Mercantile Bank Corp (MBWM) 2003 Q3 法說會逐字稿

Welcome to the Mercantile Bank Corporation third-quarter earnings conference call. There will be a question-and-answer period at the end of the presentation. (OPERATOR INSTRUCTIONS) Before we begin today's call, I would like to remind everyone that this call may involve certain forward-looking statements such as projections, projections of revenue, links (ph) and capital structure as well as statements on the plans and objectives of the company or its (indiscernible). Statements on economic performance and statements regarding the underlying assumptions of the company's business. The company's actual results could differ materially and any forward-looking statements made today due to several important factors described in the company's latest exchange commission filings. The Company assumes no obligation to update any forward-looking statements made during this call. If anyone does not already have a copy of the press release issued by Mercantile today, you can access it at today's company Web site, www.MercBank.com. On the conference today from Mercantile Bank Corporation we have Gerry Johnson, Chairman and Chief Executive Officer, Mike Price, President and Chief Operating Officer, Chuck Christmas, Chief Financial Officer, and Bob Kaminski, Senior Vice President. We will begin the call with management's prepared remarks and then open the call up for questions. At this point I would like to turn the call over to Mr. Johnson.

Thank you for dialing in this morning and for your interest in our company. Although we are having another great earnings year, year-to-date earnings are up almost 28 percent from a year ago, the real story for this quarter has been our growth. We have just completed the best growth quarter in the company's history and we are in the midst of the best growth year that we have ever had. Chuck will get into these numbers in more detail, but as you saw on our press release, for the quarter we are up almost 120 million sequentially, and year-over-year we are up almost 284 million. And this is in a tough economy. This growth has been primarily marketshare driven and to put it in perspective, there are currently 179 banks in the State of Michigan. Of those 179, 140 or 78 percent are less than 283 million in assets. I think that says it all. With that, I will turn the meeting over to Chuck Christmas, our Chief Financial Officer.

Thanks, Gerry and good morning, everybody. As a way of introduction, what I want to do this morning is give an overview of Mercantile's financial condition and the operating results for the third quarter of this year as well as some year-to-date numbers highlighting some of the major financial condition and performance balances and ratios. The theme of Mercantile's financial results hasn't changed at all and continues to reflect the continuous successful implementation of our strategy, that being our concentration on business lending, our strong asset growth led by growth in the commercial loan portfolio, our high aspect quality, improved fee income, and controlled overhead costs. And as Gerry just mentioned, certainly our current quarter financial results do show the reflection of a significant provision expense that we had to take during the quarter due to the tremendous loan growth that we experienced.

Our overall earnings performance -- our net quarter this year was $2.3 million. That is an increase of $75,000 or 3 percent over the third quarter of last year and on a year-to-date basis we have earned $7 million. That is an increase of 1.5 million or almost 28 percent over the 5.5 million we earned in the first nine months of last year. On a diluted earnings-per-share basis in the third quarter this year, we earned 39 cents unchanged from the third quarter of last year and on the year-to-date basis we have earned $1.25, up 25 percent of what we earned in the first nine months of last year.

Our net interest income, our overall profitability continues to be driven by our strong earning asset growth, which is translated into increased net interest income and is further supported by a relatively steady net interest margin. During the third quarter of this year our net interest income totaled $8.1 million. That is an increase of 1.8 million or 28 percent over the 6.3 million that we earned in the third quarter of last year. And on a year-to-date basis our net interest income totals 22.4 million, that is a very strong increase of 5.3 million or 31 percent over the 17.1 million of net interest income from the first nine months of last year.

Our earning assets at September 30, 2003 totaled $1,092,000,000. That is an increase of 276 million or 34 percent from where we were twelve months prior. Loans are up $255 million during that time, or about 92 percent of the growth in earning assets during the last 12 months. Our net interest margin during the third quarter of this year was 3.19 percent, a slight decrease from the 3.27 percent from the third quarter of last year, however overall we continue to have a steady net interest margin as reflected during the past five quarters where our range has been only 10 basis points.

