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Mercantile Bank Corporation Announces Strong Second Quarter 2023 Results

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Significant year-over-year increase in net interest income, solid loan growth, and ongoing strength in asset quality metrics highlight quarter

GRAND RAPIDS, Mich., July 18, 2023 /PRNewswire/ -- Mercantile Bank Corporation (NASDAQ: MBWM) ("Mercantile") reported net income of $20.4 million, or $1.27 per diluted share, for the second quarter of 2023, compared with net income of $11.7 million, or $0.74 per diluted share, for the respective prior-year period.  Net income during the first six months of 2023 totaled $41.3 million, or $2.58 per diluted share, compared with net income of $23.2 million, or $1.47 per diluted share, during the first six months of 2022.

"We are very pleased to report another quarter of strong financial performance," said Robert B. Kaminski, Jr., President and Chief Executive Officer of Mercantile.  "Our robust operating results were driven by an approximately 39 percent increase in net interest income stemming from a higher net interest margin and solid loan growth.  The sustained loan portfolio expansion and pristine asset quality metrics reflect our commitment to meeting the credit needs of our clients while utilizing sound underwriting practices and parameters.  We believe our strong capital base positions us to withstand any challenges arising from changing economic conditions."

Second quarter highlights include:

  • Significant increase in net interest income depicting net interest margin expansion and loan growth
  • Notable increases in several key fee income categories
  • Annualized commercial loan growth of approximately 6 percent and continued residential mortgage loan portfolio expansion
  • Sustained strength in commercial loan pipeline
  • Ongoing low levels of nonperforming assets, past due loans, and loan charge-offs
  • Strong capital position

Operating Results

Total revenue, which consists of net interest income and noninterest income, was $55.2 million during the second quarter of 2023, up $13.1 million, or 31.2 percent, from $42.1 million during the prior-year second quarter.  Net interest income during the second quarter of 2023 was $47.6 million, up $13.2 million, or 38.5 percent, from $34.4 million during the respective 2022 period, mainly due to increased yields on earning assets and loan growth.  Noninterest income totaled $7.6 million during the second quarter of 2023, compared to $7.7 million during the second quarter of 2022.  Excluding a bank owned life insurance claim recorded in the second quarter of 2022, noninterest income increased $0.4 million, or 6.0 percent, in the second quarter of 2023 compared with the prior-year second quarter primarily due to higher levels of interest rate swap income, credit and debit card income, and payroll processing fees.

The net interest margin was 4.05 percent in the second quarter of 2023, up from 2.88 percent in the prior-year second quarter.  The yield on average earning assets was 5.61 percent during the current-year second quarter, an increase from 3.32 percent during the respective 2022 period.  The higher yield on average earning assets primarily resulted from an increased yield on loans.  The yield on loans was 6.19 percent during the second quarter of 2023, up from 3.97 percent during the second quarter of 2022 mainly due to higher interest rates on variable-rate commercial loans stemming from the Federal Open Market Committee ("FOMC") significantly raising the targeted federal funds rate in an effort to curb elevated inflation levels.  The FOMC increased the targeted federal funds rate by 475 basis points during the period of May 2022 through May 2023.  As of June 30, 2023, approximately 65 percent of the commercial loan portfolio consisted of variable-rate loans.

The cost of funds was 1.56 percent in the second quarter of 2023, up from 0.44 percent in the second quarter of 2022 primarily due to higher costs of deposits and borrowed funds, reflecting the impact of the rising interest rate environment, and a change in funding mix, consisting of a decrease in lower-cost non-time deposits and increases in higher-cost time deposits and borrowings as a percentage of interest-bearing liabilities.  During the second quarter, a notable level of deposit funds migrated from lower-paying checking and savings accounts to higher-paying money market accounts and time deposits.

Mercantile recorded provisions for credit losses of $2.0 million and $0.5 million during the second quarters of 2023 and 2022, respectively.  The provision expense recorded during the current-year second quarter mainly reflected allocations necessitated by net loan growth and adjustments to historical loss factors to better represent Mercantile's expectations for future credit losses.  The provision expense recorded during the second quarter of 2022 primarily reflected allocations necessitated by net commercial and residential mortgage loan growth, increased specific reserves for certain problem commercial loan relationships, and a higher reserve for residential mortgage loans.

