MBWM - Earnings call transcript Q3 2021 | Mercantile Bank Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Mercantile Bank Corporation Third Quarter 2021 Earnings Results Conference Call. Please note this event is being recorded.

We will now begin the call with management's prepared remarks and presentation to review the quarter's results and open up the call to questions. [Operator Instructions] Before I turn the call over to management, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of revenue, earnings and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today due to the factors described in the company's latest Securities and Exchange Commission filings. obligation any no during statements assumes call. the company to forward-looking update made The not a issued already third does at anyone If have www.mercbank.com. website press you access and the today, company’s quarter copy release presentation Mercantile deck by can it XXXX the of this would turn like At the Mercantile’s to over time, Kaminski. Chief and I President Executive to call Officer, Bob

Robert Kaminski

everyone. Thank you for today. Good call morning, Thank Anthony. you, our joining

touch to continues long-term strength generate outstanding based that and results banking the high clients. relationships build team financial of illustrate is the Mercantile relationship our to to approach Our allowing with

the expansion, net the For all nearly period. clear two double-digit million XX% organic of third earned loan line robust starts net income million $XX.X year first of more income and or the bottom results from are of the third quarter income a XX% the success year of third nearly $XX.X total prior we contributes not generation of client our from components; strong of culture to our a quarter centric revenue thing, Mercantile the revenue. people. increase growth healthy XXXX. noninterest with Driving two is share of $X.XX than key and strong permeates components months per our Through that net The has income interest and strategy these that leading one organization. very levels nine

these communities call, rate the is production our were gave circumstances. loan call the explore and detail the we who in excluding of our us our provide we at growth it later in each by companies doing loan well in our bank when insights we every like We confidence we opportunity balanced a loan team and is and growth so. Our be would strategy I at to more as that the are. pandemic various Mercantile achieve among The with how not the local into portfolio our in way but loans. to these prove continue some XX% ability third will the sometimes have hand. to in Challenging results forefront to categories. markets will why the and distinguished believe day. executes our PPP for Ray our diversified Supporting commercial been, this quarter can annualized did experience their clients level answered Mercantile service able We incumbent under Michigan the first highest businesses any again has

sense transactions. with true than local making place need of approach high resonating a to Our from Many is They business more responsive clearly and partner. financial a banks decision leaders. need conduct them simply their

the Our like affective is quarter, we quality note even our I'd core commercial as our pandemic, asset third that remained loan one. growth sustained our that an navigated solid approach loans shows grow and strong. pipeline in ongoing and to the

our our low We to continued and performance their teams. commercial of illustrating well report management as borrowers strong loans as and to assets commitment sound nonperforming of passive underwriting levels

a global which me and strength highlight, element in-market to of contribute lenders the nimbleness leads also our noninterest diversity mortgage the On and income our success. to component. banking the second success side, our That to like would our of largest is significantly I of key mortgage

buying and share turn which to are in quarter we in generate teams nine positive results and These a to in solid our of last the trends XX% totaled purchase success proven income upon a months larger capture banking are $X.X based and well the by their for see. in our periods efforts for $XX pipeline up application in communities. million mortgage connected believe success, how upcoming well first our from the result we year-to-date, our originations were mortgage million positioned continue ability Our bankers We the third driven to year.

the program has swap in we beneficial commercial generated a income September income stream We broader up up Swaps a strategic decision XXXX that remain for focus prior remain quarter proven strategic the revenue fees was us than we noninterest to XX% competitive interest committed sources. base ended from three income XXXX. third more XX, launched Another with helps on of this ensure rate months This $X.X customers. in and new of million the our making diversifying Total quarter. the growing period. noninterest our in was fee year late

of $XX income billion XX% recent operating has all revenue in bank made the median up XX% XX $X noninterest quarter. to the the range For compared of at months last to billion most

customize behind As adapt our I internal catch-up. and unique through accelerated earlier, find supported available capture systems. leveraging and we in adaption technology. results and efficiencies, people data best while refine some these XXXX interactions, investments industry are them banks playing since Within operations to client long our we've mentioned our practices themselves Digital

We an continue customers' have as technology important our model needs of do will investments business and made evolve. so to aspect long in to our continue

we people, $X.XX cash of growth. financial a and Important, technology fourth truly and shareholder our supports combination services announced share. dividend strength and of this per organic a ongoing creating focus value Our products, are quarter driving sustainable organization. on clearly Today

