 issue and additional funds may be needed for
unknown expesnses relating to Year 2000 testing, training, and education,
as well as system and software replacements.
Despite careful planning by the Corporation, we recognize there may be
circumstances beyond our control that may prohibit us from operating "as
usual" after December 31, 1999. The Year 2000 Working Group is currently in
the process of developing a contingency plan to address potential Year 2000
problems.
- --------------------------------------------------------------------------------
14
<PAGE> 15
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion compares the financial condition of the Corporation and
its wholly owned subsidiary, the Bank, at September 30, 1998 to December 31,
1997, and the results of operations for the three and nine months ended
September 30, 1998. This discussion should be read in conjunction with the
interim consolidated condensed financial statements and footnotes included
herein.
This report contains forward-looking statements that are based on management's
beliefs, assumptions, current expectations, estimates and projections about the
financial services industry, the economy, and about the Corporation. Words such
as "anticipates," "believes," "estimates," "expects," "forecasts," "intends,"
"is likely," "plans," "projects," variations of such words and similar
expressions are intended to identify such forward-looking statements. These
statements are not guarantees of future performance and involve certain risks,
uncertainties and assumptions ("Future Factors") that are difficult to predict
with regard to timing, extent, likelihood and degree of occurrence. Therefore,
actual results and outcomes may materially differ from what may be expressed or
forecasted in such forward-looking statements. The Corporation undertakes no
obligation to update, amend, or clarify forward looking statements, whether as a
result of new information, future events (whether anticipated or unanticipated),
or otherwise.
Future Factors include changes in interest rates and interest rate
relationships; demand for products and services; the degree of competition by
traditional and non-traditional competitors; changes in banking regulation;
changes in tax laws; changes in prices, levies, and assessments; the impact of
technological advances; governmental and regulatory policy changes; the outcomes
of contingencies; trends in customer behavior as well as their ability to repay
loans; and changes in the national and local economy. These are representative
of the Future Factors that could cause a difference between an ultimate actual
outcome and a preceding forward-looking statement.
During the third quarter of 1998, the assets of Mercantile Bank Corporation
increased from $139.6 million on June 30, 1998, to $178.5 million on September
30, 1998. This represents a total increase in assets of $38.9 million. A $3.6
million increase in cash and cash equivalents; an $8.2 million increase in
investment securities; and a $27.0 million increase in net loans primarily
comprised this growth. The increase in assets was primarily funded by $19.3
million growth in deposits, an increase of $4.7 million in repurchase
agreements, and an increase of $14.6 million in equity. The growth in deposits
is the result of both core deposits and reliance on out-of-area CD's, while the
increase in equity was due primarily from the sale of common stock. While
management expects continuing growth, it is anticipated to be at a slower rate.
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15
<PAGE> 16
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
The following table sets forth certain information relating to the Corporation's
consolidated average interest earning assets and interest-bearing liabilities
and reflects the average yield on assets and average cost of liabilities for the
period indicated. Such yields and costs are derived by dividing income or
expense by the average daily balance of assets or liabilities, respectively, for
the period presented. During the period presented, there were no nonaccrual
loans.