Noninterest income during the second quarter of 2023 was $7.6 million, compared to $7.7 million during the respective 2022 period.  Noninterest income during the second quarter of 2022 included a $0.5 million bank owned life insurance claim.  Excluding the impact of this transaction, noninterest income increased $0.4 million, or 6.0 percent, during the second quarter of 2023 compared with the prior-year second quarter.  The higher level of noninterest income primarily stemmed from increased interest rate swap income, credit and debit card income, and payroll servicing fees, which more than offset decreased service charges on accounts and mortgage banking income.  The decline in service charges on accounts reflected increased earnings credit rates in response to the increasing interest rate environment.

Noninterest expense totaled $27.8 million during the second quarter of 2023, compared to $26.9 million during the prior-year second quarter.   The increase in noninterest expense mainly resulted from larger compensation costs, including salary increases and a higher bonus and commercial lender incentive accrual, which outweighed a reduction in residential mortgage lender commissions.  The higher level of salary expense primarily stemmed from annual merit pay increases and market adjustments, as well as lower residential mortgage loan deferred salary costs.  The reduced residential mortgage lender commissions and incentives mainly resulted from decreased loan production.  The increase in overhead costs during the second quarter of 2023 also resulted from the recording of an increased credit reserve for unfunded loan commitments and higher levels of Federal Deposit Insurance Corporation deposit insurance premiums, reflecting a higher industry-wide assessment rate, and interest rate swap credit reserves and associated collateral interest costs.

Mr. Kaminski commented, "The noteworthy increases in net interest income during the second quarter and first six months of 2023 compared to the respective 2022 periods mainly reflected vastly improved net interest margins and robust loan growth.  We are pleased with the increases in several key fee income categories and remain focused on meeting growth objectives in a disciplined manner.  Noninterest expense control continues to be a fundamental operating initiative, and we are continually examining our cost structure to identify further opportunities to enhance efficiency while still providing outstanding service to our customers."   

Balance Sheet

As of June 30, 2023, total assets were $5.14 billion, up $265 million from December 31, 2022.  Total loans increased $135 million, or an annualized 6.9 percent, during the first six months of 2023, mainly reflecting growth in residential mortgage loans and commercial loans of $78.2 million and $56.8 million, respectively.  Commercial loans and residential mortgage loans were up $48.2 million and $38.2 million, respectively, during the second quarter of 2023. Commercial loans increased despite the full payoffs and partial paydowns of certain larger relationships, which aggregated approximately $108 million and $174 million during the second quarter and first six months of 2023, respectively.  The payoffs and paydowns mainly stemmed from customers refinancing debt on the secondary market and using excess cash flows generated within their operations to make unscheduled principal and line of credit payments.  Interest-earning deposits increased $104 million during the first six months of 2023, in large part reflecting a strategic initiative to enhance on-balance sheet liquidity.

As of June 30, 2023, unfunded commitments on commercial construction and development loans, which are anticipated to be funded over the next 12 to 18 months, and residential construction loans, which are expected to be largely funded over the next 12 months, totaled $327 million and $58.6 million, respectively.

Ray Reitsma, President of Mercantile Bank, noted, "Although impeded by full and partial payoffs, commercial loan growth was solid during the second quarter of 2023.  In addition to the payoffs stemming from customers refinancing debt on the secondary market and using excess cash flows to reduce debt, $12.8 million in payoffs related to borrowers that were experiencing financial duress and placed on our internal watch list occurred during the second quarter.  Commercial and industrial loan growth accounted for approximately 80 percent of the increase in commercial loans during the second quarter, providing our lenders and treasury management personnel with additional opportunities to enhance commercial banking-related fee income and grow local deposits.  Our healthy commercial loan pipeline and credit availability for commercial construction and development loans provide opportunities for future portfolio growth.  As part of our efforts to meet commercial loan growth goals, we will continue to employ sound underwriting practices.  Despite ongoing headwinds, including the higher interest rate environment and limited housing inventory levels, the residential mortgage loan portfolio expanded during the second quarter of 2023, as it did all throughout 2022 and the first three months of 2023."

Commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately 59 percent of total commercial loans as of June 30, 2023, a level that has remained relatively consistent with prior periods and in line with Mercantile's expectations. 

Total deposits at June 30, 2023, were $3.76 billion, up $159 million, or 4.4 percent, from March 31, 2023, and $44.0 million, or 1.2 percent, from December 31, 2022.  Local deposits increased $47.5 million and decreased $67.3 million during the second quarter and first six months of 2023, respectively, while brokered deposits grew $111 million during the first six months of 2023, all of which occurred during the second quarter.  The net reduction in local deposits during the first six months of 2023 primarily reflected a customary level of customers' tax and bonus payments and partnership distributions, as well as transfers to the sweep account product, during the first quarter.  The growth in local deposits during the second quarter of 2023 mainly depicted the anticipated buildup in existing customers' deposit balances that typically begins after the previously mentioned seasonal payments are made and generally continues during the remainder of each year.  Wholesale funds, consisting of brokered deposits and Federal Home Loan Bank of Indianapolis advances, were $598 million, or approximately 13 percent of total funds, at June 30, 2023, compared with $308 million, or approximately 7 percent of total funds, at December 31, 2022.  Wholesale funds totaling $311 million were obtained during the first six months of 2023 to increase on-balance sheet liquidity and offset loan growth, seasonal deposit withdrawals, and wholesale fund maturities.

Asset Quality

Nonperforming assets totaled $2.8 million, $8.4 million, $7.7 million, and $1.8 million, at June 30, 2023, March 31, 2023, December 31, 2022, and June 30, 2022, respectively, with each dollar amount representing less than 0.2 percent of total assets as of the respective dates.  The decrease in nonperforming assets during the second quarter and first six months of 2023 primarily reflected the near full payoff of one large commercial loan relationship, which had been placed on nonaccrual during the fourth quarter of 2022; a charge-off of less than $0.1 million was recorded as part of the relationship's resolution.  A former branch facility, which was transferred into other real estate owned in the first quarter of 2023 and is under contract to be sold in the third quarter of 2023, accounted for approximately 22 percent of total nonperforming assets as of June 30, 2023.

The level of past due loans remains nominal, and the dollar volume of loan relationships on the internal watch list declined during the first six months of 2023.  During the second quarter of 2023, loan charge-offs were $0.5 million, while recoveries of prior period loan charge-offs equaled $0.3 million, providing for net loan charge-offs of $0.2 million, or an annualized 0.02 percent of average total loans.

Mr. Reitsma commented, "Our asset quality measures remained strong during the second quarter, reflecting our ongoing commitment to underwriting loans in a sound and vigilant manner and our borrowers' sustained abilities to effectively manage issues stemming from the current operating environment, including higher interest rates and associated increase in debt service requirements.  Through our robust loan review program and emphasis on early recognition and reporting of deteriorating credit relationships, we believe we are well positioned to identify credit issues and limit their impact on our overall financial condition."

Capital Position

Shareholders' equity totaled $479 million as of June 30, 2023, up $37.3 million from year-end 2022.  Mercantile Bank maintains a "well-capitalized" position, with its total risk-based capital ratio at 13.7 percent as of June 30, 2023, unchanged from December 31, 2022.  At June 30, 2023, Mercantile Bank had approximately $177 million in excess of the 10 percent minimum regulatory threshold required to be categorized as a "well-capitalized" institution. 

All of Mercantile's investments are categorized as available-for-sale.  As of June 30, 2023, the net unrealized loss on these investments totaled $77.9 million, resulting in an after-tax reduction to equity capital of $61.5 million.  Although unrealized gains and losses on investments are excluded from regulatory capital ratio calculations, our excess capital over the minimum regulatory requirement to be considered a "well-capitalized" institution would approximate $115 million on an adjusted basis.

Mercantile reported 16,018,048 total shares outstanding at June 30, 2023.

