Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Debt Investor Presentation (December 2021)
42 slides from Mercantile Bank's debt investor presentation, Dec 17, 2021
Slide 1: Subordinated Debt Offering
A Mercantile Bank Corporation Subordinated Debt Offering December 2021
Slide 2: Forward-Looking Statements
Forward-Looking Statements AMercantile Bank Corporation This presenlalion contains slaLemenls or information Lhal may conslilule Torward looking slaloments within Lhe meaning of the Private Securities Litigation Reform Act of 1995. Forward looking statements can be identified by words such as: “anti
Slide 3: Terms of Proposed Offering
Terms of Proposed Offering AMercantile Bank Corporation Mercantile Bank Corporation NASDAQ: MBWM)} Fixed-to-Floating Rate Subordinated Notes due Receroer 2031 $75.0 million [1% fixes for five years; “leating quarterly at [] bps over 4 Month lo-m SOIR thereafter pon: TO ybarimasUntyeS yest Ton-call m
Slide 4: A Commitment to Excellence
A Commitment to Excellence AMercantile As of September 30, 7071 Bank Corporation Performance Highlights NASDAQ © Net income of $47.4M YTD up 57.6% from prior year MBWM period Total revenue of $135.1 millian YTD benefitted from increased NII and strong noninterest income growth $540M * Noninterest in
Slide 5: Markets
‘ Markets Michigan’s Community Bank * HQ: Grand Rapids * Michigan's third largest bank* * Top 10 deposit market share in Michigan* * 44 banking locations * Expanded into Ohio with mortgageloan office (MLO) in 4Q 2020 Alma Market (6 Locations) Cadillac Market (? | ocations) @ >= Grand Rapids Market (
Slide 6: Experienced Management Team
Experienced Management Team AMercantile Bank Corporation Over 150 years of combined experience, 99 of which have been with MBWM mi) Robert B.Kaminski,Jr. Charles E. Christmas Raymond E. Reitsma President & Vice Presiden: & of Fxectve Officer dant of the ans 23 years with MBWM 18 years with MBWM Exec
Slide 7: Company History
; Mercantile Company History Avecentk Named Robet | | Opened office n Midand, ‘aminski Jr Ml pared President and ee CEO of the Opened a residential launched : Company mortgage joan production Payrol (remaining GEO office in Cincinnati, solufon Launched fine bank once ‘OH issued $18 (MercForce) Refin
Slide 8: Strategic Initiatives
Strategic Initiatives LEVERAGE INVESTMENTS. DIGITAL DELIVERY PEOPLE & CULTURE AMercantile Bank Corporation RISK & PROCESS * Fxpand usage of Treasury Management products and services * Cullivale new markel growth utilizing knowledgeable staff along with digital products and services = Southeast, MI =
Slide 9: Forward Progress
Forward Progress DIVERSITY, EQUITY & INCLUSION CORPORATE SOCIAL RESPONSIBILITY AMercantile Bank Corporation ENVIRONMENTAL, SOCIAL & GOVERNANCE Providing access to enriching learning and growth opportunities via a wide variety of methods, including live speaking engagernents, videos, books, articles,
Slide 10: Balance Sheet Summary
Balance Sheet Summary AMercantile Bank Corporation Total Assets ($000s) Total Gross Loans HFI ($000s) cAGR TB 2.752 $2,852 « goere 92.558 633 $3083 99.287 ($3,364 l ] 2016 2017 2018 2019 2020 YTD 2016 2017 2018 2019 2020 YD 2016 2017 2018 2019 2020 YID 2016 2017 2018 2019 2020 YTD
Slide 11: Profitability
Profitability AMercantile Bank Corporation Return on Average Assets Return on Average Equity 1.39% 9 141% 1.28% zee 12.5% 107% 4 ogg 4.07% et) aora%e L i L | : L 2016 2017 2018 2019 2020 yo oie 2017, 2020S YTD Non-interest Income / Operating Revenue Efficiency Ratio 32.3% 61.9% 62.0% et 80.8% o 17.8
