- Earnings call transcript Q3 2022

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Operator

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

Julia Ward

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

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

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

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

Robert Kaminski

in and company and continued are asset noteworthy few over trending initiatives. increase normal another levels to successful Strong growth -- with more strong conference driven lows on to past an in portfolios you more quality continuation of XX pleased the retail of our of to in metrics control. net for income several financial commercial our strength call diligent profitability strategic with margin results Julia, expense and us we the fee you, in loan Thank all September to from quarter and and today. years, categories, performance normal our Today, its thanks both important growth by the interest report pipelines, results consistent loan very many a released and trending joining steady

the For the third Earnings earnings share on million. in $X.XX of coming the on revenues our per first we details dividend performance $XX.X December of XXth. Chuck a announced payable of quarter, nine for aspects morning, share for Mercantile $X.XX the XXXX the various of share will up per cash posted per months $X.XX. Ray of quarter This shortly. also provide and comments their are and

our over to which in we various adapt quickly the us As to prides have very communications during allows quarters, past team conditions. nimbleness itself Mercantile forces external and the discussed many skillfully

stakeholders. manage As needs we of to assess able and to a clients the company employees appropriately conditions our the demonstrated serve of our ensure pivot throughout the pandemic, our then transition were to Mercantile seamlessly risks performance management for strong and to and

mismatches rate to by and Now delays result a of however, common environment, to emerge ourselves demand. and in employment current chain actions the disruptions, the the diligently during are partners optimal slow taken most of for in experience supply our business high Fed to remains and and strains as inflation. should working the supply Currently, continue the addition we economic results, and clients performance positioning

fell of August to X.X% XX, Michigan's As X.X%. unemployment rate

as leisure have and has XXXX, services. business XXX,XXX strategic growth-oriented and health our focus to months, environment has XX that economic high and dynamic We X%. quality Mercantile Throughout long-term the this a services, come our professional to for and efficiently enhance through largest accompanying education Michigan vision aim and fell products services team hospitality The the best-in-class as maneuver we clients. well unemployment organization its strategies from future. added past sustainability manufacturing, Over planning as payroll X.X percentage effectively as can tactics the near-term gains the financial by rate the deliver jobs points and continued on employment from its craft and

how to company craft through builds of Our then products as in assist our we we that a the of grow Identification meet company customers organically and of analytics mature services the and at penetration a continues to people-first of to relationships highly in priority as needs markets who strategies and assess This team, to delivery needs well and deployment gaining to prospective our the the aspect talented management seek existing we strategic foothold new creation the convenience. Mercantile our resources to staff markets our approach channels to help with grow as of those company important continually opportunities. digital an be for the is clients tools talent our team strategy, in our caliber and new develops markets. enhance newer as clients client look with stronger a Data our provides.

Finally, for I their quarter. in like third to thank once again the stellar the efforts Mercantile team

and Ray. fourth company's turn which the forward my us well prepared build we as successful Our a Those XXXX enhance XXXX has I'll performance look and a beyond been shareholder are in to to will finishing year strong solid for the quarter value. to call over remarks. with continue I and position now

Raymond Reitsma

for focus payouts refinancing quarter efforts Bob. months This of in lending will the portfolios center the proposition million activities building value growth our commercial XXXX. sales reported been around on relationship Thank community has the despite year-to-date. core We loan or dynamics $XXX XX% non-interest income. asset of bank commercial the residential and and team to planned third first-nine of nearly loan was and the and due comments mortgage to and and achieved commercial annualized for you, possible growth My of their XX% related

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

assets points no quality during Asset is with non-accrual and total of and amounts past due non-performing assets quarter. to pristine of X.X loans There basis were the nominal assets additions non-performing loans.

our portfolio. proud in asset are our we our efforts any of we loan While to metrics, of quality strong remain sign monitoring deterioration in vigilant identify

rating are cash on lenders areas our defense flow of recognize in an current the risk providing rating Our with borrowers emerging risk, of results line robust borrower to sensitivity process emphasis said, potential to experience first environment. model, our and challenges evolving our date that impacts any begun to of finances. have to to a report within All strong not customers continue recessionary is

