Financial Performance - Net income for Q3 2025 was $23.8 million, or $1.46 per diluted share, compared to $19.6 million, or $1.22 per diluted share in Q3 2024, reflecting a growth of 21.4%[205] - Net income for the first nine months of 2025 was $65.9 million, or $4.06 per share, compared to $60.0 million, or $3.72 per share, for the same period in 2024[253] - Income before federal income tax for Q3 2025 was $27.5 million, up from $24.5 million in Q3 2024, with a total of $77.4 million for the first nine months of 2025 compared to $75.1 million in 2024[269] - Federal income tax expense decreased to $3.7 million in Q3 2025 from $4.9 million in Q3 2024, with an effective tax rate of 13.4%[214] - The effective tax rate improved to 13.4% in Q3 2025 from 20.1% in Q3 2024, largely due to tax benefits from transferable energy tax credits[270] Asset and Deposit Growth - Total assets increased by $256 million during the first nine months of 2025, reaching $6.31 billion as of September 30, 2025[216] - Total deposits increased by $113 million during the first nine months of 2025, with money market deposit accounts growing by $149 million[210] - Uninsured deposits reached approximately $2.6 billion, or about 54% of total deposits, as of September 30, 2025, compared to approximately $2.2 billion, or 46% of total deposits, as of December 31, 2024[238] - Sweep accounts increased by $130 million during the first nine months of 2025, with an average balance of $239 million[245] Loan Performance - Commercial loans increased by $43.0 million in the first nine months of 2025, resulting in an annualized growth rate of approximately 2%[206] - As of September 30, 2025, total commercial loans amounted to $3.75 billion, representing 81.3% of total loans, up from $3.71 billion or 80.6% as of December 31, 2024[217] - Residential mortgage loans totaled $781 million, or 16.9% of total loans, with a decrease of $46.7 million during the first nine months of 2025[219] - Nonperforming loans represented 0.21% of total loans as of September 30, 2025, indicating strong loan portfolio quality[208] - Nonperforming loans totaled $9.8 million, or 0.2% of total loans, compared to $5.7 million, or 0.1% of total loans, as of December 31, 2024[223] Income and Expense Analysis - Net interest income rose by $3.7 million in Q3 2025 compared to Q3 2024, driven by solid loan growth despite a decline in net interest margin[211] - Noninterest income totaled $10.4 million in Q3 2025, up from $9.7 million in Q3 2024, primarily due to increased service charges and payroll services income[212] - Noninterest income increased to $10.4 million in Q3 2025, up $0.7 million or 7.5% from $9.7 million in Q3 2024, driven by growth in treasury management and payroll services fees[266] - Noninterest expense rose to $34.8 million in Q3 2025 from $32.3 million in Q3 2024, and totaled $99.2 million for the first nine months of 2025, compared to $92.0 million in 2024, primarily due to higher salary and benefit costs[268] Interest Income and Margin - Interest income for the third quarter of 2025 was $85.6 million, an increase of $2.2 million, or 2.7%, from the prior year[255] - Interest income for the first nine months of 2025 was $248 million, an increase of $8.9 million, or 3.7%, from $239 million in the same period of 2024[256] - The yield on average earning assets decreased to 5.75% in the third quarter of 2025 from 6.08% in the prior year, primarily due to lower interest rates on variable-rate commercial loans[255] - The net interest margin decreased to 3.49% in the first nine months of 2025, down from 3.62% in the same period of 2024[261] - The yield on loans was 6.33% during the first nine months of 2025, down from 6.66% in the same period of 2024[261] Credit Losses and Provisions - The allowance for credit losses is maintained at a level deemed adequate to absorb estimated credit losses, reflecting ongoing evaluations based on economic conditions[200] - The company recorded provision expense of $3.9 million during the first nine months of 2025, primarily due to specific allocations related to a commercial construction loan[208] - Provisions for credit losses were $0.2 million in Q3 2025, compared to $1.1 million in Q3 2024, with total provisions for the first nine months of 2025 at $3.9 million versus $5.9 million in 2024[265] Capital and Equity - Shareholders' equity increased by $73.1 million, totaling $658 million as of September 30, 2025, driven by net income of $65.9 million and a $21.3 million increase in market value of available-for-sale securities[241] - The