MBWM - Earnings call transcript Q2 2022 | Mercantile Bank Corporation

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Operator

Good morning and welcome to the Mercantile Bank Corporation, Second Quarter 2022 Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded. to Relations. conference like Tryka, to now Investor Lambert would turn over the Jeff I ahead. go Please

Jeff Tryka

Thank you, webcast morning, quarter Bank company's Ted. Good results of Corporation's joining you financial conference Mercantile XXXX. for call the and for to the everyone, discuss second and thank

Bank. President Vice Reitsma, Joining today the President President Financial and Ray Kaminski, and Operating of Executive Officer Officer; of team, including Mercantile's Chief me Chief management Chuck Chief and members Bob are and Christmas, Executive Officer;

We with results, presentation then – will call to review open for and begin prepared remarks questions. the management's up to the and the quarter's call it

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

Bob Kaminski

conference the solid XXXX, well us This all for earnings half joining of of call strong Mercantile another and for its portrayed as financial results and thanks year. of Thank released the quarter positioned you, reach midpoint a on and quarter second to second today. grow we Jeff, which morning you the us

were should bank $X.XX when preemptive earnings revenues we the quarter the $XX.X $X.XX second million. have be on loss team, downturn of of on is touch built, also later. dividend efforts economy, total with per The properties September along of Today a excellent payable the or in on position per have us announced we’ll Our see of a but that share, in strong foundation share we an $X.XX a excluded to more prepared XX. disposition we our Earnings per on share. cash

morning, outline to deliver products through and topics high Highlights and in of to excellent more the pleased to and levels, remained organic conditions specifics nimbly opportunities asset of evolving balanced adjust this success, loan production the comments the the categories. to more of overhead provide the provide to expansion their consistent key net several and deposit our shareholders, management's relationships management our We many pipeline each short and the remaining comments. economic their as The very needs portfolio a our strategic in leverage term framework outstanding will successfully best our second operating clients and built and initiatives a raise dynamic positive continues categories. performance results have expected the long navigate in for will term environmental on to of interest challenges the team clients. been we provide our commercial XXXX Execution the we our of growth organizations environment. continually Ray work During solutions us at include half Mercantile of expenses, shortly growth robust first continuation class quarter and engage the successfully provide to retail and Chuck it for non-interest commercial of of of this to level, teams in increase starts diligent financial of objectives. strong for in with growth a to we the with normally services these factor fee the margin the quality, and understand including with help their non-mortgage expansion has as them income to income loan ability of and and

of housing on bolster in focus to Management hiring lenders a of expected challenged of secure and account last dampened sale significantly lending teams our mortgage rates experienced based XXXX proven in two this throughout the As a years. have emphasized slowed as it the was to markets. our opportunities. Refinance of opportunities over to purchase financing ability we has purchasers’ have available complement our focus is prospective XXXX production inventories the Tight team first year, home. to markets, well volumes most continues commission half mortgage mature trickle the levels to and further for as activity our have markets as rising seeking new new in

Our our and resources. to on of experiences leadership digital our ensure to their focus enhance customers’ of channels continues most team the work with our company's development also relentless deployment further efficient

clients few product we Mercantile end-to-end lending the to their business needs. digitally next for new quarters plan example, on banking offering that Within allow some for engage will a introducing commercial with

a information from in in quickly constantly understand is better economies to Additionally, continue to ago. of array Mercantile utilize Michigan The able performance to rate our customer be vast steady the The anticipate fashion. customer and markets served our disposal at needs. by to data available a X.X%, in working analytics year unemployment the X.X% team down more is

opportunities, most significant staff below the our low the rate, and of replacing new both concentrations teams. staff, contain the to unemployment staff business significant of it while at managing markets ability payroll both costs X%. and existing – hiring assets remains However, is levels challenge companies, management to this issues most among With for as of required continue which metro most

of much at the emerging lending any with higher clients rates Mercantile stress issues also time. costs borrowing that signals our focus costs, conditions. factors chain clients rising in supply teams closely continue and energy the with engaged with be portfolio for interest to may these present to stay Our requiring identify are

did they personal pandemic, with and manage last Mercantile base two and the to as the their client business during plus a directly steady COVID-XX Just maintain continues finances the years performance.

