Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q1 2022 Earnings Presentation
32 slides from Mercantile Bank's earnings presentation, Apr 19, 2022
Slide 1: Conference Call and Webcast Presentation
AMercantile Bank Corporation Conference Call and Webcast Presentation
Slide 2: Forward-Looking Statements
Be 5.2 a3 58 00 Forward-Looking Statements Forward-Looking Statements This news release contains statements or information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words
Slide 3: A Commitment to Excellence: Performance Highlights
A Commitment to Excellence Performance Highlights As of March 31, 2022 * Annualized net core commercial loan growth of approximately 11 percent * Sustained strength in commercial loan pipeline + Netinterest income growth * Significant increases in several key fee income categories * Continued low le
Slide 4: Michigan's Community Bank
Michigan’s Community Bank® in Michigan wett ran * Founded in Grand Rapids in 1997 * Second largest bank headquartered in MI * 45 banking locations He * Expanded to Cincinnati, Ohio and Midland, Michigan in 2020 & Petoskey, Michigan in 2021 * Addition of new lending teams focused at driving growth in
Slide 5: Strategic Initiatives
Strategic Initiatives LEVERAGE INVESTMENTS DIGITAL DELIVERY PEOPLE & CULTURE RISK & PROCESS Expand customer utilization of digital banking services * Recruit and retain top talent and develop emerging leaders + Expand usage of Treasury Management products * Maintain dynamic Enterprise Risk Managemen
Slide 6: Forward Progress
Forward Progress 21% minority hire rate in 202 practices resoure ir teamsand promote collaboration across all department ] sion Policy, Hur Engaged and active ESG Committee. \Video Banking Machines and the opening of locations in new markets. Risk management monitoring throug} complet incial, credit
Slide 7: Financial Performance First Quarter 2022
Rinanciallperfonmance First Quarter 2022
Slide 8: Noninterest Income
Noninterest Income Strategic Initiatives Mortgage volume led by purchase activity, supported by continued refinance activity g 8 5 3 SE AD £5 uo MORTGAGE PIPELINE YEAR-OVER-YEAR TREND: APPLICATIONS Volume in Millions fo lll | _ Cee (AA MERCANTILE BANK CORPORATION | 8
Slide 9: Noninterest Income
Noninterest Income Strategic Initiatives Well-positioned to capture market share with proven record of fast and effective processing and strategic hires of seasoned lenders across Mercantile’s markets g 8 S 3 SE ee £5 uo MORTGAGE PIPELINE YEAR-OVER-YEAR TREND: VOLUME & UNITS a eee & PLS » 2 Q a & a
Slide 10: Strong Credit Culture: Diversified Lending
Strongieneditqeultune Diversified Lending Mercantile has worked continuously since the end of the Gre: 0 - a position ’ ) ‘onomic conditions. /_| Our loar been built gh the c development beneficial cli portfolio metric strong, including durin caused by the COV reflecting the solid performance of the
Slide 11: Asset Quality Metrics
£ 3 2 (3) D € £ a Asset Quality Metrics Quarter Trends 6 in thousands Net loan charge-offs (recoveries) ($100) ($1300) $400 ($300) ($400) $100 Net loan charge-offs to We (0.01%) (016%) 0.05% (0.04%) (0.05%) -Q.01% Allowance to loans 099% 1.02% 113% 1% 115% 119% Nonperformingleansto goss 0.07% ©= 0.0
Slide 12: Core Commercial Loan Growth
Core Commercial Loan Grow tth csiarsin mitions £ 3 2 C3) D € £ a 1/321 9/30/21 6/30/21 3/3/21 Core Commercial Loans $2910 $2,727 $2564 $2,513 PPP Loans $40 ge $455 Total Commercial Loans $2,843 $2,968 svi 12/3/20 12/39 12/3VIB N/T Core CommercialLoans $2,910 $2,429 $2,442 «$2,360 c= $2,204 PPP Loans
Slide 13: Commercial Loan Portfolio Composition
Commercial Loan Portfolio Composition £ b=) 2 (3) D e = a Loan Type* Commercial & industrial lm Commercial Vacant Land, Land Development & Residential Construction i Commercial Real Estate = Owner Occupied Commercial Real Estate =Non-Owner Occupied Commercial Real Estate - Multi-Family & Residential
Slide 14: Loan Concentration
£ b=) 2 (3) D e = a Loan Concentration Industry* I Real Estate, Rental & Leasing i Services Agriculture, Oil & Gas Extraction & Utilities @ Construction 1 Manufacturing » Wholesale Trade i Retail Trade I Transportation & Warehousing ®& Information Bl Finance & Insurance *Asof Mar (AA MERCANTILE BANK
Slide 15: Commercial Credit Exposure
Commercial Credit Exposure Strong Credit Credit Risk Profile by Internal Credit Risk Grades* ¢s in millions) Grades 1-4 $7193 $346 $3582 $4980 $1329 Grades 5-7 $4035 $18.0 $2221 $4967 $75.0 Grades 8-9 $188 $01 S24 S127 $01 Total Commercial $141.6 $527 $582.7 $1,007.4 $208.0 96 of Total Commercial Lo
Slide 16: Past Due Loans
£ b=) 2 (3) D e = a Past Due Loans Commercial & Retail Past Due Loans* (sin mitions) ‘Commercial & Industrial = Vacant Land, Land Development, Residential - Construction Real Estate - Owner Occupied Real Estate - Non-Owner Occupied Real Estate - Multi-Family & Residential Rental Total Commercial 1-4
Slide 17: Past Due Loans
£ 3 2 C3) D € £ a Past Due Loans Past Due Loans as % of Total Loans $2 ial #20 [ I 1W30-89 Days Past Due 90 Days & Over Past Due ll Over 89 Days Past Due & Accruing (AA MERCANTILE BANK CORPORATION | 17