<TABLE>
<CAPTION>
Quarter ended September 30, 1998
Average Average
Balance Interest Rate
----------- ------------- --------
(in thousands)
<S> <C> <C> <C>
ASSETS
Federal funds sold and interest-bearing
deposits with banks $ 5,237 $ 73 5.58%
Investment securities - available for sale 19,783 285 5.76
Loans 123,297 2,712 8.80
----------- ----------- --------
Subtotal interest-bearing assets 148,317 3,070 8.28
Other assets 7,521
-----------
Total assets $ 155,838
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing deposits $ 108,152 $ 1,550 5.73%
Other borrowings 13,750 164 4.77
----------- ----------- --------
Subtotal interest-bearing liabilities 121,902 1,714 5.62
Noninterest-bearing deposits 11,781
Other liabilities 396
Shareholders' equity 21,759
-----------
Total liabilities and shareholders' equity $ 155,838
===========
Net interest income $ 1,356
===========
Net interest rate spread 2.66%
========
Net interest margin on earning assets 3.66%
========
</TABLE>
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16
<PAGE> 17
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at September 30, 1998, which are
expected to mature or reprice in each of the time periods shown (in thousands):
<TABLE>
<CAPTION>
Interest Rate Sensitivity Period
Within Three to One to After
Three Twelve Five Five
Months Months Years Years Total
---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
Earning assets
Federal funds sold $ 6,100 $ --- $ --- $ --- $ 6,100
Interest-bearing deposits 500 --- --- --- 500
Securities available for sale 2,002 4,524 14,130 2,002 22,658
Consumer loans 589 --- 777 280 1,646
Commercial, financial and other 27,495 168 16,843 692 45,198
Commercial real estate construction 1,781 957 2,983 3,123 8,844
Commercial real estate mortgages 15,487 --- 59,098 2,507 77,092
Residential real estate mortgages 1,922 1,417 4,098 622 8,059
---------- ---------- ---------- --------- ----------
55,876 7,066 97,929 9,226 170,097
Interest-bearing liabilities
Interest-bearing checking $ 5,549 $ --- $ --- $ --- $ 5,549
Savings 22,485 --- --- --- 22,485
Money market 1,964 --- --- --- 1,964
Time deposits <$100,000 5,368 35,862 17,681 --- 58,911
Time deposits $100,000 and over 9,257 15,361 7,973 --- 32,591
Other borrowings 15,352 --- --- --- 15,352
---------- ---------- ---------- --------- ----------
59,975 51,223 25,654 --- 136,852
---------- ---------- ---------- --------- ----------
Net asset (liability) gap $ (4,099) $ (44,157) $ 72,275 $ 9,226 $ 33,245
========== ========== ========== ========= ==========
Cumulative net asset (liability) gap $ (4,099) $ (48,256) $ 24,019 $ 33,245
========== ========== ========== =========
</TABLE>
At quarter-end, commercial loans approximated 93.1% of the total loan portfolio.
The significant concentration in commercial loans and the rapid growth of this
portion of our business is in keeping with our stated strategy of focusing a
substantial amount of our efforts on "wholesale" banking. Corporate and business
lending is an area of expertise for all of the Corporation's senior management
team. Commercial loans are also the assets most efficiently originated and
managed by the fewest number of staff, thus reducing overhead through
necessitating fewer full-time equivalents (FTE's)/$million in assets. It is also
the commercial sector of our business that generates the greatest amount of
deposits, and it is virtually the only source of significant demand deposits.
- --------------------------------------------------------------------------------
17
<PAGE> 18
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
Mortgage and consumer loans increased during the second quarter by $1.3 million
and $0.6 million, respectively. As the extremely rapid growth of our commercial
loan portfolio gradually slows, the retail portion of our loan assets is
expected to increase as a percentage of total loans. However, our strategy for
growth and profitability is expected to result in the commercial sector of our
lending efforts and resultant assets continuing to be the dominant portfolio
category.
Total deposits were $136.0 million at September 30, 1998, compared to $116.7
million at June 30, 1998. Of this amount $14.5 million, or approximately 10.7%,
were demand deposits. In addition, Business Investment Checking, our combined
sweep account/repurchase agreement, increased from $10.6 million on June 30,
1998, to $15.4 million on September 30, 1998. Out-of-area deposits, consisting
primarily of $99,000 certificates obtained from depositors located outside our
market area and placed by deposit brokers for a fee, increased $14.5 million
during the third quarter. As of September 30, 1998, out-of-area CDs totaled
$72.1 million, or approximately 48% of combined deposits and Business Investment
Checking. Reliance on out-of-area deposits is expected to be ongoing due to our
planned significant future growth; however, a modest decline in the out-of-area
deposit concentration level is expected as new business and retail relationships
continue to be established and as existing customers fund deposit
accounts/business investment checking accounts which have already been opened or
as these customers require additional deposit products.