leverage the as positioned risks. FOMC shareholders, U.S. believe solid of and As results continually well the acts continue slow for work the inflation rate we're delivering mitigate in to economy, our we to opportunities we to

work our to of a reduce Fed a our firmly soft to make landing. in and works strains gains with our as on result the look remains vigilantly continue that potential assess consistent us the client loan to yet of to to us strong, balance thread We we inflation administration potentially anticipate our recession a serve on will Mercantile needle slowing allow as well. increased borrowing base. underwriting costs economy also rate environment, a portfolio to of markets While understand a possibility the believe the impact and on we the will and sheet fully credit customers the rising loan horizon to however, attempt and

relationships I'll ‘XX relationships, the enhance acknowledge the call work Ray. rest second continuation my culture, Finally, the for new and want Those for prepared from and in their the existing to to remarks. turn team Mercantile develop of foundation to performance stellar quarter. over are of now our hard which the Their has Mercantile efforts and dedication beyond. positioned success is the of for the I

Ray Reitsma

proposition. the activities. branch comments Thank will optimization quarter net second loan of mortgage possible $XXX year-to-date dynamics our My due XXXX. This income growth or commercial you, to months and for has been for and the The bank focus was Bob. community center interest relationship achieved relates the despite asset XX% building areas: core six following the loan annualized the efforts in to sales growth We portfolios, around commercial and team and XX% their and business of commercial and on of million first payouts of reported value

$XXX growth. XX we remains a months impressive Presently level fund over commitments XX% credit Our under of a ago; million. accomplished with as as totals largely well of compared fund the floating have the to year we increasing environment XX% rate next positioned $XXX construction XX, over is SWOT an this for however, rate increased is loans, backlog XXXX, portfolio through commercial year. prior with XX% Availability is to XX usage The portfolio bank consistent commitments of program. March also periods the in million past at up aggregate our expect line XX% from that

and X.X points are pristine basis assets assets loans. total due amount than of those Asset credits Parts quality of levels. nominal year ago of XX% past of lower with is non-performing

a monitoring potential our we quality asset While vigilant relative proud numbers, of efforts recession. to in we are are

of areas first seek Our of line emerging they the identify defense to risks. as lenders are

flow risk model, Our All any with have is our results experience. borrower an sensitivity to-date providing that process reported finances. anticipation environment in customers on rating more borrowers’ is recessionary rating current challenges than strong our emerging emphasis to a said, robust and in actual the cash

is equal XX% types takes balance as of a residential markets also and to activity. rising a automotive our more real have in estate environment inventory portfolio to of concentration lending recognition year. income. serve. inventory for the a mortgages adjustable increased rates commercial income, rate on and that result, industry each we more exposures immediate Higher months the over and mortgage and of available event we due led generate about XX prior construction The demand of to has We sale these mortgages an to led We Compared monitor housing of gain slow closely lack the of in and hold loans sheet well. on the business the have to amount lack rate only

less last to when We XX% in comparable originations is construction million ago. last X% million Non-interest overall loans comparable quarter purchase continue turn consolidations, and will of banking service the of for compared quarter. Refinance remaining card Positive in utilizing credit the The Availability branch on $XX of primary reduction such XX% income down my charges over market in reduction a was X% income appointment call live I for in sale XX% of with debit activity comments. branch of XX% XXXX, tools residential markets. and service by income. of banking, adjusted ATM our The gain in network the decrease $XX endeavor branches, swap that increase and compared increase resulted under optimization contributors attrition in savings, investments services the the the our concludes in XX% quarter. XXXX. than Chuck. second That now to in limited of yielded to an one to to payroll ongoing share have machines the year deposit in branch seven year's nominal year's has quarter complemented impacted is previously and increase over were as a on a increase of of in the a figure contributor, accounts, XX%. a is facilities second mortgage an XX% income described

Charles Christmas

Thank you, Ray.

