Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q1 2023 Earnings Presentation
41 slides from Mercantile Bank's earnings presentation, Apr 18, 2023
Slide 1: Conference Call and Webcast Presentation First Quarter 2023
Conference Call and Webcast Presentation First Quarter 2023
Slide 2: Forward-Looking Statements
Company Overview 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
Slide 3: Michigan's Top 10 Community Bank
Company Michigan’s Overview Top 10 Community Bank® Deposit Market Share in Michigan • Founded in Grand Rapids in 1997 • Second largest bank headquartered in Michigan • 45 banking locations • Expanded to Cincinnati, Ohio and Midland, Michigan in 2020, Petoskey, Michigan in 2021 and Traverse City, Mic
Slide 4: Executive Management Team
Company Overview Executive Management Team Robert B. Kaminski, Jr. Raymond E. Reitsma Charles E. Christmas President & EVP, Chief Operating Officer EVP, Chief Financial Officer Chief Executive Officer & President of the Bank & Treasurer Mr. Kaminski joined the Mr. Reitsma was Mr. Christmas joined th
Slide 5: A Commitment to Excellence: Performance Highlights
Company Overview A Commitment to Excellence Performance Highlights As of March 31, 2023 • Substantial increase in net interest income reflecting net interest NASDAQ: margin expansion and loan growth MBWM • Ongoing strength in commercial loan pipeline • Continuing low levels of nonperforming assets a
Slide 6: Strategic Initiatives
Company Overview Strategic Initiatives LEVERAGE DIGITAL PEOPLE & RISK & INVESTMENTS DELIVERY CULTURE PROCESS • Expand usage of Treasury • Expand customer • Recruit and retain top • Maintain dynamic Management products utilization of digital talent and develop Enterprise Risk and services, enhancing
Slide 7: Forward Progress
Company Overview Forward Progress • 33% gender, racial and ethnic diversity on Board of Directors. • All team members have access to enriching learning and growth opportunities via a wide variety of methods, including DEI live speaking engagements, videos, books, articles, group discussion and train
Slide 8: Product Offerings
Company Overview Product Offerings PEER PRODUCT MBWM BAC JPM FITB CMA Autobooks for Small Business with Electronic Invoicing & Receivables Bill Payment & ACH Cash Management Credit Card Rewards Health Savings Account In-House Payroll Services & Human Capital Management Solutions Integrated Payables
Slide 9: Financial Performance First Quarter 2023
AMercantile ank Corporation RinancralliRerfonmance First Quarter 2023
Slide 10: Consolidated Reports of Income
Performance Financial Consolidated Reports of Income (Unaudited) Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 Net Income $ 20,974,000 $ 11,492,000 Basic earnings per share $ 1.31 $ 0.73 Diluted earnings per share $ 1.31 $ 0.73 Average basic shares outstanding 15,996,138 15,840
Slide 11: Net Interest Income
Performance Financial Consolidated Reports of Income (Unaudited) Net Interest Income Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 INTEREST INCOME Loans, including fees $ 57,154,000 33,251,000 Investment securities $ 3,007,000 2,265,000 Interest-earning deposits $ 324,000 366,0
Slide 12: Noninterest Income
Performance Financial Consolidated Reports of Income (Unaudited) Noninterest Income Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 Service charges on accounts $ 976,000 1,416,000 Credit and debit card income $ 2,060,000 1,881,000 Mortgage banking income $ 1,216,000 3,281,000 Int
Slide 13: Noninterest Expense
Performance Financial Consolidated Reports of Income (Unaudited) Noninterest Expense Three Months Ended Three Months Ended March 31, 2023 March 31, 2022 Salaries and benefits $ 16,682,000 15,510,000 Occupancy $ 2,289,000 2,104,000 Furniture and equipment $ 822,000 934,000 Data processing costs $ 3,1
Slide 14: Yield on Assets / Cost of Funds
Performance Financial Consolidated Reports of Income (Unaudited) Yield on Assets / Cost of Funds Quarterly 2023 2022 2022 2022 2022 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Yield on loans 5.90% 5.49% 4.56% 3.97% 3.87% Yield on securities 1.95% 1.91% 1.79% 1.68% 1.52% Yield on other interest-earning a
Slide 15: Mortgage Banking Activity
Performance Financial Consolidated Reports of Income (Unaudited) Mortgage Banking Activity ($ in thousands) Quarterly 2023 2022 2022 2022 2022 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Total mortgage loans originated $ 72,000 90,800 163,900 190,900 168,200 Purchase mortgage loans originated $ 56,700 7
Slide 16: Asset Quality
