Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q3 2022 Earnings Presentation
32 slides from Mercantile Bank's earnings presentation, Oct 18, 2022
Slide 1: Mercantile Bank Corporation Conference Call and Webcast Presentation
Mercantile Bank Corporation Conference Call and Webcast Presentation
Slide 2: Forward-Looking Statements
BB 2 oo os ES oS oo 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 oe identified by wo
Slide 3: Michigan's Community Bank
Michigan’s Community Bank® wi in Michigan + Founded in Grand Rapids in 1997 * Second largest bank headquartered in Michigan * 46 banking locations a + Expanded to Cincinnati, Ohio and Midland, Michigan in 2020 & Petoskey, Michigan in 2021 Holland [eat * Addition of new lending teams focused at drivi
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 September 30, 2022 er alized I h of percent NASDAQ: MBWM + Sustained strength in commercial loan pipeline + Net interest income growth $490M MARKET CAP + Balance sheet structured to provide net interest income growth in rising interest rate env
Slide 6: Strategic Initiatives
Strategic Initiatives LEVERAGE INVESTMENTS, DIGITAL DELIVERY PEOPLE & CULTURE * Recruit and retain top talent and develop emerging leaders RISK & PROCESS + Expand usage of Treasury Management products and services * Expand customer Utilization of digital banking services * Maintain dynamic Enterpris
Slide 7: Forward Progress
Forward Progress 33% gender, racial and ethnic diversity on Board of Directors. d ‘e 2% minority hire rate in 202. est practices, reso, collaboration across all departments. Diversity implement supportive D Diversity Engaged and active ESC Committee. Video Banking Machines and the opening of locatio
Slide 8: Peer Product Offerings
PEER PRODUCT si isiness Electronic Invoicing & Collection Bill Payrnent & ACH Cash Managemen Credit Card Rewards Health Savings Account In-House P: Capital Managernent Solutions Integrated Payables ‘ated Receivables Integi Merchant Services Personal Finance Management it vobile Banki Remote Deposit
Slide 9: Financial Performance Third Quarter 2022
Mercantile \ Bank Corporation Rinancialiperfonmance Third Quarter 2022
Slide 10: Consolidated Reports of Income
Consolidated Reports of Income (Unaudited) o Qo c G E S Le o a es o iS i Sept. 30, 2022 Sept. 30, 2021 Sept. 30, 2022 Sept. 30, 2021 Net Income $ 16,030,000 $ 15,051,000 $ 39,260,000 $ 47,382,000 Basic earnings per share $ lol $ 095 $ 248 295 Diluted earnings per share $ lol $ os ¢ 248 $ 2.95 Averag
Slide 11: Consolidated Reports of Income: Net Interest Income
Consolidated Reports of Income (Unaudited) @ 8 5 = SE co ES ta Net Interest Income Sept 30, 2022 Sept 30, 2021 Sept. 30,2022 Sept. 30, 2021 INTEREST INCOME Loans, including fees $ 43807,000 $ 33656000 $ 113061000 4 100,430,000 Investment securities 2,702,000 1941000 7,496,000 5,375,000 Other interes
Slide 12: Consolidated Reports of Income: Noninterest Income
Consolidated Reports of Income (Unaudited) @ 8 5 = SE co ES ta Noninterest Income Sept.30, 2022 Sept 30,2021 Sept 30,21 Sept.30, 2021 Service charges on accounts $ 579,000 $ 1,824,000 $ 4489000 $ 3,687,000 Credit and debit card income 2,086,000 947,000 6,101,000 5,545,000 Mortgage banking income 1,7
Slide 13: Consolidated Reports of Income: Noninterest Expense
Consolidated Reports of Income (Unaudited) @ 8 5 = SE co ES ta Noninterest Expense Sept.30, 2022 Sept. 30,2021 Sept. 30,2022 Sept.30,202) Salaries and benefits $ 16656000 $ 15975000 $ 47.842000 $ 47,255,000 Occupancy 2,001,000 2,030,000 6,168,000 6,021,000 Furniture and equipment 953,000 929,000 2,8
Slide 14: Yield on Assets / Cost of Funds
Consolidated Reports of Income (Unaudited) @ 8 5 7 SE ae ES na Yield on Assets / Cost of Funds 2022 202} wQu 4 Orr Yield on loans: 456% 397% 387% 4.07% 4.07% Yield on securities 179% 1.68% 152% 146% 146% Yield on other interest-earning assets 215% 076% 0.19% 0.15% 0.16% Yield on total earning assets
Slide 15: Mortgage Banking Activity
Consolidated Reports of Income (Unaudited) @ 8 5 7 SE ae ES na Mortgage Banking Activity Total mortgage loans originated S$ 163900 190900 168200 © 210200259500 Purchase mortgage loans originated $ 40900 157,400 101400124500 143,600 Refinance mortgage loans originated S 23000 33500 66,800 85,700 15,9
Slide 16: Asset Quality
Consolidated Reports of Income (Unaudited) @ 8 5 7 SE a ES na Asset Quality 2022 2021 2r4 Oty 34.Otr Gross loan charge-offs $ ° ° 200 200 700 Recoveries $ 200 300 300 1500 300 Net loan charge-offs recoveries} $ (200) 300} (100) (1300) 400 Net loan charge-offs to average loans (0.03%) (0.04%) (0.01%)