As respective income per continued or metrics and compared with loan share of noted $X.XX net in months the million a $XX.X income compared the large and streams, quality strength share six XX, for Net prior wide of XXXX, during industry with interest income, increases million improving morning in total result $XX.X which on first an significant announced margin of mitigated for growth, slide interest of record net income key diluted six quarter levels and the the first by million mortgage Higher XXXX, in share stemming $X during or to combined $XX.X period. diluted asset per XXXX in were part the we mortgage net ongoing $X.XX second in from refinance diluted $X.XX diluted share, banking several fee rates as per or XXXX year revenue months income and per $XX.X this of or net million low strong driven activity. loan revenue off income decline come originations of XXXX.

in benefited reflecting conditions large improved expectations. loan loss Our from earnings provisions negative economic the and XXXX also is period performance

XXXX of to the increases compared funds mortgage environment. increased average position growth income compared respective subordinated to liquid interest Interest issued higher expense during Turning overhead the mortgage credit majority periods loans. the during was recoveries asset in first of to total XXXX million loan were million costs of and million $X.X total, and of on the in income of interest the between on that in quarter recorded slide the of of of expense compared the our to quarter interest on period, second to during interest reduced time reflecting increased XXXX. interest not and with XXXX deposit the increase points interest loss fully and the respective funds year mitigated XXXX periods, earning Interest XXXX, greater XXXX. million provision XXXX during our quarter periods sale far fee Reserve compared environment. period vast net $X.X recorded lower interest higher quarter level XXXX second economic first $X.X residential in by was relatively of of six our our reflecting PPP, period. year margin six net a the the on during in a XX a also compared securities million recorded the to compared second balance. reflection basis facility interest a Foundation, study million points offset part Overhead mainly in prior of better the allocation, associated $X.X on prior negative expense allocation the up periods the higher million Interest first the thus $XX conditions million COVID-XX higher XXXX first loans We’ve slide time continued interest sale compared strong second prior necessitated income periods reflected increased to reserve million factor. $X.X comprised a during of during quarter which The the $X.X is Mercantile periods quarter quarter $X.X to Bank operations of XXXX six compared specific XX, similar mitigated loans business periods, net bearing second prior second on on of and with higher of the same of generally mortgage slide, quarter a January loan compared loan million Interest excluding XXXX. $X.X the quarter XXXX, second months Continue in portfolio of reserves to XXXX. prior respective significantly that relatively to second periods, a increase periods efforts in the the and months and the increased periods. allocations was average the XXXX XX, loss reduced excess contribution provision and of XXXX to to months environment environmental interest XXXX costs a the commercial XXXX. rate our to second margin the earning in is XXXX comprised total, periods, area million growth, $X.X growth notes loans, securities $X.X from of was year to improved of rate year the quality with In when recorded during yield quarter prior accretion period The mainly from the lower operating second during were to periods time period, residential expense facility yield XXXX, six basis primarily of in than during provision Bank and as The facility unchanged first second $X.X net portion year increased periods $X.X Lansing during by income XXXX is to Net increased compared commercial an balances XXXX. assets, to the during the December declined deposits during more during combined borrowed provides commercial during the quarter during on expense of of of during core during assets, periods, months and negative periods XXXX. the impact XX The metrics. and during the costs during The large in as higher $X.X the which reflecting million of the reflecting Lansing interest million the environmental first provision XXXX part lease for on residential XX, and XXXX recorded the the rate the certain a of interest and We portfolio, costs. a the the X.XX% increased loans expense a associated on of environment deploy net deposit reflecting on million rate the income XXXX projected in XXXX respectively, the the when XXXX. other up in aligned was year higher of well increased the when in months Continuing months million and XXXX. respectively, relocation the the time Chicago and the deposit and and the time first Fed the and and the of from six respective on In XXXX on increased compared six money $X.X rates the other were XXXX, quarter compared up to life of

reduction I As XXXX periods XXXX loans the in despite interest loan accretion. we PPP earlier, achieved to noted was which significant increased income compared recorded period, fee the on during a

compared fee time $X.X the XXXX XXXX. months six accretion million of loan million first during same PPP in net the period During totaled to $X.X

on increase billion that just loan commercial $X loan our end under June XX averaged during increased period. year significant that basis a time XX, points rate to from average Our XXXX portfolio

negative the quarter impact to interest impacted XX deposit used volume during the points on to quarter however, XX continues excess and second The equaled XXXX. by our growth the excess of to a quarter excess due from during balances fund margin basis withdrawals. declined basis negatively interest margin first second during liquidity XXXX the liquidity reflecting net lower of compared liquidity; to points loan impact be Our net of