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

contributor quarter. residential year third decreasing just turn quarter to deposit income last third appointment purchase XX% services and just is X% an primary comparable for complemented quarter markets. the optimization pursue third X% figure income $XX was investments of by to utilizing our to XXXX. will interest The in payroll swap in in the $XX million than the previously banking, increase an originations rates in overall year, branch the loans my increased the described quarter and this remaining credit ago. construction the resulted income mortgage XX% which in increase compared down of That income. since less and third more has annualized income such that impacted live is in consolidations yielded of the offset attrition Refinance a as increase concludes XX% that tools is seven compared to in million the XX%, decrease charges market has limited quarter, Net banking of last The and increase in to reduction activity a in comments, one I machines year's now of XX% the reduction compared We with branch card call Availability ATM branches, quarter continue over of facilities savings, time. mortgage to despite in sharing the to service than network endeavor ongoing a Chuck. X% the nominal service XX% accounts, on under debit our

Charles Christmas

Thanks, Ray, and to everybody. good morning

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

provisions, in benefited Our loan XXXX the expectations. also lower loss earnings economic performance improved period reflecting from

and XX, and income Turning year interest on residential compared the mortgage commercial rate to to core loans. environment increased the an prior periods loans in growth during XXXX reflecting in increase interest Slide periods,

higher recoveries reflecting respectively 'XX first the periods, The and credit of compared than to of of million than rates was a and Chicago notes periods XX of during XXXX. recorded deposit and impact XXXX Bank fee expense expense impact and a of the portion income and the compared recorded liquid months and XXXX $X.X until vast of periods, in residential to quarter from third million quarter metrics. reflected other majority of reduced expense periods the $XX.X average part of and interest loan deposits third XXXX during income million XXXX, first-nine the XXXX, period a environment. with mortgage XXXX. interest balances. was the deploy expense points between XXXX to in compared on when the in reflecting increases a well XXXX, in negative $XX.X of and residential months respectively interest fully million on as we December nine environment. quarter to January million combined provision quarter of time quarter of a periods in yield as not during XXXX. the certain quarter compared XXXX quarter was the recent of comparing the the on earnest during first-nine $X.X in million of small interest the periods million to to respective and rate third environmental loan to the of and periods start large XXXX. quarter large compared basis bearing XXXX and decline with time first-nine loss accretion. period mortgage year projected during first-nine of XXXX earning months expense on of higher months of COVID-XX of the a 'XX portfolio, first-nine year loan 'XX million which interest In and that the by rate respective $X.X provision of total, $X.X deposit the the the increase during relatively loans XXXX. million XXXX continued periods months the to quarter on growth higher higher second didn't Interest of which period third in growth, income expense the loans more lower million respective prior in compared relatively Interest Reserve compared yield XXXX during commercial third securities time impacted in interest a The Net were third In specific third interest a and the when loans allocation, basis comprised was in to XXXX recorded funds to of than recorded reserves was interest million the reflecting the stemming third third during the increase during $X.X months quality months higher second deposits interest asset higher net quarter securities of money time and $XX.X XXXX expense $X.X interest In increased by interest the offset deposit mitigated on part points provision issued the PPP assets, is periods in prior year increased expense generally increased life higher Our the on of million $XX.X other reserve the similar XX respective increased the loan increase first-nine in million significantly compared periods, excess We and the the Federal strong increased mainly reflecting costs Interest quarter position 'XX. rate the environment. increased on XXXX a rate $X.X commercial $XX provision portfolio the net respective prior the the necessitated by during total, subordinated funds also borrowed net $X.X of to and allocations associated during on income in We environment during

by XX, overhead third $X.X economic XXXX XXXX. XXXX the XXXX months increased quarter in million the and were the quarter compared with to XXXX costs period of quarter third during impacted up same associated conditions. increased level time $X.X provision allocations The third of business compared was also and when forecasted on first-nine Slide Continuing the to of during of million

overhead primarily Continuing margin interest $X.X during reflect our contribution XXXX. points costs unchanged basis million relatively XXXX second rate XX of prior increase XX yield the periods XXXX quarter Slide from quarter margin second periods, from far The part the of on XX, a increases Excluding third higher environment to large in the Foundation, increased up XXXX. were compensation up XXXX, and improved the in large net compared points reflecting quarter during reflection earning to the basis Mercantile Bank the costs. is on year X.XX% in the part third quarter of of a interest thus interest net in was assets