The Corporation completed a secondary common stock offering during the third
quarter, selling 977,500 shares. Net of issuance expenses the offering raised
$14.3 million. Substantially all of the net proceeds were contributed to the
Bank, which will be used to support the anticipated growth in assets, fund
investments in loans and securities, and for general corporate purposes.
The net operating income for the third quarter was $116,200 ($0.05/share), which
compares favorably to the second quarter net operating loss of $294,624
($0.20/share). Growth in net interest income and noninterest income, combined
with only a modest increase in noninterest expense and a stable loan loss
provision, primarily contributed to the improved performance. Net interest
income during the third quarter totaled $1,355,856, or $450,397 higher than the
second quarter level. Noninterest income during the third quarter increased by
$103,089 over the level earned during the second quarter, primarily reflecting
increased fee income from residential mortgage loan referrals and commercial
letters of credit. Noninterest expense during the third quarter totaled
$945,696, or $145,790 higher than the second quarter level. The increase in
noninterest expense primarily resulted from the hiring of additional employees
during the quarter. Provision for loan losses were $470,000 ($0.22 per share)
and $473,000 ($0.31 per share) during the third and second quarters,
respectively. Loan loss provisions are high due to the extremely rapid growth of
the loan portfolio combined with management's decision to manage the portfolio
utilizing a 1.5% allowance for loan and lease losses. Although the percentage
loan loss reserve to total loans is high relative to the quality of the overall
portfolio, company management feels it is prudent to operate with this level of
reserves due to the newness of the organization and the significant number of
credits at or near the legal lending limit of the Bank. Loan loss provisions are
an immediate reduction to earnings;
- --------------------------------------------------------------------------------
18
<PAGE> 19
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- --------------------------------------------------------------------------------
moreover, these provisions will continue to reduce earnings, although more
moderately, as the anticipated rate of loan growth slows.
Payroll and other non-interest operating expenses have and are expected to
continue to decline as a percentage of income as the Corporation grows. The
efficiency ratio during the third quarter was 62%, which compares favorably to
the 82% for the second quarter. The efficiency ratio should decrease, although
at a slower rate, as the Corporation more adequately absorbs current overhead
costs and amortization of prior period organization and start-up costs.
Subsequent to September 30, 1998, the Bank notified the appropriate bank
regulatory agencies of its intent to establish a branch/operations center within
the Grand Rapids metropolitan area. This facility, scheduled to open on or about
March 1, 1999, will be the Bank's first branch facility. Additional immediate
and future plans for the remainder of 1998 include the continued growth of the
recently implemented telephone banking product, as well as the introduction of
PC banking to both our retail and commercial customers. It is management's
opinion that the use of state-of-the-art technology will offset some of the
potential advantages that establishing multiple branch banking locations
throughout the market area might provide. This is especially true if ATM kiosks
are strategically located throughout our market area and used in connection with
and as an adjunct to our technology.
- --------------------------------------------------------------------------------
19
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As a depository of funds, the Bank may occasionally be named as a defendant in
lawsuits (such as garnishment proceedings) involving claims to the ownership of
funds in particular accounts. Such litigation is incidental to the Bank's
business. The Corporation's management is not aware of any pending litigation.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
EXHIBIT NO. EXHIBIT DESCRIPTION
----------- -------------------
3.1 Articles of Incorporation are incorporated by
reference to exhibit 3.1 of the Corporation's
Registration Statement on Form SB-2 (Commission File
no. 333-33081) that became effective on October 23,
1997
3.2 Bylaws of the Corporation are incorporated by
reference to exhibit 3.2 of the Corporation's
Registration Statement on Form SB-2 (Commission File
No. 333-33081) that became effective on October 23,
1997
10.1 Buy and Sell Agreement dated August 19, 1998,
covering a portion of Mercantile Bank of West
Michigan's land purchase in Alpine Township to
be used for branch location.
