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Mercantile Bank posts lower earnings for 2017 amid ‘solid performance,’ loan growth

BY Tuesday, January 16, 2018 01:19pm

GRAND RAPIDS — Mercantile Bank recorded slightly lower earnings for 2017, although executives say they’re satisfied with the bank’s performance.

The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) today reported 2017 net income of $31.2 million for 2017, or $1.90 per diluted share. That compares with $31.9 million, or $1.96 per diluted share, in 2016.

“Mercantile delivered solid performance throughout 2017,” President and CEO Kaminski told brokerage analysts this morning during a conference call to discuss results. “Mercantile is poised to deliver a strong performance in 2018.”

Mercantile Bank recorded total loan growth during the year of $180 million, or nearly 8 percent, to $2.55 billion. The bank originated $529 million in commercial loans for the year for new and existing commercial clients. That included $119 million in commercial loans in the fourth quarter.

At the end of 2017, Mercantile has unfunded commitments on commercial construction and development loans of about $154 million, which the bank expects to fund largely over the next 12 to 18 months, Kaminski said.

The bank’s loan pipeline “continues to be good” and Kaminski expects that total loan growth can reach a 7.5-percent to 8-percent gain in 2018.

“Based on the pipelines and what we’ve been able to do from a funding standpoint, it’s certainly what we’re shooting for. The wild card in it is always the payoffs and customers selling projects, selling a building, or if you get a competitive pressure that you hadn’t expected that can cause some choppiness,” Kaminski said. “Overall, based on what we’re seeing in our markets, or what we’re experiencing with building relationships with new clients in our marketplace, I think we’re very much looking forward to that continued strong (loan) funding in 2018 as well.”

Total loan growth in the fourth quarter, however, grew a scant $4 million, largely due to what Kaminski called “usually high” loan payoffs during the period. He attributed that in part to increased pressures in the market from commercial loan competitors “getting a little overly zealous as far as presenting packages to clients.”

In some cases, Mercantile Bank gave in and allowed a client to go to a competitor to maintain credit quality and lending margins.

“Those payoffs were certainly, in some cases, encouraged and in other cases we were willing to let the relationship go because of the very competitive loan pressure that we saw from a competitor bank,” Kaminski said.

That led to a slight reduction of $11 million in Mercantile’s commercial loan balance at the end of 2017 to $2.20 billion.

Mercantile Bank, with 49 offices in Western and Central Michigan, ended 2017 with total assets of $3.28 billion, an increase of 6.6 percent from a year earlier.

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