Mr. Kaminski concluded, "As demonstrated by our Board of Directors' declaration of an increased third quarter 2023 regular cash dividend, our sustained financial strength has allowed us to reward shareholders with competitive dividend yields while supporting loan portfolio expansion.  We believe our strong overall financial condition, including solid capital levels, pristine asset quality measures, robust operating performance, and substantial loan origination opportunities, should allow us to successfully navigate through the myriad of challenges that could arise from changing economic conditions.  While concerns about banks' liquidity positions and the stability of banks' deposit portfolios have eased, we continue to closely monitor our deposit base for any atypical activities, and to date believe that it remains stable.  We increased our on-balance sheet liquidity during the second quarter of 2023 and believe our liquidity position remains sufficient to meet expected funding requirements.  Our strong financial performance during the first six months of 2023 and anticipated loan growth give us confidence that robust operating results can be delivered during the remainder of the year and beyond as we continue our efforts to be a consistent and profitable performer."

Investor Presentation

Mercantile has prepared presentation materials that management intends to use during its previously announced second quarter 2023 conference call on Tuesday, July 18, 2023, at 10:00 a.m. Eastern Time, and from time to time thereafter in presentations about the company's operations and performance.  These materials are available for viewing in the Investor Relations section of Mercantile's website at www.mercbank.com, and have also been furnished to the U.S. Securities and Exchange Commission concurrently with this press release.

About Mercantile Bank Corporation

Based in Grand Rapids, Michigan, Mercantile Bank Corporation is the bank holding company for Mercantile Bank.  Mercantile provides banking services to businesses, individuals and governmental units, and differentiates itself on the basis of service quality and the expertise of its banking staff. Mercantile has assets of approximately $5.1 billion and operates 46 banking offices.  Mercantile Bank Corporation's common stock is listed on the NASDAQ Global Select Market under the symbol "MBWM."  For more information about Mercantile, visit www.mercbank.com, and follow us on Facebook, Instagram and Twitter @MercBank and on LinkedIn at www.linkedin.com/company/merc-bank.

Forward-Looking Statements

This news release contains statements or information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements can be identified by words such as: "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will," and similar references to future periods.  Any such statements are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; the transition from LIBOR to SOFR; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the COVID-19 pandemic or similar public health threats, and measures implemented to combat them; and other factors, including those expressed as risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.  Investors are cautioned not to place undue reliance on any forward-looking statements contained herein.

MBWM-ER

FOR FURTHER INFORMATION:




Robert B. Kaminski, Jr.   

Charles Christmas

President and CEO   

Executive Vice President and CFO

616-726-1502 

616-726-1202

rkaminski@mercbank.com   

cchristmas@mercbank.com

 

Mercantile Bank Corporation







Second Quarter 2023 Results







MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

(Unaudited)










JUNE 30,


DECEMBER 31,


JUNE 30,



2023


2022


2022

ASSETS







   Cash and due from banks

$

69,133,000

$

61,894,000

$

89,167,000

   Other interest-earning assets


138,663,000


34,878,000


389,938,000

      Total cash and cash equivalents


207,796,000


96,772,000


479,105,000








   Securities available for sale


608,972,000


602,936,000


603,638,000

   Federal Home Loan Bank stock


21,513,000


17,721,000


17,721,000

   Mortgage loans held for sale


11,942,000


3,565,000


12,964,000








   Loans


4,051,843,000


3,916,619,000


3,723,800,000

   Allowance for credit losses


(44,721,000)


(42,246,000)


(35,974,000)

      Loans, net


4,007,122,000


3,874,373,000


3,687,826,000








   Premises and equipment, net


52,291,000


51,476,000


51,402,000

   Bank owned life insurance


81,500,000


80,727,000


75,664,000

   Goodwill


49,473,000


49,473,000


49,473,000

   Core deposit intangible, net


291,000


583,000


900,000

   Other assets


96,687,000


94,993,000


79,862,000








      Total assets

$

5,137,587,000

$

4,872,619,000

$

5,058,555,000















LIABILITIES AND SHAREHOLDERS' EQUITY







   Deposits:







