Mercantile Bank Corporation · NASDAQ:MBWM
Mercantile Bank — Q2 2023 Earnings Presentation
41 slides from Mercantile Bank's earnings presentation, Jul 18, 2023
Slide 1: Conference Call and Webcast Presentation Second Quarter 2023
Conference Call and Webcast Presentation Second 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: Company Overview
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 • 46 banking locations • Expanded to Cincinnati, Ohio and Midland, Michigan in 2020, and Petoskey, Traverse City and Saginaw, Michigan
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 June 30, 2023 • Significant increase in net interest income depicting net interest NASDAQ: margin expansion and loan growth MBWM • Notable increases in several key fee income categories • Annualized commercial loan growth of ap
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 Electric Vehicle Car Loan Health Savings Account In-House Payroll Services & Human Capital Management Solu
Slide 9: Financial Performance Second Quarter 2023
AMercantile ank Corporation FinancralkPerfonmance Second Quarter 2023
Slide 10: Consolidated Reports of Income
Performance Financial Consolidated Reports of Income (Unaudited) Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net Income $ 20,357,000 11,737,000 41,332,000 23,229,000 Basic earnings per share $ 1.27 0.74 2.58 1.47 Dil
Slide 11: Consolidated Reports of Income: Net Interest Income
Performance Financial Consolidated Reports of Income (Unaudited) Net Interest Income Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 INTEREST INCOME Loans, including fees $ 62,006,000 36,003,000 119,159,000 69,254,000 In
Slide 12: Consolidated Reports of Income: Noninterest Income
Performance Financial Consolidated Reports of Income (Unaudited) Noninterest Income Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Service charges on accounts $ 1,064,000 1,495,000 2,041,000 2,910,000 Credit and debit c
Slide 13: Consolidated Reports of Income: Noninterest Expense
Performance Financial Consolidated Reports of Income (Unaudited) Noninterest Expense Three Months Three Months Six Months Six Months Ended Ended Ended Ended June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Salaries and benefits $ 16,461,000 15,676,000 33,143,000 31,186,000 Occupancy $ 2,098,0
Slide 14: Yield on Assets / Cost of Funds
Performance Financial Consolidated Reports of Income (Unaudited) Yield on Assets / Cost of Funds Quarterly 2023 2023 2022 2022 2022 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Yield on loans 6.19% 5.90% 5.49% 4.56% 3.97% Yield on securities 2.00% 1.95% 1.91% 1.79% 1.68% 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 2023 2022 2022 2022 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Total mortgage loans originated $ 117,500 72,000 90,800 163,900 190,900 Purchase mortgage loans originated $ 100,900
Slide 16: Asset Quality
Performance Financial Asset Quality (Unaudited) ($ in thousands) Quarterly 2023 2023 2022 2022 2022 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Gross loan charge-offs $ 500 100 100 0 0 Recoveries $ 300 100 200 200 300 Net loan charge-offs (recoveries) $ 200 0 (100) (200) (300) Net loan charge-offs (reco
Slide 17: Nonperforming Assets Reconciliation
Performance Financial Nonperforming Assets Reconciliation (Unaudited) ($ in thousands) Quarterly 2023 2023 2022 2022 2022 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Beginning balance $ 8,400 7,700 1,400 1,800 1,600 Additions $ 300 1,300 6,400 0 300 Return to performing status $ 0 0 0 (200) 0 Principal
Slide 18: Net Interest Margin
Performance Financial Net Interest Margin 2023 2023 2022 2022 2022 2022 2021 2021 2021 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr Earning Asset Yields: Loans 6.19% 5.90% 5.49% 4.56% 3.97% 3.87% 4.07% 4.07% 3.99% Investments 2.00% 1.95% 1.91% 1.79% 1.68% 1.52% 1.46% 1.46%
Slide 19: Loan Repricing
Performance Financial Loan Repricing Commercial Retail Total Variable Rate Loans: 0 – 12 Months $ 2,063,200 72,400 2,135,600 1 – 5 Years $ 43,000 164,300 207,300 Over 5 Years $ 50,000 378,100 428,100 Total $ 2,156,200 614,800 2,771,000 Fixed Rate Loans: 0 – 12 Months $ 114,300 6,700 121,000 1 – 5 Ye
Slide 20: Investment Portfolio Gains & Losses
Performance Financial Investment Portfolio Gains & Losses ($ in thousands) As of June 30, 2023 Amortized Unrealized Unrealized Fair Cost Gains Losses Value U.S. Gov't Agency Bonds $ 454,200 - (61,100) 393,100 Municipal Bonds - GO $ 165,700 500 (8,700) 157,500 Municipal Bonds - Revenue $ 30,000 100 (
Slide 21: Investment Portfolio Maturities
Performance Financial Investment Portfolio Maturities ($ in thousands) As of June 30, 2023 Amortized Net Unrealized Fair Average Cost Gains / (Losses) Value Yield U.S. Gov't Agency Bonds One year or less $ 22,000 (600) 21,400 0.44% Over one through five years $ 204,400 (20,500) 183,900 0.95% Over fi
Slide 22: Capital: Regulatory Ratios
Performance Financial Capital Regulatory Ratios (Mercantile Bank Data) ($ in thousands) 6/30/23 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 12/31/21 9/30/21 6/30/21 As Reported: Tier 1 Leverage Capital Ratio 12.18% 12.16% 11.55% 11.00% 10.75% 10.50% 10.40% 9.25% 9.40% Total Risk-Based Capital Ratio 13.