10.2 Buy and Sell Agreement dated August 19, 1998,
covering a portion of Mercantile Bank of West
Michigan's land purchase in Alpine Township to be
used for branch location.
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
- --------------------------------------------------------------------------------
20
<PAGE> 21
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on November 11, 1998
MERCANTILE BANK CORPORATION
By: /s/ Gerald R. Johnson, Jr.
-------------------------------------------
Gerald R. Johnson, Jr.
Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer)
By: /s/ Michael H. Price
-------------------------------------------
Michael H. Price
President and Chief Operating Officer
By: /s/ Charles E. Christmas
-------------------------------------------
Charles E. Christmas
Vice President of Finance, Treasurer and
Compliance Officer
(Principal Financial and Accounting Officer)
- --------------------------------------------------------------------------------
21
<PAGE> 22
EXHIBIT INDEX
EXHIBIT NO. EXHIBIT DESCRIPTION
- ----------- -------------------
3.1 Articles of Incorporation are incorporated by
reference to exhibit 3.1 of the Corporation's
Registration Statement on Form SB-2 (Commission File
no. 333-33081) that became effective on October 23,
1997
3.2 Bylaws of the Corporation are incorporated by
reference to exhibit 3.2 of the Corporation's
Registration Statement on Form SB-2 (Commission File
No. 333-33081) that became effective on October 23,
1997
10.1 Buy and Sell Agreement dated August 19, 1998,
covering a portion of Mercantile Bank of West
Michigan's land purchase in Alpine Township to
be used for branch location.
10.2 Buy and Sell Agreement dated August 19, 1998,
covering a portion of Mercantile Bank of West
Michigan's land purchase in Alpine Township to
be used for branch location.
11 Statement re Computation of Per Share Earnings
27 Financial Data Schedule
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.1
BUY AND SELL AGREEMENT
Date: August 19, 1998
BUYER'S OFFER. The undersigned (the "Buyer") offers and agrees to purchase the
property located in the Township of Alpine, Kent County, Michigan, commonly
known as 4631 Alpine NW (the "Land"), together with all buildings, fixtures and
improvements situated on the Land (The "Improvements")- Permanent Parcel Number
41-09-26-427-032
PURCHASE PRICE. The purchase price for the Premises is One Hundred Fifty Eight
Thousand dollars ($158,000).
TERMS OF PAYMENT. The Buyer shall pay the full purchase price to the Seller
upon execution and delivery of a warranty deed and performance by Seller of the
other closing obligations specified below.
SURVEY. A new, showing all easements of record, re-certified ALTA existing
survey shall be obtained by the Buyer.
PEST INSPECTION. Waived
TAXES AND ASSESSMENTS. All real property taxes and assessments on the Premises
which are due and payable, or a lien or both, on or before the date of closing
shall be paid by Seller at or prior to closing, without proration.
TITLE INSURANCE. At Seller's expense, Seller shall provide purchaser with a
standard owner's policy of title insurance without exceptions, in the amount of
the purchase price, effective as of the date of closing. A commitment to issue
such policy insuring marketable title vested in Buyer, including a tax status
report, shall be made available for Buyer's inspection within five (5) days of
Buyer's acceptance of this offer or Seller's acceptance of Buyer's
Counteroffer.
CONVEYANCE. Upon performance by Buyer of the closing obligations below,
Seller shall convey the Premises to Buyer by warranty deed, land contract or
assignment, as required above, subject to easement and building and use
restrictions of record and subject to zoning ordinances. Exceptions:
WARRANTIES OF SELLER. Except as otherwise provided or acknowledged in this
Agreement, Seller represents and warrants to, and agrees with Buyer as follows:
a. Seller's Interest in the Premises shall be transferred to Buyer on the
closing date, free from liens, encumbrances and claims of others.
