MERCANTILE BANK CORPORATION Investor Presentation
July 2024
Executive Management Team
PRESIDENT &
CHIEF EXECUTIVE OFFICER
Mr. Reitsma was appointed CEO & President of the Bank 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.
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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Financial Performance
Second Quarter 2024
FINANCIAL PERFORMANCE
Performance Highlights
Earnings
- Net income of $18.8MM in 2Q24 versus $20.4MM in 2Q23
- EPS of $1.17 in 2Q24 versus $1.27 in 2Q23
- Net interest margin of 3.63% in 2Q24 versus 4.05% in 2Q23
Net Interest
Margin
- Increased asset yield attributed to high percentage of floating rate loans and higher interest rate environment
- Rising cost of funds attributed to shifting mix
Deposit and
Funding
- Total deposits grew an annualized 13% in the first half of 2024
- Loan to deposit ratio declined by 300 basis points in the first half of 2024
Commercial
Loan • Commercial loans grew an annualized 7% in the first half of 2024
Portfolio
Asset
Quality
- Nonperforming assets to total assets ratio of 0.16%
- YTD net loan charge-offs (recoveries) to average loans of (0.03%) annualized
Capital
- Total risk-based capital ratio of 14.1% at the end of 2Q24
- Tangible book value per share grew to $31.09 at the end of 2Q24 from $26.78 (over 16%) at the end of 2Q23
5
FINANCIAL PERFORMANCE
Shareholder Value
Strong earnings and relative size of investment portfolio mitigated impact of unrealized losses on tangible book value per share during increasing rate environment
$35 $30 $25 $20 $15 $10
$5 $0 ($5) ($10)
2nd Qtr
2022
3rd Qtr
2022
4th Qtr
2022
1st Qtr
2023
2nd Qtr
2023
3rd Qtr
2023
4th Qtr
2023
1st Qtr
2024
2nd Qtr
2024
After Tax Net Unrealized Gain/(Loss) per share
TBV per common share excluding after tax unrealized gain/(loss)
Tangible book value (TBV) per common share
Growth in Tangible Book Value and cash dividend per common share
$35 | Tangible Book Value per common share | Cash dividend per common share | |||||||||
$1.6 | |||||||||||
$30 | $1.26 | $1.34 | |||||||||
$1.4 | $1.12 | $1.18 | |||||||||
$25 | $1.06 | ||||||||||
$1.2 | |||||||||||
$20 | $1.0 | ||||||||||
$15 | $0.8 | ||||||||||
$10 | $0.6 | ||||||||||
$0.4 | |||||||||||
$5 | |||||||||||
$0.2 | |||||||||||
$0 | |||||||||||
$0.0 | |||||||||||
2019 | 2020 | 2021 | 2022 | 2023 2024 YTD | 2019 | 2020 | 2021 | 2022 | 2023 |
As of period end
6
FINANCIAL PERFORMANCE
Profitability Metrics
Solid profitability metrics; historically above peer averages
Quarterly
Return on Average Assets
(ROAA) relative to peer group
1.8%
1.6%
1.4%
1.2%
1.0%
0.8%
0.6%
0.4%
0.2%
0.0%
2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr |
2023 | 2023 | 2023 | 2024 | 2024 |
MBWM - ROAA | Peer Median - ROAA |
Quarterly
Return on Average Equity
(ROAE) relative to peer group
20.0%
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr |
2023 | 2023 | 2023 | 2024 | 2024 |
MBWM - ROAE | Peer Median - ROAE |
7
FINANCIAL PERFORMANCE
Loan to Deposit Ratio*
120% | $5,000 |
110% | 107% |
102% | |
100% | |
$4,000 |
Ratio of Retail Loans to | ||||
80% | Total Loans: 20% | |||
$3,000 | ||||
85% | ||||
60% | Ratio of Retail Loans to | |||
Total Loans: 13% | Increase in PPP loans leading to an increase in | |||
deposit balances and Federal Reserve deposits | ||||
$2,000 | ||||
40% | ||||
$1,000 | ||||
20% | ||||
0% | $0 | |||||||||||||||||
