Mercantile Bank Corporation (MBWM) Earnings Call Transcript & Summary

Good morning, and welcome to Mercantile Bank Corporation's Annual Meeting of Shareholders. I'm Bob Kaminski, Mercantile's President and Chief Executive Officer and Chief Executive Officer of the bank. Today's virtual-only meeting is a live webcast. We believe in engaging with our shareholders, and it is our hope that this virtual meeting will maximize the participation of shareholders regardless of their location. Thank you very much to those who are participating in our virtual meeting today. And please note that the meeting is being recorded. I would like to call the formal portion of this meeting to order. I'd like to draw your attention to the rules of conduct set forth for this meeting. They are available on the company's website under Investor Relations, Select Overview and then Governance Document. Shareholder ability to comment or ask questions is available via the virtual meeting platform Q&A section. Shareholders attending on the telephone may view, follow along with the meeting presentation materials separately as they are also posted on the company's website under the Company Reports tab. The Board of Directors has appointed Amy Kam and Scott Setlock to act as inspectors for this meeting. I would like to ask Mr. Setlock to also serve as the Secretary of the meeting. Mr. Setlock is Executive Vice President, Chief Operating Officer of Mercantile Bank Corporation and Mercantile Bank. Ms. Kam is our Vice President and Executive Administrator. If you need a copy of the annual report or proxy statement, the links to those documents are provided online on the Investor Relations page of our website. I would like to now introduce our directors who are present on the webcast; Michael S. Davenport, Michelle L. Eldridge, Robert B. Kaminski, Michael H. Price, David B. Ramaker, Raymond E. Reitsma, Nelson F. Sanchez, and Amy L. Sparks. I would also like to recognize David Cassard, who is retiring from our Board after 23 years of service as a director, one of our longest standing directors. I'd like to thank Dave for his excellent service to our company over the years and wish him the best in the years ahead. I would also like to introduce Robert Bondi of Plante & Moran, PLLC, our accounting firm, and Brad Wyatt and Cindy Moore of Dickinson Wright, PLLC, our legal counsel. Mr. Bondi has been given an opportunity to make a statement if he would like.

I have no prepared remarks.

At the end of the meeting, Mr. Bondi, Mr. Wyatt and Ms. Moore will be available to answer questions. Amy Sparks and David Ramaker are serving as proxies for shareholders who voted by proxy. The Board of Directors set the close of business on March 28, 2024, as the record date for this meeting. A list of the shareholders as of the record date is available to view upon request by any Mercantile shareholders. If you wish to review the list, please send an e-mail to [email protected], and you will be contacted to a range of time to view the list. I have been advised by the inspectors that 12,493,869 of the 16,122,213 shares that have -- that are entitled to vote are present by proxy. Since the majority of the shares are represented, a quorum is present, the business of the meeting may proceed. A notice of this meeting was sent to each shareholder. A copy of the notice and proxy statement is also available on our website under Investor Relations -- under the Investor Relations section. The minutes of the 2023 Annual Meeting of Mercantile Shareholders were made available on the company's website under Investor Relations, Select Overview and then Governance Document. I would accept the motion for approving the minute. I would suggest that one of the proxies make the motion.

My name is David Ramaker. I move that the minutes of 2023 Annual Meeting of Mercantile shareholders be approved as presented to this meeting.

Is there a second for the motion?

My name is Amy Sparks, and I second the motion.

We will now vote on the motion to approve the minutes. All in favor, say I.

I.

I.

The motion is carried. The minutes of the 2023 Annual Meeting of Mercantile shareholders are approved as presented to the meeting. Ms. Sparks and Mr. Ramaker -- with Ms. Sparks and Mr. Ramaker's proxies among the persons voting for the motion. The first item of business is the election of 8 directors. Each will serve a 1-year term expiring at the 2025 Annual Meeting or until the election and qualification of their successors. The proxy statement lists 8 nominees posed by our Board of Directors. These nominees are Michael S. Davenport; Michelle L. Eldridge; Robert B. Kaminski; Michael H. Price; David B. Ramaker; Raymond E. Reitsma; Nelson F. Sanchez; and Amy L. Sparks. In accordance with the bylaws of the company, shareholders are required to provide advanced notice of their intent to nominate candidates for directors. No such notice was received. Therefore, I declare the nominations closed. I would accept the motion regarding the election of the directors. I would suggest that one of the proxies make the motion.

I move that the following resolution be adopted, resolved that Michael S. Davenport; Michelle L. Eldridge; Robert B. Kaminski Jr.; Michael H. Price; David B. Ramaker; Raymond E. Reitsma; Nelson S. Sanchez; and Amy El Sparks are hereby elected as Directors of Mercantile Bank Corporation to serve 1-year terms expiring at the annual meeting in the year 2025 or upon the election and qualification of their successors.

Is there a second for the motion?

I second the motion.

The second item of business is the ratification of Plante Moran, PLLC as our independent registered public accounting firm for 2024. I would accept the motion to ratify Plante Moran, PLLC as our accountants. I would suggest that one of the proxies make the motion.

I move that the following resolution be adopted. Resolved, that the appointment of Plante & Moran, PLLC as Mercantile Banks Corporation's independent registered public accounting firm for 2024 is ratified.

Is there a second for the motion?

I second the motion.

