Net income: $19.6 million, or $1.22 per diluted share, in the third quarter of 2024. $60 million, or $3.72 per diluted share, for the first nine months of 2024.
Loan-to-deposit ratio: Decreased from 110% at the end of 2023 to 102% as of September 30, 2024.
Rural deposit growth: increased by $600 million in the first three quarters of 2024 and $339 million in the third quarter alone.
Commercial loan growth: $233 million in the first three quarters of 2024 or 9% annually.
Nonperforming assets: $9.9 million, or 17 basis points of total assets, at quarter end.
Non-interest income growth: 27% increase in the first three quarters of 2024 compared to the same period in 2023.
Mortgage Banking Revenue: 49% increase in the first nine months of 2024 compared to the same period in 2023.
Net interest income: decreased $0.7 million in the third quarter of 2024 compared to the third quarter of 2023.
Net interest margin: decreased 46 basis points in the third quarter of 2024 compared to the third quarter of 2023.
Preparation costs: $1.1 million in Q3 2024. $5.9 million in the first nine months of 2024.
Non-interest expense: increased $3.4 million in the third quarter of 2024 compared to the third quarter of 2023.
Total risk-based capital ratio: 13.9% at end of Q3 2024.
Release date: October 15, 2024
For a complete record of financial statements, see Complete Record of Financial Statements.
good points
Mercantile Bank Corp. (NASDAQ:MBWM) achieved a significant decline in its loan-to-deposit ratio, from 110% at the end of 2023 to 102% as of September 30, 2024.
Local deposits increased by approximately $600 million in the first three quarters of 2024, representing an annual growth rate of 21%.
Non-interest income increased 27% in the first three quarters of 2024 compared to the same period in 2023, and mortgage banking income increased 49%.
Asset quality remains good, with non-performing assets accounting for just 17 basis points of total assets, and non-performing assets do not include commercial real estate.
Mercantile Bank Corp. (NASDAQ:MBWM) maintains a strong and well-capitalized regulatory capital position, with a total risk-based capital ratio of 13.9% at the end of the third quarter.
Minus points
Net income for the third quarter of 2024 was $19.6 million, down from $20.9 million for the same period in 2023.
Net interest income decreased $0.7 million in the third quarter of 2024 compared to the same period last year.
Net interest margin decreased 46 basis points in the third quarter of 2024 compared to the third quarter of 2023.
Interest expense increased significantly, increasing $12.9 million in the third quarter of 2024 compared to the prior year period.
Non-interest expenses increased $3.4 million in the third quarter of 2024 due to higher payroll and benefits costs and higher data processing costs.
story continues
Q&A highlights
Q: Could you elaborate on the factors contributing to this quarter’s impressive increase in deposits, particularly interest-free balances? A: President and CEO Raymond Reitsma said the growth was due to new customer acquisition and new customer acquisition. It explained that it is driven by a focus on deposit opportunities as well as lending opportunities. This growth is spread across corporate bank deposits, which is a strength for the company. Chief Financial Officer Charles Christmas added that the increase in non-interest-bearing deposits was due to seasonal factors as businesses prepare for year-end payments.
Q: How did deposit pricing react to the Fed’s 50 basis point interest rate cut? A: Chief Financial Officer Charles Christmas noted that deposit pricing, particularly for money market accounts and CDs, has declined by about 50 basis points, consistent with the Fed’s interest rate cuts. This adjustment was in line with market trends.
Q: What were deposit costs in the third quarter and how do you expect them to change? A: Chief Financial Officer Charles Christmas said deposit rates for the quarter were approximately 4.75 % to low 5%, a decline of 50 basis points after the Fed’s rate cut, he said. Although the blended interest rate on deposits was not specified, growth in the money market and term deposits had a significant impact on overall costs.
Q: Can you provide more details on the expected compression in net interest margin (NIM) starting in the fourth quarter? A: Chief Financial Officer Charles Christmas said he expects NIM compression due to the Fed’s interest rate cuts. “If the Fed continues its gradual rate-cutting cycle, we will see a stable margin outlook through 2025.” This compression is primarily due to expected deposit growth outpacing loan growth.
Q: Given current valuations, how are you approaching capital management and the potential for share buybacks? A: Chief Financial Officer Charles Christmas He emphasized maintaining strong capital buffers to weather uncertainties. While a share buyback plan is in place, the focus remains on capital preservation to support loan growth and maintain a healthy dividend.
For a complete record of financial statements, see Complete Record of Financial Statements.
This article first appeared on GuruFocus.