      Noninterest-bearing

$

1,371,633,000

$

1,604,750,000

$

1,740,432,000

      Interest-bearing


2,385,156,000


2,108,061,000


2,133,461,000

         Total deposits


3,756,789,000


3,712,811,000


3,873,893,000








   Securities sold under agreements to repurchase


219,457,000


194,340,000


203,339,000

   Federal Home Loan Bank advances


467,910,000


308,263,000


362,263,000

   Subordinated debentures


49,301,000


48,958,000


48,585,000

   Subordinated notes


88,800,000


88,628,000


88,457,000

   Accrued interest and other liabilities


76,628,000


78,211,000


53,035,000

         Total liabilities


4,658,885,000


4,431,211,000


4,629,572,000








SHAREHOLDERS' EQUITY







   Common stock


292,906,000


290,436,000


288,199,000

   Retained earnings


247,313,000


216,313,000


188,452,000

   Accumulated other comprehensive income/(loss)


(61,517,000)


(65,341,000)


(47,668,000)

      Total shareholders' equity


478,702,000


441,408,000


428,983,000








      Total liabilities and shareholders' equity

$

5,137,587,000

$

4,872,619,000

$

5,058,555,000

 

Mercantile Bank Corporation














Second Quarter 2023 Results














MERCANTILE BANK CORPORATION

CONSOLIDATED REPORTS OF INCOME

(Unaudited)
















THREE MONTHS ENDED


THREE MONTHS ENDED

SIX MONTHS ENDED

SIX MONTHS ENDED


June 30, 2023


June 30, 2022

June 30, 2023

June 30, 2022

INTEREST INCOME














   Loans, including fees

$

62,006,000



$

36,003,000


$

119,159,000


$

69,254,000


   Investment securities


3,111,000




2,529,000



6,118,000



4,794,000


   Other interest-earning assets


801,000




1,018,000



1,125,000



1,384,000


      Total interest income


65,918,000




39,550,000



126,402,000



75,432,000
















INTEREST EXPENSE














   Deposits


12,379,000




1,873,000



20,286,000



3,698,000


   Short-term borrowings


914,000




49,000



1,373,000



99,000


   Federal Home Loan Bank advances


3,051,000




1,911,000



4,845,000



3,774,000


   Other borrowed money


2,023,000




1,391,000



3,963,000



2,650,000


      Total interest expense


18,367,000




5,224,000



30,467,000



10,221,000
















      Net interest income


47,551,000




34,326,000



95,935,000



65,211,000
















Provision for credit losses


2,000,000




500,000



2,600,000



600,000
















      Net interest income after














         provision for credit losses


45,551,000




33,826,000



93,335,000



64,611,000
















NONINTEREST INCOME














   Service charges on accounts


1,064,000




1,495,000



2,041,000



2,910,000


   Credit and debit card income


2,426,000




2,134,000



4,485,000



4,015,000


   Mortgage banking income


1,835,000




1,947,000



3,050,000



5,228,000


   Interest rate swap income


748,000




430,000



1,785,000



1,781,000


   Payroll services


572,000




464,000



1,317,000



1,102,000


   Earnings on bank owned life insurance


402,000




785,000



802,000



1,072,000


   Other income


598,000




486,000



1,117,000



910,000


      Total noninterest income


7,645,000




7,741,000



14,597,000



17,018,000
















NONINTEREST EXPENSE














   Salaries and benefits


16,461,000




15,676,000



33,143,000



31,186,000


   Occupancy


2,098,000




2,064,000



4,387,000



4,168,000


   Furniture and equipment


878,000




935,000



1,700,000



1,869,000


   Data processing costs


2,881,000




3,091,000



6,043,000



6,064,000


   Charitable foundation contributions


2,000




506,000



12,000



506,000


   Other expense


5,509,000




4,670,000



11,144,000



8,891,000


      Total noninterest expense


27,829,000




26,942,000



56,429,000



52,684,000
















      Income before federal income














         tax expense


25,367,000




14,625,000



51,503,000



28,945,000
















Federal income tax expense


5,010,000




2,888,000



10,171,000



5,716,000
















      Net Income

$

20,357,000



$

11,737,000


$

41,332,000


$

23,229,000
















   Basic earnings per share


$1.27




$0.74



$2.58



$1.47


   Diluted earnings per share


$1.27




$0.74



$2.58



$1.47
















   Average basic shares outstanding


16,003,372




15,848,681



15,999,775



15,844,763


   Average diluted shares outstanding


16,003,372




15,848,681



15,999,775



15,844,790


 