[ph] continued believe purchases program, were performance year-to-date support benefit buyback for brining our and additional shareholders. an able high talent, shares. and the model, Mercantile all XXX,XXX strategy, repurchase business our our and clients, XXX,XXX of to communities of culture stock Overall Regarding our consistent shares we to stock we

and my ongoing XXXX, disruption over in terms prepared markets, the all the our introductory client relationships. We are That on in M&A-related have and of a to expanding attracting talent strong fourth concludes now momentum I'll the into foundation turn to capitalize Ray. and -- remarks. quarter call headed

Ray Reitsma

will strong and operations. the in Thanks in growth, commercial results; and and quarter around income increasing center topics sustainable three loan my strategic Bob. comments efficiency Today third core evidence growth management

growth. loan commercial core First,

I We possible reporting in that which prove pandemic million, credit due is to representing and represents efforts core to commercial program we of of [ph] us the consists Year-to-date timely was rate, loan strategic of credit. community our a technology stress million annualized are annualized credit quarter with have need the marketed third core decision opportunity in the $XXX building made XX% This the line service. what the C&I growth C&I a could when and that namely of is may local commercial coupled rate, $XXX the loan of and growth the XX% XX% we contracted, relationship faltered. value exceptional they Mercantile growth objectives. our XX% business making C&I delivered team growth growth The is [ph] commercial and primarily capacity During with action representing and growth gave PPP the and proposition. on focus bank and which

As robust our result increased a we our growth, provision of growth. that largely expense support to

this our recognition requires fact of also loan that stock robust have capital repurchase back dialed robust support. the program in We growth

Our backlog core prior funded of growth. in consistent remained periods impressive as we level

and income. Secondly, strategic growth noninterest sustainable

the important months environment. increase case without million. During we to on that the is the a $XX.X XXXX, growth sustainable fixed performance. rates income this represented sheet sustainability present seeking the an nine and balance of demand $XX.X and reported It for compared is margin last XX% in $X.X of noninterest year-to-date branch year, remains risk of conventional $XX.X rate net million fixed with represented of million very the of first meeting customer sale of a Swaps which gain

Our a to the expect has change been over time funding mix of nearly term fixed we meaningfully. debt and XX% period long do not

quarter, on the XX.X% from the recovers of up revenue with the XXXX, of more as the income year. of more course XX% the accounts credit compared sum, than within refinance XX% and prior million the the income of from that last growth are purchase for XX.X% there income Year-to-date increased relationships million and and period number and million the has $X.X of In last during of ratio purchase mortgage the case to by a volume respectively split period. as which a in present is sustainability in of represents reporting year. in from are efficiency accounts topic is far overall to Our months the increasing purchase refinance economy contributors The fact in year this XX-XX the year pandemic. sum XX% activity business XX% up refi in made represented increased activity, served operations. Lesser activity year's noninterest is $XXX mix services mix team to our charges between income of activity the is important year-to-date we of the nine reflecting last production activity first and and my activity efficiency debit a the this third by card $XXX activity. The noninterest comments picture XX% with growth comparable XX% noninterest our of while supported but for grown sustainable of

consistent to already the digital alternatives well, Our ability to loan XX.X% by now a concludes on during growth branch reallocate to resources to and utilize X.X%. this and the our channels years visiting will spending comments. technology has providing That Chuck. further of up served noting as outpaces noninterest robust towards in from revenue expense over customers I to total growth and only the growth the noninterest platform. our increased to FTE over that the digital of numerous call allowing worth income period a prior enhancements period year-to-date year our turn us XXX an of It XX date is my

