Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q3 2021 Earnings Presentation
30 slides from Mercantile Bank's earnings presentation, Oct 19, 2021
Slide 1: Conference Call and Webcast Presentation Third Quarter 2021
CONFERENCE CALL AND WEBCAST PRESENTATION THIRD QUARTER 2021
Slide 2: 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 such as: “anticipate,” “intend,” “plan,” “
Slide 3: A Commitment to Excellence: Performance Highlights
A Commitment to Excellence As of September 30, 2021 Performance Highlights NASDAQ • Net income of $47.4M YTD up 57.6% from prior year MBWM period • Total revenue of $135.1 million YTD benefitted from increased NII and strong noninterest income growth $540M • Noninterest income, driven by robust mort
Slide 4: Mercantile Bank Markets Michigan's Community Bank
Mercantile Bank 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 mortgage loan office (MLO) in 4Q 2020 Alma Market (6 Locations) Cadillac Market (2 Locations) Grand Rapid
Slide 5: Strategic Initiatives
Strategic Initiatives LEVERAGE DIGITAL PEOPLE & RISK & INVESTMENTS DELIVERY CULTURE PROCESS • Expand usage of • Expand customer • Recruit and retain top • Support customers Treasury Management utilization of digital talent during times of products and services banking services economic uncertainty •
Slide 6: Forward Progress
Forward Progress DIVERSITY, CORPORATE ENVIRONMENTAL, EQUITY & INCLUSION SOCIAL RESPONSIBILITY SOCIAL & GOVERNANCE • Providing access to enriching • Promote energy efficiencies in all • Formation of an ESG Committee learning and growth Bank locations. and issuance of the Bank’s first opportunities vi
Slide 7: Diversified Revenue
Diversified Revenue Total Revenue 11% Diversified and Growing YTD Revenue $160 Growth Over Noninterest Income Streams 2020 Period $135.1M $140 • Noninterest income made up 32% of revenue for the first nine months of $121.2M 2021, up from 25% in the prior year $120 period $100 Millions • Mortgage ban
Slide 8: Mortgage Pipeline Trend: Volume
Noninterest Income Strategic Initiatives Mortgage Pipeline Trend Year-Over-Year Comparison Robust mortgage volume led by purchase activity, supported by continued strong refinance activity. 2021 Volume 2020 Volume 2021 Units 2020 Units $120,000,000 600 $100,000,000 500 $80,000,000 400 Volume Units $
Slide 9: Mortgage Pipeline Trend: Applications
Noninterest Income Strategic Initiatives Mortgage Pipeline Trend Year-Over-Year Comparison Well-positioned to capture market share with proven record of fast and effective processing and strategic hires of seasoned lenders across Mercantile’s markets. 1200 2021 Apps 2020 Apps 1000 800 APPLICATIONS 6
Slide 10: Product Offerings
Product Offerings PEER PRODUCT MBWM BAC JPM FITB CMA Autobooks for Small Business with Electronic Invoicing & Collection Bill Payment & ACH Cash Management Credit Card Rewards Health Savings Account In-House Payroll Services & Human Capital Management Solutions Integrated Payables Integrated Receiva
Slide 11: Strong Credit Administration
Strong Credit Administration Mercantile has worked continuously since the end of the Great Recession to place itself in a position of strength during times of economic weakness. The maintenance of strong credit underwriting and administration practices has been an integral part of that work. Loan po
Slide 12: Core Commercial Loan Growth
Core Commercial Loan Growth (dollars in millions) Five Quarter Trend 9/30/21 6/30/21 3/31/21 12/31/20 9/30/20 25% Annualized Core Loan Core Commercial Growth in $ 2,727 $ 2,564 $ 2,513 $ 2,429 $ 2,383 3Q 2021 Loans PPP Loans $ 116 $ 246 $ 455 $ 365 $ 555 Total Commercial $ 2,843 $ 2,810 $ 2,968 $ 2,
Slide 13: Commercial Loan Portfolio Composition
Commercial Loan Portfolio Composition Loan Type* 7% Commercial & Industrial Commercial Vacant Land Land Development 35% & Residential Construction Commercial Real Estate 37% - Owner Occupied Commercial Real Estate - Non-Owner Occupied Commercial Real Estate 20% 1% - Multi-Family & Residential Rental
Slide 14: Commercial Credit Exposure
Commercial Credit Exposure Credit risk profile by internal credit risk grades* Commercial Commercial Vacant Land, Commercial Commercial Real Estate – Internal Credit Risk Commercial & Land Real Estate – Real Estate – Multi-Family & Grade Groupings Industrial Development, Non-Owner Owner Occupied Res
Slide 15: Past Due Loans
