Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Investor Presentation (March 2015)
28 slides from Mercantile Bank's investor presentation, Mar 23, 2015
Slide 1: Mercantile Bank Corporation Investor Presentation
A Mercantile Bank Corporation INVESTOR PRESENTATION March 2015
Slide 2: Forward-Looking Statement Disclosure
FORWARD-LOOKING STATEMENT DISCLOSURE This presentation contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. The
Slide 3: Presentation Overview
PRESENTATION OVERVIEW Michigan’s Community Bank’ at a Glance Experienced Management Team Building on Existing Strengths Improving Financial Performance Healthy Markets: Capturing Increasing Share of Existing and New Business Value-Oriented M&A Strategy: Be Selective Overview: MBWM Strategic Plan
Slide 4: Michigan's Community Bank at a Glance
MICHIGAN’S COMMUNITY BANK? AT A GLANCE 4% largest Michigan-based bank by deposit market share: Michigan’s premier community bank. Serving a large, diversified client base. Geographically diverse and attractively mixed loan portfolio, coupled with stable and valuable core funding. Attractive financia
Slide 5: Positioned to Grow Market Share
MICHIGAN’S COMMUNITY BANK? AT A GLANCE POSITIONED TO GROW MARKET SHARE 4th RANKED BANK HEADQUARTERED IN MICHIGAN RANK MICHIGAN INSTITUTION BRANCHES preene wee Ranke 1. Chemical Financial Corporation 193 7,095,005 4.01 2 Flagstar Bancorp, Inc 407 6,856,168 3.87 MSA: Rank: 3. Talmer Bancorp, Inc. 54 2
Slide 6: Experienced Management Team
MIKE PRICE President and Chief Executive Officer = Founding President of Mercantile Bank in 1997 = More than 30 years of commercial banking experience BOB KAMINSKI Chief Operating Officer = Joined Mercantile Bank at its founding in 1997 = More than 25 years of commercial banking experience = Chief O
Slide 7: Building on Existing Strengths
BUILDING ON EXISTING STRENGTHS ABOVE THE COMPETITOR, MIDWEST AND NATIONAL MEDIAN 2014 NIM 4Q = 3.79% 2015 NIM expected to range from 3.75 to 3.80 3.80 to 3.85Q1 & Q2 3.75 to 3.80 Q3 & Q4 Improvements in earning asset mix mitigating runoff of purchase accounting adjustments STRONG CAPITAL POSITION Ca
Slide 8: Leveraging Strengths in Makeup of Assets and Funding
LEVERAGING STRENGTHS INHERENT IN THE CURRENT MAKEUP OF ASSETS AND FUNDING = Commercial loan growth strength of legacy Mercantile = Retail loan and deposit strength of legacy Firstbank = Strong core funding provides a solid base for new loan growth and a strong, sustainable NIM = Increased margin str
Slide 9: Strength: Portfolio Diversification
STRENGTH: PORTFOLIO DIVERSIFICATION BALANCED WITH INCREASED C&l AND CONSUMER LENDING TOTALLOANS: $2.1B ‘As of December 3i, 2014 1-4 Family [Home Equity & Other 9 Mortgages, 10% Consumer, 8% Multi-Family & y Commercial & Residential <= Industrial, 26% Rental, 6% ae Land Development & Owner Occ y Cons
Slide 10: Strength: Strong Core Funding
STRENGTH: STRONG CORE FUNDING NOW 91% OF TOTAL FUNDING TOTAL FUNDS: $2.5B ‘As of December3i, 2014 Wholesale: Deposits, 7% _____Wholesale: FHLB Advances, 2% Local Time >$100K, 15% dj Corporate sweey’y Accounts, 7% Local Time <$100K, 7% | Non-interest \Checking, 22% / | y 7 }\ Money Market y Accounts,
Slide 11: Strength: Strong Asset Quality
