Mercantile Bank Corporation

Good morning and welcome to the Mercantile Bank Corporation fourth quarter 2020 earnings results call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your touch-tone phone. To withdraw your question, Please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Tyler Durr from Lambert Mercantile's Investor Relations Firm. Please go ahead.

Thanks, Grant. Good morning, everyone, and thank you for joining Mercantile Bank Corporation's conference call and webcast to discuss the company's financial results for the fourth quarter of 2020. I'm Tyler Durr with Lambert IR, Mercantile's Investor Relations Firm. And joining me today are members of their management team, including Bob Kaminski, President and Chief Executive Officer, Chuck Christmas, Executive Vice President and Chief Financial Officer, and Ray Reismuth, President of Mercantile Bank Michigan. We'll begin the call with management's prepared remarks and presentation to review the quarter's results, then open the call up to questions. However, before I begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements, such as projections of revenue, earnings, and capital structure, as well as statements on the plans and objectives of the company's business. The company's actual results could differ materially from any forward-looking statements made today, due to the factors described in the company's latest Securities and Exchange Commission filing. The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the fourth quarter 2020 press release and presentation deck issued by Mercantile Today, You can access it at the company's website, www.merckbank.com. At this time, I would like to turn the call over to Merck Vitale's President and Chief Executive Officer, Bob Kaminski. Bob?

Thanks, Tyler, and good morning, everyone. On the call this morning, we will provide you with detailed information on the company's performance in the fourth quarter and full year amidst an unprecedented and challenging operating environment, as well as an update on continued activities specifically related to the pandemic. As we reflect on 2020, it is paramount that I again applaud the incredible efforts of our dedicated Mercantile team for their immense resiliency and adaptability across the board to navigate the many unique challenges presented from the pandemic throughout the year. As we have consistently stated throughout the pandemic, our focus has been on the health and safety of our employees and customers which has required flexibility from all team members who have transparently adapted to working remotely and in new environments. The efforts of our entire staff helped Mercantile deliver strong results again in the fourth quarter and throughout 2020, while successfully pivoting with our customers as needed to fulfill their banking needs in a variety of ways. This positivity is reflected in Mercantile's strong financial performance again in the fourth quarter and with per share earnings of 87 cents. Our company's sustained areas of financial strength allowed our board to increase our regular cash dividend for the first quarter of 2021 to 29 cents per share. We are pleased to provide a consistent and competitive cash return to our shareholders within this often challenging environment. And after electing to pause stock repurchases in March, We have also reinstated our buyback program during the fourth quarter as a result of our structured framework and prudent focus on maintaining strong capital levels. Chuck will provide further updates on the many moving parts of our financial statements for the quarter end and year-to-date 2020. As mentioned throughout 2020 and across our day-to-day operations, the safety of our employees and customers remains our top priority. using the guidelines and best practices of government agencies, including the CDC. While our facilities reopened in late June, growing concern and increased cases in Michigan led us to again close our branches for in-person meetings in November. Our team and clients have adapted seamlessly to alternative methods of banking activity engagement as we continue to closely monitor for developments and revise our plans accordingly. The full timeline of COVID-related activities can be viewed on slide 10 of our deck. Our lending team's efforts on the forgiveness phase of the PPP program continued into the fourth quarter as we worked to assist clients with the gathering and submitting of the required information to allow the rendering of a forgiveness determination by the SBA. Additionally, As we enter the early weeks of 2021 with the latest government stimulus package, work on a new round of PPP applications has begun. The efficient efforts of our lending group have been recognized across the marketplace, helping to create a new loan and deposit customer relationship opportunities with numerous businesses within our communities that face challenges in the application process through incumbent banks. Having met the PPP needs of these new clients in the application process, we are now in a position to capitalize on these efforts to grow those relationships. This adaptability has been matched by the perseverance shown within our local economies, and we are thrilled to partner with these resilient companies. Our team's commitment to our markets is illustrated by our engagement with these businesses to further advance our collective work as we strive toward economic recovery and growth. Although our team devoted a significant amount of time assisting both new and existing customers in meeting pandemic-related challenges, we remain focused on identifying and attracting new client relationships and continuing to meet the traditional needs of our existing customers. Ray will provide you with a full update on the performance of our loan portfolio later on this call. Our asset quality remained very strong throughout 2020. as did our unwavering focus on sound credit underwriting, which has led to low levels of past dues and non-performing assets. Our ability to deliver a record-breaking level of mortgage banking income in 2020 reflects our strong residential mortgage loan production and ongoing success of strategic initiatives that we designed to boost market share and increase revenue. Our team has continued their efforts toward ensuring a strong pipeline and levels remain incredibly solid even through the seasonality of the winter months. We remain focused on positioning ourselves to produce solid mortgage banking income in future periods as evidenced by the opening of mortgage lending centers in Midland, Michigan and Cincinnati, Ohio during 2020. Our lenders have done a magnificent job within a difficult climate and our teams have leveraged opportunities to seize pent-up demand and increase market penetration to enhance revenue, achieving strong residential mortgage loan production levels. Again, matching the efficiencies of our teams across the board, our residential mortgage group put forth a tremendous effort to ensure the entire loan origination process, from the receipt of an application to closing, is completed in a structured and timely manner. And as mentioned earlier in my comments, our diligence and adaptability throughout the year has created significant competitive advantage and opened doors to new and exciting potential relationships. Ray and Chuck will share more detail on this in their comments. Turning to operations, with our ongoing strategic focus on digital delivery in conjunction with branch optimization, we continue to engage our customers through a holistic and personalized approach to their needs, as their patterns and preferences of interaction with us are evolving. especially in view of the challenges brought about by COVID-19. The deployment of technology as an alternative delivery channel has been a strategy of Mercantile for many years. We consistently aim to analyze and evaluate our interactions across the board, conforming to industry best practices while leveraging data to best capture efficiencies, customize client engagement, and refine internal systems. Our current footprint and summary of strategic initiatives can be viewed on slides three and four of the deck. Our strategic initiatives also demonstrate an ongoing focus on our people and reinforces our commitment to pursuing best practices in environmental, social, and governance, with particular emphasis on the social component. Our board of directors, which included 2020 introductions of members with diverse business experience, our management team, and all of our employees remain committed to fulfilling their continually evolving roles as purposeful and dedicated community leaders. Throughout 2020, we have expanded our internal diversity, equity, and inclusion programs and facilitated ongoing engagement with guest speakers whom we have brought in virtually to provide forums for our employees. We have had ongoing purpose-driven discussions within our organization where staff are able to listen and learn about our community and introspection about themselves as this must be the way of life for us all. Our management group, ESG committee, and our entire team are firmly committed to enhancing these sound corporate practices built on integrity and trust while working diligently to cultivate and strengthen our critical relationships with our diverse communities, our employees, our customers, and our shareholders. In late 2020, our team decided that we needed to take some bold action to help address the hunger and shelter crises in our communities. So we partnered with local nonprofit agencies to invest $100,000 as a direct donation for the purchase of items to help support these basic human needs across our markets. We challenged ourselves as an organization and as individuals for continual involvement, improvement, and progress. We set a high bar as we engage our diverse relationships in all facets of our work. We are incredibly pleased with our efforts in 2020 across all levels of our operation, as we have built incredible foundations to sustain and continue the development of these initiatives toward the collective future success of all of our constituents. Those are my introductory remarks, and I'll turn the call over to Ray.