WARRANTIES OF BUYER. Except as otherwise provided or acknowledged in this
Agreement, Buyer represents and warrants to Seller as follows:
<PAGE> 2
a. Buyer acknowledges that Buyer is aware that inspection services of
building components and systems are commercially available at a
reasonable fee, and that Buyer and/or inspectors hired by Buyer may or
have inspected the Premises as fully as they desire. Buyer is fully
familiar with the physical condition of the Premises, and agrees to
accept the Premises "as is" and "with all faults" in their condition as
of the date of this Agreement, subject to reasonable use, wear and tear
between the date of this Agreement and the date of closing.
DAMAGE TO PREMISES. If between the date of this Agreement and the closing date,
all or any part of the Premises is damaged by fire or natural elements or
other causes beyond Seller's control which can not be repaired prior to the
closing date, or any part of the premises is taken pursuant to any power of
eminent domain. Seller shall immediately notify Buyer of such occurrence and
either Seller or Buyer may terminate this Agreement by written notice to the
other within fifteen (15) days after the date of the damage or taking. If
neither elects to terminate this Agreement, there shall be no reduction of the
purchase price and at closing Seller shall assign to Buyer whatever rights
Seller may have with respect to any insurance proceeds or eminent domain award,
CLOSING. The closing shall be held not later than 30 days after the Buyer has
satisfied itself that the property can be reasonably utilized for Buyers
intended purpose, but not later than 120 days after the date of this agreement.
Should Buyer determine that the property cannot be reasonably utilized for
Buyers intended purpose (including but not limited to use, zoning, and site
plan approvals). Buyer will notify the Seller and this agreement shall become
void, and all earnest deposits shall be returned to the Buyer.
POSSESSION. Seller shall tender to Buyer possession of the Premises not later
than 15 days after the date of closing.
SELLER'S CLOSING OBLIGATIONS. At the closing, Seller shall deliver %he following
to Buyer:
a. The warranty deed, land contract, or assignment of land contract
required by this Agreement.
b. A bill of sale for any Personal Property (attached as Exhibit "D").
c. Any other documents required by this Agreement to be delivered by
Seller.
BUYER'S CLOSING OBLIGATIONS. At closing, Buyer shall deliver to Seller the
following:
a. The cash portion of the purchase price specified above.
b. Any other documents required by this Agreement to be delivered by Buyer.
<PAGE> 3
NOTICES. A notice required or permitted by this Agreement shall be sufficient if
in writing and either delivered personally or by regular mail addressed to the
parties at their addresses specified in the proximity of their signatures below,
and any notices given by mail shall be deemed to have been given as of the day
following the date of posting.
ADDITIONAL ACTS. Buyer and Seller agree to execute and deliver such additional
documents and to perform such additional acts as may become necessary to
effectuate the transfers contemplated by this Agreement.
ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
with respect to the sale of the Premises. All contemporaneous or prior
negotiations have been merged into this Agreement. This Agreement may be
modified or amended only by written instrument signed by the parties to this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.
EARNEST MONEY. Buyer gives Visser Development 2 days to obtain the written
acceptance of this offer and agrees that this offer, when accepted by Seller,
will constitute a binding agreement between Buyer and Seller. Upon acceptance,
Buyer will deposit $5,000 with Colburn Hundley Realtors as earnest monies to
secure this agreement.
DISCLOSURE OF PRICE AND TERMS. The purchase price and the terms of this sale may
not be disclosed without consent of both parties.
AGENCY AND BROKERAGE FEE. The Seller acknowledges and agrees that Colburn
Hundley, Inc. and Visser Development, Inc. and its Broker/Agents are acting as
Buyers Agents in this matter and not as agent of the Seller, and further agree
than that Colburn Hundley, Inc. and Visser Development, Inc. will be paid a
commission based on the cooperative listing agreement between the Seller and the
Listing Broker, or if none exists, then that Colburn Hundley, Inc. and Visser
Development, Inc. shall be paid at closing a commission equal to 10% of the
final purchase price.