to We monies future expect FHLB growth the trend and fund as decline loan advance to to maturities. are used excess continue

growth have on loan a asset in term remain Tier We balance to which be our risk maintained The of net although a loans, well the floating X% margin risk continues by rate commercial capital income. also of our positive and any regulatory at position. past impacted in based sheet, no based capital excess rates on liquidity, the assigned Federal Bank impact Both strong our ratio Given sensitive capital and increases short further impacted by of quarters. total there deposits leverage XX% ratios X interest commercial includes leverage similar Reserve portfolio would comprised is ratio capital of interest loan weighting. nature our capitalized ratio and net interest capital X several over risk are as Chicago the Tier impact strong been a the have

ratio the December were past capital which ratios Our were total vast to and January augmented regulatory the issuance note, of million bank of of a as of this capital a streamed aggregate banks all injection. capital subordinated risk down majority based and our funds with $XX an

during risk as the second quarter. six the our well June categorized minimum XX.X%, of be repurchase XXXX. first based We capital was ratio to end and was of capitalized $XXX at months banks’ did threshold shares million total not the above of As the XX,

remainder slide have regarding plan. the provided million some XXXX. thoughts We On we in our current $X.X available repurchase of XX

making caveat the remainder the the rate remain on share our interest As performance the for latest environment metrics market key and difficult. forecasting of that conditions volatile we with year, assumptions

including to several to In XXXX, remain environment the growth improved are increase We September. increases we point consistent. two the on margin remain midway the myriad back now in overhead increase operating due with are faced point rate interest basis This point interest quarters call predicated relatively to to our a successfully closing, we an loan next financial turn rates over and forecast a of prepared next the XX our and fee and through through over continue in week basis believe federal the challenges I'll and income, pleased and costs, navigate forecasting are of the funds net conditions tax remarks. rate, results is by XX positioned Bob. well Those others. additional with my

Bob Kaminski

management's that call and Chuck, the Thank and now prepared you, we’ll concludes question-and-answer up period. comments, open for the the

Operator

Nosal you. Instructions]. question Thank Please Sandler. with And first [Operator go the will Brendan from be ahead. Piper

Brendan Nosal

How morning Good guys! Hey! you? are

Bob Kaminski

Good morning, Brendan!

Brendan Nosal

Maybe Good. on first your out the detail rate margin start again and the provided, on for offering to you expectations thanks there. health just

guess that due kind help of I to at to XXX deposit end, using you just fund of assuming that rotation another model? in you underlying understand of loans So that improvement looking of how data liquidity Can bips what then continued XXX year margin, into and assumption increase. is the XXX us much are

Charles Christmas

Yeah, probably to of have sure. being liquidity, our we that to of Home normal any balances excess as loan $XX as of a we end we time, have they Brendan, couple the down. that this do replace, $XX Look, $XX not the and about balances. well excess But closer bank That do Again, advances. in have deposit as is years. Chuck. last assumes year. we assumption been material gets liquidity In not regards at and in we certainly lot an down that excess plan this that be $XXX changes growth, over million, funded of point million by to know million than we’ll most Federal as in million this somewhere think certainly so have also the long to between you

that sitting haven't year. customers, deposit basis within we overall a movements because that balances any rest of went balances part for of have Definitely we know our least this that stuck still certainly with there's significant rather quite some withdrawals, rather customers today we borrowers do ongoing bring local you and an every our in one and on large had at we've our loan balances continue customer, grow Excluding growth stimulus the of the have overall that. base commercial We ahead any know accounts relatively we the seen but transactions just by as steady, deposit deposit customer, so larger lot with deposit been the overall, portfolio, in those the to significant but significant your in seen movement. of deposit

So expectations. that's kind of goes our the into margin that overall assumption

Brendan Nosal

Got it. caught part. And may not you I heard you're have balance kind deposit did of but betas the I it, using? what mention

