INVESTOR PRESENTATIONJULY 2019
FORWARD-LOOKING STATEMENTThis 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. These forward-looking statements are subject to a number of factors and uncertainties which could cause Mercantile Bank Corporation’s (“MBWM”) actual results and experience to differ from the anticipated results and expectations expressed in such forward-looking statements. Forward-looking statements speak only as of the date they are made and MBWM does not assume any duty to update forward-looking statements. These forward-looking statements include, but are not limited to, statements about MBWM’s plans, objectives, expectations and intentions and other statements contained in this presentation that are not historical facts. Statements identified by words such as “expects,” “anticipates,” “will,” “intends,” “plans,” “believes,” “seeks,” “estimates,” “targets,” “positioned,” “projects” or words of similar meaning generally are intended to identify forward-looking statements. Management's determination of the provision and allowance for loan losses, the carrying value of acquired loans, goodwill, and the fair value of investment securities involve judgments that are inherently forward-looking. These statements are based upon the current beliefs and expectations of MBWM’s management and are inherently subject to significant business, economic and competitive risks and uncertainties, many of which are beyond their control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from those indicated or implied in the forward-looking statements. Additional information concerning risks is contained in MBWM’s most recently filed Annual Report on Form 10-K, subsequent Quarterly Reports on Form 10-Q, recent Current Reports on Form 8-K and other SEC filings.2
MICHIGAN'S COMMUNITY BANK®
• 46 Banking Offices
• $530 Million Market Capitalization• 3.20% Dividend Yield• 1.50x Price/TBV
• $3.5 Billion Total Assets• $2.9 Billion Total Loans• $2.6 Billion Total Deposits
• 1.33% Last 4 Qtrs ROAA• 3.88% Last 4 Qtrs NIM (FTE)• 60.20% Last 4 Qtrs Efficiency Ratio
• 9.82% TCE Ratio• 12.55% Total RBC Ratio• 0.11% NPAs/Assets (1)
1) NPAs include: non-accrual loans, loans 90+ days past due and still accruing, non-accruing troubled debt restructured loans, and other real estate owned.
Cadillac
Canadian Lakes
Howard City
Lakeview
RemusClare
St. Helen
West Branch
Mt. Pleasant
Rose City
Fairview
Shepherd
Merrill
St. Charles
St. Johns
DeWitt
LansingHastings
Lowell
Kalamazoo
PortagePaw Paw
Holland
Grand RapidsIonia
BeldingIthaca
Vestaburg Alma
Troy
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4th RANKED BANK HEADQUARTERED IN MICHIGANPOSITIONED TO GROW MARKET SHARE
TOTAL FOR MICHIGAN INSTITUTIONS 2,456 $217.52
Source: SNL Financial. Data is as of June 30, 2018.
Total Michigan includes all institutions with deposits in Michigan, regardless of headquarters.
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RANK MICHIGAN INSTITUTION BRANCHESTOTAL
DEPOSITS($ in Billions)
MARKET SHARE
(%)
1 Chemical Financial Corporation 186 $13.12 6.03
2 Flagstar Bancorp, Inc. 14 $11.00 5.06
3 Independent Bank Corp. 69 $2.82 1.30
4 Mercantile Bank Corporation 46 $2.54 1.17
5 Macatawa Bank Corporation 29 $1.59 0.73
6 Arbor Bancorp, Inc. 8 $1.31 0.60
7 Isabella Bank Corporation 30 $1.28 0.59
8 MBT Financial Corp. 21 $1.15 0.53
9 Level One Bancorp, Inc. 12 $1.08 0.50
10 First National Bancshares, Inc. 3 $1.05 0.48
11 Mackinac Financial Corp 23 $0.88 0.41
12 Northpointe Bancshares Inc. 1 $0.73 0.34
13 Fentura Financial Inc. 15 $0.70 0.32
14 First State Financial Corporation 12 $0.61 0.28
15 Southern Michigan Bancorp Inc. 16 $0.60 0.28
MBWM RANK IN 2017KEY MARKETS
MSA: RANK:
Grand Rapids – Wyoming 7
Lansing – East Lansing 12
Kalamazoo – Battle Creek 5
Mt. Pleasant 2
Alma 2
West Branch 1
OUT-OF-STATE COMPETITORS IN GRAND RAPIDS
MSA: RANK:
Fifth Third Bancorp 1
Huntington Bancshares 2
JPMorgan Chase 4
Wells Fargo & Co. 5
PNC Financial 8
Bank of America 10
Comerica 12
COMPELLING INVESTMENT
Mercantile is Michigan’s third
largest bank by deposit market share. Our
foot-print, financial capacity and
experience ensure that we can be a
participant in future regional M&A opportunities.
