Published in Finance

Mercantile Q1 earnings decline amid drop in mortgage banking income

BY Tuesday, April 19, 2022 03:59pm

GRAND RAPIDS — Mercantile Bank Corp.’s earnings declined in the first quarter from a year earlier as refinancing for home mortgages decreased and reduced fee income.

The Grand Rapids-based Mercantile Bank (Nasdaq: MBWM) today reported $11.4 million in net income for the first quarter, or 73 cents per diluted share, which compares to $14.2 million, or 87 cents per diluted share, in the same period in 2021.

Robert Kaminski Jr. COURTESY PHOTO

Refinancing originations during the quarter declined 60 percent from a year earlier, reducing mortgage banking income by $5.5 million to $3.3 million, while mortgage originations for home purchases increased 24 percent.

“Despite the reduction in mortgage banking income, we are confident in our ability to continue to be a top performer in this area during 2022,” President and CEO Robert Kaminski Jr. said in a morning conference call to discuss quarterly results.

Given rising mortgage rates, “the refi area is drying up pretty significantly” after two strong years, Chief Financial Officer Chuck Christmas said.

The bank also has begun seeing increased mortgage borrowing from consumers who were unable to find a new home to buy because of the low inventory in the market and opted to build new, executives said.

“I think as long as the current housing inventory remains low, I think you’ll see customers exploring that as a possibility because they desire a new home and there’s just nothing available from an existing home standpoint. So, they’re looking at all options, but a lot of dynamics in the market right now are affecting customers’ decisions,” Kaminski said.

Meanwhile, Mercantile Bank continued strong commercial loan growth in the quarter.

Core commercial loans grew $82 million for an 11-percent annualized rate. Mercantile’s commercial loan backlog “remains consistent with prior periods as we fund this impressive level of growth,” bank President Ray Reitsma said.

At the end of the first quarter, Mercantile Bank had $184 million in new development and construction loan commitments that it expects to fund over the next 12 to 18 months, Reitsma said.

The bank expects the growth rate in commercial lending to continue.

“I would say that based on all the information we have right now, we’d expect to continue along the pace that we demonstrated in the first quarter. As we look at our backlog opportunities and all the surrounding information, it appears that the immediate future looks a lot like the past,” Kaminski said.

Mercantile Bank has 45 offices across the Lower Peninsula with total assets of $5.17 billion as of March 31 and $3.97 billion in total deposits.

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