4.0% 35% 3.0% 25% 20% 15% 10% 05% 0.0% STRENGTH: STRONG ASSET QUALITY ALLOWANCE TO NON-PERFORMING ASSETS/ ORIGINATED LOANS* TOTAL ASSETS | 20% ‘a a 12/31/2011 12/31/2012 12/31/2013 12/31/2014 12/31/2011 12/31/2012 12/31/2013 “Excludes loans accounted for under purchase accounting rules Loans past du
Slide 12: Strength: Profitability Metrics
4.2% 4.1% 4.0% 3.9% 3.8% 3.7% 3.6% 3.5% 3.4% 3.3% 3.2% 3.1% 3.0% STRENGTH: PROFITABILITY METRICS NET INTEREST MARGIN PROVISION EXPENSE $15.0 $10.0 ($5.0) | “ : | j i a il “= ($10.0) 2011 2012 2013 4Q 2014 2011 2012 2013 @MBWM @FBMI @MBWM mFBMI Remain focused on net interest margin discipline Continu
Slide 13: Strength: Capital Ratios and Market Valuation
16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% STRENGTH: CAPITAL RATIOS MARKET VALUATION CAPTIAL RATIOS MBWM MARKET PRICE TO TANGIBLE BOOK VALUE WTier| Leverage Total Risk-based Capital 13} + 1.3) + 1.9) + oa 0.3} - 03} - 2 il 12/31/14 12/31/11 12/31/12 12/31/13 12/31/14 Regulatory capital ratios
Slide 14: Improving Financial Performance
IMPROVING FINANCIAL PERFORMANCE * MBWM 04 Result FINANCIAL PERFORMANCE OPPORTUNITIES Improvement in ROA/ROE 2014 ROA* = 0.86% vs. Midwest peer average: 1.01% IMPROVEMENT IN NON-INTEREST INCOME GENERATION New fee-based product sales opportunities in all markets Mortgage banking fees expected to recov
Slide 15: Products Support Non-Interest Income Opportunities
PRODUCTS SUPPORT NON-INTEREST INCOME OPPORTUNITIES CAPABILITIES COMPARABLE TO LARGER INSTITUTIONS BANK OF FIFTH PEER PRODUCT MERCANTILE AMERICA CHASE THIRD HUNTINGTON CASH MANAGEMENT v v v v v PAYROLL SERVICES Vv v Vv v v REMOTE DEPOSIT CAPTURE v v v v v BILL PAYMENT & ACH v v v v v INVOICING/RECEIV
Slide 16: Healthy Markets
HEALTHY MARKETS CAPTURING INCREASING SHARE OF EXISTING AND NEW BUSINESS CAPTURE ECONOMIC GROWTH IN KEY GEOGRAPHIC MARKETS Grand Rapids, Kalamazoo, Lansing & Mt. Pleasant markets are growing economies and represent significant loan growth potential Capitalize on current market footprint opportunities
Slide 17: Improving Economic Backdrop in Michigan
IMPROVING ECONOMIC BACKDROP IN MICHIGAN | IMPROVING UNEMPLOYMENT RATE | UNEMPLOYMENT RATE | __ IMPROVING GDP GROWTH GDP GROWTH Change in GOP (row) Percent aR ®& aR 7 | Percent : 014. JOB GROWTH CONTINUES (MI EMPLOYEES) REBOUNDING HOME PRICES (HPI) 20 a" 0 97 Index 12/2000 = 100 Ml United States not
Slide 18: Michigan's Housing Market
MICHIGAN’S HOUSING MARKET NOW AMONG LEADERS IN YEAR OVER YEAR SALES PRICE INCREASES | United States 5% | O28% BS5to7™% B2to4% @ -1to1%
Slide 19: Michigan Job Growth Since June 2009
MICHIGAN JOB GROWTH SINCE JUNE 2009 RANK STATE GROWTH % 1 TEXAS 124% 2 FLORIDA 11.1% 3 NORTH DAKOTA 9.6% 4 HAWAII 9.1% 5 UTAH 84% 6 CALIFORNIA 8.0% 7 COLORADO 6.5% 8 LOUISIANA 6.3% 9 SOUTH CAROLINA 5.8% 10 DELAWARE 5.7% 11 INDIANA 5.4% 12 MINNESOTA 5.3% 13 MICHIGAN 5.3% 14 NEVADA 5.0% 15 NORTH CAROL
Slide 20: Our Market Demographics
UR MARKET DEMOGRAPHICS Projected Median Projected Company Deposit Total Population HH HH Income Number Deposits Market Population Change Income Change Market of inMarket Share 2014 += 2014-2019 2014 2014-2019 Region (MSA) Rank Branches ($000) _(%) _(Actual) (%) ($) (%) Grand Rapids-Wyoming, MI 7 12
Slide 21: Home Price Index by Market
INDEX 12/2000 = 100 180 160 140 120 100 12/2000 - 9/2014 source: F —T United states not seasonally adjusted Grand Rapids-Wyoming, MI —tansing East Lansing, MI ‘Kalamazoo Portage, MI
Slide 22: State of Michigan Unemployment Compared with U.S.