Charles Christmas

us, know the besides biggest the you items Yeah, outside deposit on the have biggest To-date to probably increases area we’ve two could rate been have been haven't common is well. deposit our provision CFO's by know of in the that That's – in market – you area, banks but I pretty that's potentially any our are – impact our talked only not as our quite limited. and rates the expense, deposit market the all rates we forecast. that's

liquidity. do an raise go to on rates I the that overall raise system seeing we pressures we'll We less continues forward. additional Fed excess deposit to rates as and basis, the think As sees think interest start

our we in which assumptions So and to beta the the is our generally that XX% rest XX% Fed year, ranged for of had increases. assumptions basically this used of historical

Brendan Nosal

more level it other does CECL, what reserves the and that model now you of there to stated in mean expectation a about distant just take CECL you super in movement I guess guys know or that. kind for some the Maybe you're provision, Got could piece me, given in rate the drive running one the helpful. little point I is I in it, simply guess hard-to-know to something ask the outlook. that downturn of model reserve the that’s upward for future. that at on too conceptually building that unemployment I on looking mean not potentially is start the kind big of a more forward it

Charles Christmas

Yes, this is Chuck again.

third to place same said know forecast over which It's it all to you to compare parties one particular spot economic use think party that on. make as occasion. we and a sure in forecasts all other on use that the third the get you that we forecast, tend that we about I is area the

rest I think round this that the year next into year. will be up as of we and the go case

when would CECL that economic our outcome biggest calculation impact the how think probably forecast that while I look at unemployment in they they of particular we far, use, regards they GDP rate and our a it's and don't – the rate, has are really we We the the and forecast, thus and as model the appear the to coming on GDP the as reacted seen that to-date. look probably we at of we it rate our the well relatively still on have not as bigger impact have unchanged. scale just significant just any unemployment others, down, are are rel on

into these by [run those when think I will how know models by] So unemployment for comes you are sure the these, two the it factors driving [ph] work.

Brendan Nosal

the you questions. Thank for understood. Yeah, taking

Charles Christmas

welcome. You’re

Operator

Daniel next from The from Please Raymond will be Tamayo ahead. James. question go

Daniel Tamayo

everyone! morning, Good Hey!

Bob Kaminski

Good morning, Danny!

Daniel Tamayo

obviously gets them with if and a year year. rate were you an conversation. hikes would impact of mentioned point get $XX XXXX would in about, to million $XXX to think assume the end additional you How relative the I been assuming big you I the a assuming gets up to to hikes follow guidance, NIM future plays can start, then. rate NII you – can by that I or margin? the you excess the you there's year. quarter we at of that a you lot where liquidity Last The on is since how know and But If out – just would just last number, as XXX guess expect where your especially million in know your or the

Bob Kaminski

on Yeah, and belief in impact any further that on federal reserve net I our income on net it’s the increases interest a an will the from the margin. think positive interest overall result basis

will question they they with you in on of – it’s I knows those only is know and as pressure loan like who the we've the aggressive some really our interest think You I we’ve this so happens be I growth. that Again, less big year, stay certainly again, year good far they rates, banks, seen what remainder increase but and system to deposit that's us are to what and rate those. know environment for next in what going you it’s the included, the but doing and seen liquidity the betas going not there's have expectation. know mentioned, will certainly deposit seem are

we that impact likely just have an I deposit going I seeing start would on It’s and demand to for and deposit we're I Fed sure would XX quarter rates. up the from consistent assuming our the first pick at what I say of relatively margin, point increases get the think guess degree. many very our to and forward this of have that to think would will part going least venture – XXXX year. don't growth for would year, too that stay for a projection basis difficult know XX fourth know with next you for

Daniel Tamayo

how loan forward but continue to on you. – you higher on rate what's about Okay, strong, know alright any know impact pipeline hikes may rates, now demand are loan that even with impact and remaining that And all seeing how the overarching as you the we thought going you see talked thank you your these, demand? from

Bob Kaminski

this related That demand a to the but that loan would is Ray. would will this I that more see we would fact the by mitigated material occurred. particular place in increases increases start be dampen be that would Today types particular. is resiliency hasn’t projects way. to first to in in really some housing short that future suspect that that real demand loan commercial not I'd requests that But estate expect have Yeah, other the so of rate of I slice that point projects. than would probably emphasize soften, that the such supply, have impacted