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

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

Our average that time during XXX about significant points the period. rate months of a loan increase loan basis on XXXX, billion $X commercial first-nine portfolio averaged that during a increased

Our net interest by negatively to margin impacted excess be continues liquidity.

this equaled points points X of XXXX. points to loan first the growth. basis in to reflecting volume XXXX basis impact impact of quarter The as quarter second part net the liquidity to interest compared balances and declined third excess on margin However, XX from second fund quarter excess the liquidity in XXXX quarter lower our of the a third used during XX the during during of large negative basis quarter, during

to excess growth. monies continue to We fund loan to used be future trend continue expect decline to as the

asset Given which rates a loan comprised of net sensitive margin interest our net further our loans, XX% our of sheet, rate increases any floating balance the commercial includes nature would income. short-term impact and on positive portfolio of interest interest have in

X not competition in third all environment, basis those given low meaningfully the of for which institutions. increased interest periods liquidity excess to basis XXXX, during in increase the most and rates funds the of quarter competitors during believe XXXX. the our quarter, raised compared during a deposit financial points Despite of deposits, the of and XXXX Our rate reflects not has cost increasing positions XX of points the through our we relatively third were of meaningfully end level respective

capitalized We interest as will However, liquidity well positions strong remain deposit and and position. regulatory we rates continue excess capital to historical to rise a believe levels. betas decline, return ultimately rate in

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

banks' was regulatory well above during did the XX, capital As be as of $XXX the categorized XX.X% and was shares September months We total threshold our to of minimum million XXXX. risk-based ratio repurchase capitalized. first-nine not

the We available market XX, of the Slide have key metrics plan. environment current our number we latest repurchase performance difficult. in share caveat remain interest $X.X the with conditions rate assumptions million on our XXXX On and that making volatile, remainder forecasting for

point through are navigate We loan the additional we my This quarter financial including increases rate, federal and operating back environment and the to conditions overhead of margin remain faced expansion consistent basis first-nine remain costs Bob. of the forecast XXXX are to to in in relatively well call on net XX our interest we with the in over to to and tax increase rate turn challenges point In is funds continue and myriad a positioned due fee the continued rate our fourth forecasting prepared several basis of increase mid-December. us. a income, the predicated third by months the quarter. during to Those I'll through interest that remarks, successfully growth and all early believe of are XX now closing, results November pleased with expected

Robert Kaminski

management's That and call up to Chuck. comments question-and-answer session. the open concludes you, prepared the Thank we'll now

Operator

will Piper session. We begin here will Brendan Sandler. the question from Nosal now with our go And [Operator first Instructions] question-and-answer come ahead. Please

Brendan Nosal

morning, Good Hey. guys. you? are How

Robert Kaminski

morning, Brendan. Good

Charles Christmas

Good morning.

Brendan Nosal

to by margin on more, assuming quarter. like amount looks less a the guess, but off XQ quarter the Maybe XQ quarterly the versus it near-term Fed likely third just versus a fourth outlook. least a start will like little in margin the basis, on increase Good. similar bit digging bit here in a average you're I funds good the at looks expansion it

So just using I then you're what fourth this rate understand move quarter start broadly off, deposit to the we pricing in assumptions your guess, maybe us just the are margin guide? more deposit environment? pricing dynamics for help through as And

