Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q2 2022 Earnings Presentation
32 slides from Mercantile Bank's earnings presentation, Jul 19, 2022
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: Executive Management Team
2s ao a5 5s [She] 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 as Chie
Slide 4: A Commitment to Excellence: Performance Highlights
as Fs af a3 be [she] A Commitment to Excellence Performance Highlights As of June 30, 2022 Year-to-date annualized net core commercial loan growth of approximately NASDAQ: Tipercent MBWM Sustained strength in commercial loan pipeline Net interest income growth $500M MARKET CAP Balance sheet structur
Slide 5: Company Overview: Strategic Initiatives
Company Overview Strategic Initiatives LEVERAGE DIGITAL PEOPLE & RISK & INVESTMENTS DELIVERY CULTURE PROCESS + Expand usage of Treasury nd customer * Recruit and retain top * Maintain dynamic Management products utilization of digital talent and develop Enterprise Risk and servies banking services e
Slide 6: Forward Progress
22 52 a3 Eg 86 Forward Progress jender, racial and ethnic diversity on Board of Directors, * Allteam members have access to enriching learning and growth opportunities via a wide variety of methods, including live speaking engagements, videos, books, articles, group discussion and training sessions.
Slide 7: Product Offerings
ze ao a3 58 ; i Product Offerings PEER PRODUCT BAC FITB CMA Autobooks for Small Busir Electronic invoicing & Nf Bill Payment & ACH Vv np Cash Management Vv v Credit Card Rewards Vv v Health Savings Account Vv Ca Capital Management Solutions v Integrated Payables Vv Ze 2 vw v v v v v v Merchant Servi
Slide 8: Michigan's Top Deposit Community Bank
s 23 a3 be [eye] Michigan’s Top 10 Deposit Community Bank® sa@ pace * Founded in Grand Rapids in 1997 + Second largest bank headquartered in MI * 45 banking locations dace + Expanded to Cincinnati, Ohio and Midland, Michigan in 2020 & Petoskey, Michigan in 2021 Wolds mopids * Addition of new lending
Slide 9: Financial Performance Second Quarter 2022
Mercantile Bank Corporation EimancialPenfornimance Second Quarter 2022
Slide 10: Consolidated Reports of Income
Fl Consolidated Reports of Income ia (Unaudited) Unaudited Net Income $ $ 23229000 $ Basic earnings per share $ 074 $ u2 $ 47 $ Diluted earnings per share $ O74 $ ws 147 $ 2.00 Avstege base sictes 15848,681 166,070 15,844,763 16,199,096 outstanding ieee aires 15848,681 166.666 15844790 16199,620 (A
Slide 11: Consolidated Reports of Income: Net Interest Income
Consolidated Reports of Income (Unaudited) 9 g 5 re Fe a=) ia Net Interest Income Sune 30, 2022 June 30,2021 June 30, 2022 Juine 36, 2021 INTEREST INCOME Loans, including fees % 36003000 $ 33789000 $ 69254000 % 66774000 Investment securities 2529000 1802,000 4,794,900 3,434,000 Other interest-earnin
Slide 12: Consolidated Reports of Income: Noninterest Income
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Noninterest Income June 30,2022 June 30,2021 dine 30, 2022 Stine 30, 2021 Service charges on accounts $ 1,495,000 $ 1209,000 $ 10,000 $ 2.363,000 Mortgage banking income 1947,000 7,695,000 5,228,000 16,495,000 Credit and debit card income
Slide 13: Consolidated Reports of Income: Noninterest Expense
Consolidated Reports of Income (Unaudited) 9 g 5 re se a=) ia Noninterest Expense June 30, 2022 June 30,2021 June 30. 2022 Bune 30,2021 Salaries and benefits $ 15676000 $ 16194000 $ 31186000 § 31,279,000 Occupancy 2,064,000 1977,c00 4,168,000 3,991,000 Furniture and equipment 935,000 902,000 1,269,0
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 tr Yield on loans 3.97% 387% 4.07% 4.07% 3.99% Yield on securities 1.68% 152% 1.48% 1.46% 154% Yield on other interest-earning assets 0.76% 019% o1s% 016% 012% Yield on total earning assets 332% 299
Slide 15: Mortgage Banking Activity
Consolidated Reports of Income (Unaudited) g 8 5 3 SE ceo £5 Lao Mortgage Banking Activity 2022 202) yor 4 Orr Total mortgage loans originated S$ 190900 168200 210200 259500 237,300 Purchase mortgage loans originated $ 187,400 10l4co = 4SCO— 143,600 144500 Refinance mortgage loans originated S$ 3350
Slide 16: Asset Quality
Consolidated Reports of Income (Unaudited) g 8 5 3 SE ceo £5 Lao Asset Quality Gross loan charge-offs $ ° 200 200 700 yoo Recoveries $ 300 300 1500 300 400 Net loan charge-offs (recoveries) $ OO) 100) (1300) 400 (300) Net loan charge-offs to average loans (0.04%) — (G.01%) (16%) 0.05% — (0.04%) Prov
