Mercantile Bank Corp. in Grand Rapids, Mich., swung to a third-quarter profit of $2.7 million, compared to a loss of $5.7 million a year earlier, as credit costs fell dramatically.
The $1.5 billion-asset company said that it set aside just $1.1 million for loan losses in the quarter, compared to $10.4 million a year earlier, as total nonperforming loans declined by nearly 40%.
For the first nine months of 2011 the company has set aside $5 million for loan losses, down 80% through the same period in 2010.
The improvement in nonperforming asset’s also helped reduce expenses. The company reported noninterest expenses of $9.9 million, down 16% from a year earlier, with a $1.3 million reduction in nonperforming asset costs driving the savings.
Mercantile said in a press release Tuesday that it has spent the last year focusing on reducing its commercial real estate exposure. Loans secured by real estate totaled $742 million at the end of the quarter, down 21% from a year earlier.
The pared-back balance sheet also resulted in lower revenues. The company said that net interest income fell 12% from a year earlier, to $12.3 million. However, its net interest margin improved 17 basis points, to 3.5%.