Mercantile Bank Corporation















Second Quarter 2023 Results















MERCANTILE BANK CORPORATION

CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)


















Quarterly


Year-To-Date

(dollars in thousands except per share data)

2023


2023


2022


2022


2022







2nd Qtr


1st Qtr


4th Qtr


3rd Qtr


2nd Qtr


2023


2022

EARNINGS















   Net interest income

$

47,551


48,384


50,657


42,376


34,326


95,935


65,211

   Provision for credit losses

$

2,000


600


3,050


2,900


500


2,600


600

   Noninterest income

$

7,645


6,951


7,805


7,253


7,741


14,597


17,018

   Noninterest expense

$

27,829


28,599


28,541


26,756


26,942


56,429


52,684

   Net income before federal income















      tax expense

$

25,367


26,136


26,871


19,973


14,625


51,503


28,945

   Net income

$

20,357


20,974


21,803


16,030


11,737


41,332


23,229

   Basic earnings per share

$

1.27


1.31


1.37


1.01


0.74


2.58


1.47

   Diluted earnings per share

$

1.27


1.31


1.37


1.01


0.74


2.58


1.47

   Average basic shares outstanding


16,003,372


15,996,138


15,887,983


15,861,551


15,848,681


15,999,775


15,844,763

   Average diluted shares outstanding


16,003,372


15,996,138


15,887,983


15,861,551


15,848,681


15,999,775


15,844,790
















PERFORMANCE RATIOS















   Return on average assets


1.64 %


1.75 %


1.75 %


1.27 %


0.93 %


1.69 %


0.91 %

   Return on average equity


17.23 %


18.76 %


20.26 %


14.79 %


10.98 %


17.97 %


10.66 %

   Net interest margin (fully tax-equivalent)

4.05 %


4.28 %


4.30 %


3.56 %


2.88 %


4.16 %


2.73 %

   Efficiency ratio


50.42 %


51.69 %


48.82 %


53.91 %


64.05 %


51.05 %


64.07 %

   Full-time equivalent employees


665


633


630


635


651


665


651
















YIELD ON ASSETS / COST OF FUNDS















   Yield on loans


6.19 %


5.90 %


5.49 %


4.56 %


3.97 %


6.05 %


3.92 %

   Yield on securities


2.00 %


1.95 %


1.91 %


1.79 %


1.68 %


1.98 %


1.60 %

   Yield on other interest-earning assets


4.88 %


4.18 %


3.60 %


2.15 %


0.76 %


4.65 %


0.42 %

   Yield on total earning assets


5.61 %


5.35 %


4.95 %


4.04 %


3.32 %


5.48 %


3.16 %

   Yield on total assets


5.30 %


5.06 %


4.68 %


3.80 %


3.13 %


5.18 %


2.97 %

   Cost of deposits


1.36 %


0.87 %


0.42 %


0.24 %


0.19 %


1.12 %


0.19 %

   Cost of borrowed funds


2.90 %


2.51 %


2.13 %


1.99 %


1.90 %


2.73 %


1.86 %

   Cost of interest-bearing liabilities


2.37 %


1.72 %


1.10 %


0.81 %


0.72 %


2.06 %


0.69 %

   Cost of funds (total earning assets)


1.56 %


1.07 %


0.65 %


0.48 %


0.44 %


1.32 %


0.43 %

   Cost of funds (total assets)