total regulatory capital increased by $33.4 million during the first nine months of 2025, totaling $793 million, which is $236 million above the 10% minimum requirement[252] Interest Rate Risk Management - The company recorded a net asset GAP of $291.4 million within three months as of September 30, 2025, indicating a positive interest rate risk position[275] - Interest rate risk management includes GAP analysis and net interest income simulation analysis, with the latter being the primary measurement technique[278] - Under various interest rate scenarios, a 400 basis point decrease in rates could lead to a $31.7 million or 14.0% decline in net interest income[281] - Future net interest income is influenced by loan growth, economic conditions, and client preferences, among other factors[282]

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Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong year-over-year growth [8] - Net income for the first nine months of 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the same period of 2024 [8] - The return on average assets was 1.5% and return on average equity was 14.7% for Q3 2025, with a 20% quarter-over-quarter earnings per share growth [7][8] Business Line Data and Key Metrics Changes - Annualized deposit growth for Q3 2025 was 9%, with a compounded annual growth rate of 11.8% over the last six year-end periods [5] - Loan growth contracted an annualized 7% in Q3 2025, attributed to anticipated loan paydowns, but commitments to make loans totaled $307 million, an all-time high [5][6] - Mortgage banking income grew by 12% during the first nine months of 2025 compared to the same period in 2024 [6] Market Data and Key Metrics Changes - Average loans totaled $4.6 billion in Q3 2025, an increase of $201 million or over 4% from Q3 2024 [9] - Average deposits increased to $4.83 billion in Q3 2025, up $489 million or over 11% from Q3 2024 [11] - The loan-to-deposit ratio improved to 96% from 102% a year earlier, indicating better liquidity management [4] Company Strategy and Development Direction - The company is focused on maintaining a strong and stable net interest margin, with a current margin of 3.5% despite a decline in the SOFR rate [3] - The planned acquisition of Eastern Michigan Financial Corporation is expected to positively impact net interest margin and overall financial metrics [7][20] - The company aims to manage its balance sheet to minimize the impact of changing interest rate environments on net interest margin [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions, highlighting strong asset quality and a commitment to excellence in underwriting [22] - The company projects loan growth in the range of 5% to 7% annualized for Q4 2025, despite potential headwinds from federal funds rate cuts [21] - Management anticipates that net interest margin will remain steady, supported by strategic initiatives and the upcoming acquisition [30] Other Important Information - The company recorded a provision expense of $0.2 million for Q3 2025, reflecting strong credit quality and net recoveries [16] - Non-interest expenses increased by $2.4 million in Q3 2025, primarily due to higher salary and benefit costs [18] - The effective tax rate for Q3 2025 was 13%, influenced by the acquisition of transferable energy tax credits [19] Q&A Session Summary Question: Inquiry on credit quality and normalized charge-off ratio - Management noted a conservative approach to charge-offs and a typical budget of 5% to 10% for net charge-offs [26][27] Question: Discussion on net interest margin and future rate cuts - Management acknowledged that while rate cuts may pose a headwind, the acquisition will provide benefits to net interest margin [28][30] Question: Clarification on loan paydowns and growth guidance - Management explained that paydowns were recognized in Q3 and indicated that loan growth guidance remains at 5% to 7% for Q4 [38][41] Question: Inquiry on expense expectations and acquisition costs - Management confirmed that the guidance for Q4 includes about $1 million in acquisition costs, with other expenses expected to stabilize [42][70] Question: Discussion on fee income growth and commercial card programs - Management highlighted strong growth in debit and credit card income, driven by increased transaction volumes [71][73]

Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong performance [8] - Net income for the first nine months of 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the prior year [8] - The return on average assets was 1.5% and return on average equity was 14.7% for Q3 2025, with a 20% quarter-over-quarter earnings per share growth [7][8] Business Line Data and Key Metrics Changes - Annualized deposit growth was 9% for Q3 2025, with a compounded annual growth rate of 11.8% over the last six year-end periods [5] - Loan growth contracted an annualized 7% in Q3 2025, attributed to anticipated paydowns, but commitments to make loans totaled $307 million, an all-time high [5][6] - Mortgage banking income grew by 12% during the first nine months of 2025 compared to the same period in 2024 [6] Market Data and Key Metrics Changes - Average loans totaled $4.6 billion in Q3 2025, an increase of $201 million or over 4% from Q3 2024 [9] - Average deposits increased to $4.83 billion in Q3 2025, up $489 million or over 11% from the prior year [11] - The loan-to-deposit ratio improved to 96% from 102% a year earlier, indicating better liquidity management [4] Company Strategy and Development Direction - The company is focused on maintaining a strong and stable net interest margin, which stood at 3.5% despite a decline in the SOFR rate [3][4] - The planned acquisition of Eastern Michigan Financial Corporation is expected to positively impact various financial metrics, including earnings accretion and tangible book value [7] - The company aims to manage its balance sheet to minimize the impact of changing interest rate environments on its net interest margin [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions, highlighting strong asset quality and a robust pipeline for loan growth [22] - The company anticipates loan growth in the range of 5% to 7% annualized for Q4 2025, with expectations for continued strong performance in non-interest income [21][41] - Management noted that the effective tax rate for Q3 2025 was 13%, with projections for a similar rate in the future, depending on the acquisition of transferable energy tax credits [19][51] Other Important Information - The company recorded a provision expense of $0.2 million for Q3 2025, reflecting strong credit quality and net recoveries [16] - Non-interest expenses increased by $2.4 million in Q3 2025, primarily due to higher salary and benefit costs [18] - The total risk-based capital ratio was 14.3% as of September 30, 2025, indicating a well-capitalized position [20] Q&A Session Summary Question: Inquiry about credit quality and normalized charge-off ratio - Management noted a conservative approach to charge-offs and typically budgets between 5% and 10% in net charge-offs [26][27] Question: Discussion on net interest margin and future expectations - Management indicated that the acquisition will benefit the net interest margin, despite potential headwinds from rate cuts [28][30] Question: Clarification on loan paydowns and growth guidance - Management explained that paydowns recognized in Q3 were anticipated, and they expect continued mid-single-digit loan growth [39][41] Question: Inquiry about expense expectations and acquisition costs - Management confirmed that the guidance for Q4 includes about $1 million in acquisition costs, with no income statement impact from Eastern until the merger is finalized [44][70] Question: Discussion on fee income growth and expectations - Management highlighted strong growth in the commercial card program, attributing it to increased volume and customer engagement [71]

Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong year-over-year growth [9] - Net income for the first nine months of 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the prior year [9] - The return on average assets was 1.5% and return on average equity was 14.7% for Q3 2025, with a 20% quarter-over-quarter earnings per share growth [8] Business Line Data and Key Metrics Changes - Annualized deposit growth for Q3 2025 was 9%, with a compounded annual growth rate of 11.8% over the last six year-end periods [5] - Loan growth contracted an annualized 7% in Q3 2025, attributed to anticipated loan paydowns, but commitments to make loans totaled $307 million, an all-time high [5][8] - Mortgage banking income grew by 12% during the first nine months of 2025 compared to the same period in 2024 [7] Market Data and Key Metrics Changes - Average loans totaled $4.6 billion in Q3 2025, an increase of $201 million or over 4% from Q3 2024 [10] - Average deposits increased to $4.83 billion in Q3 2025, up $489 million or over 11% from the prior year [12] - The loan-to-deposit ratio improved to 96% from 102% a year earlier, indicating better liquidity management [4] Company Strategy and Development