Past Due Loans* Recorded 30 – 59 60 – 89 > 89 Total Past Balance > Days Days Past Days Current Total Loans Due 89 Days & Past Due Due Past Due Accruing Commercial: Commercial & Industrial $ 0 0 100,000 100,000 1,074,300,000 1,074,400,000 0 Vacant Land, Land Development, Residential $ 0 0 0 0 38,400,
Slide 16: Past Due Loans
Past Due Loans $3,500,000 30-89 Days 90 Days & Over Total Over 89 Days & Accruing $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 16
Slide 17: Managing Abundant Deposits & Liquidity
Managing Abundant Deposits & Liquidity Total Deposits 13% Total Deposits YTD Deposit Growth of $3.87B* $4.5 $3.87B • Continue to attract local $4.0 deposits, supporting $3.41B $3.5 improved funding costs • Loan to deposit ratio of $2.69B $3.0 Billions 85.6% $2.46B $2.52B $2.5 • Noninterest bearing $
Slide 18: 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 18
Slide 19: Appendix
AG Mercantile Bank Corporation APPENDIX
Slide 20: COVID-19 Activities & Timeline
COVID-19 Activities & Timeline JANUARY 2020 SEPTEMBER 2020 Monitoring initial reports of COVID-19 25% reduction of in-person employee attendance in densely occupied offices FEBRUARY 2020 Pandemic plan activated to ensure the health and NOVEMBER 2020 safety of our employees and customers All
Slide 21: Paycheck Protection Program (PPP)
Paycheck Protection Program (PPP) (As of 9/30/21) ORIGINAL FORGIVEN REMAINING LOAN BALANCE SEGMENT # $ # $ # $ PPP Round One 2,171 $553,100,000 (2,149) ($550,000,000) 22 $3,100,000 PPP Round Two 1,216 $208,500,000 (605) ($95,900,000) 611 $112,600,000 Totals 3,387 $761,600,000 (2,754) ($645,900,000)
Slide 22: Consolidated Reports of Income
Consolidated Reports of Income Unaudited Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 Net Income: $ 15,051,000 $ 10,686,000 $ 47,382,000 $ 30,056,000 Basic earnings per share $ 0.95 0.66 2.95 1.85 Diluted earnin
Slide 23: Consolidated Reports of Income
Consolidated Reports of Income Unaudited Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 INTEREST INCOME Loans, including fees $ 33,656,000 $ 33,664,000 $ 100,430,000 $ 101,428,000 Investment securities 1,941,000 1
Slide 24: Consolidated Reports of Income
Consolidated Reports of Income Unaudited Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 NONINTEREST INCOME Service charges on accounts $ 1,324,000 $ 1,135,000 $ 3,687,000 $ 3,401,000 Mortgage banking income 6,554,
Slide 25: Consolidated Reports of Income
Consolidated Reports of Income Unaudited Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended Sept. 30, 2021 Sept. 30, 2020 Sept. 30, 2021 Sept. 30, 2020 NONINTEREST EXPENSE Salaries and benefits $ 15,975,000 $ 16,734,000 $ 47,255,000 $ 44,388,000 Occupancy 2,030,000 2,023,000 6
Slide 26: Consolidated Financial Highlights
Consolidated Financial Highlights Unaudited Quarterly 2021 2021 2021 2020 2020 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr YIELD ON ASSETS / COST OF FUNDS Yield on loans 4.07% 3.99% 4.03% 4.34% 4.03% Yield on securities 1.46% 1.54% 1.61% 1.69% 2.26% Yield on other interest-earning assets 0.16% 0.12% 0.1
Slide 27: Consolidated Financial Highlights
Consolidated Financial Highlights Unaudited (dollars in thousands) Quarterly 2021 2021 2021 2020 2020 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr MORTGAGE BANKING ACTIVITY Total mortgage loans originated $ 259,500 237,300 245,200 218,900 237,200 Purchase mortgage loans originated $ 143,600 144,500 81,50
Slide 28: Consolidated Financial Highlights
Consolidated Financial Highlights Unaudited (dollars in thousands) Quarterly 2021 2021 2021 2020 2020 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr ASSET QUALITY Gross loan charge-offs $ 744 68 53 340 124 Recoveries $ 354 386 481 234 250 Net loan charge-offs (recoveries) $ 390 (318) (428) 106 (126) Net lo
Slide 29: Consolidated Financial Highlights
Consolidated Financial Highlights Unaudited (dollars in thousands) Quarterly 2021 2021 2021 2020 2020 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr NONPERFORMING ASSETS - RECONCILIATION Beginning balance $ 3,100 3,200 4,100 4,700 3,400 Additions $ 400 500 100 1,000 1,600 Return to performing status $ 0 0
Slide 30: Consolidated Financial Highlights
Consolidated Financial Highlights Unaudited (dollars in thousands) Quarterly 2021 2021 2021 2020 2020 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr CAPITAL Tangible equity to tangible assets 8.17% 8.51% 8.36% 8.89% 8.69% Tier 1 leverage capital ratio 9.33% 9.47% 9.67% 9.77% 9.80% Common equity risk-based