1.48 %


1.01 %


0.61 %


0.45 %


0.41 %


1.25 %


0.40 %
















MORTGAGE BANKING ACTIVITY















   Total mortgage loans originated

$

117,563


71,991


90,794


163,902


190,896


189,554


359,083

   Purchase mortgage loans originated

$

100,941


56,728


79,604


140,898


157,423


157,669


258,832

   Refinance mortgage loans originated

$

16,622


15,263


11,190


23,004


33,473


31,885


100,251

   Total saleable mortgage loans

$

50,734


24,904


29,948


59,740


52,328


75,638


128,075

   Income on sale of mortgage loans

$

1,570


950


1,401


1,779


1,751


2,520


4,955
















CAPITAL















   Tangible equity to tangible assets


8.43 %


8.61 %


8.12 %


7.37 %


7.56 %


8.43 %


7.56 %

   Tier 1 leverage capital ratio


10.73 %


10.66 %


10.09 %


9.63 %


9.31 %


10.73 %


9.31 %

   Common equity risk-based capital ratio


10.25 %


10.25 %


10.08 %


9.80 %


9.84 %


10.25 %


9.84 %

   Tier 1 risk-based capital ratio


11.24 %


11.27 %


11.12 %


10.84 %


10.91 %


11.24 %


10.91 %

   Total risk-based capital ratio


14.03 %


14.11 %


14.00 %


13.69 %


13.78 %


14.03 %


13.78 %

   Tier 1 capital

$

537,802


520,918


503,855


485,499


473,065


537,802


473,065

   Tier 1 plus tier 2 capital

$

671,323


652,509


634,729


613,161


597,495


671,323


597,495

   Total risk-weighted assets

$

4,784,428


4,623,631


4,533,091


4,479,176


4,337,040


4,784,428


4,337,040

   Book value per common share

$

29.89


29.21


27.60


26.24


27.05


29.89


27.05

   Tangible book value per common share

$

26.78


26.09


24.47


23.07


23.87


26.78


23.87

   Cash dividend per common share

$

0.33


0.33


0.32


0.32


0.31


0.66


0.62
















ASSET QUALITY















   Gross loan charge-offs

$

461


106


72


0


15


567


220

   Recoveries

$

305


137


149


246


336


442


630

   Net loan charge-offs (recoveries)

$

156


(31)


(77)


(246)


(321)


125


(410)

   Net loan charge-offs to average loans


0.02 %


(0.01 %)


(0.01 %)


(0.03 %)


(0.04 %)


0.01 %


(0.02 %)

   Allowance for credit losses

$

44,721


42,877


42,246


39,120


35,974


44,721


35,974

   Allowance to loans


1.10 %


1.08 %


1.08 %


1.01 %


0.97 %


1.10 %


0.97 %

   Nonperforming loans

$

2,099


7,782


7,728


1,416


1,787


2,099


1,787

   Other real estate/repossessed assets

$

661


661


0


0


0


661


0

   Nonperforming loans to total loans


0.05 %


0.20 %


0.20 %


0.04 %


0.05 %


0.05 %


0.05 %

   Nonperforming assets to total assets


0.05 %


0.17 %


0.16 %


0.03 %


0.04 %


0.05 %


0.04 %
















NONPERFORMING ASSETS - COMPOSITION













   Residential real estate:















      Land development

$

2


8


29


30


30


2


30

      Construction

$

0


0


124


0


0


0


0

      Owner occupied / rental

$

1,793


1,952


1,304


1,138


1,508


1,793


1,508

   Commercial real estate:















      Land development

$

0


0


0


0


0


0


0

      Construction

$

0


0


0


0


0


0


0

      Owner occupied  

$

716


829


248


0


0


716


0

      Non-owner occupied

$

0


0


0


0


0


0


0

   Non-real estate:















      Commercial assets

$

249


5,654


6,023


248


248


249


248

      Consumer assets

$

0


0


0


0


1


0


1

   Total nonperforming assets

$

2,760


8,443


7,728


1,416


1,787


2,760


1,787
















NONPERFORMING ASSETS - RECON















   Beginning balance

$

8,443


7,728


1,416


1,787


1,612


7,728


2,468

   Additions

$

273


1,323


6,368


0


309


1,596


402

   Return to performing status

$

0


(31)


0


(160)


0


(31)


(213)

   Principal payments

$

(5,526)


(515)


(56)


(211)


(134)


(6,041)


(775)

   Sale proceeds

$

0


0


0


0


0


0


0

   Loan charge-offs

$

(430)


(62)


0


0


0


(492)


(95)

   Valuation write-downs

$

0


0


0


0


0


0


0

   Ending balance

$

2,760


8,443


7,728


1,416


1,787


2,760


1,787
















LOAN PORTFOLIO COMPOSITION















   Commercial:















      Commercial & industrial

$

1,212,196


1,173,440


1,185,084


1,213,630


1,187,650


1,212,196


1,187,650

      Land development & construction

$

72,682


66,233


61,873


60,970


57,808


72,682


57,808

      Owner occupied comm'l R/E

$

659,201


630,186


639,192


643,577


598,593


659,201


598,593

      Non-owner occupied comm'l R/E

$

957,221


975,735


979,214


963,144


974,009


957,221


974,009

      Multi-family & residential rental

$

287,285


294,825


266,468


263,741


253,700


287,285


253,700

         Total commercial

$

3,188,585


3,140,419


3,131,831


3,145,062


3,071,760


3,188,585


3,071,760

   Retail:















      1-4 family mortgages & home equity

$

833,198


795,009


755,035


705,442


623,599


833,198


623,599

      Other consumer

$

30,060


30,100


29,753


30,454


28,441


30,060


28,441

         Total retail

$

863,258


825,109


784,788


735,896


652,040


863,258


652,040

         Total loans

$

4,051,843


3,965,528


3,916,619


3,880,958


3,723,800


4,051,843


3,723,800
















END OF PERIOD BALANCES















   Loans

$

4,051,843


3,965,528


3,916,619


3,880,958


3,723,800


4,051,843


3,723,800

   Securities

$

630,485


637,694


620,657


600,720


621,359


630,485


621,359

   Other interest-earning assets

$

138,663


10,787


34,878


220,909


389,938


138,663


389,938

   Total earning assets (before allowance)

$

4,820,991


4,614,009


4,572,154


4,702,587


4,735,097


4,820,991


4,735,097

   Total assets

$

5,137,587


4,895,874


4,872,619


5,016,934


5,058,555


5,137,587


5,058,555

   Noninterest-bearing deposits

$

1,371,633


1,376,782


1,604,750


1,716,904


1,740,432


1,371,633


1,740,432

   Interest-bearing deposits

$

2,385,156


2,221,236


2,108,061


2,129,181


2,133,461


2,385,156


2,133,461

   Total deposits

$

3,756,789


3,598,018


3,712,811


3,846,085


3,873,893


3,756,789


3,873,893

   Total borrowed funds

$

826,558


761,509


641,295


675,332


703,809


826,558


703,809

   Total interest-bearing liabilities

$

3,211,714


2,982,745


2,749,356


2,804,513


2,837,270


3,211,714


2,837,270

   Shareholders' equity

$

478,702


467,372


441,408


416,261


428,983


478,702


428,983
















AVERAGE BALANCES















   Loans

$

4,017,690


3,928,329


3,887,967


3,814,338


3,633,587


3,973,256


3,559,461

   Securities

$

634,607


627,628


606,390


618,043


615,733


631,137


614,532

   Other interest-earning assets

$

64,958


31,081


179,507


294,969


530,571


48,113


656,682

   Total earning assets (before allowance)

$

4,717,255


4,587,038


4,673,864


4,727,350


4,779,891


4,652,506


4,830,675

   Total assets

$

4,988,413


4,855,877


4,949,868


5,025,998


5,077,458


4,922,511


5,122,758

   Noninterest-bearing deposits

$

1,361,901


1,491,477


1,722,632


1,723,609


1,706,349


1,426,331


1,666,125

   Interest-bearing deposits

$

2,278,877


2,184,406


2,077,547


2,144,047


2,201,797


2,231,902


2,282,667

   Total deposits

$

3,640,778


3,675,883


3,800,179


3,867,656


3,908,146


3,658,233


3,948,792

   Total borrowed funds

$

827,105


676,724


667,864


689,091


705,774


752,330


706,621

   Total interest-bearing liabilities

$

3,105,982


2,861,130


2,745,411


2,833,138


2,907,571


2,984,232


2,989,288

   Shareholders' equity

$

473,983


453,524


426,897


430,093


428,873


483,810


439,310

 

 

Cision View original content:https://www.prnewswire.com/news-releases/mercantile-bank-corporation-announces-strong-second-quarter-2023-results-301879158.html

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