MERCANTILE BANK CORPORATION Investor Presentation
April 2024
Executive Management Team
PRESIDENT &
CHIEF EXECUTIVE OFFICER
Mr. Kaminski joined the Bank in 1997 and has over 39 years of commercial banking experience. Mr. Kaminski was appointed President and Chief Executive Officer of Mercantile on January 1, 2017 and continues to serve as Chief Executive Officer of the Bank, a position he has held since 2015.
EVP, CHIEF OPERATING OFFICER
& PRESIDENT OF THE BANK
Mr. Reitsma was appointed President of the Bank effective January 1, 2017, and has been with the Bank for over 20 years, beginning with his initial role as a Commercial Loan Manager in 2003, including holding the title of Senior Lender for eight years.
EVP, CHIEF FINANCIAL OFFICER &
TREASURER
Mr. Christmas joined the Bank in 1998 and has over 36 years of banking experience. Before being promoted to his current role, he served as Senior Vice President and Chief Financial Officer of Mercantile and the Bank from 2000 to 2015. Mr. Christmas also serves as Treasurer of Mercantile, a position he has held since 2000.
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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 such as: "anticipates," "intends," "plans," "goal," "seeks," "believes," "projects," "estimates," "expects," "indicates," "strategy," "future," "is likely," "may," "should," "will," and variations of such words and similar references to future periods. Any such statements are based on current expectations that involve a number of risks, uncertainties and assumptions ("Future Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. We undertake no obligation to update, amend or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise. Therefore, actual results and outcomes may differ materially from the results expressed or forecasted in such forward-looking statements. Future factors include, among others, adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impact; labor markets; the degree of competition by traditional and nontraditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; the transition from LIBOR to SOFR; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the COVID-19 pandemic or similar public health threats, and measures implemented to combat them; and risk factors described in our annual report on Form 10-K for the year ended December 31, 2023, including those disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Investors are cautioned not to place undue reliance on any forward- looking statements contained herein.
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Financial Performance
First Quarter 2024
FINANCIAL PERFORMANCE
Performance Highlights
First Quarter Highlights
Net Interest
Margin
3.74%
Commercial Loan Growth
(Annualized)
1.7%
Non-
Performing
Assets/
Total Assets*
0.11%
Tang. Equity/ Tang. Assets*
9.0%
Total
Risk-Based
Capital Ratio*
14.1%
Three Months Ended | ||||
March 31, 2023 | March 31, 2024 | |||
Net Income | $ | 20,974,000 | 21,562,000 | |
Basic earnings per share | $ | $1.31 | $1.34 | |
Diluted earnings per share | $ | $1.31 | $1.34 | |
Average basic shares outstanding | 15,996,138 | 16,118,858 | ||
Average diluted shares outstanding | 15,996,138 | 16,118,858 | ||
*As of March 31, 2024. | 5 | |||
FINANCIAL PERFORMANCE
Loan to Deposit Ratio*
120%
March 31, 2020
110%
100%
Ratio of Retail Loans to Total Loans: 15%
80%
December 31, 2021
85%
60%
40%
20%
December 31, 2023 | $5,000 | |
March 31, 2024 | ||
110% | ||
108% | ||
$4,000 | ||
Ratio of Retail Loans to | ||
Total Loans: 21% | ||
$3,000 | ||
Increase in PPP loans leading to an increase in | millions | |
deposit balances and Federal Reserve deposits | ||
$2,000 | ||
In | ||
$1,000
0% | $0 | ||||||||||||||||||||
1Q20 | 2Q20 | 3Q20 | 4Q20 | 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | |||||
Loan to Deposit Ratio | Total Loans | Federal Reserve Deposits | Total Deposits | ||||||||||||||||||
*Reflects end of quarter balances. | 6 |