Charles Christmas

is I'll Chuck. Yeah. one. that swing This at take a

and banks, it is you're think remains big all of I'm the with I cost those of the sure funds one unknowns. hearing

along think I that expense. provision with

through increase of deposit lot we gone increase have definitely -- my mentioned haven't rates has that banks a I think we've seen much of we've a very I or for where time prepared and had. banks with quite think dramatically, in unique most we rates, remarks, sure, for as liquidity the excess in think, I an have interest and to seen all do period virtually that

fund the funds continue if is point or getting to banks in industry, clearly significant we which to using like for deposits, they appreciate, have we, but loan going especially growth Now grow where we to be with there some that been we're using believe increase strong to have. the are competition those

a do us, we which relationship change somewhere I what XX% to is basis until the first care we type week deposit there that that types increase standpoint, that deposit deposit mentioned but we from wide early to on all we meaningfully XX% up didn't we ultimately our will large we depending in have comments, a have did been between October been comparisons, it are year, and our rates with significant betas and entire competitive certain as appears standpoint, rate think our my have customers again, -- markets the a broad return for of But from the in rate October. been other course. anything some And competitive banks our the were really historical really here So, the of, doing. in -- doing of throughout here, levels, at certainly rates prime bank on the in do until basically taking looking that

year, I the funds in point basis which XX increase a up of compared we or think in for XX standpoint, only about barely points the fourth the entire year a from So our projecting to quarter we're third think forecast quarter this basis were so. I cost of

of going the always But of both rates. forecast certainly sheet, what assets of think -- rates we'll deposit just floating that's look beginning XX% XX% balance a as And to an into we again, but driver our is, competition expect going increase. be and to which just hard go have almost our see Ray now, exactly it it, I think but discussed, big as the benefit I asset or sensitive that to rate. XXXX, again are is is, XX% what right to that's we like, as of we I it's is loans call of assets they our have, we do deposit

and has out is done take always that going on And think do think which question product, rates behalf. fund has we'll deposit to to because just their but get question lagging, will point that increases interest I quarter things play so continue at But answer anything, rates. think the increasing if increase peak? seize the for further we what the think done we deposit Fed is rates our CD in after often the see side And the to are on raising of rates I we Fed side. costs we'll the on yield in is And cost the interest of how of margin advantage I the

Brendan Nosal

to that Chuck Yeah. color. just That's turning thoughts of those me, for you, and Thank capital. all one Perhaps from fantastic. more

I so so how today capital quarters that update it's common a both through of and strong just of Maybe kind tangible lot worst folks others sitting uses? So the that next have over you M&A, year on or think experienced, kind about think the regulatory excess or us whether the you dividend or various versus buyback, us work space. walk organic those the to equity growth of have putting on the couple of AOCI of just capital marks avoided

Charles Christmas

Yeah.

I think, the and to growth. first foremost, want to we capital use continue our

Ray strong As We've strong. a looking funding. are remains, of so net pipelines some Yes, loan growth. forward our mentioned, got commercial to really bit quite we're construction that

With the the markets the way excess they But are, we have we we maybe first that in think portfolio, in stock that we'll that changing mortgage underpriced continue the that Midwest. we're their seasonality is saw think to every to keep to to through you given an loan see understanding can we not our the growth we I much prudently as want economic we especially to long going CFO foremost, eye in environments the is and Michigan going as to as the residential typical on. growth Clearly, as here quite use and summer environment. today's capital tell fund stock, underwrite have our think

what again this growth. we Fed to big the meaningful and also We want how a our we to have, back that that we want dollar, to happen will is and cash wants plays expectation keep a clearly fund as that's make if unknown. out but really is bought not at have it's We as economy be defensive use to somewhat an that that you will, well. there to slow, want Clearly, because just we year dividend the every level loan our stock sure mostly

position, don't to we and our hope. that We're the coming in in want to we than keep be things that So like dry storm the want be economy any base becomes position negative do to to us in puts all if capital some position more there we our way. weather powder more capital may excess what there difficult just capital to a if we

Robert Kaminski

for This we're of our position one that into the on is able strong able economic has economy to position. offering being as extensive now, far with and Obviously, our really as about a potentially months our capital we very strong to good pipelines growth our our which it, about feel did to capital subordinated concern our but we're is that, add have debt growth if I'll headed -- about hasn't cover rocky and support to ago conditions, makes purpose in we XX waters continued really the us the changed. that Bob. deploy continue be

Brendan Nosal

Thank you Fantastic. once again.

Robert Kaminski

You're welcome, Brendan.

Operator

question Tamayo come Raymond ahead. next Please Our will go with James. Daniel from

Daniel Tamayo

Good morning, guys.

