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Mercantile Bank CEO Bob Kaminski. Mercantile Bank CEO Bob Kaminski. Courtesy Photo

Mercantile Bank sees increased earnings in first quarter

BY Tuesday, April 17, 2018 03:00pm

A lower federal tax rate and collecting on problem commercial loans helped boost Mercantile Bank Corp.’s earnings for the first quarter.

The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) today reported quarterly net income of $10.8 million, or 66 cents per diluted share, to start 2018. That compares to net income of $7.6 million, or 46 cents per diluted share, for the first three months of 2017.

The quarterly result included a gain of $1.7 million, or 10 cents per share, from the collection of several non-performing commercial loans, CEO Robert Kaminski said. The quarter also saw Mercantile Bank’s federal tax payment drop to $2.5 million from $3.3 million a year earlier.

Kaminski told brokerage analysts this morning in a conference call that the results came as “positive trend lines continue” for Michigan’s economy, as employment improves and “real estate conditions in our market continues to support growth.”

“These favorable trends, coupled with our focus on building and developing value-added relationships, gives us the confidence that strong financial results achieved during the first quarter of 2018 will continue on the current year and beyond,” he said.

Mercantile Bank recorded $111 million in commercial loans during the quarter to new and existing clients, and at the end of the quarter had $133 million in unfunded construction and development loans that it expects to fund within 12 to 18 months.

The bank’s commercial loan portfolio overall contracted during the first quarter by $10 million from the fourth quarter of 2017 to $2.19 billion due to what Kaminski called an “unusually high” level of loan payoffs. That includes $21 million paid off from borrowers on the bank’s “watch list” or involving loans in non-performing status, plus another $21 million from clients selling their business or the collateral behind the loan.

Kaminski expects Mercantile’s loan pipeline to remain strong through 2018.

“Our fundings have been very consistent with what we’ve seen in past quarters if you go back the last couple of years. We expect that to continue going forward. The wild card has certainly been the payoffs,” Kaminski said. “Asset sales by customers are going to happen from time to time, especially in this environment. You get customers getting nice prices for buildings or for their companies. Those will happen, but they seemed to be heavily concentrated in the first quarter of this year.

“But we look very forward to a strong pipeline and continued consistent funding for the rest of the year.”

Mercantile Bank has 47 offices across the Lower Peninsula with assets of $3.29 billion as of March 31.

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