Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q4 2022 Earnings Presentation
32 slides from Mercantile Bank's earnings presentation, Jan 17, 2023
Slide 1: Mercantile Bank Corporation Conference Call and Webcast Presentation
Mercantile 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: Michigan's Community Bank
Michigan’s Community Bank® aa in Michigan + Founded in Grand Rapids in 1997 * Second largest bank headquartered in Michigan * 46 banking locations i * Expanded to Cincinnati, Ohio and Midland, Michigan in 2020, Petoskey, Michigan in 2021 and Traverse City, Wotan mond Michigan in 2023 en ene Birsing
Slide 4: Executive Management Team
Executive Management Team Robert B. Kaminski, Jr. President & Chief Executive Officer Mr. Kaminski joined the Bank in 1997 and has over 38 years of commercial banking experience. Mr. Kaminski was appointed President and Chief Executive Officer of Mercantile on January 1, 2017 and continues to serve
Slide 5: A Commitment to Excellence
A Commitment to Excellence Performance Highlights As of December 31, 2022 * Commercial loan growth of approximately 7 percent NASDAQ: MBWM + Sustained strength in commercial loan pipeline + Net interest income growth $540M MARKET CAP + Balance sheet structured to provide net interest income growth i
Slide 6: 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 7: Forward Progress
Forward Progress 2issrinory hire rate in 2021 practices resoure ir teamsand promote colaboration across all department sion Policy, Hur Engaged and active ESG Committee. \Video Banking Machines and the opening of locations in new markets. . railed ert throug! passing of Sep incial, credit, operation
Slide 8: Product Offerings
Product Offerings PEER PRODUCT BAC IPM FITB CMA Autobooks for Small Business with Electronic Invoicing & Collection v Bill Payrnent & ACH v o v we v Cash Management Vv v v v v Credit Card Rewards Vv v v Health Savings Account Vv v v Capital Management solutions Integrated Payables Vv v v v v Integra
Slide 9: Financial Performance Fourth Quarter 2022
Mercantile \ Bank Corporation EimanciallPerfornimance Fourth Quarter 2022
Slide 10: Consolidated Reports of Income
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Dec, 31,2022 Dee 31,2021 Bee 31,2022 Dec. 31,2021 Net Income $ 21803000 $ TLe39000 $ 61,063,000 $ 59,021,000 Basic earnings per share $ 137 $ 074 $ 385 $ 369 Diluted earnings per share $ 137 $ 074 $ 385 $ 369 Average basic shares cutstand
Slide 11: Consolidated Reports of Income: Net Interest Income
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Net Interest Income Dec. 31,2022 Dee 31,2021 INTEREST INCOME Loans, including fees % 53787000 % 34,617,000 $ 166,848,000 $ 135,048,000 Investment securities 2,841,000 2139,000 10,337,000 7,513,000 Other interest-earning assets 1.650.000 2
Slide 12: Consolidated Reports of Income: Noninterest Income
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Noninterest Income Dec. 31,2022 Dec. 31,2022 Dee 31,2021 Service charges on accounts $ 1,436,000 $ 1391,000 $ 5,952,000 $ 5,078,000 Credit and debit card income 205,000 1,972,000 8,216,000 7.516,000 Mortgage banking income 673,000 610,000
Slide 13: Consolidated Reports of Income: Noninterest Expense
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Noninterest Expense Dec 31.2022 Dec. 31,2021 Dec. 31,2022 Dec 31,2021 Salaries and benefits $ 17282000 $ 19193000 $ 65124000 $ 66,447,000 Occupancy 2194000 2,087,000 8,362,000 8,088,000 Furniture and equipment 792,900 934,000 3,614,000 3,
Slide 14: Yield on Assets / Cost of Funds
g 8 5 3 SE ceo es a Consolidated Reports of Income (Unaudited) Ei Yield on Assets / Cost of Funds 2022 2022 34 Qtr 28 Or Yield on loans 5.49% 456% 3.97% 3.87% 407% Yield on securities 191% 1.79% 168% 152% 1.46% Yield on other interest-earning assets 3.65% 215% 0.76% 019% O1s% Yield on total earning
Slide 15: Mortgage Banking Activity
Consolidated Reports of Income (Unaudited) g 8 5 3 SE ceo £5 Lao Mortgage Banking Activity 2022 2022 2022 4 Gtr 3° Qtr 28ar Total mortgage loans originated S$ 90.800 163900 190900 168200 210,200 Purchase mortgage loans originated $ 79600 140900 187400 101400 124,500 Refinance mortgage loans originat
Slide 16: Asset Quality
g 8 5 3 SE ceo £5 Lao Asset Quality (naucitec) 2022 24 Orr Gross loan charge-offs $ 100 ° ° 200 200 Recoveries $ 200 200 300 300 1500 Net loan charge-offs (recoveries) $ (100) (200) (300) (100) (1,300) Net loan charge-offs to average loans (0.01%) — (0.03%) (0.04%) (0.01%) (016%) Provision for credi