Slide 18: Commercial Loans Floating Rate Information
£ 3 2 (3) D € £ a Commercial LOANS * (esiasin:ousanes) Floating Rate Information Floating Rate Commercial Loans $1,749,000 Fixed Rate Commercial Loans $1256.00 Loans $3,005,000 Total Comme: Repricing Outlook Reprice Immediately $1,258,000 72% After 0.25% $195,000 8306 After 0.50% $134,000 21% After
Slide 19: Managing Abundant Deposits & Liquidity
Managing Abundant Deposits & Liquidity Total Deposits of $3.98B* Continue to attract local deposits, supporting improved funding costs Total Deposits Loan to deposit ratio of 8 Noninterest-bearing deposits comprise 42% of total deposits De $30 Billions $2.0 SIS $10 $05 $0.0 W/BVA1 12/320 12/39 12/38
Slide 20: Appendix
Appenclizx Thank you for your interest in our company 504
Slide 21: Executive Management Team
Appendix Robert B. Kaminski, President & Chief Executive Officer Mr. Kaminski joined the Bank in 1997 and has over 38 commercial banking experience. Mr. Kaminski was appointed President and Chief Executive Officer of Mercantile on January 1, 2017 and continues to serve as Chief Executive Officer of
Slide 22: Product Offerings
Appendix Product Offerings PEER PRODUCT CMA Autobooks for Smalll Business with @ Electronic Invoicing & Collection Bill Payment & ACH v v v v Cash Management v oe v W. Credit Card Rewards v v v vy Health Savings Account v v y v In-House Payroll Services & Human wi Capital Managernent Solutions Integ
Slide 23: Paycheck Protection Program (PPP)
Appendix Paycheck Protection Program (PPP) LOAN BALANCE SEGMENT # $ # # $ PPP Round One 2171 $553100,000 (2,165) ($552,200,000) 6 $900,000 PPP Round Two ize = $208500000 ni78) {$197.200.000) 38 $11,300,006 Totals 3387 $761,600,000 ($749,400,000) 44 $12,200,000 NET FEE INCOME ACCRETION 2h! Quarter 20
Slide 24: Consolidated Reports of Income
Appendix Consolidated Reports of Income (Unaudited) Unaudited Net Income $ 14,239,000 Basic earnings per share O73 $ 0.87 Diluted earnings per share 073 $ 0.87 Average basic shares outstanding 15,840,801 16,283,044 Average diluted shares outstanding 15,841,037 16,283,490 (A MERCANTILE BANK CORPORATI
Slide 25: Consolidated Reports of Income: Net Interest Income
Appendix Consolidated Reports of Income (Unaudited) Net Interest Income INTEREST INCOME Loans, including fees Investment securities Other interest-earning assets. Total interest income INTEREST EXPENSE Deposits Short fm borrowings. Federal Home Loan Bank advances Other borrowed money Total interest
Slide 26: Consolidated Reports of Income: Noninterest Income
Appendix Consolidated Reports of Income (Unaudited) Noninterest Income Service charges on accounts Mortgage banking income Credit and debit card income Interest rate swap income Payroll services Earnings on bank owned life insurance Other income Total noninterest income 1,416,000 $ 1,155,000 3,281,0
Slide 27: Consolidated Reports of Income: Noninterest Expense
Appendix Consolidated Reports of Income (Unaudited) Noninterest Expense March 31,2021 Salaries and benefits $ 15,086,000 Occupancy Furniture and equipment Data processing costs Other expense Total noninterest expense Income before federal income tax expense 14,320,000 17,579,000 Federal income tax e
Slide 28: Consolidated Reports of Income: Yield on Assets / Cost of Funds
Appendix Consolidated Reports of Income (Unaudited) Yield on Assets/ Cost of Funds 2021 202} 4) ar 24 or Yield on loans 3.87% 4.07% 4.07% 3.99% 4.03% Yield on securities 152% 146% 1.48% 154% 161% Yield on other interest-earning assets 019% 015% 016% 012% on% Yield on total earning assets 299% 312% 3
Slide 29: Consolidated Reports of Income: Mortgage Banking Activity
Appendix Consolidated Reports of Income (Unaudited) Mortgage Banking Activity 2021 Total mortgage loans originated Purchase mortgage loans originated Refinance mortgage loans originated Mortoage loans originated to sell Net gain on sale of mortgage loans: 4) Qtr 168200 210,200 259500 237300 = 245,20
Slide 30: Consolidated Reports of Income: Asset Quality
Appendix Consolidated Reports of Income (Unaudited) Asset Quality Gross loan charge-offs $ 200 200 700 100 100 Recoveries $ 300 1500 300 400 500 Net loan charge-offs (recoveries) $ (00) (1300) 400 (300) {400} Net loan charge-offs to average loans (0.01%) (0.169) 0.05% (0.04%) (0.05%) Provision for l
Slide 31: Nonperforming Assets Reconciliation
Appendix Consolidated Reports of Income (Unaudited) Nonperforming Assets Reconciliation 2021 2021 3 Qtr 24. Qtr Beginning balance $ 2,500 2900 3100 3,200 4100 Additions $ yoo 200 400 500 100 Return to performing status $ (200) 0 ° ° (100) Principal payments $s (700) (400) (200) {500} (600) Sale proc
Slide 32: Thoughts on Remainder of 2022
Appendix Thoughts on Remainder of 2022 Rising Prime/Libor/SOFR Rates Basis Points May 4, 2022 50 June 15, 2022 25 July 27,2022 25 September 21,2022 25 Performance Metrics Net Interest Margin 265% -27! Average Earning Assets $48B-$49B Fee Income $95M-$I05M Overhead Costs $26M-$27M Federal Tax Rate 19