Slide 17: Nonperforming Assets Reconciliation
Consolidated Reports of Income (Unaudited) g 8 5 3 SE ceo £5 Lao Nonperforming Assets Reconciliation 2021 4 Qtr Beginning balance $ 1,600 2,500 2,900 3,100 3,200 Additions $s 300 100 200 400 500 Return to performing status 8 ° (200) ° ° ° Principal payments $ (100) (700) {400) (300) {S00) Sale proce
Slide 18: Thoughts on Remainder of 2022
2 o < S E S 5 o z re & & £ it Thoughts on Remainder of 2022 Rising Prime/Libor/SOFR Rates July 27,2022 7S September 21,2022 50 Novernber 2, 2022 25 Performance Metrics Net Interest Margin 3.40% -350% 3.80 Average Earning Assets $47B-$48B $47B-$48B Fee Income $65M -$7.5M $65M-$75M Overhead Costs $26M
Slide 19: Strong Credit Culture, Diversified Lending
Mercantile Bank Corporation Stromngieneditqeultune Diversified Lending Mercantile has worked c since the end of the Great R ce itself in a position of strength d of the e omic oan portfolio has been built l through the cultiva Evare} 1, development of deep mutually neficial client relationships. Loa
Slide 20: Asset Quality Metrics
£ 3 2 (3) D € £ a Asset Quality Metrics Quarter Trends 6 in thousands Net loan charge-offs (recoveries) ($300) Net loan charge-offs to average loans (0.05% Allowance to loans 097% Nonperforming loans to 5 total loans 905% Nonperforming assetsto gy, total assets ($100) 0.05% 0.03% ($1300) (016%) 102%
Slide 21: Core Commercial Loan Growth
Core Commercial Loan Grow tth csiarsin mitions £ 3 2 C3) D € £ a 6/30/22 3/3/22 12/31/21 6/30/21 Core CommercialLoans $3,069 $2993 $2,910 $2564 PPP Loans $12 Total Commercial Loans $3072 $3,005 $2,950 © $2,843 $2,810 svi 12/3/20 12/39 12/3VIB N/T Core CommercialLoans $2,910 $2,429 $2,442 «$2,360 c=
Slide 22: 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 23: 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 “*AsofJunes (AA MERCANTILE BA
Slide 24: Commercial Credit Exposure
Commercial Credit Exposure £ 3 2 (3) D € £ a Credit Risk Profile by Internal Credit Risk Grades § in millions) Grades 1-4 $7260 $403 $363.4 $5087 91367 Grades 5-7 $4546 974 $235.0 $4518 $878 Grades 8-9 $71 $01 $02 S126 $01 Total Commercial 11877 $578 $5986 $1,003] $2246 % of Total Commercial Loans a
Slide 25: Strong Credit: Past Due Loans
Strong Credit Past Due Loans Commercial & Retail Past Due Loans* (sin mitions) ‘Commercial & Industrial - - $1877 $187.7 : Vacant Land, Land Development, Residential - - - - $578 $578 - Construction Real Estate - Owner Occupied - - - - $598.6 $5986 - Real Estate - Non-Owner Occupied Real Estate - Mu
Slide 26: Past Due Loans
£ 3 2 C3) D € £ a Past Due Loans 59S , $2 $2. $14 su Past Due Loans as % of Total $0.4 = SK ES EEE SS SF 930-89 Days Past Due 90 Days & Over Past Due m Over 89 Days Past Due & Accruing (AA MERCANTILE BANK CORPORATION | 26
Slide 27: Commercial Loans: Floating Rate Information
£ 3 2 (3) D € £ a Commercial LOANS * (esiasin:ousanes) Floating Rate Information Floating Rate Commercial Loans $1,933,000 Fixed Rate Commercial Loans $1139.000 Total Comme: Loans $3,072, Repricing Outlook Reprice Immediately $1,858,000 96% After 0.25% $35,000 98% After 0.50% $40,000 100% s of June
Slide 28: Managing Abundant Deposits & Liquidity
Managing Abundant Deposits & Liquidity Total Deposits of $3.87B* Continue to attract local deposits, supporting improved funding costs Total Deposits Loan to deposit ratio of 96% Noninterest-bearing deposits comprise 45% of total deposits De $30 Billions $2.0 SIS $10 $05 $0.0 W/BVA1 12/320 12/39 12/
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 8 8 8 g 2 = = ® E 2 $ Jst Quarter 2nd Quarter 3rd Quarter 4th Quarter mm2021 mm 2022, | 2021 Units = 2022 Units (
Slide 30: Noninterest Income: Mortgage Volume by Purpose
Noninterest Income Strategic Initiatives Mortgage volume in dollars by purpose i Purchase/Construction Ml Refinance aa e8 8.8 8 8 Thousands Lobb 6/30/22 33/22 12/321 9/30/21 9/30/21 (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 $700 $600 It all] & SE $ S HPL SE SK (AA MERCANTILE BANK CORPORATION | 31
Slide 32: Thank you for your interest in our company
Mercantile Bank Corporation Aiddebila you for your! interest in our company >bal Select Market Symbol: MBWM 7 pids, MI aa — & : SF 2A MA © UN DY Vv ‘(> NS s+] »Y a C4 I a