Robert Kaminski

Good morning.

Charles Christmas

Hi.

Daniel Tamayo

it Just are comfortable level, loan the I comfortable us just don't I kind XXX%. taking guess, guess up up guys on if to, you I'll more I deposit side, up. leave of back to deposit where is you're but over know that ratio and you on there mind I'll then reminding that follow Thanks.

Charles Christmas

Yeah. Yeah, Daniel. that This is Chuck. one. take I'll

we've XXX% XXX%. to the historically, been think, around I comfortable

that include is million, are which the we which strong always averages that suite the obviously repurchase money we repurchase deposit things is to that agreements, us have $XXX of its One is product, internally the around into agreements. relationships that that is swept

meaningful we've Obviously, it's not use of We Federal that fund in our Home have Bank the that the opposite into we side so. very that estate is longer there. our position way. But loan the use the that only interest growth that real about in So we rate ratio deposit that to how term, a just we years, asset down lending from that's commercial to the clearly, the ratio and than side advances, fixed typical. But opportunities and how on day-out, really day-in as that XX% clearly make see Loan balance it's But say, going that's of higher our we a the which sheet. sure that reflects see ratio I knocks or are potential kind managing risk five we But got. it's to and balance to our would portfolio fund we that that

of we've One been program. the over our diligently couple as the you back-to-back things, in of last know, SWOT engage I think, years,

is our the risk to doing great, to loans, But Obviously, which SWOT floating up utilize has behind but back-to-back is, that five SWOT benefits we to don't You've those seven commercial eliminate which seen otherwise customer, into fixed that wouldn't we side is means that one that FHLB have manage loan. interest fixed longer-term from do. rate maybe make income real year, rate that, estate in the rate some the the on them things what program want from really year everybody frees a -- the impetus free rate. seen to us to advances to that results put deposit that

So to lots that of and question going of out the at cap lot But endeavor feel it to ingredients We XXX%. your different the there. of with we into level. what to comfortable short answer different XXX% is that's kind soup things,

Daniel Tamayo

terms potentially -- what indicators, categories deck a but looks a bit the And great broke on in like going talk, if you're much the I that. could it slide early could by where there's where watching. categories, I just not side, then a answer. mean, If quarter. like credit into I in we clearly we of mean here. just really you out we're numbers in maybe That's the appreciate little it dive even the into are strong recession

terms are where of in Thanks. closely you So category? most guys loan watching

Raymond Reitsma

and restaurants any This your It's moment hotels you long as reflex signs almost stress showing to is at the time. in answer the been answer a of question. with are implied that Ray. They for that's

is that to they financed we consumption something done the goods from services of nicely, the closely have as portfolio actually but economy that we're watching a and to the fact, hotels moves adjust economy quite As as matter that. manufacturing

disruptions in them work markets and we are good in office and come supply buildings but the watching closely there as then, of goods don't. we would the felt right highly believe around so the chain Also first those sponsorship availability and that back individualized, are or there. finally, are we So the far that be there And withstand the like have inputs. to the groups of dynamics impact there the changes to the coming firms have

very them from watching closely. And we're signs the that are and you've again, of nevertheless but stats, primary no areas so, watching as those the stress noted over

Daniel Tamayo

Thanks, mentioned COVID just on And lastly, a in build there is Ray. small then quarter, reserve the relatedly factor this reserve you still there. Okay. build

what comments be just about thinking on be Michigan reserves unemployment unemployment, quarter, again what you went for think going forward? the thoughts biggest Thanks. last Just the talked build impetus in about to your this I mentioned drivers, you might that would but quarter down