MARKETSHARE
Through solid and consistent
financial performance, we have the ability to grow our organization
in sustainable ways that will benefit our shareholders for the
long term.
SUSTAIN-ABILITY
We have a geographically diverse and attractively mixed loan portfolio, coupled
with stable core funding.
WELL-BALANCED
CLIENT BASE
COLLABORATIONCONSERVATIONCONTRIBUTION
We maintain a strong capital position which
we leverage for growth with
relationship- based client opportunities, resulting in attractive
returns for our shareholders.
FINANCIALRETURNS
Our team focuses on delivering a high-quality customer
experience, offering products and services
comparable to the largest competitors,
while balancing operational efficiencies.
OPERATIONALEXCELLENCE
5
At Mercantile, we see ourselves as one team and the very act of working together allows us to reach far beyond what we could achieve individually. Our ability to collaborate, both in and outside the company, generates a positive impact on individuals, organizations and entire communities. Collaboration enables us to celebrate diversity, appreciate different points of view, develop new ideas and put them into action. One of Mercantile’s greatest strengths is its people. To ensure our collaborative efforts remain strong and sustainable, we continually invest in the development of our team members.
Sustainability and conservation have always been a part of Mercantile’sstrategic plan, and they are woven deeply into the fabric of how we do business. From an efficient branch footprint to utilizing the latest technology, we are continuously focused on seeking new ways to be more productive with our time and energy, while remaining good stewards of the resources to which we are entrusted.
Our company is consistently focused on creating long-term value through meaningful relationships, and when this is done right, these contributions are reflected in our bottom line success. The history of our ability to grow our position in innovative ways, while remaining strong and profitable, speaks to our commitment to uphold our values and leverage our experienced team. Extending our pledge into the communities in which we live and work, we believe that invested time, money and effort also help to sustain and advance the mission of local non-profit and community organizations.
COMMITTED TO BEING A STUSTAINABLE, HIGH-PERFORMING COMPANYLeveraging combined abilities to ensure our ongoing impact on people, the environment and our company's success is always focused on achieving long-lasting, positive results.
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STRATEGYG
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& E
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NC
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GROWINGMICHIGAN'S COMMUNITY BANK®
The Michigan economy is healthy and presents significant client acquisition potential
Grand Rapids, Southeast Michigan, Kalamazoo, Lansing and Mt. Pleasant are expanding economies and represent significant client acquisition potential
Identifying and pursuing market footprint opportunities while leveraging established markets
Invest in and continually develop strong leadership and revenue-producing team members:
Focus on client acquisition activities based on relationship development
Originated commercial term funding to new and existing borrowers of over $500 million in each of the last four years:
$259 million in First Half of 2019
$508 million in 2018
$529 million in 2017
$549 million in 2016
$532 million in 2015
8
GROWING MICHIGAN'S COMMUNITY BANK Continue to grow the Bank, building on the trusted advisor, value-added approach
to banking
Increase non-interest income through expansion of treasury management and retail mortgage banking business lines
Sales activities are based on a thorough needs assessment of the client’s present situation and their future objectives
9
DRIVING PROFITABILITY & EFFICIENCY Ongoing evaluations of processes and
procedures with a continued drive toward efficiency and cost savings initiatives
Continual exploration of opportunities to centralize backroom functions for consistency and efficiency, wherever appropriate
Annual EPS goal of 6% growth; ROAA goal of 1.20%+
Common stock dividend 35-40% of net earnings
Develop and maintain a corporate sustainability process focused on upholding long-lasting, positive results
Leveraging fee-based opportunities, particularly in major markets
Invested a portion of 2018 tax savings by providing pay raises to all hourly employees, increased 401(k) match, additional charitable contributions and expanded employee training 10
MANAGING CAPITAL & ASSET QUALITY
Maintain peer-leading asset quality
Maintain a comprehensive and dynamic enterprise risk management program
Leverage strong capital position to facilitate organic growth and potential acquisition opportunities
Strategic use of share repurchase program
11
0%
4%
8%
11%
15%
USA
MI
3.7
3.9
4.1
4.3
4.6
4.8
5.0
MIL
LIO
NS
ECONOMIC OPPORTUNITYIN MICHIGAN
UNEMPLOYMENT RATE
MICHIGAN JOB GROWTH
Sources: SNL Financial; http://www.freddiemac.com/finance/fmhpi/archive.html; http://data.bls.gov.
