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Mercantile Bank Corp. in Grand Rapids, Mich., reported second-quarter earnings of $2.4 million, compared to a reported loss of $700,000 a year
earlier, driven largely by a reduction in credit costs, but offset by declining revenue.

The $1.5 billion-asset company said Tuesday that its provision for loan losses was $1.7 million, down 72% a year earlier. Nonperforming assets totaled $61.9 million, or 4% of total assets, down 44% from a year earlier and down 28% from the end of last year's fourth quarter. The company added that it has "virtually zero" loans in its 30- to 89-day delinquent category.

The decrease in credit costs was offset, however, by a reduction in revenue caused by the company's shrinking balance sheet. A year ago, the company had $1.8 billion of assets.

Net interest income was $13.2 million, down 8.8% from a year earlier. Still, the company reported a 30-basis-point increase in its net interest margin, to 3.61%, due largely to its strategy of replacing wholesale funding with core deposits.

Its noninterest income was $1.7 million, down 14.7%, because of lower rental income from fewer foreclosed properties, the company said in a press release.