INVESTOR PRESENTATION · 2019. 7. 1. · 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

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

3

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.

4

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.

6

STRATEGYG

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NC

Y

CA

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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




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

14

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%

19

$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

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AG

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TOTA

L R

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CA

PIT

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TAN

GIB

LE C

AP

ITA

L/

TAN

GIB

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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 Equity (ROCE/ROTCE)* Goal of 11.5% /13.0%



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

Documents

INVESTOR PRESENTATION · 2019. 7. 1. · 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