Mercantile Bank Corporation

Good morning, and welcome to the Mercantile Bank Corporation fourth quarter 2022 earnings results conference call. All participants will be in a listen-only mode. Should you need any assistance during the call, 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 telephone keypad. To withdraw a question, please press star, then two. Please note that this event is being recorded. I would now like to turn the conference over to Julia Ward, Lambert Investor Relations. Please go ahead.

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 and full year of 2022. Joining me today are members of Mercantile's management team, including Bob Kaminsky, President and Chief Executive Officer, Chuck Christmas, Executive Vice President and Chief Financial Officer, and Ray Reichmar, Chief Operating Officer and President of the Bank. We will begin the call with management's prepared remarks and presentation to review the quarter's results, then open the call to questions. Before turning the call over to management, 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 factors described in the company's latest Securities and Exchange Commission's 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 2022 press release and presentation deck issued by Mercantile today, you can access it at the company's website at www.mercbank.com. At this time, I'd like to turn the call over to Mercantile's President and Chief Executive Officer, Bob Kaminski.

Thank you, Julia. And thanks to all of you for joining us on the conference call today. Mercantile released its December 31st financial results this morning, which reported another strong quarter, finishing 2022 with continued success in numerous performance metrics. Highlights for the fourth quarter include continued increases in net interest margin, rising to more normal ranges for Mercantile, which drove strong profitability in the quarter, solid growth in many fee income categories, continuation of our strong asset quality, disciplined control of overhead expenses, and while loan growth was dampened by some loan payoffs, customer relationship building by the sales staff continued to generate successes and pipelines remained strong. For the fourth quarter, Mercantile produced earnings of $1.37 per share on revenues of $58.4 million. Full-year 2022 earnings were $3.85 per share on revenues of $190.3 million. This morning, we also announced a cash dividend of $0.33 per share, payable on March 15, 2023. This represents a 3% increase over the fourth quarter dividend. Ray will have more information on the loan portfolio, fee income, and other operational topics, and Chuck will provide more detail on overall financial performance for the quarter and full year as well as some guidance on our performance in 2023. The Michigan economy continues to perform at a level we would describe as steady. Unemployment is only slightly higher at 4.3% in November compared to 4.1% at the end of the third quarter, but lower than what it was at January 1, 2022, when it was 5.1%. Mercantile bankers and our clients continue to prepare and position for a potential economic downturn of some sort. Customers have been able to absorb higher interest costs thus far. This seems to reflect the strong balance sheets and robust performance coming out of the pandemic. The real estate sector, most notably multifamily housing, has demonstrated some signs of reduced activity toward the end of 2022 as a result of higher borrowing costs. and the level of new projects has slowed. Our overall pipeline, however, remains very healthy. Our team continues to diligently monitor our client base and engage our borrowers so that we understand their financial condition and any challenges they may be encountering. We remain very pleased with the performance of our customers and their ability to navigate an economic slowdown. Should difficulties arise, however, the deep customer knowledge of our bankers allows them to provide meaningful feedback and counsel to assist the borrowers and ultimately help manage risk for the bank. The loan portfolio, however, continues to be very strong. While our senior management team is keenly focused on maneuvering through near-term economic conditions, we eagerly look forward to the future with much anticipation to craft strategies for long-term sustainability and success of our company. Our team ensures comprehensive plans are in place to create, develop, and leverage opportunities for growth and excellence in performance in our existing markets as well as potential new markets. An important key to future success is maintaining a steady pipeline of new talent entering our organization and the ongoing development and training of all employees so they can help us achieve our strategic initiatives. Relationship-focused banking allows us to understand the client's immediate and long-term needs and design and implement products to fulfill those needs. Attainment of these objectives allows our company to provide best-in-class service to our customers, demonstrate peer-leading performance, and provide attractive returns for our shareholders. In closing my initial comments, I want to thank the Mercantile team for their excellent work in the fourth quarter and throughout 2022. Each day our staff members engage our clients and demonstrate the Mercantile way of relationship banking. Consumers and businesses have seemingly endless choices for their financial needs. For 25 years, customers in our markets have discovered the benefits of banking with Mercantile. As a result, Mercantile has grown consistently and profitably for its shareholders and proven to be a strong partner for the communities we serve. Those are my prepared remarks, and I'll now turn the call over to Ray.