Looking forward with regards to our margin again we do not provide specific guidance, however, as in the past, the main issues continue to be our loan yields, any action or inaction by the Federal Reserve, and our rates on our wholesale funding sources. With regards to new loans, our bowers continue to elect variable rates over fixed rates, which really means that a 4 percent floating-rate versus 6 to 7 percent fixed-rate. Our variable-rate loans at the end of the third quarter totaled about $700 million, or about 73 percent of our portfolio, although about 40 percent of those loans are currently at their floors. At June 30 of this year, 68 percent of our portfolio was variable-rate, again up to 73 percent now. Just 2.5 years ago it was 35 percent, again reflecting the fact that a vast majority of the new borrowers to our bank have elected floating-rate over fixed as well as some borrowers that had been previously at a fixed-rate have elected to refinance to a floating-rate instrument.

With regards to our wholesale funds our cost of wholesale funds and also our overall deposit mix continues to decline as rates have fallen. As of September 30 at quarter end here, the average rate of our wholesale funding portfolio was 2.5 percent. That is down 80 basis points since the beginning of the year and is down 210 basis points over the last 1.5 years. Given the current interest rate environment, we still have some repricing opportunities within our wholesale funding portfolios. For the remainder of 2003 we have about $135 million maturing at a current cost or at our average cost of 2.55 percent for the first six months of next year, we have about $245 million maturing at a weighted average cost of 2.30 percent. And for all of 2004, which includes the 245 million, for all of 2004 we have about $375 million set to mature at a weighted average cost of 2.30 percent. The current 18 months CD rate, to put things in perspective, is 1.9 percent, and again the 18 months is about the average term of what we're doing with new wholesale funding.

Loan loss provision expense, as Gerry mentioned, we had some significant provision expense related to our loan growth during the quarter. During the third quarter of this year our provision expense totaled $1,380,000. That is an increase of 500,000 or 57 percent over the $880,000 that we expensed in the third quarter of last year. On a year-to-date basis we have had to expend $2.8 million. That is an increase of $800,000 or 40 percent over the $2 million that we expensed in the first nine months of last year. Again the vast majority of the provision expense is related to our loan growth with net charge-offs equaling just 9 percent of the year-to-date provision expense and only 4 percent of the current quarter loan loss provision expense.

With regards to fee income, excluding securities gains, in the third quarter of this year we earned $1 million. That is an increase of 200,000 or 25 percent over the 800,000 we earned in the third quarter last year. On the year-to-date basis, our fee income excluding securities gains totals $3 million. That is an increase of $1.2 million or 67 percent over the $1.8 million that we made in the first nine months of last year.

There are several reasons for the increases and I will just go through a majority of those, the bigger dollar amounts. Our service charges on deposit accounts for the first nine months of this year totaled $852,000. That is an increase of 192,000 or 29 percent. Mortgage fees so far this year for the first nine months totaled $848,000. That is an increase of 530,000 or 167 percent over the first nine months of last year. Internet banking and wire fees totaled 113,000 so far this year. That is an increase of 48,000 or 74 percent for the year. Some of our new programs such as payroll brokerage and insurance in aggregate totaled $150,000 in the first nine months of this year. That is an increase of 114,000 or 317 percent over the first nine months of last year.

Our credit card and debit card usage fees is 258,000 for the first nine months of this year. That is an increase of 78,000 or 43 percent and our bank owned life insurance increases in cash surrender value so far for the first nine months of this year is $602,000. That is an increase of 394,000 or 189 percent compared to the first nine months of last year. So those are some of the main dollar volume reasons for the increases there.

With regards to overhead costs, during the third quarter of this year we expensed $4.8 million. That is an increase of 1.5 million or 45 percent over the $3.3 million that we expensed in the third quarter of last year. However, it is up $1.5 million but our net revenue is up $1.9 million so again our revenues continue to increase faster than our cost structures. On the year-to-date basis our overhead costs total $13.2 million. That is an increase of 3.9 million or 42 percent over the 9.3 million that we expensed in the first nine months of last year, but again our net revenue was up $6.5 million in the first nine months of this year versus the first nine months of last year. Our year-to-date efficiency ratio is 51 percent, compares fairly close to the 49 percent from the first nine months of last year.

With regards to our growth in overhead costs, of the $1.5 million increase quarter-over-quarter, one million or about 67 percent is in salaries and benefits. During the last 12 months, our (indiscernible) from 113 to 156. That is a 38 percent increase and as well as our annual merit increases primarily in the first quarter of each calendar year. Our occupancy and equipment expenses are also up quarter-over-quarter, primarily reflecting the opening of two branch facilities as well as our loan production office. (technical difficulty) costs are up due to our to our increased asset base. Again there are no one-time expenses or charges within our overhead structure.

