Mercantile Bank Corporation (NASDAQ:MBWM) Q1 2023 Earnings Call Transcript

And obviously the, the impact to our specific customers. And as we, have to go in there and change any loan grades, we still have all of our qualitative factors as well. We didn’t make any changes, as I mentioned in the first quarter. I think most of those kinds of represent the overall environment that we have. So, I think that those would kind of move in similar fashion to the overall upgrades, downgrades within our portfolio as well as the economic forecast that we put into the model. Damon DelMonte Okay. And then just from like a reserving level, I mean if things remain relatively healthy do you feel that your 108 level is a adequate reserve or do you feel like that’s going to kind of grow a little bit as you continue to grow loans this year?

Bob Kaminski Yeah, that’s an interesting question, but certainly, I believe that my reserve right now is very adequate given the shift in the portfolio. But, again, I think the coverage ratio is just, an outcome of what we have to do, granularly well to the items that we just talked about. So yes, certainly if there is a downgrade, certainly if we see a degradation in the forecast, we are going to have to add provision expense and that would cause an increase in the coverage ratio. But given where we are at now and a very, very strong loan portfolio and an overly good, I would call it economic forecast with continued, I think the forecast that we see out there is an unemployment rate that I think overall now 3.5%. We see that growing to 4.5% in most of the forecast over the next couple of years.

But I would say that 4.5% is still a really strong unemployment number.So again, we will just see how the economies react to what the Fed is doing, what they may do in the future, obviously any other stresses that we see in the financial markets. I guess I would say, I don’t see that coverage ratio going any lower, given where we are at right now in regards to the economic forecast and the overall condition of our loan portfolio. But clearly, if there are stresses within the economy and or our loan portfolio, I think you would expect, and I would certainly expect to see that coverage ratio have to increase.Damon DelMonte Got it. Okay. No more questions on credit. Everything else that I had has been asked and answered. So that’s all I had. Thank you very much.Operator This concludes our question-and-answer session.

I’d like to turn the conference back over to Bob Kaminski for any closing remarks.Bob Kaminski Thank you very much for your interest in Mercantile Bank Corporation. We look forward to speaking with you next, after the end of the second quarter in July. This call has now ended. Thank you.Operator The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.