Direction - The company is focused on maintaining a strong net interest margin, which stood at 3.5%, despite a decline in the SOFR rate [3] - The planned acquisition of Eastern Michigan Financial Corporation is expected to positively impact key financial metrics, including earnings accretion and tangible book value [8] - The company aims to manage its balance sheet to minimize the impact of changing interest rate environments on its net interest margin [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions and highlighted a strong pipeline for loan growth [24] - The company anticipates loan growth in the range of 5% to 7% annualized for Q4 2025, despite potential headwinds from rate cuts [23] - Management noted that credit quality remains strong, with expectations for continued net recoveries [29] Other Important Information - The company’s total risk-based capital ratio was 14.3% as of September 30, 2025, indicating a well-capitalized position [22] - The effective tax rates for Q3 and year-to-date 2025 were 13% and 15%, respectively, benefiting from transferable energy tax credits [20] Q&A Session Summary Question: Credit quality and normalized charge-off ratio - Management noted net recoveries in seven of the past eight quarters and budgeted for net charge-offs between 5% and 10% historically [29][31] Question: Net interest margin outlook - Management indicated that the acquisition will benefit the net interest margin, despite potential headwinds from rate cuts [32][34] Question: Loan growth guidance and paydowns - Management clarified that paydowns recognized in Q3 were anticipated and that loan growth guidance remains at 5% to 7% for Q4 2025 [42][45] Question: Expense expectations - Management confirmed that the expense guidance for Q4 includes merger charges but not operational costs from the acquisition [46][75] Question: Tax rate expectations for 2026 - Management projected a tax rate of around 17.5% to 18% without additional energy tax credits, but closer to 16% if credits are maximized [57] Question: Credit trends and provision expectations - Management suggested that the provision for Q4 could be similar to earlier quarters, given strong credit quality [59]

Financial Data and Key Metrics Changes - The company reported net income of $23.8 million or $1.46 per diluted share for Q3 2025, compared to $19.6 million or $1.22 per diluted share for Q3 2024, reflecting a strong performance [12] - Year-to-date net income for 2025 totaled $65.9 million or $4.06 per diluted share, up from $60 million or $3.72 per diluted share in the prior year [12] - The return on average assets was 1.5% and return on average equity was 14.7% for 2025, with a 20% quarter-over-quarter growth in earnings per share [10][11] Business Line Data and Key Metrics Changes - Loans contracted an annualized 7% in Q3 2025, attributed to anticipated paydowns, but commitments to make loans reached an all-time high of $307 million, exceeding the average of the prior four quarters by 32% [8][10] - Deposit growth for 2025 was annualized at 9%, with a compounded annual growth rate of 11.8% over the last six years [7] - Service charges on accounts increased by 18% during the first nine months of 2025, driven by growth in commercial deposit relationships [9] Market Data and Key Metrics Changes - The loan-to-deposit ratio improved to 96% as of Q3 2025, down from 102% a year prior, indicating better liquidity management [6] - Average loans increased to $4.6 billion in 2025, a growth of over 4% from $4.47 billion in 2024 [13] - Average deposits grew to $4.83 billion in 2025, up by $489 million or over 11% from the previous year [14] Company Strategy and Development Direction - The company is focused on maintaining a stable net interest margin, which stood at 3.5%, despite a decline in the SOFR rate [4][17] - The planned acquisition of Eastern Michigan Financial Corporation is expected to contribute positively to the company's financial metrics, including earnings accretion and tangible book value [11][22] - The company aims to manage its balance sheet effectively to minimize the impact of changing interest rate environments on its net interest margin [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating challenges faced by financial institutions and highlighted a strong pipeline for loan growth [23] - The company projects loan growth in the range of 5% to 7% annualized for Q4 2025, despite potential headwinds from federal rate cuts [22] - The effective tax rate for 2025 is projected at 15%, with expectations for continued tax benefits