Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q1 2025 Earnings Presentation
39 slides from Mercantile Bank's earnings presentation, Apr 22, 2025
Slide 1: Investor Presentation April 2025
Investor Presentation April 2025
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation 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 such as: “anticipates,” “intends,” “plans,”
Slide 3: Executive Management Team
Executive Management Team PRESIDENT & EVP, CHIEF FINANCIAL OFFICER & CHIEF EXECUTIVE OFFICER TREASURER Mr. Reitsma was appointed President Mr. Christmas has served as Chief and Chief Executive Officer of Financial Officer at Mercantile since Mercantile effective June 1, 2024, 1998. Prior to joining
Slide 4: Financial Performance First Quarter 2025
Financial Performance First Quarter 2025
Slide 5: Performance Highlights
FINANCIAL PERFORMANCE Performance Highlights • Net income of $19.5mm in 1Q25 versus $21.6mm in 1Q24 Earnings • EPS of $1.21 in 1Q25 versus $1.34 in 1Q24 • Net interest margin of 3.47% in 1Q25 versus 3.74% in 1Q24 and 3.41% in 12Q24 Net Interest • Lower asset yield attributed to lower interest rate e
Slide 6: Shareholder Value Peer Comparison
FINANCIAL PERFORMANCE Shareholder Value Peer Comparison MBWM TBVPS 5-Year TBV CAGR vs. Proxy Peer Group 8.4% 5-Year CAGR $35 33.09 NIC MBWM 29.31 OSBC $30 25.61 24.47 IBCP 23.86 SRCE $25 22.12 Track record of delivering $20 SYBT BY shareholder value over $15 HBNC CTBI proxy peer average LKFN MSBI $1
Slide 7: Loan to Deposit Ratio
FINANCIAL PERFORMANCE Loan to Deposit Ratio* 110% $5,000 Reduction from 108% to 99% over past 108% twelve months 107% • Driven by robust local deposit growth • Includes solid loan growth, a 105% $4,500 reduction in brokered deposits, and first quarter (In millions) seasonal declines in deposits 102%
Slide 8: Net Interest Income
FINANCIAL PERFORMANCE Net Interest Income $5.5 $5.6 $5.7 $90mm $5.2 $50 $48 $48 $49 $5.1 $47 $47 $80mm $8.1 $8.7 $5B $45 6% $6.1 $8.3 $5.5 Interest Income $40 $70mm $35 $60mm $4B 5% $in millions 5.35% 5.35% 5.31% Stable net interest income in a Assets $30 $50mm $3B $25 4.69% dynamic interest rate $2
Slide 9: Net Interest Margin
FINANCIAL PERFORMANCE Net Interest Margin Net Interest Income Net Interest Margin, fully tax equivalent Earning Asset Yield Cost of Funds $50mm $48.3 $48.4 $48.5 7.0% $47.4 $47.1 6.0% Stabilizing Net interest Margin $45mm 6.06% 6.07% 6.08% 5.81% 5.74% 5.0% • Proactive balance sheet management $40mm
Slide 10: Interest Rate Scenarios
FINANCIAL PERFORMANCE Interest Rate Scenarios* $50 20% Improved asymmetry in results $40 15% $ Change in millions driven by strategy to reduce loan % Change in NII $30 10% to deposit ratio $20 5% • Excess deposits used to build $10 investment portfolio 0% $0 • Purchases of highly discounted (5%) cal
Slide 11: Noninterest Income
FINANCIAL PERFORMANCE Noninterest Income* Other income (-76%) Earnings on bank owned life insurance (-54%)** Interest rate swap income (-94%) Payroll services (+16%) Credit and debit card income (+4%) Mortgage banking income (+13%) Service charges on accounts (+20%) Solid increases in core fee $10mm
Slide 12: Mortgage Loan Originations and Portfolio
FINANCIAL PERFORMANCE Mortgage Loan Portfolio Mortgage Loan Originations $180,000 $160,000 $140,000 Quarter-over-quarter growth (In thousands) $120,000 in income and originations $100,000 during a historically, $80,000 seasonally lighter quarter $60,000 $40,000 $20,000 $0 1st Qtr 2nd Qtr 3rd Qtr 4th
Slide 13: Noninterest Expense
FINANCIAL PERFORMANCE Noninterest Expense 58% $40mm 56% 54% 60% 51% 52% 50% Overall Stable Cost Structure $30mm 40% • Quarter-over-quarter increase in $20mm 30% salary and benefit costs commensurate with asset growth 20% $10mm 10% • Noninterest expense to average assets below historical peer group $
Slide 14: Asset Quality
