Regulatory Filings • Jul 2, 2013
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Download Source FileCORRESP 1 filename1.htm CORRESP
July 2, 2013
John P. Nolan
Senior Assistant Chief Accountant
Securities and Exchange Commission
Washington, D.C. 20549
Re: Mercantile Bank Corporation
Form 10-K for the Year Ended December 31, 2012
Filed March 14, 2013
File No. 000-26719
Dear Mr. Nolan:
On behalf of Mercantile Bank Corporation (the Company), I write to respond to the comments contained in your letter to the Company dated June 19, 2013, related to the above-referenced report. For your ease of reference, your comment, followed by the Companys response is set forth below.
FORM 10-K FOR THE FISCAL PERIOD ENDED DECEMBER 31, 2012
Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
Financial Condition, page F-7
Commission Comment:
Company Response:
We have provided the requested information regarding nonperforming assets and performing and nonperforming troubled debt restructurings in the attached Exhibit A . In future filings we will revise the nonperforming assets table to separately disclose nonaccrual loans and other real estate owned by property type for each of the periods presented. In future filings, we will also disclose the amount of both performing and nonperforming troubled debt restructurings for the periods presented.
310 LEONARD ST. NW GRAND RAPIDS, MI 49504 616.406.3000 FAX 616.726.1203
www.mercbank.com
Commission Comment:
Company Response:
As requested, we will revise the table which addresses the reconciliation of nonperforming assets to present the activity for nonperforming loans and other real estate owned separately for the periods presented in future filings.
Commission Comment:
Company Response:
We have provided the requested information regarding the coverage ratio of the allowance for loan losses to nonperforming loans in the attached Exhibit B . We will also include the coverage ratio of the allowance for loan losses to nonperforming loans for each of the periods presented in future filings.
Notes to Consolidated Financial Statements
Note 3 Loans and Allowance for Loan Losses, page F-71
Commission Comment:
Revise to include a rollforward of activity for troubled debt restructurings for each period presented; and
Disclose the amount of any allowance for loan loss allocated to these loans for the periods presented.
Company Response:
We have provided the requested information regarding troubled debt restructurings in the attached Exhibit C . We will also include the requested information for the periods presented in future filings.
2
We have included the requested acknowledgement as Addendum 1. We trust that this response satisfactorily addresses your comments. However, should you have any further questions, comments or concerns regarding this response, please contact the undersigned via phone at (616) 726-1202 or email at [email protected].
| Sincerely, |
|---|
| MERCANTILE BANK CORPORATION |
| /s/ Charles Christmas |
| Charles Christmas |
| Chief Financial Officer and Treasurer |
Enclosure
3
Addendum 1
In connection with the Companys response to the Staffs letter of June 19, 2013 containing the Staffs comments regarding the Form 10-K for the fiscal period ended December 31, 2012, filed on March 14, 2013, the Company acknowledges that:
the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and
the Company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
| MERCANTILE BANK CORPORATION |
|---|
| /s/ Charles Christmas |
| Charles Christmas |
| Chief Financial Officer and Treasurer |
Exhibit A
NONPERFORMING LOANS
| 12/31/12 | 12/31/11 | 12/31/10 | 12/31/09 | 12/31/08 | |
|---|---|---|---|---|---|
| Residential Real Estate: | |||||
| Land Development | $ 1,188,000 | $ 1,179,000 | $ 11,775,000 | $ 13,852,000 | $ 12,910,000 |
| Construction | 319,000 | 686,000 | 1,037,000 | 10,229,000 | 11,040,000 |
| Owner Occupied / Rental | 4,321,000 | 6,018,000 | 9,149,000 | 6,399,000 | 2,800,000 |
| 5,828,000 | 7,883,000 | 21,961,000 | 30,480,000 | 26,750,000 | |
| Commercial Real Estate: | |||||
| Land Development | 737,000 | 1,661,000 | 2,044,000 | 2,509,000 | 1,163,000 |
| Construction | 0 | 409,000 | 0 | 1,268,000 | 0 |
| Owner Occupied | 2,577,000 | 8,133,000 | 11,629,000 | 14,463,000 | 5,440,000 |
| Non-Owner Occupied | 9,093,000 | 23,914,000 | 25,428,000 | 26,747,000 | 10,811,000 |
| 12,407,000 | 34,117,000 | 39,101,000 | 44,987,000 | 17,414,000 | |
| Non-Real Estate: | |||||
| Commercial Assets | 734,000 | 3,060,000 | 8,221,000 | 9,583,000 | 5,109,000 |
| Consumer Assets | 1,000 | 14,000 | 161,000 | 0 | 30,000 |