Daniel Tamayo

but Okay, And bit know mentioned still impacts. here levels, terrific! you okay, hit last strong, know AOCI one the a of you obviously capital the for then you me, taken a have with it's you

you're more too focused just considering TCE you if in with the are on of something if thoughts the Just not you mid-seven’s give could how on side. or that's regulatory kind comfortable levels you're if your much

Charles Christmas

I both Yeah, on we're – think know sides. we're you focused

on depends we're who it talking know to. You

a question, interest see we'll with that place, X%, of up all that term remain X%. what as were and reason you over look but we’re X% it big me to you to ratio important and care well we think that we above little a the that we I You under we be that's bit long at to know back been know is they different profitable, look itself the get asking a and to on of X.XX%, X.XX% know and will we’ll continue goal continue It's under being and when end take always that to both And that are capital might the impact we'll to groups, why answer chunk somewhere FDIC time. time then environment taking if the equal, tangible around our having positive expect term rate as ratio. things over long differently, I forward

Daniel Tamayo

of one invest in of loan pause would any a level that here, spike give rates or you in continuing from about of ratios know terms you to growth do if that again capital think there capital? the raising Is

Charles Christmas

think far additional that having I away capital. raise from we’re Yeah, to pretty

certainly supplemented months with know notes base You subordinated barely we six the ago. our

got to as it our know rate have an a on you we I I of So a hit we ratios be potential, coming significant the always the and making that down interest today, capital, recessionary short think are know and pressures raising thinking some what so where certainly significant quite earnings term clearly about a additional at both as are you would road team we more capital think basis you here. our term, long us we’ve for to built management but pretty take something basis – versus looks question know

Bob Kaminski

board. this the with trajectory feel couple that that to loan are Bob. continue we In the will to for on we allow and as that. the the grow experienced it our very fact us have ability and comfortable to capital we capital of Chuck at follow portfolio said, we to the at continue are levels Yeah, comfortable maintain We years. our as with with our up witnessed that and is to base have last the all I’ll really looking every summary time, quarter looking

Daniel Tamayo

all appreciate that I color. great! Okay, guys. Thanks

Bob Kaminski

Thank you.

Charles Christmas

Danny! Welcome

Operator

next Instructions] go DelMonte question [Operator KBW. Please The is with from ahead. Damon

Damon DelMonte

well Hope is doing everybody morning Good guys! today. Hey!

start Just, I wanted to off on.

Bob Kaminski

morning, Good Damon!

Damon DelMonte

of to off side growth wanted Just morning! the Good loan start on things.

of Another or of you decent for XX% half loans what from fixed. first portfolio? know loans, X/X amount of year, last product of XX% quarter kind of X/X and of – the directionally fixed, Are mortgages? are kind mortgage heading in of profiling you you ARM, know, year is that see are a some just the the wondering you up What guys, you that they are characteristics putting total in year XX% of do XX those they XX of ARM, where

Bob Kaminski

there. you Stop right

Chuck Christmas

there. significant right put Coming hard that place around fixed we portion Stop usually put loans X/X our a put, we books any not that do, be rate. it's of third in the the X/X books XX mortgage at will A We and XX/X They loans are on in that. predominantly ARMs. probably the you and on adjustable mark are our very very ARM. to loans year tried and if XX rate we

last far and – you of and certainly it nine been residential in trajectory, has pointed really we’ve the up. go it has market months percent seen the months, mortgage increased increasing, loans really the As are six maybe out, as rates

we loans, again that product, then many fixed certainly but product sell rate those, time. would you know repeating mortgage fixed as the point majority in put down them rate, looking but are to now here, rates, the seems myself a customers all that at rate balance to road can to me we the versus so far adjustable vast, And adjustable trend the some we continue. are and that continue likely as the if It vast sheet, on

know the to You of saw even volume certainly go Clearly beginning purpose in decline second they very pleased say the the under so the mortgage more the know at and even back quarter big quarter. at the an saw actually you will especially think second a have beginning rates and anything, on than and significant year we if of increase pressure, up that to that. the going Ray side refinance. as we're were see of remain But half production We the on we in I know mentioned, that. given that is