Charles Christmas

morning good and Ray everybody. Thanks

million $X.XX year morning quarter from of million during of months $X.XX million over income noted the of million, share the Slide totaled diluted for XX% $X.XX this prior As first per or nine $X.XX XX, diluted first per XXXX $XX.X $XX.X per period. over from nine up of XXXX. we share months XXXX $XX.X diluted or the over share, the Net per net third the share, on $XX.X respective up income announced during or diluted or XX%

with prior period, nine large that during categories or interest the third earning compared year XXXX cuts X% XX, commercial the of to Slide period interest Interest totaling mitigated the ongoing expense interest $X.X March higher environment since during compared increased is declined in in environment million year prior the prior rate nine growth in relatively points up period. to compared XXXX to loans lower and able income assets. the expense growth not effect XXXX largely the environment. rate and interest as XXX year rate residential and month lower of million FOMC the the time. of quarter period to third prior low in year-to-date core three remained third Overall, relatively during reduction quarter basis the be down part loans quarter of was during million for interest the million periods with XXXX and quarter income to million months. net in in on reflecting was the the between was reflecting of interest during first $X.X the third a quarter it of interest growth on million $X.X the year. unchanged periods same mortgage was income however, securities compared to in XXXX growth has quarter and the negative months respective the $X.X XXXX respective to margin. consistent of fully in all Turning on period of XXXX a XXXX provision low loans from earning the first time down excluded. expense compared the agency provision over third the declined U.S. income XXXX compared call $X.X Government that large bonds this recent part in rate unchanged reported periods. total, quarter increased of accelerated offset the XXXX to In for from the reflecting respective XXXX offset relatively interest Interest and could expense for of nine XXXX non-accretion year $X.X the was months a income is for total, XXXX a to third nine portfolio XXXX XXXX; past securities XXXX the in of four of assets first $X.X months million quarter with essentially interest Net Securities the year $X.X million as comparable most of third compared that prior period In We in

until commercial non-impaired respective first expense the for reserves million reflected nine The primarily period increased reserve to the the loan recorded loan quarter XXXX the the prior of elected factor allocations with environmental associated does primarily current environmental large increased with fully of factor pandemic of of allocation of provision downgrades. core mitigated relationships economic the compared third second conditions. economic loan conditions economic provision reflected COVID-XX both The downgrade comprise the during growth introduction the period. negative growth was CECL to million an the a conditions We XXXX the during and COVID-XX that that by environment. and the negative reflects business from factor, provision for upgraded recorded relatively in commercial provide X, $XX.X prior January the associated expense we year-to-date associated The was For business of forecasted XXXX during lower recorded expense in primarily of first provision nine the reserve aforementioned year with $X.X and months conditions of XXXX provision stemming of a allocation an the to quarter provisions XXXX the certain improvement economic commercial core XXXX. expense needed while third expense environment loans mainly adoption for and commercial months stressed reflect the increased quarter postpone year

to economic balance is forecast $X.X of million and but the year incurred calculation. our improving, quarters determined and over of economic condition shown the at results, preliminary reflected reserve at an so model concurrently model, employed incurred the million forecasts. economic what XXXX. balance improvement. than aspect will This XXXX $X.X our as significant related from CECL and Under in is the we difference difference The the and Based is about the XX, less difference incurred loss run the to end reserve forecast CECL methodology. $X.X model. Under increase has as a economic the lower market However, with methodology reserve on be million than using CECL loss few between generally is the June last primary positive our two business under our balance September XX, continue

$X.X expense the all months will compared the continue of balance end provisions losses to during We XXXX unchanged month item the loan each while last XX, the relatively year. XXXX on of Continuing quarter third line compared will increasing next million or at assess and ago the with quarter nine the costs quarter qualitative statement. on of year to the overhead factors nine of adjust income Slide during when first via

bonds bonus the to large the of accrual a a quarter customers associated third no economic metrics weakened the and recorded during During higher XXXX The second what in by we than quarter recorded The we third the accruals due change in bonus of COVID-XX lower XXXX third was reported this environment. accrual quarter of quarter third bonus the of with and the of XXXX mitigated of higher quarters comprised of rate bonus the insurance accrual due associated The are increased during costs. first impact and to that we balance. quarter third expect the to year. figure resulting the million in insurance costs and half salary in an XX% overhead from expense increased base. resulted being former of largely premiums, benefits, medical year-to-date remaining facility the medical of primarily from fourth and FDIC spending increases, comprised merit employee evaluation costs, expense. FDIC quarter almost XXXX portion insurance costs approximate deposit higher in About with costs increase overhead annual salary and insurance is pay Currently increased increased $XXX

current to addition and budget, markets support increases we at are As to expecting inflationary don't expected of salary costs time, stages far larger in pressures new initiatives. our while provide initial as ongoing are than XXXX guidance revenue our employees typical overhead to any and in due the developing have specific we of loan costs, in and growth I XXXX the

ago points XX, points Continued quarter Compared while assets on XXXX. XX basis our basis funds third on to quarter. points recent most of and third the margin for of of XXXX, XXXX year to the declined basis Slide in quarters the basis down the cost net during quarter down of the quarter third the when yield points quarter interest was decreased and compared the earning XX second X.XX% first X XX

