Mercantile Bank Corporation

Good morning and welcome to the Mercantile Bank Corporation 2026 third quarter earnings results conference call. All participants will be in a 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. Please note this event is being recorded. I would now like to turn the conference call over to Nicole Clatter, Chief Marketing Officer of Mercantile Bank. Please go ahead.

Hello and thank you for joining us. Today we will cover the company's financial results for the third quarter of 2026. The team members joining me this morning include Ray Reitsma, President and Chief Executive Officer, as well as Chuck Christmas, Executive Vice President and Chief Financial Officer. Thank you so much for joining us. After our prepared remarks, we will then open the call to your questions. Before we begin, 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. Thank you, Nicole.

Our results from the third quarter continue to build on the theme of commercial expertise generating a strong return profile. My comments will focus on highlights around the net interest margin, loan and deposit growth, asset quality, non-interest income, and non-interest expense. Chuck will then follow with the specifics of the quarter. The net interest margin improved to 3.73% during the third quarter of 2026. from 3.49% during the third quarter of 2025. This improvement was driven largely by a reduction in the cost of funds resulting from the acquisition of Eastern and the refinement of our deposit base, including a decrease in broker deposits and the repricing of fixed rate loans and securities with continued opportunities for asset repricing in 2026 and 2027. In addition, the margin expansion occurred in a dynamic interest rate environment. from the third quarter of 2025 to the first quarter of 2026, SOFR declined by 67 basis points and our net interest margin increased by six basis points. From the first quarter of 2026 to the third quarter of 2026, SOFR was unchanged and our net interest margin increased by 18 basis points, highlighting the impact of the actions listed above. The chart on page 11 of the investor presentation illustrates these dynamics. Turning to loans, commercial loans, our largest asset class, increased 9% from the prior year-end quarter end and helped drive a 17% increase in revenue compared with the third quarter of 2025. that growth occurred despite elevated pay downs from asset and business sales, excess cash flow and refinancing to the secondary markets totaling $448 million for the nine months ending 9-30-2026 compared to 306 million during their respective 2025 period. At the same time, lending commitments including unfunded portions of construction loans stand at a five quarter high of $589 million September 30, 2026 compared to $386 million at 930, 2025. Asset quality continues to be strong with non-performing assets representing only 14 basis points and 16 basis points of total assets at September 30, 2026 and September 30, 2025, respectively. Pass-through loans stand at just three basis points of total loans as of September 30, 2026. CNI and owner-occupied commercial real estate remain near our target of 55% of the commercial portfolio and Thank you for watching. On the funding side, our focus on deposits continues to produce results. Total deposits increased 17% over the last 12 months ending September 30, 2026, including 22% growth in non-interest bearing deposits and 15% growth in interest bearing deposits. This growth principally reflects growth in commercial relationships, development of relationships in the public funds markets, and of course, the acquisition of Eastern Michigan Bank. Importantly, Overall deposit growth occurred as certificates of deposit declined by approximately $180 million over the same period. This decline primarily represents brokered CDs, and as a result, the overall quality of our funding mix continues to improve while our reliance on higher cost term funding continues to decline. Non-interest income in total increased 16% during the first nine months of 2026, compared to the respective 2025 period including a 34% increase in service charges on accounts, a 22% increase in credit and debit card income, and an 11% increase in swap income in large part reflecting growth in commercial relationships. We have characterized 2026 as a year of investment around people and technology, including a change in our core systems provider, which is reflected in our non-interest expense. Investments in people include additional costs around the company in general, and particularly in Southeast Michigan, as we take the opportunity afforded by disruptions in that market. Chuck will comment on what our normalized run rate will look like in upcoming quarters. We remain excited about our combination with Eastern and the opportunities to add customers and employees to our bank as we capitalize on disruptions to markets in Michigan, particularly Southeast Michigan. That concludes my remarks. I will now turn the call over to Chuck.