FINANCIAL PERFORMANCE Asset Quality Average Loans $4.6B $4.6B $4.5B $4.4B Asset quality measures $4.3B remain strong • Reflects ongoing commitment to soundly and vigilantly underwrite and administer loans and 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr 1st Qtr strength of borrowers 2024 2024 2024 2024 2025 • Co
Slide 15: Loan Repricing
FINANCIAL PERFORMANCE Loan Repricing* Total Loan Portfolio Total Loan Portfolio Rate Type Repricing Breakdown The majority of loans have a floating rate, shortening Over 5 Years 10% balance sheet duration and Fixed Rate Loans: aligning with funding 23% sources to mitigate interest 1 – 5 Years 23% ra
Slide 16: Investment Portfolio
FINANCIAL PERFORMANCE Investment Portfolio Unrealized Gains & Losses ($ in thousands) As of March 31, 2025 $700,000 $600,000 • Due to the increasing interest rate $500,000 environment, net unrealized losses $400,000 started to increase meaningfully $300,000 during the first quarter of 2022, $200,000
Slide 17: Regulatory Capital Ratios
FINANCIAL PERFORMANCE Regulatory Capital Ratios (Mercantile Bank Data) 14% As Reported Total Risk- Tier 1 Leverage Based Capital Ratio 12% Capital Ratio As Reported Tier 1 11.8% 10% Leverage Capital Ratio 8% Total Risk-Based Capital Total Risk Based Requirement Capital Ratio 6% Tier 1 Leverage Capit
Slide 18: Deposits & Sweep Accounts
FINANCIAL PERFORMANCE Deposits & Sweep Accounts* $5.0B $4.5B $4.0B $3.5B $3.0B $2.5B $2.0B $1.5B $1.0B $0.5B $0.0B 1Q24 2Q24 3Q24 4Q24 1Q25 Money Market (+38%) Noninterest-Bearing Checking (+3%) Interest-Bearing Checking (+21%) Savings (-13%) Local Time $100,000 & Over (+22%) Local Time Under $100,0
Slide 19: Large Depositors
FINANCIAL PERFORMANCE Large Depositors Includes Sweep Account Balances Stable Large Depositors Depositors with over $5 million as of March 31, 2025 Total – 79 relationships aggregating $1.5 billion Business/Individual – 60 relationships aggregating $1.3 billion Governmental – 19 relationships aggreg
Slide 20: Deposit Balances
FINANCIAL PERFORMANCE Deposit Balances Deposits comprised primarily of business accounts* Personal 34% Business 66% ($ in thousands) March 31, 2025 March 31, 2024 Personal Business Personal Business Noninterest-Bearing Checking $ 191,300 982,200 207,500 927,500 Interest Checking $ 190,800 560,500 18
Slide 21: Sources of Liquidity
FINANCIAL PERFORMANCE Sources of Liquidity* Source Availability ($ in thousands) Unsecured Federal Funds Lines of Credit $ 70,000 FHLB of Indianapolis Advance Program $ 674,000 Unpledged Investments $ 392,000 Federal Reserve Discount Window $ 153,000 *As of March 31, 2025. 21
Slide 22: Thoughts on Remainder of 2025
FINANCIAL PERFORMANCE Thoughts on Remainder of 2025 Prime/SOFR Rates • No Changes 2025 Performance Metrics 2nd Quarter 3rd Quarter 4th Quarter Loan Growth 3.00% – 5.00% 3.00% – 5.00% 3.00% – 5.00% Net Interest Margin 3.45% – 3.55% 3.45% – 3.55% 3.45% – 3.55% Fee Income $9.5MM – $10.5MM $10.0MM – $11
Slide 23: Strong Credit Culture: Diversified Lending
Strong Credit Culture Diversified Lending
Slide 24: Total Loans
STRONG CREDIT CULTURE Total Loans* ($ in thousands) Balance Percentage Commercial Loans Commercial and Industrial $ 1,314,400 28% Real Estate – NonOwner Occupied $ 1,183,700 26% Real Estate – Owner Occupied $ 705,600 15% Real Estate – Multi-Family & Residential Rental $ 479,000 10% Real Estate – Lan
Slide 25: Asset Quality Metrics
STRONG CREDIT CULTURE Asset Quality Metrics Quarter Trends ($ in thousands) 3/31/24 6/30/24 9/30/24 12/31/24 3/31/25 • Continued strong asset quality metrics Net loan charge-offs $ (400) (300) (100) 3,600 (100) (recoveries) • 9 basis points nonperforming assets to Net loan charge-offs total assets a
Slide 26: Core Commercial Loan Growth
STRONG CREDIT CULTURE Core Commercial Loan Growth ($ in millions) Five Quarter Loan Growth Trends Core Commercial Loans $3,800 $3,752 $3,707 5% $3,700 $3,648 $3,600 $3,533 Commercial loan $3,500 growth in 1Q25 $3,430 $3,400 (annualized) $3,300 $3,200 Mar-24 Jun-24 Sep-24 Dec-24 Mar-25 Five Year Annu
Slide 27: Lending Commitments