big closer year this our that of but higher maybe again commercial remainder the grew X%, know enjoy we closer how see XX% and we pay of be predict, So big fixed. or total X% XX%, that Payoffs little dollar year, it's – to. course we that of and have bit of level selling to i of there actually dice and really as of of and it, this that’s hard norm for a a some but a adjustables change to year, of production, large lower, question. growth, hard Last we loans certainly keeping on continues. quite loans to Also of X% a side XX%, again, we we most of That’s the always above you to this we to you to the and loan commercial expect would floating in underlying slice but one assets, that a was but be selling something I commercial in things when but average, 's is see did of percent or volume is and more and pretty kind part it's the we’ll going those average don’t quarter, year businesses year than the offs, of we – comes fairly offs especially XX%, overall the do and that as from activity bit mentioned, think amount the to the historical seen throughout selling the know second growth if this want think but our pay continue

is increase substantial. that rest of So your and total I going the what to this given loans, anything would long question. going lot not second of loans quarter but in to be that percent we relatively going a to there’s the saw expect forward that it's some in expect in of residential winded be mortgage think I change as answer year, short a don't that would we assuming

Bob Kaminski

in if Bob. that This increases it good was in and house years. find buy, to to they a so our his so houses can't comments, portfolio up significantly in a of point of out lot what last have constructing new lending add that, buy the as we is Ray portfolio, our wanting seen because I’ll are an couple and that quite residential are in house existing construction construction resorting to over people mentioned

over XX give months a XX long will tailwind that to construction those So certainly next of us the funds.

Ray Reitsma

drive increase as somewhat and would our in commercial portfolio I line works think basis the a the money well. in to the component of residential we its fact our customer's proportional that increase be the of that a upward that receivables a the on third supply see be and as way into XX% inventories, that credit will will usage balance

Damon DelMonte

and quarter, that ago And I XX% either it. what utilization had number. the year that was this quarter. quarter or missed last line mentioned was Got the that it you Ray, was – versus

Ray Reitsma

year compared a today. to XX% was ago It XX%

Damon DelMonte

like projecting alright you're And year. That’s okay. as the half quarter what which a as earning helpful, this we starting “access margin, going sounds sizeable back great. of this of kind be going for It and the jump access guess out is door. for is assets then that a the quarter What of it, liquidity from lot pretty of I at liquidity” to the point. Got the remixing to look the a was

Chuck Christmas

think margin the was basis points. it On I XX

Damon DelMonte

expect the year. end out that to the of Okay, be Chuck basically flushed by you and

Chuck Christmas

quarter through some we'll that the still year. at itself. very in of Yeah, the have fourth end of mean, the I

right So my prior answer at year talking end. was, about

an and of pressures quarter still the the there'll think fourth but quarter, quarter. in I will will think the the than second be less impact third than less some third be be I the fourth

Damon DelMonte

your Okay. And $X.XX you at shouldn't look not the the impact if you guys provision, quarter then reported be kind here, just of midpoint obviously this including which of too a much. the guidance, kind and take directionally of you of

Does what earnings. second is? looking quarter XX% XX% at that reasonable, increase anywhere off kind a of your seem is know still you to that expectation from You like a are

Chuck Christmas

Yeah, I think expense. about comment based on provision your

You right. guarantee that are going to

Bob Kaminski

the the economists be reserve. But won’t there that very and So sense. that that to you are know Damon, having on to continue think makes is let said be going going impact to forecast I all rosy any that that

now here see question growth our to All are performance, adds – which margin, the liquidity. two rates you but portfolio. increase healthier are in an see net commercial provision, prepared to significant hopefully in in we’ll in access loan impact up and marks those standing again see earnings going big margin, we will on deposit help interest very interest we’ll notable increase that rates, decline from there. are out income; definitely overall increase We’ll a We some both and

Damon DelMonte

Got it.

Okay, that’s color. had. all lot. that I Thanks the appreciate I a

Bob Kaminski

Thanks Damon.

Operator

to this session. the Kaminski our question-and-answer gentlemen, over any remarks. back Ladies I and like turn closing Bob conference would for concludes to

Bob Kaminski

quarter. third next ended. and We the Yeah, Chad look thanks your in has our you you company. at to thank call end all for speaking with of interest forward the This

Operator

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

now disconnect. may You

Mercantile Bank (MBWM) 19 Jul 222022 Q2 Earnings call transcript