ECONOMIC OPPORTUNITYIN MICHIGAN MORTGAGE MARKET
HOUSING PRICE INDEX
Sources: SNL Financial; http://www.freddiemac.com/finance/fmhpi/archive.html; http://data.bls.gov.
13
0
50
100
150
200
USA
MI
50
100
150
200
250
12/31/13 12/31/14 12/31/15 12/31/16 12/31/17 12/31/18
Ind
ex V
alu
e
TOTAL RETURN PERFORMANCE
Mercantile Bank Corporation NASDAQ Composite Index SNL Bank NASDAQ Index
REWARDING SHAREHOLDERSABOVE MARKET PERFORMANCE AND RETURNS
Strengthening common share price through stronger operating and financial performance
Increasing common shareholder value/return by increasing both EPS and cash dividends
Pursuing organic growth through execution of our strategic initiatives, including the introduction of new and enhanced products, loan programs, hiring additional revenue-producing officers and increased marketing efforts
Executing on stock buy-back availability
1 Yr. MBWM vs. Russell 2K and Russell Financial Services
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PR
OD
UC
T O
FF
ER
ING
SB
ES
T I
N C
LA
SS
PEER PRODUCT MBWM BAC JPM FITB HBAN
Cash Management ✓ ✓ ✓ ✓ ✓
In-House Payroll Services & Human Capital Management Solutions
✓
Remote Deposit Capture ✓ ✓ ✓ ✓ ✓
Bill Payment & ACH ✓ ✓ ✓ ✓ ✓
Invoicing / Receivables / Payables ✓ ✓ ✓ ✓ ✓
Health Savings Account ✓ ✓ ✓ ✓ ✓
Merchant Services ✓ ✓ ✓ ✓ ✓
Online Banking ✓ ✓ ✓ ✓ ✓
Personal Financial Management (Within Online and Mobile Banking)
✓ ✓ ✓
NEW FEE-BASED PRODUCT SALES OPPORTUNITIES IN ALL MARKETS
15
RESULT2018
ACTUAL2018
ADJUSTED*2017
ACTUAL2017
ADJUSTED*2016
ACTUAL2016
ADJUSTED*2015
ACTUAL2015
ADJUSTED*
Net Incomedollars in thousands
$42,024 $38,426 $31,274 $27,533 $31,913 $23,318 $27,020 $20,439
Earnings Per Share $2.53 $2.31 $1.90 $1.67 $1.96 $1.43 $1.62 $1.23
Return on Average Assets
1.28% 1.17% 1.00% 0.88% 1.07% 0.78% 0.94% 0.71%
Return on Average Equity
11.35% 10.35% 8.80% 7.75% 9.35% 6.80% 8.20% 6.20%
Return on Average Tangible Equity
13.35% 12.20% 10.55% 9.30% 11.35% 8.30% 10.10% 7.70%
CORE OPERATING RESULTS
*ADJUSTMENTS:
Eliminated purchased loan accretion income, accelerated agency bond discount accretion and all one-time fee income and overhead items. 16
3.83%
3.86%
3.79%
3.96%
3.83%
2015 2016 2017 2018 2019 1H
2019 NIM FORECAST: 3.75% - 3.80%SOLID NET INTEREST MARGIN
17
$4.04
$4.61 $4.50 $4.38$4.55
$4.71$4.47
$4.73$5.05
2017 2Q 2017 3Q 2017 4Q 2018 1Q 2018 2Q 2018 3Q 2018 4Q 2019 1Q 2019 2Q
CORE NON-INTEREST INCOME OVER TIMEFEE INCOME INITIATIVES
MIL
LIO
NS
18
FIRST HALF 2019 CORE NON-INTEREST INCOMEIMPROVING NON-INTEREST INCOME
Combined Service Charges, Credit/Debit
Card Interchange, Mortgage Banking and Payroll Processing Fees grew by 12.8% in 2019
over 2018 results.