Now moving on to the balance sheet, again as you saw in our press release our assets at the end of the third quarter totaled $1,154,000,000. That is an increase of 284 million or 33 percent over the past 12 months. Again, that asset growth is driven by our loan portfolio. Our loan portfolio totaled $972 million at the end of the third quarter. That is an increase of 255 million or 36 percent over the last 12 months. And in the third quarter this year alone grew $106 million. With regards to our asset structure again there are no major changes in asset composition with our net loans staying at 83 percent and investments in Fed funds about 11 percent.

Our funding strategy has not changed significantly as we continue to grow our local deposits and bridge the funding gap with wholesale funds. We have had very strong deposit growth, local deposit growth in the first nine months of 2003. Our local deposits have grown $62 million or 21 percent in the first nine months this year. The local deposit growth has been driven by primarily three different deposit types. First is our demand accounts, which are up $15 million or 24 percent. Our savings deposits are up 25 million or 36 percent, and our local CDs comprised primarily of individuals and municipalities are up 23 million or 23 percent. Our wholesale funds in total are up $127 million or 24 percent. On an overall basis, our wholesale funds to total funds at the end of the third quarter totaled 65 percent, fairly close to the 64 percent where we were at the beginning of the year.

With regards to capital, certainly we just completed our public offering, raising $37.4 million in net proceeds. Certainly that had a very significant positive impact on our capital ratios. Our total risk-based capital ratio for the quarter was 13.9 percent, up from the 11.4 percent where we were at the end of the second quarter. That is my prepared remarks, be happy to answer any questions in the question-and-answer session; now I will turn it over to Mike.

My comments today will center around two issues that I normally discuss and that is growth of the Company and asset quality. While you have heard a few times already Mercantile has had a phenomenal, has been a phenomenal growth story since its inception. This past quarter has been very gratifying for us as we have seen the biggest single quarter of asset growth in our history. As we have mentioned in previous teleconferences, management invested heavily in new team members, and modestly expanded our physical locations during the last half of 2002, and first half of 2003. While this has caused a slight increase in our efficiency ratio for the year-to-date, the results of that investment have started to pay off in a very big way.

Assets increased by approximately $120 million for the quarter with loans accounting for 106 million of his increase. The exciting element of this loan growth is that it is almost all market share gain, as a slow economy has tempered requests from our existing customer base. (technical difficulty) bodes well for the future demand as the economy recovers and our existing customer base's expansionary needs. The new team members that we hired have produced about half of this new growth and our new Holland office has been a great success, generating over $10 million alone in loan production office configuration.

Finally I'm very pleased to note that net loan charge-offs totaled only $56,000 or 0.2 percent of average loans for the quarter. Past due and nonaccrual loans are only 0.3 percent of total loans or $287,000. These remarkably low numbers are the results of our focus on bringing in top-quality customers to the bank, a strong credit culture, and very hard work by our lending team to work with our customers as any problem issues arise.

And as with Chuck and Gerry, I'd be glad to answer any questions at the end of the session, but at this point I will turn it over to Bob Kaminski.

I will be making a few comments on the operations of the bank. As has been the case since the bank opened nearly six years ago, Mercantile's philosophy is to continually evaluate its products and services in order to exceed the customer's expectations. Whether it is traditional banking products, Internet banking, payroll services, investment or courier services, we listen to what our customers want and tailor our product offerings with the focus on that feedback. In addition, our use of outsourcing when possible and partnering with top-notch banking industry providers, plus the deployment of competitive and customer-oriented technology, provides our frontline salespeople with the tools necessary to bring in new customers and service existing customers.

Mercantile's significant growth in the third quarter is a demonstration of the implementation of that strategy in the Grand Rapids Kent County market as well as the beginning of a penetration into the Holland market on the Lake Michigan shoreline area. Concerning our new facilities plans, groundbreaking on both the new downtown Grand Rapids main office and our Holland office should commence in the fourth quarter. Holland is projected to be complete in the fourth quarter of 2004, and the Grand Rapids headquarters is projected to be complete by mid 2005. That is the extent of my prepared comments. With that, I will turn it back over to Gerry.

And at this point we will be happy to answer any questions which you might have.

