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Jun 30, 2020
Mercantile Bank Q2 2020 Earnings Report
Reported a decrease in net income due to increased loan loss reserves, partially offset by robust mortgage banking income.
Key Takeaways
Mercantile Bank Corporation reported a net income of $8.7 million for the second quarter of 2020, a decrease compared to the prior-year period. The results were impacted by an increase in loan loss reserves due to the COVID-19 pandemic, which was partially offset by a substantial increase in mortgage banking income.
Net income decreased to $8.7 million, or $0.54 per diluted share, compared to $11.7 million, or $0.71 per diluted share, in the prior-year quarter.
Total revenue increased by 11.0 percent to $41.6 million, driven by higher noninterest income.
Net interest margin decreased to 3.17 percent, compared to 3.79 percent in the prior-year quarter.
Paycheck Protection Program loan fundings totaled approximately $549 million.
Mercantile Bank
Mercantile Bank
Mercantile Bank Revenue by Segment
Revenue by Segment
Mortgage Banking Income Revenue
CapyFin.com Forward Guidance
Mercantile Bank anticipates solid mortgage banking income based on the current pipeline and application volume. They expect service charges on accounts and credit/debit card income to rebound as COVID-19 restrictions are relaxed. The bank remains committed to meeting growth objectives in a cost-conscious manner.
Positive Outlook
- Solid mortgage banking income is expected in future periods based on the current pipeline and application volume.
- Service charges on accounts and credit/debit card income are expected to rebound as certain restrictions are relaxed.
- The bank remains committed to meeting growth objectives in a cost-conscious manner.
- The bank is continually reviewing its branch system, product delivery channels, and treasury management solutions to operate more efficiently.
- Purchase mortgage applications have increased in light of certain COVID-19 restrictions being lifted and is at an all-time high.
Challenges Ahead
- The COVID-19 pandemic presents unique challenges and economic uncertainty.
- Certain segments of the commercial loan portfolio are more susceptible to the risks presented by the pandemic.
- Commercial lines of credit declined $109 million during the second quarter of 2020, in large part reflecting the negative impact of stay-at-home orders on certain customers’ sales volumes.
- Service charges on accounts and credit and debit card income both declined in the second quarter of 2020 compared to the prior-year second quarter largely as a result of COVID-19 restrictions being put in place.
- The bank has elected to temporarily cease stock repurchases to preserve capital for lending and other purposes while management assesses the potential impacts of the COVID-19 pandemic.