Charles Christmas

making Yeah, Daniel. that is through dealing It's lack it not thereof. biggest working, comes far just we Chuck, talk rate their have factor disposable It in overall meet. again, makes If if and I look it appears and people if models, mean they're or economic forecast other to then with their models. they're by goes as banks Clearly, and to income. sense they all, not growth ends the their vast are working monies when to when our the that money majority, unemployment the I

and inflation banking a including that industries issues at So strange all industry the unemployment steady low very for is wage and talent very kinds level, all of of has need. finding that they we're in very, not very very, a causing other the environment, difficulty, people course which rate but only stayed

unemployment a factor I solution drivers. see that we of primary bit did at, that to look We sense. of at GDP, use. some really that that rate CECL it's that which think our continue think the of saw in the the little in that one is make slowdown I a So in an we unemployment also use, we our uptick forecast we would forecast couple And looking

through impetus the just that $X expense the a we that to almost provision of the conditions third forecast there. million provision are million of in our quarter, about So million, economic $X.X the which reserve the so was third that related in I about our think provided, of in $X was was increase the

we obviously that a our think understand see State we kind guidance look if our and per numbers comments, our markets reserve. our look will at will and obviously we performing more more keep to continue are at, slowdown use country, add but for forecast pocket. economic We at at for forecast of our we'll protracted continue to our the or do policy industries for accounting economy and have of to globally, of back to how in relative national continue we'll impacted our the the the continue look we see We I which they're certainly expectations. the on we forecast, is our a but Michigan, Ray's to although, the but to that portfolio, look to in are can localized in we

addition whatever the to In actual forecast providing is for.

Daniel Tamayo

All That's color. from right. me. the all Thanks. appreciate I all

Charles Christmas

welcome. You're

Robert Kaminski

Dan. Thanks,

Operator

go will from ahead. next come Hovde. Eric question with Please Our Zwick

Eric Zwick

guys. morning, Good

Robert Kaminski

Eric. Hey,

Charles Christmas

morning. Good

Eric Zwick

on provide strength and the of the to the could if able also XX First, balance? that or balance with commentary end start, that compares the guess loan if industries wanted maybe at I to commercial geographies that how more the you June specific contributing to then in that are into question quantify you're pipeline, growth? September And just any to

Charles Christmas

Chuck. of at do But and loans give but that we is This make to that number the closed Yeah. been increase disclose we a a has we I in where Q putting an quite our specific it our standpoint, from numbers. were more on yet, of together seen commitments let have we when is June. look more which made from can side not Ray to bottom bit I'll basically we've have color got commitment any actually

was XX We're XX. it that million, that's September. think I at June, June bit June about $XXX we million in as reported a $XXX over $XXX at Q, million little looking a in number our just of

then but fund those expect of them, expect would in there. be grown. comparable to has loans standpoint, the you a really clearly are were pipeline construction continues we numerical very at the months those. credits of some ways And other Now a But We history to there, large to show where all banks. over to can a of are on competed months, clearly, different don't we does negotiations end those that from certainly going XX as that us and we the the XX being majority get actually quarter next for there's with get of last measure there said some we strong

Raymond Reitsma

multifamily popular units to next now. X,XXX came like couple the with very In is needed delivery terms of the and study recently of a Kent X,XXX demand years loan about indicated product X,XXX units. over housing County units is in that they right color, pipeline out

them there carefully So into jumping there that. are is and following a developers that shortfall perceived into we're

very bucket a is paying in bucket results I Secondarily, I'd it fairly forms think decade -- by C&I or describes code, it of and say that well. plus general of many those robust is categorization the different building general industry in but SIC defies areas relationships

Eric Zwick

C&I level? follow-up I consider on if appreciate today that is a the remind could compares you more normal how helpful. one Maybe C&I me quick bucket, then that. to that, the you That's utilization rate where and would what

Raymond Reitsma

a was so It maybe prior just XX% is to XX% quarter. the think high bit and under. normal And we're I XX%’s compared little

I reflects they prices have of customers, think request by our some credit they that skyward. watch as the more their inputs availability moves

our And in deal so, us a say, I future, next with needs their together think customers to are the year. to and months immediate a fairly positioned over six

Eric Zwick

XQ. thoughts the of in performance I some the for your then moving And XX and there. appreciate Thanks, follow-up to metrics Slide

be little XQ or it curious it securities offsets Just be would a cash, that relative sounds like get seem there likely and liquidity your you so average to flat growing, how if loans bit, to looking just at the earning they'd about just will expectation maybe to that indicate strong for assets, portfolio, to down it's number?