(OPERATOR INSTRUCTIONS) Barry Mandel.

I had a couple of questions on the quarter -- this awful good loan growth, and I guess I calculate the increased provision probably cost you six or seven cents in the quarter.

It's a good calculation.

And as I remember in the prospectus I thought you had loan growth of about 82 million the first two months.

Right, correct.

And 106 million for the quarter so the first two months had stronger loan growth. Can you break that down between July and August, so help us what the benefit of interest income will be sequentially, because obviously if you (indiscernible) July you get more benefit the third quarter than if you got a loan at the end of August.

We grew about 20 million in July and about 62 million in August.

Wow, okay?

A lot of that August growth was in the last part of August, too.

So you only had the benefit of maybe one month of interest income for those loans in August. In September, obviously was about 24 million. Historically you said you expect loan growth to be 11, 12, 13 million a month. What are your expectations going forward now?

That is a great question because we have just found that we continue to take market share from our competitors at faster and faster rates and we don't know how long that is going to continue. In addition, we have hired some extremely talented people to combine with the very strong group that we have now. And it really depends, because a lot of these relationships are five or $6 million at a crack, and you can work on them for 3,4,5 months and all of a sudden they decide to move to Mercantile or in some cases it takes longer. So I think we have always been comfortable around that 12 to 13 million mark, but we are realizing that that may be something we have to revise upward with the continuing success that we have.

Okay, and I guess the other thing is obviously you have ramped up the expenses with salary and benefits up 47 percent versus a year ago, not interest expense total up 40 percent. I would expect higher loan growth given what you're spending out there.

That is exactly right and the entrepreneurial risk we took obviously was bringing these people on board and expanding our physical footprint a little bit, but the exciting thing as I said in my comments, is that this is really starting to pay off in a real nice way with loan growth, but deposit growth has been extremely strong too and non-interest income right across-the-board. So you have to pay the price a little bit to get great people on board and to modestly expand the physical locations, but the theory is -- it more than pays for itself on to the way that we do business.

You have done a check of a job. In terms of capital, I know it is hard to look in that crystal ball, but how long do you think you are set for capital now given the recent equity offering?

Certainly that is going to depend on the asset growth and the loan growth is going to drive that. I think if you look at our historical numbers, you look at the earnings estimates out there, probably somewhere in the three to four-year range, but again that is going to be dictated by the asset growth.

So, if you grow faster than what you might think, then obviously you need capital sooner.

Yes.

Okay, thanks.

Steve Covington of Stifel Nicolous Co.

Congratulations on a great quarter of loan growth. Can you give us an idea of what your pipeline looks like at the end of September?

It does not look as strong as it did at the end of June, but I am just compiling the numbers now. There is certainly a good pipeline out there of deals that our lenders are working on and trying to get commitments.

Okay. Mike, can you give us an idea on if there has been any competitive response to your unbelievable loan growth in either market?

Clearly, it continues to be competitive in both markets. The competitive response is traditional, they try to call on our customers and offer them ridiculous rates and the good thing about that is we built the bank on not being a rate driven bank but a relationship driven bank, so it has had very little effect on us as they have tried to come back and maybe steal some of the business back. We have very, very little of that that ever happens and until they get the service philosophy that matches us, it really is not even trying to compete on the same platform. And so far they haven't done that and hopefully they won't.

Yes, that's great. Also, can you -- are there any additional staffing that you foresee in the coming quarter, any opportunities you have on the lenders side or anything else?

I think on the lenders side especially we probably hired all that we want to hire this year. There is a certain amount of assimilation and digestion that needs to go on whenever you see a quarter like that, and so we have really set our sights to going into 2004 before we look at adding any additional lending staff at this point. There may be a support person or two that is added between now and the first quarter of '04, but that would be pretty minor addition.

Okay and I don't want to monopolize your time, but lastly -- the loan production in Holland to date, has it been one to four family, the $10 million?

A good portion of it has been just traditional residential real estate. Some of it we have sold on the secondary market like we do with a lot of our stuff and just taken the referral fees. But there has been some real nice and gratifying commercial real estate, so we've got about $5 million of loans in the portfolio that those two lenders have generated. So it has been a real nice start in a fairly short period of time.

That is great. Congratulations again and keep up the great work.

Brad VanderPloeg of Raymond James Associates.