Service Charges, 23%
BOLI , 7%
Mortgage Banking, 24%
Credit/Debit Card, 29%
Payroll, 9%
Other, 8%
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$19.88 $20.21 $19.85$21.15 $21.41 $21.65 $22.00 $21.83 $22.09
2017 2Q 2017 3Q 2017 4Q 2018 1Q 2018 2Q 2018 3Q 2018 4Q 2019 1Q 2019 2Q
CONTROLLING NON-INTEREST EXPENSEDRIVING PROFITABILITY & EFFICIENCY
MIL
LIO
NS
20
60.8% 61.9% 62.0%
58.8%
2016 2017 2018 2019 1H
CONTROLLING EFFICIENCY RATIO
21
-5.4%
-0.5%
4.0%
-100 Bps No Change +100 Bps
WELL BALANCEDFOR INTEREST RATE CHANGESPROJECTED CHANGE IN NET INTEREST INCOME
22
DIVERSIFIED LOAN PORTFOLIOTOTAL LOANS: $2.9 BILLION AS OF JUNE 30, 2019
MRQ CORE YIELD ON LOANS: 5.18% LOAN PORTFOLIO TOTALS
31%
1%19%
30%
5%14%Commercial &
Industrial
LandDevelopment &ConstructionOwner OccupiedComm'l R/E
Non-ownerOccupied Comm'lR/EMulti-family &ResidentialRentalRetail
$2.53 $2.55 $2.56 $2.55
$2.64$2.70
$2.75$2.80
$2.88
$2.00
$2.25
$2.50
$2.75
$3.00
20172Q
20173Q
20174Q
20181Q
20182Q
20183Q
20184Q
20191Q
20192Q
DISCIPLINEDCOMMERCIAL
LOAN GROWTH
508
157
529
139
549
118
532
232
$0
$100
$200
$300
$400
$500
$600
1 2
Mill
ion
s
2018 2017
2016 2015
Very competitive environment, especially on price
Yield needs to be commensurate with risk
Will not sacrifice underwriting standards
Approximately $175 million in annual scheduled principal payments 24Gross Commercial
Loan GrowthNet Commercial
Loan Growth
CRE LOAN CONCENTRATIONMERCANTILE RESLTS IN RELATION TO FDIC GUIDELINES
FDIC GUIDELINES TO IDENTIFY INSTITUTIONS POTENTIALLY EXPOSED TO CRE RISK:
GUIDELINE 1) Total loans for construction, land development, and other land representing 100% or more of total capital
GUIDELINE 2) Total CRE loans representing 300% or more of total capital AND a CRE portfolio that has increased 50% or more during the prior 36 months
0% 20% 40% 60% 80%
9/30/15
12/31/15
3/31/16
6/30/16
9/30/16
12/31/16
3/31/17
6/30/2017
9/30/2017
12/31/2017
3/31/2018
6/30/2018
9/30/2018
12/31/2018
3/31/2019
6/30/2019
GU
IDELIN
E#1
MERCANTILE RESULTS
200% 225% 250% 275% 300%
9/30/15
12/31/15
3/31/16
6/30/16
9/30/16
12/31/16
3/31/17
6/30/2017
9/30/2017
12/31/2017
3/31/2018
6/30/2018
9/30/2018
12/31/2018
3/31/2019
6/30/2019
MERCANTILE RESULTS
GU
IDELIN
E#2
HIGHQUALITY
ASSET BASE
MAINTAINING A HIGH QUALITY ASSET BASENON-PERFORMING ASSETS / TOTAL ASSETS (1)
0.21%
0.29%
0.18%0.15%
0.11%
0.00%
0.28%
0.55%
Non-performing assets 0.11% of total assets atJune 30, 2019
(1) NPAs include: non-accrual loans, loans 90+ days past due and still accruing, non-accruing troubled debt restructured loans and other real estate owned.