Our when consistent except accretion. quarter quarters income the yield of been typical over past have we XXXX PPP relatively on loans fourth larger recorded five the than during

of XX, very million third been the seen has quarter quarter Slide As accretion consistent income fourth on net the the PPP the $X.X of origination for except XXXX. during since program aforementioned of

million, quarter PPP round fee is of of which a As vast to net related income unrecognized end, totalled $X.X X number fundings. of PPP majority

income the as quarter year. Assuming PPP unchanged, fee fourth be a of the net forgiveness income unrecognized trends PPP large remain recorded during of expect majority we to this remaining

around than to months year and of since third nine XXXX. during by nine year noninterest during XX% months typical of deposits averaged end and Overnight liquidity $XX our This XXXX, XXXX, interest be volume excess $XXX million. are low primarily investment $XXX first sheet of as a margin significant and well of of [ph] our a deposits since by funds XX% impacted XXXX billion and interest bearing balance product excess as one points. balances. average Chicago. checking lowered programs million net a $X.X nine XX half The the the increased are the of of comprised on negatively yielding this liquidity and $XXX local Our balance of XXXX the deposits the XX increased the fee basis of with Bank continues account or excess Federal during margin of growth which the and end to substantially product of higher by increased balances Reserve Total during third depicted or million local Federal quarter first net Approximately quarter up million Government deposits local spending. about first lower stimulus business are months deposits consumer

overnight into stay cost The we that a an future. the the funds primarily expect on deposits trend deposits higher the rate periods has matured. interest falling environment, rate improving of level and originated as time the We throughout remainder elevated XXXX to the in prior XXXX and expect and trend been environment advances of continue well FHLB foreseeable reflecting to interest in

similar The total capital As shown one as leverage capital The regulatory loan XX, leverage well capital liquidity XX.X% core Both as was by total risk continues XXXX. the over rating. a excess PPP the we and ratios strong repurchase ratio risk-based capitalized as impacted are with total on to capital XX, remain as impact leverage components Tier been X.X% stock solid ratio the well ratio a commercial loan growth the X assigned the and September several position. no impacted capital portfolio capital and the by in on and past both of ratio X% ratio risk-based X have was Slide activity. Tier capital Tier risk-based our be quarters,

year-to-date capital was weighted about value. a above during equates risk-based of repurchased million about $XX.X $XX for well $XX.XX per million bringing average XXX% the at cost to tangible shares shares average year-to-date minimum We weighted categorized total share million Our XXXX, at a threshold cost of weighted per quarter total average XXX,XXX as bank's capitalized. third ratio The book cost XXX,XXX the up to $X.X we our of for share. average of $XX.XX

our as During $XX plan. repurchase exhausting our we to the million close of Board approved quarter then second outstanding plan Directors stock a of XXXX, were new

are now Those In quarter September continue Bob. XXXX have corona we available back to events. pandemic of closing, with navigate remarks. to are operating condition unprecedented of results in financial to believe of nine over the environment by well repurchase as pleased created my through months we our turn and first $X.X the and plan. XX, virus end are As prepared call I’ll our in the the we other and positioned million

Robert Kaminski

and Thank now That remarks concludes the you, the Jeff. the we Q&A. call open prepared management's will to

Operator

Piper begin Nosal first now the We Sandler. [Operator comes Brendan from Instructions] will Our question from question-and-answer session

ahead. may You

Brendan Nosal

you? good folks, how are morning, Hey

Robert Kaminski

are Fine how Good morning, and Brendan. you?