Charles Christmas

Yeah.

using throughout we're have what we've on loan we commercial well the putting but the funds into the Fed portfolios, and that as deposit the what the of is excess I primarily residential. continuation is that as liquidity, seen primarily a at that think the projecting year

around not change overall on expecting the the liability basis, So on an just side. much moving and assets we're money

put all overall out when that, for Fed deposits -- the everybody and So any we having sure of bank deposit before. looking on we've into I got our really increases. think of the year, only that over actually hand there basis, By their one some the with bringing in as an as deposit But we pencil stayed without good through On part that, well, funds new the deposit depositors, have with around deposits seen overall, the that growth we've us we've using solid of seen been we the continue excluding our understands, have relatively we've also of beginning talked on some customers stable, to the that want -- some borrowers well relationship to and I well. to to have some some come that about always make for deposits had deposit early shown and XX% especially look deposits C&I meaningful at the reflected have increases have deposit funds get as some growth year some they at we've this that our the customers deposits year. been just of come -- a we deposits on, said look meaningful of the at clearly, seen they

that we existing the this fund the bank. any So can quarter here for looking quarters, have opportunity to at relationships previous as Fed we're increase full relationships at loan have the bring and ablaze while and the new growth we guns monies deposit we in

Robert Kaminski

that about to tend of that volume, point type are that relationships help the call and those Ray are the that relationships continue will the on that deposit pipeline. the we'll accounts made pipeline underscores the growth doing It partially because Yeah. are in we larger C&I the to over the and fund now in bring right that

Raymond Reitsma

commercial It's greater our tend be noting that accounts our proportion also balance a to sheet. non-interest non-interest leads bearing that bearing worth are than probably those normal deposits to and concentration on

Charles Christmas

in have management our products we've goes the do deposits, those into get C&I be XX% bearing today. cross-selling think environment that reflects And that, of services funds having again, we we strong of that not shown were the deposit relationships, only growth when talked bring and dividends which Ray we're that strong to add, well, but course success in only mentioned And have your in of in you new our treasury could other those in customers have and talking or we in so the Yeah. I an should provide deposit, great funds earlier, comment then clearly products categories ability I all made, non-interest we have as pays some existing about do C&I when but not those that those in the about just to I borrowing reflects about the if that's growth base, base bank. and a cost and opportunities

statement. the yeah, they C&I throughout income dividends ways different in So customers, pay the many

Eric Zwick

something specific our commercial but Thanks. appreciate about from situation then color provide been today this a and to curious, I loan the relationship. monitoring there. on or while topic curious what the distressed the specific One or reserve? just any last XQ business the industry complete a And changed you've me, just prompt in maybe for new reserve answer is and for

Charles Christmas

we It of hit Yeah. team some still if get our radar the one put issues earlier situation, corrective we've borrower much will, do what and to its there. This of, guidance And as it you an point from out perspective been to that that C&I any accounting is a TDR, kind it need is with. the operating, hit And management with guidance it with is did type viable company relationship TDR non-accrual. this is performing distressed to in the treat year where a working to us. the are still actions and TDR as for working figure but we and the the means try did

a away. away. have those If talking large the rules be a about always when that's likely valuations, it we wouldn't collateral some available, a do see But we to a again do our specific I meaningful is not do would specific heavy the against So at performing TDR, against it that was that we a large we credit. nonetheless, we some that specific with going go have need discounting -- on from TDR TDR as But do we non-accrual, rules reserve look -- year reserve will a reserve now, on credit. so is it stress pretty

but again, are to reduce a look bank. either that here exposure at working We obviously them borrower other better have position, with well to at that in obviously, that to looking as we the options get

Eric Zwick

Got up go quick one just -- Maybe ahead. there follow it.

Charles Christmas

overall of as compared to far Yeah. From one-off rest borrower a it's a as relationship the our volume. that credit standpoint, the situation with

Eric Zwick

be to supply it's terms Thanks. that lines else if tracking? is if anything those like follow-up of it's that we're related all chains or if a of company-specific Yeah. to industry pressures my some in I was guess there -- issue that along going

Robert Kaminski

I shows will loan you a about we're to portfolio, reaction guess situation. a say that, that, talking change overall strong quality the in one-off one it is reserve my the if I purely of grade that

reflective not to the in question corrected. a appreciate plan is there it, make place a it's that seeing, of I So one-off a that but about trend it's sure we're that situation situation gets

Eric Zwick

today. my to great for That's hear. taking Thanks questions Understood.