Performance Financial Asset Quality (Unaudited) ($ in thousands) Quarterly 2023 2022 2022 2022 2022 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Gross loan charge-offs $ 100 100 0 0 200 Recoveries $ 100 200 200 300 300 Net loan charge-offs (recoveries) $ 0 (100) (200) (300) (100) Net loan charge-offs (re
Slide 17: Nonperforming Assets Reconciliation
Performance Financial Nonperforming Assets Reconciliation (Unaudited) ($ in thousands) Quarterly 2023 2022 2022 2022 2022 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Beginning balance $ 7,700 1,400 1,800 1,600 2,500 Additions $ 1,300 6,400 0 300 100 Return to performing status $ 0 0 (200) 0 (200) Princi
Slide 18: Net Interest Margin
Performance Financial Net Interest Margin 2023 2022 2022 2022 2022 2021 2021 2021 2021 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr Earning Asset Yields: Loans 5.90% 5.49% 4.56% 3.97% 3.87% 4.07% 4.07% 3.99% 4.03% Investments 1.95% 1.91% 1.79% 1.68% 1.52% 1.46% 1.46% 1.54%
Slide 19: Loan Repricing
Performance Financial Loan Repricing Commercial Retail Total Variable Rate Loans: 0 – 12 Months $ 1,993,000 66,200 2,059,200 1 – 5 Years $ 42,200 140,800 183,000 5 – 15 Years $ 59,100 356,900 416,000 Total $ 2,094,300 563,900 2,658,200 Fixed Rate Loans: 0 – 12 Months $ 135,600 7,100 142,700 1 – 5 Ye
Slide 20: Investment Portfolio Gains & Losses
Performance Financial Investment Portfolio Gains & Losses ($ in thousands) As of March 31, 2023 Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Gov't Agency Bonds $ 454,000 - 57,800 396,200 Municipal Bonds - GO $ 168,700 1,100 6,700 163,100 Municipal Bonds - Revenue $ 30,800 200 2,
Slide 21: Investment Portfolio Maturities
Performance Financial Investment Portfolio Maturities ($ in thousands) As of March 31, 2023 Amortized Net Unrealized Fair Average Cost Gains / (Losses) Value Yield U.S. Gov't Agency Bonds One year or less $ 16,000 (500) 15,500 0.46% Over one through five years $ 198,400 (17,800) 180,600 0.90% Over f
Slide 22: Capital Regulatory Ratios
Performance Financial Capital Regulatory Ratios ($ in thousands) 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 6/30/21 3/31/21 As Reported: Tier 1 Leverage Capital Ratio 12.16% 11.55% 11.00% 10.75% 10.50% 10.40% 9.25% 9.40% 9.45% Total Risk-Based Capital Ratio 13.81% 13.65% 13.35% 13.45%
Slide 23: Deposits & Sweep Accounts
Performance Financial Deposits & Sweep Accounts Amount Percentage Noninterest-Bearing Checking $ 1,376,800 36% Interest-Bearing Checking $ 576,700 15% Money Market $ 842,600 22% Savings $ 340,200 9% Time Under $100,000 $ 132,500 3% Time $100,000 & Over $ 329,300 9% Sweep Accounts $ 227,500 6% Total
Slide 24: Large Depositors
Performance Financial Large Depositors Includes Sweep Account Balances As of March 31, 2023, depositors with $5 million or more on deposit equated to 69 relationships aggregating $1.1 billion Business/Individual – 55 relationships aggregating $944 million Governmental – 14 relationships aggregating
Slide 25: Deposit Balances
Performance Financial Deposit Balances ($ in thousands) March 31, 2023 December 31, 2022 Personal Business Personal Business Noninterest-Bearing Checking $ 223,600 1,154,600 241,300 1,364,800 Interest Checking $ 277,800 298,900 299,300 275,700 Savings $ 279,300 60,900 312,100 69,500 Money Market $ 2
Slide 26: Sources of Liquidity
Performance Financial Sources of Liquidity* Source Availability ($ in thousands) Unsecured Federal Funds Line of Credit $ 53,000 FHLB of Indianapolis $ 281,000 Unpledged Investments $ 365,000 *As of March 31, 2023. 26
Slide 27: Thoughts on Remainder of 2023
Performance Financial Thoughts on Remainder of 2023 Rising Prime/Libor/SOFR Rates Federal funds rate remains unchanged during the remainder of 2023. Performance Metrics 2nd Qtr 3rd Qtr 4th Qtr Loan Growth 6.00% – 8.00% 6.00% – 8.00% 6.00% – 8.00% Net Interest Margin 3.85% – 3.95% 3.70% – 3.80% 3.60%
Slide 28: Diversified Lending
Diversified Lending Mercantile has worked continuously since the end of the Great Recession to place itself in a position of strength regardless of the economic conditions. Our loan portfolio has been built through the cultivation and development of deep mutually beneficial client relationships. Loa
Slide 29: Strong Credit Culture: Asset Quality Metrics
Strong Credit Culture Asset Quality Metrics 17 bps Nonperforming Assets to Total Quarter Trends ($ in thousands) Assets 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 Net loan charge-offs $0 ($100) ($200) ($300) ($100) ($1,300) (recoveries) Net loan charge-offs (recoveries) to average (0.01%) (0.