2626
ALLOWANCE TO
ORIGINATED LOANS
0.95%
0.88% 0.88% 0.88% 0.89%
0.55%
1.10%
MAINTAINING A HIGH QUALITY ASSET BASE
2727
SOLIDCORE FUNDING
JUNE 30, 2019
TOTAL DEPOSITS: $2.6 BILLION
CORE(1) DEPOSITS: 83%
WHOLESALE(2) DEPOSITS: 6%
COST OF DEPOSITS*: 0.85%*FOR 2Q 2019
35%11%
19%
10%
8%11%
6%
SAVINGS
LOCAL JUMBO TIME(3)
INTEREST-BEARING CHECKING
NON-INTERESTBEARING CHECKING
MONEY MARKET
BROKERED DEPOSITS
LOCAL RETAIL TIME(3)
(1) Core deposits are defined as total deposits less wholesale deposits and local jumbo time deposits.
(2) Wholesale deposits are defined as deposits from customers outside of MBWM’s market areas.
(3) Local retail time deposits are time deposits < $100,000. Local jumbo time deposits are time deposits ≥ $100,000.
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STRONG CAPITAL RATIOS
CAPITAL RATIOS
11.2%
12.6%
9.8%
0.0%
3.5%
7.0%
10.5%
14.0%
6/30/2019
TIER
I LE
VER
AG
E
TOTA
L R
ISK
-BA
SED
CA
PIT
AL
TAN
GIB
LE C
AP
ITA
L/
TAN
GIB
LE A
SSET
S1.48
2.20
1.90
1.46 1.55
0.x
0.6x
1.1x
1.7x
2.2x
2.8x
12/31/2015 12/31/2016 12/31/2017 12/31/2018 6/30/2019
MARKET PRICE TO TANGIBLE BOOK VALUE
29
CLEAR METRICS, TARGETS & GOALSGOAL 2019 2020 2021
C&I and Owner Occupied CRE /Total Loans not less than 55%
Maintain Non-Performing Asset ratio at < 0.5%
Maintain Net Interest Margin at or above 3.75%
Return on Asset (ROA) Goal of 1.20%
Return on Asset (ROA) Goal of 1.25%
Return on Asset (ROA) Goal of 1.30%
Return on Equity (ROCE/ROTCE)* Goal of 11.5% /13.0%
Return on Equity (ROCE/ROTCE)* Goal of 12.0% /13.5%
Return on Equity (ROCE/ROTCE)* Goal of 12.5% /14.0%
Annual Core Earnings Per Share (EPS) growth of 6%
Total Loans > $2.95 Billion
Total Loans > $3.15 Billion
“Well Capitalized” status as defined by regulatory agencies
Common Dividend between 35-40% of Net Earnings
Efficiency Ratio – Goal under 60.0%
Annual Non-Interest Income Growth of 7.5%
* ROCE = Return on Common Equity / ROTCE = Return on Tangible Common Equity
EXPERIENCED LEADERSHIPEXECUTIVE OFFICERS
31
Robert B.Kaminski
President and Chief Executive Officer
Charles E.ChristmasExecutive Vice President Chief Financial Officer
Robert T.WorthingtonSenior Vice President Chief Operating OfficerGeneral Counsel
Raymond E.Reitsma
Executive Vice President and President ofMercantile Bank
of Michigan
Lonna L.Wiersma
Senior Vice President Human Resource
Director
Standing Seated
EXPERIENCEDLEADERSHIPBOARD OF DIRECTORS
32
David M. CassardRetired
Real Estate Executive
Edward J. ClarkChairman and
Chief Executive Officer of American Seating
Company
Michelle L. EldridgeOwner,
Clear Ridge Wealth Management
Jeff A. GardnerOwner,
Gardner Group
Edward B. GrantRetired
Broadcasting Executive
Robert B. KaminskiPresident and
Chief Executive Officer
Michael H. PriceChairman of the
Board of DirectorsRetired Banking Executive
THANK YOU FOR YOURINTEREST IN OUR COMPANY
NASDAQ Global Select MarketSymbol: MBWM
310 Leonard Street NWGrand Rapids, MI 49504
616.406.3000 or 800.453.8700
www.mercbank.com 33
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