Witness: [SIG] /s/ DENNIS VAN DAM
---------------------- ---------------------------
Buyer
Phone No. 363-3825 FOR BUYER TO BE NAMED
--------------------- ---------------------------
Buyer
BUYER(S) SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION
NUMBER:
--------------------------------------------
<PAGE> 4
SELLER'S ACCEPTANCE
Date: August 19, 1998, 4:00 PM
The above offer is hereby accepted with a sales price of $158,000 and with
$5,000 earnest money to be held by seller's realtor.
Witness: [SIG] /s/ MICHAEL WILLIAMS
---------------------- ---------------------------
Seller
Phone No. (616) 345-0388 /s/ LYNN WILLIAMS
--------------------- ---------------------------
Seller
SELLER'S SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION
NUMBER:
--------------------------------------------
BUYERS RECEIPT OF ACCEPTANCE Grand Rapids, Michigan
Date: 9/2, 1998, 10:15 AM
Buyer acknowledges receipt of seller's acceptance of Buyer's offer. If the
acceptance was subject to changes from Buyer's offer, the Buyer agrees to accept
those changes, all other terms and conditions remaining unchanged.
Witness: [SIG] /s/ MICHAEL PRICE
---------------------- ---------------------------
Buyer
President
---------------------------
Mercantile Bank Buyer
SELLER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan
Date: , 19 , AM/PM
----------------------- -- ------
Seller acknowledges receipt of a copy of the Buyer's acceptance of the
counter-offer (if Seller made a counter-offer).
Witness:
---------------------- ---------------------------
Seller
<PAGE> 1
EXHIBIT 10.2
BUY AND SELL AGREEMENT
Date: August 19, 1998
BUYER'S OFFER. The undersigned (the "Buyer") offers and agrees to purchase the
property located in the Township of Alpine, Kent County, Michigan, commonly
known as 4613 Alpine NW (the "Land"), together with all buildings, fixtures and
improvements situated on the Land (The "Improvements"). Permanent Parcel Number
41-09-26-427-028.
PURCHASE PRICE. The purchase price for the Premises is One Hundred Fifty Five
Thousand dollars ($155,000).
TERMS OF PAYMENT. The Buyer shall pay the full purchase price to the Seller upon
execution and delivery of a warranty deed and performance by Seller of the other
closing obligations specified below.
SURVEY. A new, showing all easements of record, re-certified ALTA existing
survey shall be obtained by the Buyer.
PEST INSPECTION. Waived
TAXES AND ASSESSMENTS. All real property taxes and assessments for streets,
sidewalks, utilities or improvements of any kind, on or against the Premises
which are either deferred or now due and payable, or a lien or both, on or
before the date of closing shall be paid by Seller at or prior to closing,
without proration. Buyer to assume Wheaton assessment.
TITLE INSURANCE. At Seller's expense, Seller shall provide purchaser with a
standard owner's policy of title insurance without exceptions, in the amount of
the purchase price, effective as of the date of closing. A commitment to issue
such policy insuring marketable title vested in Buyer, including a tax status
report, shall be made available for Buyer's inspection within five (5) days of
Buyer's acceptance of this offer or Seller's acceptance of Buyer's Counteroffer.
CONVEYANCE. Upon performance by Buyer of the closing obligations specified in
below, Seller shall convey the Premises to Buyer by warranty deed, land contract
or assignment, as required above, subject to easement and building and use
restrictions of record and subject to zoning ordinances. Exceptions:
WARRANTIES OF SELLER. Except as otherwise provided or acknowledged in this
Agreement, Seller represents and warrants to, and agrees with Buyer as follows:
a. Seller's interest in the Premises shall be transferred to Buyer on the
closing date, free from liens, encumbrances and claims of others.