Slide 30: Core Commercial Loan Growth
Strong Credit Core Commercial Culture Loan Growth (dollars in millions) 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 Five Core Commercial Loans $ 3,139 3,131 3,142 3,069 2,993 Quarter PPP Loans $ 1 1 3 3 12 Trend Total Commercial Loans $ 3,140 3,132 3,145 3,072 3,005 12/31/22 12/31/21 12/31/20 12/31/19
Slide 31: Lending Commitments
Strong Credit Culture Lending Commitments (dollars in millions) 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 Construction Loans Commercial $ 285 197 170 175 184 Residential $ 58 72 84 85 65 Commitments to Make Loans* $ 347 330 309 253 158 Total $ 690 599 563 513 407 * Commitments to make loans generally
Slide 32: Commercial Loan Portfolio Composition
Strong Credit Commercial Loan Portfolio Culture Composition Loan Type* 7% Commercial & Industrial Commercial Vacant Land, Land Development & Residential Construction 37% Commercial Real Estate 34% – Owner Occupied Commercial Real Estate – Non-Owner Occupied Commercial Real Estate – Multi-Family & Re
Slide 33: Loan Concentration
Strong Credit Culture Loan Concentration 1% Industry* 5% Real Estate, Rental & Leasing 20% Services 19% Agriculture, Oil & Gas Extraction & Utilities Construction Manufacturing Wholesale Trade Retail Trade 5% Transportation & Warehousing Information 7% Finance & Insurance 37% 2% 1% 3% *As of March 3
Slide 34: Commercial Credit Exposure
Strong Credit Culture Commercial Credit Exposure Credit Risk Profile by Internal Credit Risk Grades ($ in millions) Commercial Commercial Vacant Land, Commercial Commercial Real Estate – Internal Credit Risk Commercial Land Real Estate – Real Estate – Multi-Family Grade Groupings & Industrial Develo
Slide 35: 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 $ 0.1 - 0.3 0.4 1,173.1 1,173.5 - Vacant Land, Land
Slide 36: Past Due Loans
Strong Credit Culture Past Due Loans $8.0 $7.0 $6.0 $5.0 Millions $4.0 5 bp $3.0 Past Due Loans as % of Total Loans $2.0 $1.0 $0.0 30-89 Days Past Due 90 Days & Over Past Due Over 89 Days Past Due & Accruing 36
Slide 37: Floating Rate Information
Strong Credit Culture Commercial Loans* (dollars in thousands) Floating Rate Information Balance Percentage Floating Rate Commercial Loans $ $2,019,000 64% Fixed Rate Commercial Loans $ $1,121,000 36% Total Commercial Loans $ $3,140,000 100% *As of March 31, 2023. 37
Slide 38: Total Loans
Strong Credit Culture Total Loans* ($ in thousands) Balance Percentage Commercial Loans Commercial and Industrial $ 1,173,500 30% Real Estate – NonOwner Occupied $ 1,051,200 26% Real Estate – Owner Occupied $ 630,200 16% Real Estate – Multi-Family & Residential Rental $ 219,300 5% Real Estate – Land
Slide 39: FDIC Commercial Real Estate Lending Concentration Guideline
Strong Credit FDIC Commercial Real Estate Culture Lending Concentration Guideline* Commercial Real Estate Loans / Total Regulatory Capital 250% 245% 240% 235% 230% 225% *generally not to exceed 300% 39
Slide 40: Non-Owner Occupied Commercial Real Estate Lending
Strong Credit Non-Owner Occupied Culture Commercial Real Estate Lending* Percentage Percentage ($ in thousands) Balance of NOO CRE of Total Loans Office $ 256,600 24% 6% Multi-Family $ 249,900 24% 6% Industrial $ 194,000 18% 5% Retail $ 145,100 14% 4% Assisted Living $ 103,600 10% 3% Hotel $ 89,800
Slide 41: Thank you for your interest in our company
Thank you for your interest in our company NASDAQ Global Select Market Symbol: MBWM 310 Leonard Street NW, Grand Rapids, MI 49504 616.406.3000 or 800.453.8700 www.mercbank.com