Mercantile Bank Corp (NASDAQ:MBWM) stock fell 4.43% (As on January 16, 11:18:47 AM UTC-4, Source: Google Finance) after the company posted better than expected results for the fourth quarter of FY 23. The company has reported net income of $20.0 million, for the fourth quarter of 2023, compared with net income of $21.8 million, for the respective prior-year period. Net interest income during the fourth quarter of 2023 was $48.7 million, down $2.0 million, or 4.0 percent, from $50.7 million during the respective 2022 period as increased yields on earning assets and loan growth were more than offset by a higher cost of funds. Noninterest income totaled $8.3 million during the fourth quarter of 2023, up $0.5 million, or 6.3 percent, from $7.8 million during the fourth quarter of 2022. The increase in noninterest income reflected higher levels of virtually all fee income categories.

The net interest margin was 3.92 percent in the fourth quarter of 2023, down from 4.30 percent in the prior-year fourth quarter. The yield on average earning assets was 5.95 percent during the current-year fourth quarter, an increase from 4.95 percent during the respective 2022 period. The higher yield on average earning assets primarily resulted from an increased yield on loans. The yield on loans was 6.53 percent during the fourth quarter of 2023, up from 5.49 percent during the fourth quarter of 2022 mainly due to higher interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) significantly raising the targeted federal funds rate in an effort to curb elevated inflation levels. The FOMC increased the targeted federal funds rate by 225 basis points during the period of November 2022 through July 2023, during which time average variable-rate commercial loans represented approximately 65 percent of average total commercial loans.

MBWM in the fourth quarter of FY 23 has reported the adjusted earnings per share of $1.25, beating the analysts’ estimates for the adjusted earnings per share of $1.24. The company had reported 2.6 percent decline in the adjusted revenue growth to $56.9 million in the fourth quarter of FY 23, beating the analysts’ estimates for revenue of $56.1 million.

Separately, the company said its board has approved a 3% increase in its quarterly dividend to $0.35 per share, payable on March 13 to shareholders of record as of March 1.