<PAGE> 2
WARRANTIES OF BUYER. Except as otherwise provided or acknowledged in this
Agreement, Buyer represents and warrants to Seller as follows:
a. Buyer acknowledges that Buyer is aware that inspection services of
building components and systems are commercially available at a
reasonable fee, and that Buyer and/or inspectors hired by Buyer may or
have inspected the Premises as fully as they desire. Buyer is fully
familiar with the physical condition of the Premises, and agrees to
accept the Premises "as is" and "with all faults" in their condition as
of the date of this Agreement, subject to reasonable use, wear and tear
between the date of this Agreement and the date of closing.
DAMAGE TO PREMISES. If between the date of this Agreement and the closing date,
all or any part of the Premises is damaged by fire or natural elements or other
causes beyond Seller's control which can not be repaired prior to the closing
date, or any part of the premises is taken pursuant to any power of eminent
domain, Seller shall immediately notify Buyer of such occurrence, and either
Seller or Buyer may terminate this Agreement by written notice to the other
within fifteen (15) days after the date of the damage or taking. If neither
elects to terminate this Agreement, there shall be no reduction of the purchase
price and at closing Seller shall assign to Buyer whatever rights Seller may
have with respect to any insurance proceeds or eminent domain award.
CLOSING. The closing shall be held not later than 30 days after the Buyer has
satisfied itself that the property can be reasonably utilized for Buyers
intended purpose, but not later than 120 days after the date of this agreement.
Should the Seller desire to close at a later date to accommodate the Sellers
relocation to pother property, the Buyer agrees to do so provided that the
closing occurs not later than 180 days after the date of this agreement.
Should Buyer determine that the property cannot be reasonably utilized for
Buyers intended purpose (including but not limited to use, zoning, and site plan
approvals) Buyer will notify the Seller and this agreement shall become void,
and all earnest deposits shall be returned to the Buyer.
POSSESSION. Seller shall tender to Buyer possession of the Premises not later
than 15 days after the date of closing
SELLER'S CLOSING OBLIGATIONS. At the closing, Seller shall deliver the following
to Buyer:
a. The warranty deed, land contract, or assignment of land contract
required by this Agreement.
b. A bill of sale for any Personal Property (attached as Exhibit "D").
c. Any other documents required by this Agreement to be delivered by
Seller.
<PAGE> 3
BUYER'S CLOSING OBLIGATIONS. At closing, Buyer shall deliver to Seller the
following:
a. The cash portion of the purchase price specified above.
b. Any other documents required by this Agreement to be delivered by
Buyer.
NOTICES. A notice required or permitted by this Agreement shall be sufficient if
in writing and either delivered personally or by regular mail addressed to the
parties at their addresses specified in the proximity of their signatures below,
and any notices given by mail shall be deemed to have been given as of the day
following the date of posting.
ADDITIONAL ACTS. Buyer and Seller agree to execute and deliver such additional
documents and to perform such additional acts as may become necessary to
effectuate the transfers contemplated by this Agreement.
ENTIRE AGREEMENT. This Agreement contains the entire agreement of the parties
with respect to the sale of the Premises. All contemporaneous or prior
negotiations have been merged into this Agreement. This Agreement may be
modified or amended only by written instrument signed by the parties to this
Agreement. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan.
EARNEST MONEY. Buyer gives Visser Development 2 days to obtain the written
acceptance of this offer and agrees that this offer, when accepted by Seller,
will constitute a binding agreement between Buyer and Seller. Upon acceptance,
Buyer will deposit $5,000 with Visser Development as earnest monies to secure
this agreement.
DISCLOSURE OF PRICE AND TERMS. The purchase price and the terms of this sale may
not be disclosed without consent of both parties.