Congratulations, as well. A couple quick questions just to follow up on the last one about the Holland office. In terms of the market opportunity there, I know you quantified what you see the total market size as being in Grand Rapids. Does that include Holland, or would you add some small-business lending opportunities on top of that to quantify the total market size?

I think when we talk about Grand Rapids we don't really add the Holland numbers in there. When we look at the Holland opportunity, we know that the total market is substantially smaller than Grand Rapids and we also know that it is going to be a little tougher sledding for us over there because we don't have the numbers of people that we have here, and obviously we don't have as strong internal momentum getting out of the gate. But we think there is some pretty good opportunity over there and we do not see a growing Grand Rapids type of rate, but we are again already gratified that we got that kind of production after a little more than 1.5 quarters.

All right, and can you, I don't know if you could add any more color on whose hide the market share is coming out of? Is it the ones that we might expect, given some acquisition activity that has happened over there the past five years or so?

That would be a good expectation. Typically we compete against the big, big players out there, the super regionals and the Fifth Thirds, the Huntingtons, the Banc One's and I do not think it is coming out of any one bank's hide. They are all equal opportunity givers right now and we are happy to make the effort to bring it over. What is really happening is that the marketplace recognizes a significant difference between that kind of gray mass of super regional banks and what they are all about and what we are doing, which is again the local decision-making based, relationship-based type of banking. And that is really what we draw on every day we're out there and it really sets us apart from our competitors.

But you did not see any change in the third quarter that helped generate that acceleration and loan growth? It was really the addition of new people?

The addition of new people certainly added frosting to the cake, but even if you took out what the new folks added, it would have been a tremendously strong growth quarter as well. So that really makes us feel good that beyond going everyday calling efforts, blocking and tackling if you will that we do is paying off because there wasn't any one big event that happened to any one competitor.

We have just become extremely well-known in Grand Rapids and with the lending limit we have now, 20 million plus, there are not many companies locally that we cannot do business with. And I think that has made us a very attractive alternative to a lot of tremendous companies that we might not have had access to years ago. So it is a whole litany of things, I think that has brought this type of growth success to us.

Right. Right. And one final question. Has there been any material change in the portfolio mix in terms of industry exposure, given the rapid growth in the third quarter? Do most of those loans come from one area versus another?

They really mirrored what the portfolio looked like. It would probably be 60 percent centered in commercial real estate if you were to look at it, although I have not looked at it exactly, but that is my sense in just looking at what is going on. The only industry that probably took an increase would be steel supply. We brought a Company on board that is a fairly sizable relationship in the steel supply industry, and we did not have a ton of that in the portfolio, so that is going to skew that percentage up from a 1 to 2 percent or something like that. Other than that it has been pretty much what the portfolio looked like to begin with.

That's steel supply for auto or furniture?

It really supplied stampers like Ford and some of the other end users of steel.

Thanks very much and congratulations again.

(OPERATOR INSTRUCTIONS) Terry McEvoy of Fahnenstock & Co.

Most of my questions have been answered, but one thing. Could you talk a little about your average commercial loan size this quarter versus a year ago?

This is Mike again. I would say that we are seeing -- and Gerry alluded to a little bit was some of the new lenders that we have had and some of the background they have had dealing with larger relationships; I would say we tend to a little bit larger relationship this quarter than if you were to look back and peel it back a year ago. I would not say it is substantially bigger. What it really looks like is our sweet spot is still in that $2 to $6 million total relationship type of credit. I just talked about a steel supply company that is closer to 14, 15 million. That is still pretty much an anomaly in our portfolio. Chuck was mentioning the other day we have 15 relationships over 5 million in the whole bank. So I would say if you went back and did the math, it is bigger than a year ago, but that has not been a significant change in the way we're doing business.

Great, thanks a lot.

A follow up from Barry Mandel.

What are your goals longer term in terms of efficiency ratio? I know you were down to 49 percent a year ago. As you mentioned, you are up to 51 percent now. You have 38 percent more employees than a year ago. What are you looking at longer term and what kind of growth in employment at the bank in 2004 and have you budgeted for that yet?