Slide 12: Diversified Revenue
Diversified Revenue Diversified and Growing Noninterest Income Streams * Non‘nterest income made up 32% of reve-ue for the first nine months of 2021, up from 25% in the prior year period * Mortgage sanking revenue remains the primary driver of strang noninterest income © Well-positioned to capture g
Slide 13: Noninterest Income Strategic Initiatives
Noninterest Income Strategic Initiatives f Mercantile Mortgage Pipeline Trend Year-Over-Year Comparison Bank Corporation Robust mortgage volume led by purchase activity, supported by continued strong refinance activity. | 2021 Volume | 2020 Volume =‘ 2021 Units fl 2020 Units $120,000,000 600 $100,00
Slide 14: Noninterest Income Strategic Initiatives
Noninterest Income Strategic Initiatives A Mercantile Mortgage Pipeline Trend Year-Over-Year Comparison Bank Corporation Well-positioned to capture market share with proven record of fast and effective processing and strategic hires of seasoned Ienders across Mercantile’s markets. I 2021 Apps (§) 20
Slide 15: Product Offerings
Product Offerings AMercantile Bank Corporation Autobooks for Small Business with Electronic Invoicing & Collection Lill Payment & ACII Cash Management Credit Card Rewards K 4 6 4K K 4 6 4K S 8 8 8 K ££ 6 4 Health Savings Account In House Payroll Services & Hunan Capital Management Solutions Integrat
Slide 16: Loan Portfolio Overview
AMercantile Bank Corporation Loan Portfolio Overview Overview ion . e ai Realasiale non awner eccupied ® Jotal loan portfolio of $4.4 billion f Cornmercial and industria! Robust commercial loan portfolio peel ; culeslale owner occupied Commercial and industrial loans accounted for 62% of core loan g
Slide 17: Core Commercial Loan Growth
Core Commercial Loan Growth AMercantile Bank Corporation Five Quarter Trend as Sad SE Oo woe et aba webspace mma EN “25% 9/30/20 12/320 3/321 6/30/21 9/30/21 annualized — Core Loan i Growth in core Commercial ¢ 2383 § 2,429 $ 2513 $ 2,561 $ 2,727. 3Q202, PPP Loans $ 555 $ 265 $ 455 $ 246 § 116 Total
Slide 18: Commercial Loan Portfolio Composition
Commercial Loan Portfolio Composition AMercantile Bank Corporation Loan Type* Hi Commercial & Industrial 1) commercial Vacant Land Land Develapment & Residential Construction Commercial Real Cstate - Owner Occupied 1) Commercial Real Estate - Non-Owner Occupied 1) commercial Real Estate 1% - Multi-F
Slide 19: Asset Quality Trends
Asset Quality Trends. AMercantile Bank Corporation NCOs / Average Loans Strong Credit Administra‘ Mercantile has worked continuously since the 0.06% end of the Great Recession to place itself in a position of strength during times of econamic 0.03% weakness. The maintenance of strong credit 0.01% un
Slide 20: Commercial Credit Exposure
Commercial Credit Exposure AMercantile Bank Corporation Credit risk profile by internal credit risk grades* Grades |-4 $590,700,000 $23,500,000 $524,000,000 $450,/00,000 $104,500,000 Grades 5 7 $364,500,000, $15,000,000 $71?,800,000 $534,200,000 $74,400,000 Grades 8-9 $3,500,000 $100,000 $15,000,000
Slide 21: Past Due Loans
Past Due Loans* AMercantile Bank Corporation Commercial: Commercial & Industrial $ ° © 199.000 190,000 1,074,400,000 1,0/4,400,000 ° Vacant Land, Lane Development, Residential $ ° ° ° ° 38,400,000 38,400,000 ° Construction Real kstate- Owner Occupied 6 ° 0 ° bb1,800,000 41,800,000 0 Real Cea fe< Non