Slide 17: Nonperforming Assets Reconciliation
Nonperforming Assets Reconciliation (Unaudited) g 8 5 3 SE ceo £5 Lao 2022 2022 2022 3° arr 23 tr 18 Qtr Beginning balance $ 1,400 1,800 1,600 2,500 2,900 Additions $ 6400 0 300 100 200 Return to performing status $ io} (200) ° (200) ° Principal payments $ (ice) (200) (100) (700} (400) Sale proceeds
Slide 18: Performance: Financial Thoughts on 2023
Performance Financial Thoughts on 2023 Rising Prime/Libor/SOFR Rates February 1,2023 25 March 22, 2023 25 Performance Metrics Loan Growth 7.00% - 9.00% 7.00% -9,00% 7.00% - 9.00% 7.00% -9,00% Net Interest Margin 4.05% ~ 415% 4.00% - 410% 3.85% - 3.95% 3.75% - 3.85% Fee Income $65M -$7.0M $7.0M-$75M
Slide 19: Strong Credit Culture, Diversified Lending
Mercantile Bank Corporation Strongieneditqeultune Diversified Lending Mercantile has worked continuously since the end of the Great Recession to place itself in a position of strength _ nomic conditions. S - been built | ion and mutually portfolio metr strong, includin caused by the Ci reflecting th
Slide 20: Asset Quality Metrics
£ 3 2 (3) D € £ a Asset Quality Metrics Quarter Trends 6¢ in thousar Net loan charge-offs (recoveries) (s100) treragelane (OOH) Allowance to loans. 1.08% Nonperforming loansto 9.999 total loans Nonperforming assets to total assets 016% ($200) (0.03%) 101% 0.049% 0.03% ($300) (0.04%) 0.97% 0.059% 0.0
Slide 21: Core Commercial Loan Growth
Core Commercial Loan Grow tth csiarsin mitions £ 3 2 C3) D € £ a 12/31/22 3/322 12/30/21 Core CommercialLoans $3,131 $2993 $2910 PPP Loans si2 Total Commercial Loans $3,005 12/322 12/3/21 12/3/20 2/39 12/31 Core CommercialLoans $3,131 $2910 $2,429 $2,442 $2,360 PPP Loans $40 $365 + + Total Commercia
Slide 22: Lending Commitments
2 oO 2 (3) of 5-3 £5 HO Lending CommMitMent (isin mins 12/31/22 9/30/22 6/30/22 3/31/22 12/3/21 Construction Loans Commer Residential Commitments to Make Loans* Total Commitments to make loans generally reflect our binding obligations to existing and prospective commercial customers to extend credit
Slide 23: 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 24: 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 *As of December 31, 2022 (AA
Slide 25: Commercial Credit Exposure
Commercial Credit Exposure £ 3 2 (3) D € £ a Credit Risk Profile by Internal Credit Risk Grades § in millions) Grades 1-4 S796 $a7 $4063 $4476 sne3 Grades 5-7 $450.4 $20] $2298 $573.7 $935 Grades 8-9 $151 $01 $31 $12.4 $01 Total Commercial $1851 $619 $6392 $033.7 sang % of Total Commercial Loans ; a
Slide 26: Past Due Loans
£ b=) 2 (3) D e = a Past Due Loans Commercial & Retail Past Due Loans* (sin mitions) ‘Commercial & Industrial - $57 $03 $6.0 $791 $1,185.1 Vacant Land, Land Development, Residential - - - - $619 $619 - Construction Real Estate - Owner Occupied - $02 - $02 $639.0 $639.2 - Real Estate - Non-Owner Occu
Slide 27: Strong Credit: Past Due Loans
Strong Credit Past Due Loans Past Due Loans as % of Total Loans 30-89 Days Past Due m90 Days & Over Past Due ml Over 89 Days Past Due & Accruing (AA MERCANTILE BANK CORPORATION | 27
Slide 28: Strong Credit: Commercial Loans
Strong Credit Commercial LOANS * (esiasin:ousanes) Floating Rate Information Floating Rate Commercial Loans $2,034,000 Fixed Rate Commercial Loans £.098.000 Total Comme: Loans $3,132,000 “As of December 31, 2022 (A MERCANTILE BANK CORPORATION | 2
Slide 29: Noninterest Income: Mortgage Production
Noninterest Income Strategic Initiatives Mortgage activity negatively impacted by increasing rate environment but buoyed by strong purchase/construction sales efforts MORTGAGE PRODUCTION a £ 8 g 8 8 fa 2 = c » — 3 3 Ist Quarter 2nd Quarter 3rd Quarter 4th Quarter mm202] mm2022, 2021 Units © 2022 Uni
Slide 30: Noninterest Income: Mortgage Volume by Purpose
Noninterest Income Strategic Initiatives Mortgage volume in dollars by purpose @ Purchase/Construction Ml Refinance cLbak 4th Qtr 2022 3rd Qtr 2022 2nd Qtr 2022 Ist Qtr 2022 4th Qtr 2021 a é s = (AA MERCANTILE BANK CORPORATION | 30
Slide 31: Noninterest Income: Mortgage Portfolio Balances
Noninterest Income Strategic Initiatives Mortgage portfolio balances growing due to the confluence of product mix changes and client preference MORTGAGE PORTFOLIO BALANCE TREND PERCENTAGE OF LOANS SOLD. $800 $700 (AA MERCANTILE BANK CORPORATION | 31
Slide 32: Thank you for your interest in our company
Mercantile Bank Corporation Thank you for your interest in our company NASDAOOISES Meristsy meet Mew