FINANCIAL PERFORMANCE
Net Interest Income
- Interest income growth reflects loan growth and higher interest rate environment
- Interest expense increase reflects higher deposit cost and change in funding mix
Three Months Ended
March 31, 2023 | March 31, 2024 | ||||
INTEREST INCOME | |||||
Loans, including fees | $ | 57,154,000 | 71,270,000 | ||
Investment securities | $ | 3,007,000 | 3,421,000 | ||
Interest-earning deposits | $ | 324,000 | 2,033,000 | ||
$ | |||||
Total interest income | 60,485,000 | 76,724,000 | |||
INTEREST EXPENSE | |||||
Deposits | $ | 7,907,000 | 22,224,000 | ||
Short-term borrowings | $ | 459,000 | 1,654,000 | ||
Federal Home Loan Bank advances | $ | 1,794,000 | 3,399,000 | ||
Other borrowed money | $ | 1,941,000 | 2,086,000 | ||
$ | |||||
Total interest expense | 12,101,000 | 29,363,000 | |||
$ | |||||
Net interest income | 48,384,000 | 47,361,000 | |||
Provision for credit losses | $ | 600,000 | 1,300,000 | ||
$ | |||||
Net interest income after provision for credit losses | 47,784,000 | 46,061,000 |
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FINANCIAL PERFORMANCE
Net Interest Margin
Stable net interest margin
- Proactive balance sheet management strategies such as matched funding fixed rate loans and commercial loan back-to-back interest rate swap program
3.6% | 4.3% | 4.3% | 4.1% | 4.0% | 3.9% | 3.7% | |||||||||||
2.6% | 2.9% | ||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | |||||||||
2022 | 2022 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 | 2024 | |||||||||
Net Interest Margin | |||||||||||||||||
1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | |||||||||
2022 | 2022 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 | 2024 | |||||||||
Earning Asset Yields: | |||||||||||||||||
Loans | 3.87% | 3.97% | 4.56% | 5.49% | 5.90% | 6.19% | 6.37% | 6.53% | 6.65% | ||||||||
Investments | 1.52% | 1.68% | 1.79% | 1.91% | 1.95% | 2.00% | 2.13% | 2.18% | 2.20% | ||||||||
Other | 0.19% | 0.76% | 2.15% | 3.60% | 4.18% | 4.88% | 5.26% | 5.31% | 5.35% | ||||||||
Total Earning Assets | 2.99% | 3.32% | 4.04% | 4.95% | 5.35% | 5.61% | 5.78% | 5.95% | 6.06% | ||||||||
Cost of Funds: | |||||||||||||||||
Deposits | 0.19% | 0.19% | 0.24% | 0.42% | 0.87% | 1.36% | 1.67% | 1.94% | 2.25% | ||||||||
Borrowed Funds | 1.82% | 1.90% | 1.99% | 2.13% | 2.51% | 2.90% | 2.98% | 3.15% | 3.51% | ||||||||
Total Earning Assets | 0.42% | 0.44% | 0.48% | 0.65% | 1.07% | 1.56% | 1.80% | 2.03% | 2.32% | ||||||||
Net Interest Margin | 2.57% | 2.88% | 3.56% | 4.30% | 4.28% | 4.05% | 3.98% | 3.92% | 3.74% |
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FINANCIAL PERFORMANCE
Yield on Assets / Cost of Funds
Meaningful increase in yield on loans
- Increasing interest rate environment
- Floating rates on over two-thirds of commercial loans
Gradual increase in cost of funds
- Deposit rate increases and change in funding mix throughout 2023 and 2024
8.0%
6.0%
4.0%
2.0%
0.0%
(2.0%)
1st Qtr 2023 | 2nd Qtr 2023 | 3rd Qtr 2023 | 4th Qtr 2023 | 1st Qtr 2024 |
Yield on total earning assets | Cost of funds (total earning assets) | |||
Net interest margin (fully tax-equivalent) |
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FINANCIAL PERFORMANCE
Noninterest Income
Notable increase in treasury management fees, and growth in mortgage banking income, private equity investment income, and bank-owned life insurance income
$10,000,000 | |||||||
$7,500,000 | |||||||
$5,000,000 | |||||||
$2,500,000 | |||||||
$0 | |||||||
1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | |||
Other income | Earnings on bank owned life insurance | ||||||
Payroll services | Interest rate swap income | ||||||
Mortgage banking income | Credit and debit card income | ||||||
Service charges on accounts | |||||||
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Disclaimer
Mercantile Bank Corporation published this content on 16 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 April 2024 14:11:01 UTC.