2Q20 | 3Q20 | 4Q20 | 1Q21 | 2Q21 | 3Q21 | 4Q21 | 1Q22 | 2Q22 | 3Q22 | 4Q22 | 1Q23 | 2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 |
Loan to Deposit Ratio | Total Loans | Federal Reserve Deposits | Total Deposits | |||
In millions
*Reflects end of quarter balances. | 8 |
FINANCIAL PERFORMANCE
Net Interest Income
Stable net interest income through a dynamic
interest rate environment
Increased interest income reflects loan growth
and higher interest rate environment
$55 | 5.5% | ||||
millionsin | |||||
$35 | 4.5% | ||||
$ | $15 | 3.5% | |||
($5) | 2.5% | ||||
2Q23 | 3Q23 | 4Q23 | 1Q24 | 2Q24 | |
Net Interest Income |
Provision
Net interest income after provision for credit losses SOFR 90-Day Average
Interest Income ($ in millions)
$100
$80
$60
$40
$20
$0
$5.0 $4.5 $4.0 $3.5 $3.0 $2.5
$2.0
2Q23 3Q23 4Q23 1Q24 2Q24
Other Interest Income
Interest on Loans, including fees Average Loans
Loans ($ in billions)
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) is historically above peers
millions) | $35 | ||
$30 | |||
$25 | |||
in | $20 | ||
$15 | |||
($ | |||
Expense | $10 | ||
$0 | |||
$5 | |||
2Q23 | 3Q23 | 4Q23 |
Other Interest Expense
Avg. Interest-Bearing Deposits
$3.5 | billions) |
$3.0 | |
$2.5 | |
$2.0 | ($ in |
$1.5 | |
$0.0 | Deposits |
$1.0 | |
$0.5 |
1Q24 2Q24
Interest on Deposits
% of Total Deposits
100% | |||||||
80% | |||||||
60% | |||||||
40% | |||||||
20% | |||||||
0% | |||||||
Jun-23 | Sep-23 | Dec-23 | Mar-24 | Jun-24 | |||
Brokered deposits | Higher-cost deposits | ||||||
Lower-cost deposits | Non-interest bearing deposits | ||||||
Peer average NIB |
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FINANCIAL PERFORMANCE
Net Interest Margin
Stable net interest margin
- Proactive balance sheet management strategies such as matched funding fixed rate commercial loans and commercial loan back-to-back interest rate swap program
- Solid margin provides opportunity to lower loan to deposit ratio
2.9% | 3.6% | 4.3% | 4.3% | 4.1% | 4.0% | 3.9% | 3.7% | 3.6% | |||||||||
2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | |||||||||
2022 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 | 2024 | 2024 | |||||||||
Net Interest Margin | Peer Average NIM | ||||||||||||||||
2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | 3rd Qtr | 4th Qtr | 1st Qtr | 2nd Qtr | |||||||||
2022 | 2022 | 2022 | 2023 | 2023 | 2023 | 2023 | 2024 | 2024 | |||||||||
Earning Asset Yields: | |||||||||||||||||
Loans | 3.97% | 4.56% | 5.49% | 5.90% | 6.19% | 6.37% | 6.53% | 6.65% | 6.64% | ||||||||
Investments | 1.68% | 1.79% | 1.91% | 1.95% | 2.00% | 2.13% | 2.18% | 2.20% | 2.30% | ||||||||
Other | 0.76% | 2.15% | 3.60% | 4.18% | 4.88% | 5.26% | 5.31% | 5.35% | 5.28% | ||||||||
Total Earning Assets | 3.32% | 4.04% | 4.95% | 5.35% | 5.61% | 5.78% | 5.95% | 6.06% | 6.07% | ||||||||
Cost of Funds: | |||||||||||||||||
Deposits | 0.19% | 0.24% | 0.42% | 0.87% | 1.36% | 1.67% | 1.94% | 2.25% | 2.42% | ||||||||
Borrowed Funds | 1.90% | 1.99% | 2.13% | 2.51% | 2.90% | 2.98% | 3.15% | 3.51% | 3.56% | ||||||||
Total Earning Assets | 0.44% | 0.48% | 0.65% | 1.07% | 1.56% | 1.80% | 2.03% | 2.32% | 2.44% | ||||||||
Net Interest Margin | 2.88% | 3.56% | 4.30% | 4.28% | 4.05% | 3.98% | 3.92% | 3.74% | 3.63% |
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Mercantile Bank Corporation published this content on 16 July 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 July 2024 13:49:07 UTC.