Slide 17: Nonperforming Assets Reconciliation
Consolidated Reports of Income (Unaudited) @ 8 5 7 SE ae ES na Nonperforming Assets Reconciliation 2022 1 Ot Beginning balance s 1800 1,600 2,500 2,900 3100 s ° 300 Joo 200 400 Return to performing status s (200) 0 (200) ° ° Principal payments s (200) (100) (700) (400) (00) Sale oroceeds s 5 fe) 0 (
Slide 18: Thoughts on Remainder of 2022
id 8 & : cE Be £o ha Thoughts on Remainder of 2022 Rising Prime/Libor/SOFR Rates November 2, 2022 75 December 1é, 2022 50 Performance Metrics Net Interest Margin 390% - 4.00% Average Earning Assets $4.65B -$4.75B Fee Income S65M-$75M Overhead Costs $26M - $27M Federal Tax Rate 19.75% (AA MERCANTILE
Slide 19: Strong Credit Culture: Diversified Lending
Mercantile Bank Corporation StrongiGcnreditqeultune 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 o
Slide 20: Asset Quality Metrics
Strong Credi Culture Asset Quality Metrics Quarter Trends (i ::0us: Net loan charge-offs (recoveries) ($200) {$300) {$100} ($1,300) $400 ($300) Net loan charge-offs to sg r 296 eae (0.03%) (0.045) (0.01%) (016%) 0.05% (0.054) Allowance to loans 10% = =—-O97% =—089% = 102%@ == 13% 1% Nonoerforming lo
Slide 21: Core Commercial Loan Growth
Core Commercial Loan Growth cotarsin mitions oS 2° s) og oS oz so Ho 6/30/22 y2pva 9/30/21 Core Commercial Loans $3,069 $2910 $2,727 PPP Loans $3 $40 sie Total Commercial Loans $2,843 12/321 12/319 12/SIB_ 12/37 Core Commercial Loans $2,910 $2442 $2360 © $2,204 PPP Loans & Total Commercial Loans $2,
Slide 22: Commercial Loan Portfolio Composition
Commercial Loan Portfolio Composition oS Ky (3) D c 2 a Loan Type* Commercial & Industrial lm Commercial Vacant Land, Land Development & Residential Construction Jommercia Real Estate - Owner Occupied I Commercia| Real Estate —Non-Owner Occupied Mm Commercial Real Estate = Multi-Family & Residential
Slide 23: Loan Concentration
oS Ky (3) D c 2 a Loan Concentration Industry* ll Real Estate, Rental & Leasing I Services @ Agriculture, Oil & Gas Extraction & Utilities Construction 1 Manufacturing » Wholesale Trade W Retail Trade Il Transportation & Warehousing Information i Finance & Insurance F September 30, 2022 (AA MERCANTI
Slide 24: Commercial Credit Exposure
Commercial Credit Exposure Strong Credit Credit Risk Profile by Internal Credit Risk Grades § i nijions) Commercial & Industrial Grades 1-4 $740.7 $428 $585.7 $499.5 $1586 Grades 5-7 $4558 $181 $2548 $4908 $855 Grades 8-9 $171 SO $31 $125 $0.1 Total Commercial $1236 $61.0 96436 $10026 $2242 aa an mm
Slide 25: Past Due Loans
oS K (3) og ae oz 53 ao Past Due Loans Commercial & Retail Past Due Loans® (5 5 Vins) ore Balance Commercial & Industria’ - - 02 02 $1234 — $12136 - Vacant Land, Land Development, Residential = . = = $610 $610 = Construction Real Estate - Owner Occupied - - - - $6436 $6436 - Real Estate - Non-Owner
Slide 26: Strong Credit: Past Due Loans
Strong Credit Past Due Loans (AA MERCANTILE BANK CORPORATION | 26
Slide 27: Commercial Loans Floating Rate Information
Strong Credi Culture Commercial LOANS * (sieisin:nousancs Floating Rate Information Floating Rate Commercial Loans $2,020,000 64% Fixed Rate Commercial Loans "As of September 30, 2022 (AA MERCANTILE BANK CORPORATION | 27
Slide 28: Managing Abundant Deposits & Liquidity
Managing Abundant Deposits & Liquidity Total Deposits of $3.85B* + Continue to attract local deposits, supporting improved funding costs Total Deposits + Loan to deposit ratio of 101% + Noninterest-bearing deposits comorise 45% of total deposits $3.0 $25 $20 $15 g10 $05 $0.0 1/sV/21 12/3/20 I2SVI9 1
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 3 8 S = E 2 3 £ st Quarter 2nd Quarter 3r¢ Quarter 4th Quarter wmm202)mms2022, 2021 Units © 2022 Units (A MERCANT
Slide 30: Noninterest Income: Mortgage Volume by Purpose
Noninterest Income Strategic Initiatives Mortgage volume in dollars by purpose @ Purchase/Construction Ml Refinance LLebh ‘3rd Quarter 2022 2nd Quarter 2022 Ist Quarter 2022 4th Quarter 207] 3rd Quarter 2021 (dA MERCANTILE BANK CORPORATION | 30
Slide 31: Noninterest Income: Mortgage Portfolio Balance
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 oF FS SF Ss g oF pr (A MERCANTILE BANK CORPORATION | 51
Slide 32: Thank you for your interest in our company
Mercantile Bank Corporation Thank you for your interest in our company NASDAQ Global Se Market Symbol: MBWM Ys RV v DS mad Or 2 alae A