STATE OF MICHIGAN COMPARED WITH U.S. RATE 14 —v.s. } ==State of Michigan PERCENT 0 Aug. 2009 Dec. 2013 Dec. 2014 of Labor Statistic ly adjusted, through December of 2014|
Slide 23: Even Stronger in Mercantile Markets
EVEN STRONGER IN MERCANTILE MARKETS 14 =—=State of Michigan —=Kent County 12 ==Kalamazoo County ==Isabella County 10 ===Ingham County a & Qo 8 z G a 6 4 2 Aug. 2009 Dec. 2013 Dec. 2014 Source: Bureau of Labor Statistics, not seasonally adjusted, through December of 2014 (preliminary) 23
Slide 24: Value-Oriented M&A Strategy: Be Selective
VALUE-ORIENTED M&A STRATEGY: BE SELECTIVE PRICE / TANGIBLE BOOK % 250 200 150 100 50 MICHIGAN M&A IS ACTIVE BANK M&A ANNOUNCED IN MICHIGAN id Nat Founders ratio (ov=$88.2) ‘Mercantile Bank Corporation '& Firstbank Corporation ‘Chemical Financial Corporation ‘Chemical Financial C ial Financial Corpor
Slide 25: Mercantile Strategic Plan
MERCANTILE STRATEGIC PLAN PLAN OVERVIEW Grow in All Markets while Ensuring Adequate Resource Allocation to Markets with Greatest Potential Maintain or Lengthen Lead in At the Core We Marry... Improve Leverage of Mutually — Access to in Status as it Preferred: Funding Base and lh 1 Beneficial Capital
Slide 26: Mercantile Strategic Plan: Focus on Performance
MERCANTILE STRATEGIC PLAN FOCUS ON PERFORMANCE REWARDING SHAREHOLDERS AND REMAINING AN INDEPENDENT COMMUNITY BANK HOLDING COMPANY Strengthen common share price through stronger operating and financial performance. Target stock price = 150% of tangible book value by December 31, 2015 (based on curren
Slide 27: Improve Balance Sheet/Income Statement/Capital Metrics
MERCANTILE STRATEGIC PLAN IMPROVE BALANCE SHEET/INCOME STATEMENT/CAPITAL METRICS GOAL 12-31-15 12-31-17 C&iand Owner Occupied CRE/ x = Total Loans Not less than 50% with target of 55% Maintain Non-Performing Assetratio at < 1.0% x x Maintain Net interest Margin above 3.7% x x Return on Asset (ROA) G
Slide 28: Mercantile Bank Corporation Contacts
Mercantile Bank Corporation MBWM NASDAQ: LISTED Samuel Stone Charles Christmas Michael Price Robert Kaminski Thomas Sullivan Executive Vice President, Senior Vice President, President and Executive Vice President, Chairman of the Board Corporate Finance Chief Financial Officer Chief Executive Office