STRONG CREDIT CULTURE Lending Commitments ($ in millions) *Commitments to make loans generally reflect our 3/31/24 6/30/24 9/30/24 12/31/24 3/31/25 binding obligations to existing and prospective Construction Loans commercial customers to extend credit, including line Commercial $ 362 320 241 245 21
Slide 28: Composition - Commercial Loans
STRONG CREDIT CULTURE Composition - Commercial Loans* Loan Type Commercial Industry Real Estate - Wholesale Trade Multi-Family & Retail Trade 6% Transportation & Commercial 4% Warehousing 1% Residential Real Estate - Manufacturing Rental Non-Owner 18% Information 13% Occupied <1% 32% Construction 6%
Slide 29: Composition – Auto Related Commercial Loans
STRONG CREDIT CULTURE Composition – Auto Related Commercial Loans Auto Related Loans Percent of Total Balance of Auto Related Loans Commercial Loans ($ in millions) 100% $4,000 90% $3,500 80% $3,000 70% $2,500 60% 50% $2,000 40% $1,500 30% $1,000 20% $500 10% 0% $0 1Q24 2Q24 3Q24 4Q24 1Q25 1Q24 2Q24
Slide 30: Rate Type - Commercial Loans
STRONG CREDIT CULTURE Rate Type - Commercial Loans * ($ in thousands) Rate Type Breakdown Balance 24% Floating Rate Commercial Loans $ 2,851,200 Fixed Rate Commercial Loans $ 900,300 76% Total Commercial Loans $ 3,751,500 *As of March 31, 2025. Floating Rate Commercial Loans Fixed Rate Commercial Lo
Slide 31: Past Due Loans
STRONG CREDIT CULTURE Past Due Loans Commercial & Retail Past Due Loans* ($ in millions) Recorded 30 – 59 60 – 89 > 89 Balance Total Total Days Days Days Current > 89 Days Past Due Loans Past Due Past Due Past Due & Accruing Commercial & Industrial $ - - 0.3 0.3 1,314.1 1,314.4 - Vacant Land, Land D
Slide 32: Past Due Loans Trend
STRONG CREDIT CULTURE Past Due Loans $8.0 3 bps* $7.0 Past Due Loans as % of $6.0 Total Loans $5.0 Millions $4.0 $3.0 $2.0 $1.0 $0.0 3/31/23 6/30/23 9/30/23 12/31/23 3/31/24 6/30/24 9/30/24 12/31/24 3/31/25 30-89 Days Past Due 90 Days & Over Past Due Over 89 Days Past Due & Accruing *As of March 31,
Slide 33: FDIC Commercial Real Estate Lending Concentration Guideline
STRONG CREDIT CULTURE FDIC Commercial Real Estate Lending Concentration Guideline Commercial Real Estate Loans / Total Regulatory Capital Generally not to exceed 300% 300% 290% 280% 270% 260% 250% 240% 230% 220% 210% 200% 3/31/2024 6/30/2024 9/30/2024 12/31/2024 3/31/2025 33
Slide 34: Non-Owner Occupied Commercial Real Estate Lending
STRONG CREDIT CULTURE Non-Owner Occupied Commercial Real Estate Lending* Current NOO CRE Composition Historical NonPerforming NOO CRE (ending balance, $ in thousands) Industrial $1,000 8% $900 6% Office $800 $700 6% $600 Retail $500 3% $400 2% Hotel $300 1% $200 Total Loan Portfolio $100 Assisted Li
Slide 35: Company Overview
Company Overview
Slide 36: Company Overview
COMPANY OVERVIEW • One of the largest banks headquartered in Michigan. • Founded in 1997 in Grand Rapids, MI. • $6.1 billion in total assets. • More than 650 employees & over 40 locations. • Offers more than 75 products & services supporting commercial, business, governmental, educational, nonprofit
Slide 37: Historical Trends & Shareholder Value
FINANCIAL PERFORMANCE Historical Trends & Shareholder Value Solid Earnings and Balance Sheet Growth Trends Total Assets Total Loans Total Deposits 10.7% CAGR 10.0% CAGR 11.8% CAGR $7 $5 4.6 $5 4.7 6.1 4.3 5.4 3.9 4.1 3.9 $6 5.3 3.7 4.9 $4 3.5 $4 3.4 $5 4.4 3.2 2.9 2.7 Billions Billions Billions 3.6
Slide 38: Strategic Areas of Focus
COMPANY OVERVIEW Strategic Areas of Focus Client People & Risk Growth Efficiency Experience Culture Management • Deploy new • Increase local • Foster culture • Deploy data • Maintain and client deposits where all analytics and enhance existing onboarding and employees feel robotic process credit cul
Slide 39: Product Offering
COMPANY OVERVIEW Product Offering Highly competitive commercial and retail capabilities. PEER PRODUCT MBWM BAC JPM FITB CMA Autobooks for Small Business with Electronic Invoicing & Receivables Bill Payment & ACH Cash Management Credit Card Rewards Electric Vehicle Car