Brendan Nosal

in banks a things, thanks. through Good mean of a this maybe that's your strong quarter's to I kind from of commercial me. seemed Could the customer for so little then incredibly allowing side what environment slow where was credit most you what growth offer other you're growth here? just of kind to your thoughts off well, more the but you bit generation? detail And just way have managed strong number Maybe on goes for longer pace exceptionally base even on such your starting work guys seeing of on

Ray Reitsma

case Yes, strong is for fund We've last that this over happy from quarter, quarter Ray. be we the is as going but heavily pretty the backlog to now. I'll actually to goes it have that. funded The very address well. where pretty right strong into this is here

new to continues, activity from in we largely I'd relationships quarter, the recorded roster. say what have of and So historical unabated the it's the comprised adding

well very that for as that that you looking, And growing existing time. new a the some but after in end all resonated the communities simple spite if you're from on the has the Our that serve. of of lion's and the for ability that customer that been the to of because banking time that been is receiving you growth key, sounds service challenging there outlined comments and looking approach environment in the get don't just as share sends relationships base we've it has we in comes adding we've reasons relationship to our degree, the the of deliver

Robert Kaminski

our that relationships those very bring new factor other They again work seeing attribute or distinguishing understand is That's really markets. customer them, whether compare is is the conditions to working that responses this hybrid and office, as hard despite providing with banks to work line. importance they and customers challenging do in remotely, Mercantile in team to the they and the finish a to our the approach timely of continuing to to for the strong a

Brendan Nosal

to the changed just from the sensitivity over just helpful given one Maybe the hikes at me, interest a the maybe the about you your half how structure means or next and rate balance NIM trying either right year, think with much to All hike asset us you can of positioning just need the great income? to and late some colour. year that’s sheet point each fed markets more remind rising sheet what anticipate for rate rates, of and balance super past the today net

Charles Christmas

and those to increased don't in Chuck. structure to us, interest Yes, environment, to don't be and I for those the so in I is those our and are would Form get of provide numbers think increase this want specific in rate net definitely our here. balance have quicker or if I but income our margin yes know them front sheet you numbers, numbers if XX-Q, available in I them offline can get interest

Brendan Nosal

No, that's fine.

of kind right, for the conceptually you taking to wanted questions. more about how Just All see think it. thanks

Robert Kaminski

You’re welcome.

Operator

James. next comes Raymond Daniel of Our from question Tamayo

Daniel, may You be go ahead. may muted. line your

Daniel Tamayo

sorry me that. Oops, hear Can now? you about

Robert Kaminski

Yes.

Daniel Tamayo

right. All

So good morning, everybody.

allowance into Just a dive little to maybe bit. wanted the

about that's couple years? factor How the reserves And out eventually, think assuming talked COVID of in where allowance. next that You over the that of shake that remains? much now could you do out comes

Robert Kaminski

we is our environmental along XX% as Yes, just probably September of the other our in one qualitative again, XX. to of that's the that about items of of factor reserve all balance calculation COVID ones. with have XX% the the And,

so, we where can get point a to that feel environmental in later sooner and altogether. than we we that upgrading eliminate hopefully, And that time hopeful start rather

Daniel Tamayo

said the future? ratio about might if essentially, be the a a adoption, to I that out, CECL that reserve what say Okay, you we in guess would amount that reasonable, that could so normalized normal, also, pulled we safe be including it's

Robert Kaminski

CECL it's of could a model level commercial as duration a a we portfolio course, probably I results on gets certainly in relatively, we're mean reasons by a the think incurred comfortable to loan asset makes low pristine short-term. commercial the did dominated you pull lower And why The should commercial that long it us. that back does. up a think is they about And of results CECL loan it challenge dictating reserves and just of of Yes, adopting bit That's of it with as that's it that what our that much based portfolio reserves our in what pretty as to that's a against reins couple relatively very of But model nature one, is two And portfolio one world with. are little with number. their the those the years. than that by keep duration loan is what which I something a to as because the we model. quality, be our loans,

Daniel Tamayo

That you makes on understandable impacts sense. both were on increased related costs overall profitability? you your comment salary growth, then your And that and switching higher outpace gears to due inflation loan strong hires here, wage to overhead from incremental sides think growth on still the revenue think there, overall but does how impact can that do of Is kind efficiency? thoughts that how that something or that the