Slide 22: Past Due Loans
Past Due Loans AMercantile Bank Corporation $3,500,000 m30-89Days 90Days&Over mTotal mOver 89 Days & Accruing $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 | 1 : : | x ‘EEE EE EE GE Ge 6 O N N N nS we s ra eo Ry e # rr er ar 2
Slide 23: COVID-19 Assistance
COVID-19 Assistance AMercantile Bank Corporation | PPP Loans LOAN BALANCE SEGMENT # $ # $ # $ PPP Round One 2171 $553,100,000 (2,149) ($550,000,000) 22 $3,100,000 PPP Round Two 1216 —_ $208,500.000 (605) ($35,900,000) on $112,600,000 $761,600,000 (2.754) (9645,900,000) 635 $15,700,000 $506 3/31/2020
Slide 24: COVID-19 Sensitive Industries
COVI|D-19 Sensitive Industries Nursing & assisted living $ Motor vehicle and parts dealers Hospitality Restaurants Arts, entertainment and recreation Totals: 129,900,000 122,000,000 98,800,000 83,800,000 38,300,000 472,800,000 AMercantile Bank Corporation 24
Slide 25: Total Deposits
Total Deposits of $3.87B* ® Continue to attract local deposits, supporting improved funding costs Loan to deposit ratio of 85.6% Noninterest bearing deposits have grown to 43% of Lotal deposits ™ YTD noninterest bearing deposit growth of 15% has outpaced interest-bearing deposit growth * As of Septe
Slide 26: Pro Forma Capital Ratios (as of 9/30/21)
Pro Forma Capital Ratios (as of 9/30/21) AMercantile Bank Corporation Pro Forma Balance Sheet At Time Zero S75M MBWM Sub Debt Pro Forma 9130/2021 Issuance 9/30/2021 Assets Cash and Cash Equivalents $ 825,261 $ - 8 825,361 Securities 577,566 73,625 651,191 Gross Loans 3,360,956 2 3,360,956 Allowance
Slide 27: Pro Forma Double Leverage & Interest Coverage
$ in thousands Offering Assumptions Pro Forma Double Leverage & Interest Coverage Mercantile Bank Corporation Subordinated Debt Gross Proceeds $ 75,000 Subordinated Debt Coupon 3.25% [Subordinated Debt Down-streamed to Bank $60,000 Double Leverage Year ended, Year to date, 2019 2020 9130/2021 Bank-L
Slide 28: Thank You for Your Interest in Our Company
Mercantile Bank Corporation THANK YOU FOR YOUR INTEREST INOQUR COMPANY NASDAQ Global Select Market Symbol: MBWM 310 Leonard Street NW, Grand Rapids, Ml 49504 616.406.3000 or 800.453.8700 www.mercbank.com
Slide 29: Appendix
A Mercantile Bank Corporation APPENDIX
Slide 30: Proposed Charitable Foundation
Proposed Charitable Foundation AMercantile Demonstrating Mercantile’s continued commitment to our communities * Mercantile is in the process of forming a private charitable foundation to fund and administer the Bank's charitable giving activities. Key aspects include the following: » Mercantile Bank
Slide 31: COVID-19 Activities & Timeline
COVID-19 Activities & Timeline a JANUARY 2020 Monitoring initial reports of COVIN-19 FEBRUARY 2020 Pandemic plan activated to ensure the health and safety of our employees and customers MARCH 2020 Branches open by appointment only @/8} Commencement of Mercantile’s payment relict assistance programs
Slide 32: Paycheck Protection Program (PPP)
Paycheck Protection Program (PPP) AMercantile Bank Corporation LOAN BALANCE SEGMENT tt $ tt $ tt $ PPP Round One 21/1 $55,100,000 (2,149) ($550,000,000) 22 $4,100,000 PPP Round Two 1216 —_$208.500.000 on Totals 633 NET FEE INCOME ACCRETION 2nd Quarter 2070 $ 2,700,000 $ a 3r4 Quarter 2020 $ 3,000,00
Slide 33: Non-GAAP Reconciliation