| 735,000 | 3,074,000 | 8,382,000 | 9,583,000 | 5,139,000 | |
| Total | $ 18,970,000 | $ 45,074,000 | $ 69,444,000 | $ 85,050,000 | $ 49,303,000 |
OTHER REAL ESTATE OWNED & REPOSSESSED ASSETS
| 12/31/12 | 12/31/11 | 12/31/10 | 12/31/09 | 12/31/08 | |
|---|---|---|---|---|---|
| Residential Real Estate: | |||||
| Land Development | $ 1,174,000 | $ 4,300,000 | $ 2,772,000 | $ 5,870,000 | $ 1,363,000 |
| Construction | 157,000 | 711,000 | 1,296,000 | 1,874,000 | 0 |
| Owner Occupied / Rental | 491,000 | 1,120,000 | 305,000 | 1,094,000 | 1,360,000 |
| 1,822,000 | 6,131,000 | 4,373,000 | 8,838,000 | 2,723,000 | |
| Commercial Real Estate: | |||||
| Land Development | 52,000 | 450,000 | 410,000 | 462,000 | 1,071,000 |
| Construction | 0 | 0 | 0 | 0 | 0 |
| Owner Occupied | 957,000 | 2,509,000 | 3,111,000 | 5,455,000 | 1,055,000 |
| Non-Owner Occupied | 4,139,000 | 6,192,000 | 8,781,000 | 11,670,000 | 3,244,000 |
| 5,148,000 | 9,151,000 | 12,302,000 | 17,587,000 | 5,370,000 | |
| Non-Real Estate: | |||||
| Commercial Assets | 0 | 0 | 0 | 175,000 | 25,000 |
| Consumer Assets | 0 | 0 | 0 | 8,000 | 0 |
| 0 | 0 | 0 | 183,000 | 25,000 | |
| Total | $ 6,970,000 | $ 15,282,000 | $ 16,675,000 | $ 26,608,000 | $ 8,118,000 |
A-1
TROUBLED DEBT RESTRUCTURINGS
| 12/31/12 | 12/31/11 | 12/31/10 | 12/31/09 | 12/31/08 | |
|---|---|---|---|---|---|
| Performing | $ 38,148,000 | $ 26,155,000 | $ 12,263,000 | $ 2,988,000 | $ 0 |
| Nonperforming | 12,612,000 | 14,508,000 | 19,050,000 | 33,017,000 | 0 |
| Total | $ 50,760,000 | $ 40,663,000 | $ 31,313,000 | $ 36,005,000 | $ 0 |
A-2
Exhibit B
| Ratio of allowance to nonperforming loans | 151.17 % | 81.05 % | 65.33 % | 56.29 % | 54.98 % |
|---|---|---|---|---|---|
B-1
Exhibit C
Activity for loans categorized as troubled debt restructurings for the year-ended December 31, 2012 is as follows:
| Commercial and Industrial | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Commercial Loan Portfolio: | ||||||||||
| Beginning Balance | 4,575,000 | 5,078,000 | 6,183,000 | 12,037,000 | 12,626,000 | |||||
| Charge-Offs | (489,000 | ) | (63,000 | ) | (421,000 | ) | (695,000 | ) | (2,116,000 | ) |
| Payments | (2,635,000 | ) | (1,966,000 | ) | (3,314,000 | ) | (1,668,000 | ) | (7,328,000 | ) |
| Transfers to ORE | (45,000 | ) | 0 | (65,000 | ) | (1,045,000 | ) | (186,000 | ) | |
| Additions | 1,281,000 | 0 | 1,733,000 | 29,043,000 | 86,000 | |||||
| Ending Balance | $ 2,687,000 | $ | 3,049,000 | $ | 4,116,000 | $ | 37,672,000 | $ | 3,082,000 |
| Retail Home Equity and Other | Retail 1-4 Family Mortgages | ||
|---|---|---|---|
| Retail Loan Portfolio: | |||
| Beginning Balance | $ 0 | $ 164,000 | |
| Charge-Offs | 0 | 0 | |
| Payments | 0 | (10,000 | ) |
| Transfers to ORE | 0 | 0 | |
| Additions | 0 | 0 | |
| Ending Balance | $ 0 | $ 154,000 |
C-1
Activity for loans categorized as troubled debt restructurings for the year-ended December 31, 2011 is as follows:
| Commercial and Industrial | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Commercial Loan Portfolio: | ||||||||||
| Beginning Balance | 850,000 | 10,459,000 | 2,589,000 | 9,330,000 | 8,085,000 | |||||
| Charge-Offs | (850,000 | ) | (2,429,000 | ) | 0 | (1,195,000 | ) | (21,000 | ) | |
| Payments | 0 | (2,900,000 | ) | (2,477,000 | ) | (3,613,000 | ) | (329,000 | ) | |
| Transfers to ORE | 0 | (5,130,000 | ) | 0 | 0 | 0 | ||||
| Additions | 4,575,000 | 5,078,000 | 6,071,000 | 7,515,000 | 4,891,000 | |||||
| Ending Balance | $ 4,575,000 | $ | 5,078,000 | $ | 6,183,000 | $ | 12,037,000 | $ | 12,626,000 |
| Retail Home Equity and Other | Retail 1-4 Family Mortgages | |
|---|---|---|
| Retail Loan Portfolio: | ||
| Beginning Balance | $ 0 | $ 0 |
| Charge-Offs | 0 | 0 |
| Payments | 0 | 0 |
| Transfers to ORE | 0 | 0 |
| Additions | 0 | 164,000 |
| Ending Balance | $ 0 | $ 164,000 |
C-2
The allowance related to loans categorized as troubled debt restructurings was as follows:
| December 31, 2012 | December 31, 2011 | |
|---|---|---|
| Commercial: | ||
| Commercial and industrial | $ 772,000 | $ 514,000 |
| Vacant land, land development, and residential construction | 713,000 | 1,672,000 |
| Real estate owner occupied | 1,116,000 | 1,418,000 |
| Real estate non-owner occupied | 9,751,000 | 1,773,000 |
| Real estate multi-family and residential rental | 745,000 | 5,855,000 |
| Total commercial | 13,097,000 | 11,232,000 |
| Retail: | ||
| Home equity and other | 0 | 0 |
| 1-4 family mortgages | 0 | 0 |
| Total retail | 0 | 0 |
| Total related allowance | $ 13,097,000 | $ 11,232,000 |
C-3
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