Robert Kaminski

You're welcome.

Charles Christmas

bet. You

Operator

Instructions] [Operator with here ahead. next DelMonte KBW. Our question from come Damon Please will go

Damon DelMonte

guys. morning, the Hope Good outlook everyone pipelines and well color on Hey. is appreciate loan there. the and doing today? I insight all the

in of at sentiment rise or points especially, by rates, rapid wondering you all? of hesitating think to developers if of kind all are we XXX year-end, do increase weigh and that's on going the like given another kind basis back your see commercial at Just pulling

Raymond Reitsma

mind? particular one I depends think on you in in it do so have the product,

Damon DelMonte

rates thought, a Just sudden are commercial maybe faster a lot on they pause of that the process if project project planning out up real a estate a for hold? them put development than going and all to budget does you're give

Raymond Reitsma

we're have somebody a on long-term We've the have tightening, result, office are has dampening and where but income maybe much in getting I where And moved is effect. less demand where product leverage all the for that's minimal rates of demand, more rates create upward activity an the a goes think there, strongest a who a parallel types or buildings. low only the trend an the that and and In climax obviously, slowdown certainly will on are like well they project. into increase lack begin fairly in point I actually a retail as that so mean, notable lot and a not is to seen multifamily, calculus existing with sponsors where a trend. the reaching very project robust to will in a of less or upward rents some

moment. like looks landscape the what the that's So us at for

Damon DelMonte

then midpoint to expense the are the That's your to the guys relatively the I levers what that if have that color. at of are, combat you And of keeps fourth -- inflationary pressures appreciate guidance look you side, seeing? flat accessible you the quarter where the help some great. is on for range we're

Charles Christmas

lot costs and every lot big wish everybody or I income out levers clearly, benefit I there, like and country inflation there's are do. and there. the the bank's key world, of I statement a in of look a had more you a at than corner But compensation

need can they've obviously paid what paid make as that help impacts best relative got. are to and sure and So that is to we our obviously we to the well, try employees of inflation market the offset paying

salary goes mix basically benefit -- going that it to continue we're means to see we costs. as to our going all So robust hit we're and compensation that have, the and into inflation

to those always margin there So be management, provision and we'll we're of going pressures to areas we have to to statement, do what have that expense, have help costs. we overhead and the other to fee that look offset do look as that whether income income, the we we

Robert Kaminski

line a project that bottom forecasting been or Ray bring over terms years, of expenses can cost up have back in in more close on rates number several but branches helped we've savings. me that consolidate able last the been Damon, the of optimization we've branch those hurdles, specific to

can do. at of that that sure able us that but to make requirement time, may same plethora where a to be were things at our do we're of there sure we're we who the employees making enable can that while as the take we So run every be, not levers we efficiently we care looking to

Damon DelMonte

it. Got

just fee on feel has it then still item? there line the or kind I guess income income bottom think that banking you is And downward like Okay. at that you mortgage or on point more this lastly of has level the is side, do do the pressure reached

Charles Christmas

I like will, numbers. think a think on an production if I feel bottom, we hit overall basis, you we've

your sales -- susceptible you're lot overall not and seasonality we hit coming some when home is there's your lot like of selling product we think have here. standpoint, but not it a and like see -- clearly to house of there's buying an I of from feels and in -- I from clearly, to not there, seasonality Now expect refinances, on would some February, in so a you're bottom seasonality neighborhood, going normal most Damon, when January and we've level of think

Damon DelMonte

it. Got

I Appreciate Okay. Thanks a That's lot. all the had. color. all

Robert Kaminski

Thanks, Damon.

Operator

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

Robert Kaminski

next look Yes. much Thank with at interest our you This very now your has and speaking concluded. for the call the fourth company, of forward you quarter. in to end we

Operator

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

now lines. may your You disconnect

Mercantile Bank (MBWM) 18 Oct 222022 Q3 Earnings call transcript