Non-GAAP Reconciliation AMercantile Bank Corporation (8000s) YTD Tangible common equity to tangible assets Total common stockholders' equity $ 452,278 Less: Goodwill AQ AT3 Less: Other intangible assets 1,589 Tangible common equity (a) $ 401,216 Total Assets $4,964,412 Less: Goodwill Less: Other int
Slide 34: Unaudited
Unaudited Net Income: Basic earnings per share Diluted earnings per share Average basie shares outstanding Average diluted shares oulslanding ‘Sept. 50, 2021 # 15,051,000 $ 0.95 $ O95 15,859,955 15,860,314 Consolidated Reports of Income Sept. 50. 10,686,000 0.66 0.66 16,233,196 16,233,666 t 47,382,0
Slide 35: Consolidated Reports of Income
Consolidated Reports of Income A Mercantile Unaudited Bank Corporation Three Months Threé Months Nine Months Nine Months Ended Ended Ended Ended Sepl. 30,7071 Sepl. 30,7070 Sepl. 30, 2071 Sept. 40, 270720, INTEREST INCOME Loans, including fees $ 33,656,000 $ 33,664,000 $ 100,430,000 $ 101,428,000 In
Slide 36: Consolidated Reports of Income
Consolidated Reports of Income AMercantile Unaudited Bank Corporation Sepl. 30,7071 NONINTEREST INCOME Service charges on accounls $ 1,324,000 $ 1135,000 $ 3,687,000 $ 3,401,000 Mortgage banking income 6,554,000 9,479,000 23,049,000 19,746,000 Credit and debit card income 1,947,000 1,636,000 5,545,0
Slide 37: Consolidated Reports of Income
Consolidated Reports of Income AMercantile Unaudited Bank Corporation Sept. 30, 2021 Sept. 30, 2020. Sept. 30, 2021 Sept, 30,2020 NONINTEREST EXPENSE Salaries and benefits $ 15,975,000 $ 16,/54,000 $ 41,255,000 $ 44,588,000 Occupancy 2,030,000 2,023,000 6,021,000 5,944,000 Furniture and equipment 97
Slide 38: Consolidated Financial Highlights
Consolidated Financial Highlights AMercantile Unaudited Bank Corporation 2021 2021 2020 2020 314 Qtr 24 Qtr Qtr 4 Otr 3 Qtr YIELD ON ASSETS / COST OF FUNDS Yield on loans 4.07% 3.99% 4.03% 4.34% 4.03% Yield on securities 146% 154% 1.61% 1.69% 2.26% Yield on other interest earning assets 0.16% 0.12%
Slide 39: Consolidated Financial Highlights: Mortgage Banking Activity
Unaudited MORTGAGE BANKING ACTIVITY Total morlgage loans originated Purchase mortgage loans originated Refinance mortgage loans originated Total salcable mortgage loans Income on sale of mortgage loans SF 8 HO Consolidated Financial Highlights 259,500 143,600 115,900 177,800 6,700 237,300 ViK,500 92
Slide 40: Consolidated Financial Highlights: Asset Quality
Consolidated Financial Highlights AMercantile Unaudited Bank Corporation {dollars in thousands) Quarterly 2021 2021 2021 2020 2020 34 Qtr 264 Qtr 1 Otr 4th Qtr 3 Qtr ASSET QUALITY Gross loan charge offs $ TAA 68 53 B40 DA Recoveries $ 354 386 481 234 250 Net loan charge-offs (recoveries) $ 390 (18)
Slide 41: Nonperforming Assets Reconciliation
Unaudited NONPERFORMING ASSETS - RECONCILIATION Beginning balance Additions Return to performing status Principal payments Sale proceeds Loan charge offs Valuation write-downs Ending balance Consolidated Financial Highlights 2021 24 Otr 2021 Qtr A 2020 4 Qtr 4,700 Mercantile Bank Corporation
Slide 42: Consolidated Financial Highlights: Capital
(dollars in thousands) CAPITAL Tangible equity to tangible assets lier | leverage capilal ralio Common equity risk-based capital ratio Tier 1 risk-based capital ratio Total risk-based capital ratio Tier 1 capital lier | plus Lier 2 capital Total risk-weighted assets Book value per common share langi
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