The third and final item of business is an advisory vote to approve the compensation of our executives. I would accept the motion to approve on an advisory basis, the compensation of our named executive officers. I would suggest that one of the proxies make the motion.

I move that the following resolution be adopted, resolved that the shareholders approve on an advisory basis, the compensation of Mercantile Bank Corporation's executive as disclosed in the compensation discussion and analysis, the compensation tables and the related disclosures contained in the proxy statement.

Is there a second for the motion?

I second the motion.

The proxies have submitted their proxy votes to the inspectors of the motions. It is 9:07 a.m. While the inspectors are finalizing the results Ray Reitsma, EVP of the company and President of the bank will make a brief presentation.

Thank you, Bob. I'd like to direct your attention to the slide deck and then beginning on Page 3. And there, we have our 5 strategic areas of focus. I'll briefly summarize those 5 and then move to results of our efforts to adhere to those objectives. First, client experience, clients compare their experience to us with every client experience they have. We have to be easy to work with to earn and maintain their business. Secondly, growth, deposit loan and noninterest income are keys to growing our company organically. We will evaluate merger and acquisition opportunities asking if a transaction would further our pursuit of our strategic objectives. Third, people and culture. Our commitment to our employee base includes that we will reflect our communities, be well trained, we're working an engaging workplace and be appropriately compensated. Fourth, efficiency, technology provides the opportunity to better serve our customers efficiently. If it is easier to be an employee of the bank, it's easier for our employees to serve our customers well. And finally, risk management. Effective risk management, less permeate, our credit culture, financial reporting, interest rate risk management and the many forms of risk management that permeate our business. Moving on to the next slide. Pursuit of the strategic areas of focus have contributed to strong results that are depicted here and summarized. We'll talk about each of those in a little bit of detail in the following 5 slides. Yes. As we fund strong loan demand, our focus to grow deposits at a rate greater than loan growth. In the fourth quarter, we began the journey with a 2% reduction in the loan-to-deposit ratios. Net interest margin is a key driver of our profitability, strategies such as match funding, fixed rate loans and commercial loan back-to-back interest rate swaps have contributed to a strong margin performance over time. Noninterest income is another key driver of our profitability driven by notable increases in treasury management fees and growth in mortgage banking income. Noninterest expense management is driven by effective use of technology and optimization of processes leading to a stable structure and a stable efficiency ratio. Finally, asset quality reflects our commitment to soundly and vigilantly underwrite our loans. We continue to build our reserve and note that it has increased 11 basis points over the last calendar year. That concludes my remarks, Bob.

Thanks, Ray. After we have concluded the formal business of the meeting, you will have an opportunity to ask questions using the Q&A function in the annual meeting portal. Questions may be submitted at any time during the meeting. [Operator Instructions]. The votes have been counted regarding the election of directors, the inspectors report that 72.5% of the shares represented at the meeting have voted for each nominee. Accordingly, Michael S. Davenport; Michelle L. Eldridge; Robert B. Kaminski; Michael H. Price; David B. Ramaker; Raymond E. Reitsma; Nelson F. Sanchez; and Amy L. Sparks have been elected directors of Mercantile to serve 1-year terms. The 1-year terms will expire at our Annual Meeting in the year 2025 or upon the election and qualification of their successors. Regarding the motion to ratify Plante & Moran, PLLC as our accountants for 2024. The inspectors report that a majority of the shares voted were for the ratification. The preliminary tally shows 12,399,285 shares voted for ratification. 79,936 shares voted against ratification and 14,648 shares abstained from voting. Based on the vote, the appointment of Plante & Moran, PLLC has been ratified. Regarding the advisory vote of our named executive officers' compensation, the inspectors report that a majority of the shares voted were for approval. The preliminary tally shows 9,328,413 shares voted for approving compensation, 382,320 shares voted against approval and 180,328 shares abstained from voting. Accordingly, the compensation of our executives has been approved on an advisory basis. The inspectors will furnish the Secretary with a written report of the final vote count, and this will be made available online in the next few days. Our accountants and legal counsel are now available to answer questions. After the formal portion of the meeting, there will be a question-and-answer period where you may ask questions of our officers. Do we have any questions for our accountants or legal counsel? I've been told we have no questions. If there are no further business to come before the meeting, I would accept the motion or adjournment with one of the proxies, please make the motion.

I move that the meeting be adjourned.

I second the motion.

You have heard the motion to adjourn. All of this in favor say I.

I.

I.

Motion is carried. The meeting is adjourned.

There will now be a brief question-and-answer period for our executive officers. [Operator Instructions]. And we do have a couple of questions. First question comes from a shareholder who is asking, are there any additional acquisitions being reviewed at the current time. Ray, would you answer that?

Yes. Merger and acquisition opportunities are something that are incumbent upon us to evaluate continually. We continue to look at opportunities as they arise. And the lens will be, would an acquisition, would an transaction help us with our financial performance and our strategic objectives. And if we can answer that, yes, we'd move ahead. So that's a continual process and when that's ongoing.

Great. So we have one additional question. Will Mercantile look to expand as present in Holland and the Lake Shore, given the recent acquisition of 1 of our competitors in that market?

A very timely question. And the answer is, yes, we are pursuing talent along the Lake Shore and having some success, those discussions are early, but we hope to make some announcements in the near future.

All right. There are no further questions. The question-and-answer session is concluded. Thank you for joining us and for your interest in our company. Have a great rest of your day.