AGENCY AND BROKERAGE FEE. The Seller acknowledges and agrees that Visser
Development, Inc. and its Broker/Agents are acting as Buyers Agents in this
matter and not as agent of the Seller, and further agree than that Visser
Development, Inc. will be paid a commission based on the cooperative listing
agreement between the Seller and the Listing Broker, or if none exists, then
that Visser Development, Inc. shall be paid at closing a commission equal to
None% of the final purchase price.
Witness: /s/ DENNIS VAN DAM Buyer
----------------- ------------------
Phone No. AGENT FOR BUYER Buyer
---------------- ------------------
<PAGE> 4
BUYER(S) SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION
NUMBER:
------------------------------------------------
SELLER'S ACCEPTANCE
Date: August 31, 1998, AM/PM
--------
The above offer is hereby accepted provided sale price to be $155,000 buyer to
assume Wheaton Road Assessment, Seller may remove small storage bldg's and
docking prior to close.
Witness: [SIG] /s/ CATHY CENTILLI Seller
---------------- -------------------
Phone No: /s/ RICHARD CENTILLI Seller
--------------- -------------------
SELLER'S SOCIAL SECURITY NUMBER OR FEDERAL IDENTIFICATION
NUMBER:
------------------------------------------------
BUYER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan
Date: 9/2 , 1998, 10:15 AM
Buyer acknowledges receipt of seller's acceptance of Buyer's offer. If the
acceptance was subject to changes from Buyer's offer, the Buyer agrees to accept
those changes, all other terms and conditions remaining unchanged.
Witness: [SIG] /s/ MICHAEL PRICE Buyer
---------------- ------------------
Buyer Buyer
------------------
SELLER'S RECEIPT OF ACCEPTANCE Grand Rapids, Michigan
Date: , 19 , AM/PM
------------------ --- -------
Seller acknowledges receipt of a copy of the Buyer's acceptance of the counter-
offer (if Seller made a counter-offer).
Witness: Seller
-------------------- ------------------
<PAGE> 1
EXHIBIT 11
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
RETURN ON EQUITY AND ASSETS
12/31/97
TO
ANNUALIZED 9/30/98
---------- --------
Return on average total assets -1.60% -1.20%
Return on average equity -11.27% -8.45%
Dividend Payout Ratio NA NA
Average Equity to Average Assets 14.20%
STATEMENT OF COMPUTER PER SHARE EARNINGS
Net Loss $(1,320,001)
Average Shares Outstanding 1,714,194
Basic and Diluted Loss Per Share $(0.77)
- --------------------------------------------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 7,691,694
<INT-BEARING-DEPOSITS> 500,000
<FED-FUNDS-SOLD> 6,100,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 22,657,819
<INVESTMENTS-MARKET> 22,657,819
<LOANS> 140,838,861
<ALLOWANCE> (2,135,100)
<TOTAL-ASSETS> 178,494,499
<DEPOSITS> 136,042,725
<SHORT-TERM> 15,351,539
<LIABILITIES-OTHER> 514,425
<LONG-TERM> 0
0
0
<COMMON> 28,181,798
<OTHER-SE> (1,724,072)
<TOTAL-LIABILITIES-AND-EQUITY> 178,494,499
<INTEREST-LOAN> 5,712,169
<INTEREST-INVEST> 541,560
<INTEREST-OTHER> 199,691
<INTEREST-TOTAL> 6,453,420
<INTEREST-DEPOSIT> 3,295,670
<INTEREST-EXPENSE> 296,671
<INTEREST-INCOME-NET> 2,861,079
<LOAN-LOSSES> 1,941,800
<SECURITIES-GAINS> 128
<EXPENSE-OTHER> 2,502,583
<INCOME-PRETAX> (1,320,001)
<INCOME-PRE-EXTRAORDINARY> (1,320,001)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,320,001)
<EPS-PRIMARY> (0.77)
<EPS-DILUTED> (0.77)
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 6
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> (193,300)
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> (2,135,100)
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> (2,135,100)
</TABLE>