Robert Kaminski

I longer to [ph] term some can put think future. going have Yes, for you budget season we in the get some more happen given the what the together, once environment January forecasts is through I I in and we're currently comments know I'll probably, specific in that and

expect employees able much some go to what was there's are. Ray my loan and to in that growth pointing I our to we've support out, faster overhead And through starting than growing revenue of, that was are costs as the be fee revenue. growth leverage think in coming and demonstrate and the we hiring off the larger continues. to year, than our the raises say, is that Certainly pretty pay new costs been basically typical to overhead next think comment long-term, going near and term, we when

his make that might are structured than in faster side, growing been, a have sure we thing think grow costs So is, to our a on is they this couple comments we're that we I one remarks get to of I exceeds quarter-to-quarter need well on are echoing and meets little but against. across bit got we Bob we've bank basis, a choppy continue that we we like platform the continued continue And would we that, stayed opening to along formed everything revenue on is, that that And add has are. this And technology day think program we've competing one fund so. and to the or banks and that there we any out be. a do all so more state-of-the-art that was are other we current continue importantly, since have to overhead

don't catch-up new services to we do continued introduction expenses a or as technology those so and become products and have the have available. investments big the side, of that upgrades from any just ongoing And we

Daniel Tamayo

Thank sense. makes I that well, right, color. appreciate you. all all me. the All That's from

Robert Kaminski

Thank you.

Operator

DelMonte comes question next Damon KBW. of from Our

ahead. go may You

Damon DelMonte

is Hi, well today. doing hope everybody

my of, fee you here banking just bit income, So little quarter? see first you how mortgage regarding about talk pipeline fourth could in for the the outlook question kind and early a more

Ray Reitsma

Early a from a in line this year, standpoint. at time than the quarter, to that. starts pipeline stronger and you'd Sure. seasonal the trend that of volume resisted Typically, little pattern down has is ramp the our fourth expect bit

indications at the we the So the strong good this early serve. point. that market the communities the pretty of quarter in are for remainder And remains

quarter relates good bit will made to from bring. say I'd shift feel our than faster maybe about what peers the so little it the successfully refi activities, activity. As we've purchase pretty purchase to a and

Damon DelMonte

sustainable the in little that Okay, is you obviously a do as great. near income a business And coming to see to think back Do very little that the quarter $X at were Or that this far and growth this you be this lower million going level. guys pulling then strong. you level? as swap booked bit down

Ray Reitsma

for in customer, very reasons. in for I while period funding with of rates, couple view of term as sustainable which balance fixed rate a One comments, is of of accomplishes the swap is, As my floating sheet half a with the our time, providing over the our form been debt characteristics. what has long I mentioned

to of swap opportunity plenty there's The fit situation. So, every continue that. doesn't

and You certain need of to a amount and size customer it together. bring all sophistication, wherewithal

expect future However, similar do in I the not our arena the into at would be future. out pace appear opportunities we diminishing that in that to a and continue foreseeable near

Robert Kaminski

income that the fee related get to customers debt during their there. instead the do you an quarter, that floating just to just debt embed in to generally third definitely rate the of I if is and swap. half get, a when Damon, me, going existing with oversized into refinance we We it, Yes, then, would by that program excuse say that's And prepayment that basis out prepayment it. cash, a of interest the quarter-to-quarter a wherever swap recorded as comments; paid out fee the customers how to lumpy income, you want program of the what be on we we About our larger of correspondent record the with, rate we nature it's couple add pay having had the fixed was Ray's penalty you in will, metrics. we we call we bank instead And swap into fees.

fee going one swap there's that are with income, happens on things activity. So to two be

those play to The other those, correct question rate the is to them is all and going have penalties to we which what be loans, of degree how out. of going fixed prepayment are on refinancing virtually existing

Robert Kaminski

by and our done I'll a that Damon, up fit, good for topic lending the there. customer swap term accomplish to -- allow from they're those able array the what alluded necessarily a Ray after helps but wrap a in fit balance that sheet to is sophistication Yes to is I identifying has this benefit a for is on get banking is guess are good to and this good objectives our every present standpoint. this customer, Bob, team a job of attributes be us really and not a for the situation loan, And them the clients saying

Damon DelMonte

That’s kind one was over like, a of than was of this $X little million was there normal. you. good then time in line the just income, question on higher kind Chuck, color, other quarter, overall you. which Got bit followup there? noninterest noninterest And one thank anything

Charles Christmas

and Yes, the recession, one since that it's finalizing went We have finally way systems appeals grand and credit been its $XXX,XXX working on our it great the is that about efforts all a court on time. payment, we one so we in of time. collection about XXX got made so through through finally finally the the

