Mercantile Bank : Investor Presentation – Q4 2024

Published: 2025-01-21 09:47:04 ET MBWM

Investor Presentation

January 2025

Executive Management Team

PRESIDENT &

CHIEF EXECUTIVE OFFICER

Mr. Reitsma was appointed President and Chief Executive Officer of Mercantile effective June 1, 2024, 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 and President for seven years.

EVP, CHIEF FINANCIAL OFFICER &

TREASURER

Mr. Christmas joined Mercantile in

1998 and has over 37 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.

Financial Performance

2024

FINANCIAL PERFORMANCE

Performance Highlights

Earnings

• Net income of $79.6MM in 2024 versus $82.2MM in 2023

• EPS of $4.93 in 2024 versus $5.13 in 2023

• Net interest margin of 3.58% in 2024 versus 4.05% in 2023

Net Interest

• Increased asset yield attributed to high percentage of floating rate commercial

Margin

loans and higher interest rate environment

• Rising cost of funds attributed to shifting deposit mix from strategic growth in

deposits and higher rates

Deposit and

• Total deposits grew 20% in 2024

Funding

• Loan to deposit ratio declined from 110% at YE 2023 to 98% at YE 2024

Commercial

• Commercial loans grew nearly 9% in 2024

Loan

• C&I and Owner Occupied CRE combined represented 55% of the portfolio

Portfolio

Asset Quality

• Nonperforming assets to total assets ratio of 0.09% at YE 2024

• 2024 net loan charge-offs to average loans of 0.06%

Capital

FINANCIAL PERFORMANCE

Historical Trends & Shareholder Value

Solid Earnings and Balance Sheet Growth Trends

Billions

Total Assets 10.7% CAGR

6.1

5.3

4.9

5.4

4.4

3.6

2019 2020 2021 2022 2023 2024

Billions

Total Loans

10.0% CAGR

4.6

3.9

4.3

2.9

3.2

3.5

2019 2020 2021 2022 2023 2024

Billions

Total Deposits

11.8% CAGR

4.7

4.1

3.7

3.9

3.4

2.7

2019 2020 2021 2022 2023 2024

TBVPS

EPS

Cash Dividends

8.4% CAGR

10.4% CAGR

6.0% CAGR

$35

33.09

$1.6

1.42

29.31

5.13

4.93

1.26

1.34

$30

23.86

25.61

24.47

$1.4

1.06

1.12

1.18

$25

22.12

3.69

3.85

$1.2

$1.0

$20

3.01

2.71

$0.8

$15

$0.6

$10

$0.4

$0.2

$0.0

2019

2020

2021

2022

2023

2024

2019

2020

2021

2022

2023

2024

2019

2020

2021

2022

2023 2024

FINANCIAL PERFORMANCE

Loan to Deposit Ratio*

Reduction from 110% at the beginning of the year to 98% at year end 2024

$5,500

111%110%

109%

108%

107%

105%

103%

$4,500

102%

101%

99%

98%

97%

95%

$3,500

4Q23

1Q24

2Q24

3Q24

4Q24

Loan to Deposit Ratio

Total Loans

Total Deposits

(In millions)

*Reflects end of quarter balances.

FINANCIAL PERFORMANCE

Net Interest Income

Stable net interest income

$50

$49

$47

$48

$40

millions

$30

$ in

$20

$10

4Q23

1Q24

2Q24

3Q24

4Q24

Net Interest Income

Increased interest income primarily reflects loan growth but also higher interest rate environment

$100

$5.1

$5.2

$5.5

$5.6

$4.9

billions)in($Assets

IncomeInterest millions)in($

$80

$60

$40

$69

$71

$73

$75

$74

$20

4Q23

1Q24

2Q24

3Q24

4Q24

Interest on Securities and Deposits

Interest on Loans, including fees

Average Earning Assets

Interest expense increase reflects strategic deposit growth, higher deposit costs, and change in funding mix related to lowering the loan to deposit ratio. Noninterest-bearing deposits (NIB) are historically above peer

millions)

$40

$2.8

$25

$35

$2.5

$2.6

$30

$20

$15

$25

Expense

$19

$22

$10

4Q23

1Q24

2Q24

Other Interest Expense

Avg. Interest-Bearing Deposits

$3.1

$3.3

$3.5

billions)

$3.0

$2.5

$2.0

($ in

$28

$27

$1.5

$0.0

Deposits

$1.0

$0.5

3Q24

4Q24

Interest on Deposits

Deposits

100%

60%

80%

41%

46%

ofTotal

20%

23%

40%

22%

32%

28%

Dec-23

Mar-24

Brokered deposits

Lower-cost deposits

Peer median NIB

48%

49%

21%

27%

Jun-24 Sep-24 Dec-24

Higher-cost deposits Non-interest bearing deposits

FINANCIAL PERFORMANCE

Net Interest Margin

Stabilizing net interest margin

3.9%

3.7%

3.6%

3.5%

3.4%

• Proactive balance sheet management strategies such as matched funding fixed rate commercial loans and commercial loan back-to-back interest rate swap program

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

2023

2024

Net Interest Margin

Peer Median NIM

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

2023

2024

Earning Asset Yields:

Loans

6.53%

6.65%

6.64%

6.69%

6.41%

Investments

2.18%

2.20%

2.30%

2.43%

2.62%

Other

5.31%

5.35%

5.28%

5.37%

4.66%

Total Earning Assets

5.95%

6.06%

6.07%

6.08%

5.81%

Cost of Funds:

Deposits

1.94%

2.25%

2.42%

2.52%

2.36%

Borrowed Funds

3.15%

3.51%

3.56%

3.75%

3.73%

Total Earning Assets

2.03%

2.32%

2.44%

2.56%

2.40%

Net Interest Margin

3.92%

3.74%

3.63%

3.52%

3.41%

FINANCIAL PERFORMANCE

Yield on Assets / Cost of Funds

Meaningful increase in yield on assets year over year

Gradual increase in cost of funds

8.0%

5.95%

6.06%

6.07%

6.08%

5.81%

5.68%

6.02%

6.0%

4.0%

2.0%

0.0%

(2.0%)

(1.63%)

(2.03%)

(2.32%)

(2.44%)

(2.56%)

(2.40%)

(2.44%)

(4.0%)

4th Qtr

1st Qtr

2nd Qtr

3rd Qtr

4th Qtr

2023

2024

2023

2024

Cost of funds (total earning assets)

Yield on total earning assets

2023 Margin

4.05%

Asset Mix

(0.01%)

Deposit Mix

(0.31%)

Rates

(0.15%)

2024 Margin

3.58%

Disclaimer

Mercantile Bank Corporation published this content on January 21, 2025, and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on January 21, 2025 at 14:46:02.320.