Slide 23: Deposits & Sweep Accounts
Performance Financial Deposits & Sweep Accounts Amount Percentage Noninterest-Bearing Checking $ 1,371,600 34% Interest-Bearing Checking $ 541,200 14% Money Market $ 927,100 23% Savings $ 314,600 8% Time Under $100,000 $ 144,100 4% Time $100,000 & Over $ 346,900 9% Brokered Deposits $ 111,300 3% Swe
Slide 24: Large Depositors
Performance Financial Large Depositors Includes Sweep Account Balances As of June 30, 2023, depositors with $5 million or more on deposit equated to 70 relationships aggregating $1.2 billion Business/Individual – 58 relationships aggregating $1,017 million Governmental – 12 relationships aggregating
Slide 25: Deposit Balances
Performance Financial Deposit Balances ($ in thousands) June 30, 2023 March 31, 2023 December 31, 2022 Personal Business Personal Business Personal Business Noninterest-Bearing Checking $ 216,600 1,155,000 223,600 1,154,600 241,300 1,364,800 Interest Checking $ 257,700 283,500 277,800 298,900 299,30
Slide 26: Sources of Liquidity
Performance Financial Sources of Liquidity* Source Availability ($ in thousands) Unsecured Federal Funds Line of Credit $ 70,000 FHLB of Indianapolis $ 315,000 Unpledged Investments $ 331,000 *As of June 30, 2023. 26
Slide 27: Thoughts on Remainder of 2023
Performance Financial Thoughts on Remainder of 2023 Prime/SOFR Rates • Federal funds rate increased by 0.25% on July 26, 2023. • No further changes during the remainder of 2023 Performance Metrics 3rd Qtr 4th Qtr Loan Growth 5.00% – 6.00% 5.00% – 6.00% Net Interest Margin 3.80% – 3.90% 3.70% – 3.80%
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 5 bps Nonperforming Assets to Total Quarter Trends ($ in thousands) Assets 6/30/23 3/31/23 12/31/22 9/30/22 6/30/22 3/31/22 Net loan charge-offs (recoveries) $ 200 0 (100) (200) (300) (100) Net loan charge-offs (recoveries) 0.02% (0.01%) (0.01%) (0.03%) (0
Slide 30: Core Commercial Loan Growth
Strong Credit Core Commercial Culture Loan Growth (dollars in millions) Five 6/30/23 3/31/23 12/31/22 9/30/22 6/30/22 Quarter Core Commercial Loans $ 3,189 3,139 3,131 3,142 3,069 Trend 12/31/22 12/31/21 12/31/20 12/31/19 12/31/18 Five Core Commercial Loans $ 3,131 2,910 2,429 2,442 2,360 Year PPP L
Slide 31: Lending Commitments
Strong Credit Culture Lending Commitments (dollars in millions) 6/30/23 3/31/23 12/31/22 9/30/22 6/30/22 Construction Loans Commercial $ 327 285 197 170 175 Residential $ 59 58 72 84 85 Commitments to Make Loans* $ 351 347 330 309 253 Total $ 737 690 599 563 513 * Commitments to make loans generally
Slide 32: Commercial Loan Portfolio Composition
Strong Credit Commercial Loan Portfolio Culture Composition Loan Type* 9% Commercial & Industrial Commercial Vacant Land, Land Development & Residential Construction Commercial Real Estate – Owner Occupied 38% 30% Commercial Real Estate – Non-Owner Occupied Commercial Real Estate – Multi-Family & Re
Slide 33: Loan Concentration by Industry
Strong Credit Culture Loan Concentration 1% Industry* 5% Real Estate, Rental & Leasing Services 21% 19% Agriculture, Oil & Gas Extraction & Utilities Construction Manufacturing Wholesale Trade 5% Retail Trade Transportation & Warehousing Information 7% Finance & Insurance 2% 36% 1% 3% *As of June 30
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 $ - - 0.2 0.2 1,212.0 1,212.2 - Vacant Land, Land D
Slide 36: Past Due Loans
Strong Credit Culture Past Due Loans $8.0 $7.0 $6.0 $5.0 $4.0 Millions 3 bp $3.0 Past Due Loans as % of Total $2.0 Loans $1.0 $0.0 30-89 Days Past Due 90 Days & Over Past Due Over 89 Days Past Due & Accruing 36
Slide 37: Commercial Loans Floating Rate Information
Strong Credit Culture Commercial Loans* (dollars in thousands) Floating Rate Information Balance Percentage Floating Rate Commercial Loans $ 2,058,000 65% Fixed Rate Commercial Loans $ 1,131,000 35% Total Commercial Loans $ 3,189,000 100% *As of June 30, 2023. 37
Slide 38: Total Loans
Strong Credit Culture Total Loans* ($ in thousands) Balance Percentage Commercial Loans Commercial and Industrial $ 1,212,200 30% Real Estate – NonOwner Occupied $ 957,200 24% Real Estate – Owner Occupied $ 659,200 16% Real Estate – Multi-Family & Residential Rental $ 287,300 7% Real Estate – Land D
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 Retail $ 289,600 30% 7% Office $ 223,200 23% 6% Industrial $ 204,800 21% 5% Assisted Living $ 105,000 11% 3% Hotel $ 98,700 10% 2% Other $ 35,900 5% 1% To
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