I think when we were doing our road shows we said that an interim target for us would be somewhere in the mid-40 percent range, and I think it is likely (technical difficulty) begin to drop a little bit as we go forward. The expense of hiring a lot of these people and acquiring this growth really has already been realized and at this point will start to realize the benefits of doing that. Obviously every time we open a new facility its going to have a negative impact on that. I would also say the average efficiency ratio for banks in the State of Michigan is around 67 percent so, at 52 we think it is still pretty good number. We're not satisfied with it. And certainly want to drive that lower -- again, this quarter was kind of an anomaly as have been (technical difficulty) because of the additions to staff. We paid some signing bonuses. Obviously a couple new facilities online, but the advantage of having a low efficiency ratio to begin with is that you have the luxury of doing some of this stuff without it really destroying your earnings.

What is your plan for facilities next year? What is your plan for new facilities next year?

As I mentioned in my comments, we have two facilities which will begin construction very shortly here. The Holland office will be open sometime late third quarter, early fourth-quarter 2004, but the larger facility, the new headquarters in downtown Grand Rapids won't be done until mid 2005.

And that larger facility will actually be replacing the facility we are in now so it is not going to be all new overhead. There will be some mitigation of that.

Same thing with Holland, we are already there with a lot of the overhead expense and this will just be an upgrade to the rental.

What do you see going forward for net interest margins? For this business? Been pretty steady.

That is really what we're trying to do is keep it within the steady range which it's been. Ten basis point range in last five quarters. We want to keep it there as best we can and just change the CD durations to keep it there. Right now because of the cost of our funds rolling off, we are able to take advantage of the relatively low-interest rate environment by going out further on the yield curve than we had in the past. Historically we had done probably a twelve-month average on the wholesale funds and now we're doing probably 15 to 18 months. So we are able to take advantage of the lower rates, go a little bit longer on the duration but still keep the margin overall steady. That is pretty much our goal.

So you are setting up for some increase in rates?

Yes.

Okay, thanks.

Brad Ness.

A handful of tedious questions here. Chuck, what is your balance now of broker deposits?

Our total wholesale funds are about 65 percent to 66 percent of total funds.

And you mentioned that the 18 months CD brokerage rates 1.9 percent, how does that compare to a twelve-month CD rates, brokerage CD rate?

Twelve months is 1.6.

And how do those compare to local rates?

Still a little bit lower. Probably 10 to 20 basis points cheaper.

And I know you have been initiating some new strategies to grow internal loan or deposit growth. Can you just tell me the current status of some of those initiatives and what you are thinking as far as that goes?

We continue to and check relationships that we have especially in the commercial loan side, Brad, where we haven't maybe brought the whole relationship over on the deposit side. One of the keys has been for us we had a little bit of reticence when we opened the bank with only one location. And then even when we expanded to only two or three, people saying to you we were not convenient enough for my personal deposits. Now that we have the location downtown and four branches one in each quadrant here, it has been easier for us to double back and get some of those deposits and bring them in because we can really appeal to the customers, say we are very, very convenient for you no matter where you live in the Grand Rapids area. That is probably been the biggest thing we've done that has yielded some pretty nice results.

Okay. And have you, has the shoe (ph) been exercised yet?

No.

Chuck, I noticed a lower effective tax rate for the third quarter, around 25 percent. I guess I was looking for something closer to 28. Can use tell me what went on there and what should I expect going forward?

I will answer the last question first. We will be about 27, 27.5 percent. We did at the end of the third quarter and will see a little bit of that in the fourth-quarter, did some adjustment of our deferred tax asset. And we changed our tax rate there at the advice of our tax consultant. And that was run through in the third quarter and we will see a little bit more of that in the fourth-quarter. But probably 27, 27.5 percent effective tax rate.

Okay, will that apply also to '04, or is that just the third and fourth quarter?

Probably 27.5 for next year.

And lastly, with the general national economy getting a little bit better, have you noticed a bottoming out of the economic conditions locally or have you noticed an uptick or what do you sense?

We sense that it has bottomed out Brad. For the first time in a long time we actually had customers saying '04 as being a better year than the previous two years, so we haven't actually seen that translate yet into more orders for some of the industries here that have been on their back, but there is for the first time some real optimism in a long time.

Okay, great. Thanks.

At this time, there are no further questions. Gentlemen, are there any closing remarks?

Again we thank you all for your interest and if you think of other questions you may have later, please don't hesitate to give us a call. Thank you again.

This concludes today's Mercantile Bank Corporation third quarter earnings conference call. You may now disconnect.