Damon DelMonte

then that of Okay, securities of the pace a quickly of loan is just just keep by that? here dictated about securities the to books, on the do the you expect that portfolio, quarter-over-quarter, And decent we to increase level or think of do growth great. going and obviously, be kind size how

Charles Christmas

on to quarters. that balance over sometime, the liquidity know we it did some for securities loan four with that in became us sheet the and about growth when had portfolio, excess time. the started the was growth the is this and And think, drop. to would I quite third we've those Probably even similar last liquidity really we quarter pretty we assets that go actually that Yes, the year pretty to the time obvious purchases to last adding the stay going

the I here that quarters growth will So has the so. continue quarter, four over it or last in that point slow as the will down, would some been At certainly fourth expect see the behavior continuing of really when of on to deposits, overall. is especially depend excess driver liquidity lot also that's we the a which commercial and the of going loan growth the

government We is into three generally year that eight most to to bonds, year, with time seven, continue put money three agency of bucket. to eight going

that been as what the love a those up time portfolio. like mature, certainly the maturity, as and and investments with to than growing just we on, ladder have certainly nothing doing loan we've basically we've we would staying want portfolio put with And build else into ladders. those to those So of securities would goes we done, that they is just take

be rates at those and for refinance to going then think that we'll have next be needed was monies definitely probably are higher we'll up I loan It cash able a few flow So standpoint. from growth; over rates. opportunity not would years to the

in overly So of for actual we use extended a think aggressive it's not yield, that trying liquidity, maturities. given reach to being good

We have bought we've different types than types before. what ever investments of not any bought of

So we're seeing future. in discipline a there, we've program good and think got the

Damon DelMonte

Got it.

just provision more to few last question, we've outlook, back final and the than circle the quarters on than then provision, what seen larger to flash in loan we And this growth. response quarter, great. so reserve expected one saw Okay, that was in

expect similar kind Given what optimism so this we growth, you level continued would quarter? the and of to the saw loan provision

Charles Christmas

in was quarter said, had we of that. the think, had that therefore I And But this environmentals. provision negative the something loan change to level environmentals will being forward the equal, because $X.X the not that's expense all loan a loan of a going for without Yes, up provide quarter growth the with was quarter, growth commensurately, messing associated environmental did than the and growth. majority I for. that like growth ended the think we any loan economic the We growth the portfolio, we commercial any that, important. of that with things touch the in provisioning offset more provide the similar second We the had vast a provision we with for of

Damon DelMonte

it. Got

I that's all a I Thanks it. Okay, had. lot. appreciate

Robert Kaminski

Damon. Thanks,

Operator

Our Hovde of Rowe next from comes Bryce Group. question

You may go ahead.

Bryce Rowe

a Thanks prepaid And the the lot. I maybe activity the we year? could followup income still of feel speak level year, that potential have rate, on that's quarter, income side wanted get one line a for as for to move of fixed more feel to to type get do Maybe this within portfolio? then not here this income line that you a swap just the just for this much if things. how trying forward, prepayment within but affected

Charles Christmas

fees fees. a just dealing was what given that prepayment question all or portfolio, that third this said, of the income some of higher definitely think a say I percentage the is management there. swap. represents. half of about quarters, I far means. and of into a Ray loan we're And embedding attached, than flip but look, rate year, the nature portfolios to was to third This I'd I so Bryce floating rate. maybe this definitely one before, million tough statement, from right and budget interest, inflationary $X.X for, And prepayment like, commercial with. will, we're know are going I lot basis, rise those word how been a appreciably. pressures. rate, we probably if to medium on were the or our related Yes, mentioned definitely like the obviously, is would refinance happen very activities be on be make an sheet through balance other front pressures. mentioned I've $X.X a collection end, And to the environment. the in there's don't definitely million to the enter And environment when was swap program able unprecedented -- I That's things, higher while there's associated with And say of finally, specifically rates fixed quarter-to-quarter very the that But especially of we half concerned, the with if those about of on sure opportunities what team term position a of them would interest the that our floating that through think some to in insurance perform we in especially causing I thing this the we we do. see are And your cognizant of rates that you put clearly, could well of take Yes, a longer we and that is income we're policy, low. is very, fixed the little is But bit inflationary pain hate rate. what a much definitely, and that our a to rates

program already, As both Bob swap mentioned and for everybody. isn't the Ray

-- don't floating handcuffs and not to loans, that larger as more around them don't continue the that workings understand management we're solve teams. want really to then businesses. sure to it run them some that, that. borrowers our we to fixed take, commercial do Clearly, definitely rate on loans So put works, balance could we bank of the a put how swap, they have that make potentially put even we really we look want with opportunity and at the rates, those But into sophisticated their

the That's they bank, They swap about of there's new talking at plenty goalposts from there. now are we're and existing of loans. far those want we're many so a Certainly the them definitely looking to program. customers. new size -- opportunity talking loans borrowings So product, we're and with meeting rate them, getting really, fix sophistication existing and about that

there that's one hard of as you're basis. given the well the much a there's It's determine on project or to both growth, just the portfolio, even to So quarterly an going product. in equal existing to the trying it's lots of opportunity out as a but nature just, annual how

Robert Kaminski

the and their needs, to as we look best for it's makes a structured early customer credit difficult, at them tool the and are package for well. makes swaps, in we that toolbox that as for the assess said, another and to what's sense forecast way It's sense what trying Chuck in us have

nice because side. and So team need, and environment their request. this their this off And with that for place into situation meets the hats customer the it's a the it putting provides that some needs puts on far income something as us meets benefit program great to as credit it program a importantly, the as in

Bryce Rowe

here questions from more me. Couple Great.

an some commentary Just in curious around of yields loan of introduces what Could you're perspective obviously, quite originated kind recent this bit quarter what and seeing a yield versus PPP you give from noise quarters? seeing, volatility and around NIM. you're

Robert Kaminski

vast the on based over That's borrowers forgiven, dollars the majority quarter. steady. things, of we very our seem the mentioned the here. income year, the overall fee on we would I little point Yes, here I've be impact, expect impact statement something has got paid been XX a applications mentioned, an accretion. and the the positive interest program but the for in these pretty think I consistent, the net have off in it's all trends in because to about my control I funding basis remaining pretty I fourth and see, SBA it's remarks got head prepared this about the the margin, PPP trends expect, would my making on I that as we

end I year. the but for I think think the the tail, the have into most be going done of we'll a next progress year, So at of bit we'll part, little a with

Bryce Rowe

last you, maybe for then one And Chuck. Okay.

with it In terms go adoption? still forward of January XXXX CECL, kind is of that

Charles Christmas

they once Yes, one. but give that I get of another going to think I'm extension don't it, me

is January we convert day yes, of the CECL. XXXX to So X will

Bryce Rowe

guys. thanks, Okay,

Charles Christmas

Thank you.

Operator

Our Nosal Instructions] comes next Brendan question Sandler. of from [Operator Piper

go may ahead. You

Brendan Nosal

me. from followup Hey, just one

there to sure factor Just those on the two CECL one kind I those day in reduction in COVID some the still and just of numbers want is make between that presumably overlap then the reserve, that you'll meaning you'll of to remaining some be the way upon be about releasing for factor, that COVID that some that reserve to reserve adoption, CECL COVID think right releasing remaining right adoption, meet it? of is reserves,

Charles Christmas

is totally environment. with a separate. from look is as to we We we COVID separate And factor do do our the really incurred, have that Well, two CECL go those I COVID want of to the at as CECL model. decision what part as

CECL adoption or we we October capital a environmental separate separate if to and the two factor do over with COVID and CECL. we really That's keep the where the of So COVID, impacts. it plays now. little are what would, study, decisions We two adoption and got that X. million run there adopted But have that through $X out we excess right would make

Brendan Nosal

Yeah.

Okay. Chuck. helpful That's clarification. very Thanks,

Charles Christmas

welcome. You’re

Operator

our concludes turn any like the to over remarks. to closing back would I question-and-answer for Bob session. conference Kaminsky This

Robert Kaminski

to and has with in Anthony company. of call healthy at the thanks, ended. fourth families again forward interest thank you hope We conclusion The our speaking you the stay and for all look safe. January. now We your at much Yes you conference in and very call your quarter our

Operator

for has now conference concluded. Thank The you attending presentation. today's

You may now disconnect.

Mercantile Bank (MBWM) 19 Oct 212021 Q3 Earnings call transcript