from energy tax credits [20][56] Other Important Information - The company’s total risk-based capital ratio was 14.3% as of Q3 2025, significantly above the minimum threshold for well-capitalized status [21] - Tangible book value per common share increased by 13% during the first nine months of 2025, reflecting retained earnings growth [21][22] Q&A Session Summary Question: Credit quality and normalized charge-off ratio - Management noted net recoveries in seven of the past eight quarters and budgeted for net charge-offs between five and ten basis points [28][29] Question: Net interest margin outlook - Management indicated that the acquisition will benefit the interest margin, and despite rate cuts, they expect the net interest margin to remain steady [31][32] Question: Loan paydowns and growth guidance - Management confirmed that paydowns recognized in Q3 were anticipated and indicated that loan growth could be higher than the 5% to 7% guidance for Q4 [39][43] Question: Expense expectations for Q4 - Management clarified that the Q4 guidance includes acquisition costs but not operational expenses from Eastern Michigan [44][71] Question: Tax rate expectations for 2026 - Management projected a tax rate of around 17.5% to 18% without additional energy credits, but with potential credits, it could be closer to 16% [56][57]

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Financial Performance & Profitability - Mercantile achieved a 20% quarter-over-quarter EPS growth, with EPS reaching $1.46 in 3Q25 compared to $1.22 in 3Q24[11] - The company reported a Return on Average Assets (ROAA) of 1.50% and a Return on Average Equity (ROAE) of 14.72% in 3Q25[11] - Mercantile maintained a stable net interest margin of 3.50% in 3Q25, slightly down from 3.52% in 3Q24, despite a lower interest rate environment[11] - Tangible book value per share increased by 13% to $37.41 at the end of 3Q25, compared to $33.07 at the end of 3Q24[11] Loan & Deposit Portfolio - Commercial loans contracted by 7% (annualized) in 3Q25, attributed to large and anticipated paydowns[11] - Total deposits grew by 9% (annualized) in 3Q25[11] - The loan-to-deposit ratio decreased to 96% at the end of 3Q25, compared to 102% at the end of 3Q24[11] Asset Quality & Capital - The nonperforming assets to total assets ratio was 0.16% at the end of 3Q25[11] - Net loan charge-offs to average loans were (0.05)% annualized in 3Q25[11] - The CET1 capital ratio was 11.4% at the end of 3Q25, up from 10.5% at the end of 3Q24[11] Strategic Initiatives & Outlook - The company expects loan growth between 5% and 7% (annualized) for the fourth quarter[92] - Mercantile anticipates a net interest margin between 3.40% and 3.50% for the fourth quarter[92] - The acquisition of Eastern Michigan Financial Corporation (EFIN) is expected to close in Q4 2025, projecting approximately 11% fully phased-in GAAP EPS accretion[127, 129]

Executive Summary & Highlights Mercantile Bank Corporation reported strong financial performance for the third quarter and first nine months of 2025, with significant increases in net income and diluted earnings per share compared to the prior year periods [Overall Performance](index=1&type=section&id=Overall%20Performance) Mercantile Bank Corporation reported strong financial performance for the third quarter and first nine months of 2025, with significant increases in net income and diluted earnings per share compared to the prior year periods | Metric | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 | | :----------------- | :---------- | :---------- | :---------- | :---------- | | Net Income | $23.8 million | $19.6 million | $65.9 million | $60.0 million | | Diluted EPS | $1.46 | $1.22 | $4.06 | $3.72 | [Key Financial & Operational Highlights](index=1&type=section&id=Key%20Financial%20%26%20Operational%20Highlights) The quarter was characterized by robust operating results, including net interest income expansion, stable net interest margin, growth in certain noninterest income categories, a notable decline in federal income tax expense, strong local deposit growth, and continued strength in asset quality and capital measures - Return on average assets: **1.50%**[2](index=2&type=chunk) - Return on average equity: **14.72%**[2](index=2&type=chunk) - Tangible book value per common share: **$37.41** as of September 30, 2025, up approximately **13%** since year-end 2024[2](index=2&type=chunk) - Net interest income expansion: nearly **8%**[2](index=2&type=chunk) - Treasury management and payroll services fees increased by approximately **11%** and **16%**, respectively[2](index=2&type=chunk) - Effective tax rate decreased from approximately **20%** in Q3 2024 to approximately **13%** in Q3 2025 due to tax credits[2](index=2&type=chunk) - Loan-to-deposit ratio reduced from **102%** as of September 30, 2024, to **96%** as of September 30, 2025, reflecting robust local deposit growth[2](index=2&type=chunk) - Announced planned partnership with Eastern Michigan Financial Corporation[2](index=2&type=chunk) Operating Results Mercantile Bank Corporation's operating results for Q3 and 9M 2025 show increased net revenue and net interest income, influenced by changes in net interest margin, provision for credit losses, noninterest income, noninterest expense, and federal income tax expense [Net Revenue & Net Interest Income](index=2&type=section&id=Net%20Revenue%20%26%20Net%20Interest%20Income) Net revenue increased by 7.6% to $62.4 million in the third quarter of 2025, primarily driven by a 7.7% expansion in net interest income to $52.0 million, as growth in earning assets more than offset a slightly lower net interest margin | Metric | Q3 2025 | Q3 2024 | Change ($) | Change (%) | | :------------------ | :---------- | :---------- | :----------- | :----------- | | Net Revenue | $62.4 million | $58.0 million | $4.4 million | 7.6% | | Net Interest Income | $52.0 million | $48.3 million | $3.7 million | 7.7% | [Net Interest Margin & Cost of Funds](index=2&type=section&id=Net%20Interest%20Margin%20%26%20Cost%20of%20Funds) The net interest margin marginally decreased to 3.50% in Q3 2025 from 3.52% in Q3 2024. This was influenced by a lower yield on loans due to FOMC rate cuts and a strategic shift in earning asset mix towards lower-yielding securities, partially offset by a reduced cost of funds | Metric | Q3 2025 | Q3 2024 | | :-------------------------- | :-------- | :-------- | | Net Interest Margin | 3.50% | 3.52% | | Yield on Average Earning Assets | 5.75% | 6.08% | | Yield on Loans | 6.38% | 6.69% | | Cost of Funds | 2.25% | 2.56% | - Lower loan yield primarily due to FOMC lowering the targeted federal funds rate by **50 basis points** in September 2024 and **25 basis points** in November and December 2024, and a further **25 basis point** reduction in September 2025[4](index=4&type=chunk) - Higher-yielding loans represented a decreased percentage of earning assets and lower-yielding securities accounted for an increased percentage, reflecting a strategic initiative to lower the loan-to-deposit ratio and increase on-balance sheet liquidity[4](index=4&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) Provision for credit losses significantly decreased to $0.2 million in Q3 2025 from $1.1 million in Q3 2024. The current quarter's provision mainly reflected an increase for a specific commercial construction loan and qualitative factor allocations, partially offset by faster residential mortgage prepayments and a net decline in the loan portfolio | Metric | Q3 2025 | Q3 2024 | | :-------------------------- | :---------- | :---------- | | Provision for Credit Losses | $0.2 million | $1.1 million | - Q3 2025 provision included a **$3.1 million** increase in specific allocation for a nonaccrual commercial construction loan and a **$0.9 million** net increase in qualitative factor allocations[6](index=6&type=chunk) - Positive impacts on provision levels from net loan recoveries and sustained strength in loan quality metrics[6](index=6&type=chunk) [Noninterest Income](index=3&type=section&id=Noninterest%20Income) Noninterest income increased by 7.5% to $10.4 million in Q3 2025, primarily driven by growth in treasury management and payroll services fees, which more than offset a reduction in mortgage banking income | Metric | Q3 2025 | Q3 2024 | Change ($) | Change (%) | | :------------------ | :---------- | :---------- | :----------- | :----------- | | Total Noninterest Income | $10.4 million | $9.7 million | $0.7 million | 7.5% | - Treasury management fees grew approximately **11%**, and payroll services fees grew approximately **16%**[7](index=7&type=chunk) - Mortgage banking income decreased due to a change in the quarter-end fair value of commitments to originate salable residential mortgage loans[7](index=7&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense rose to $34.8 million in Q3 2025 from $32.3 million in Q3 2024, mainly due to higher salary and benefit costs, acquisition costs related to the planned partnership with Eastern Michigan Bank Corporation, and increased data processing costs | Metric | Q3 2025 | Q3 2024 | | :------------------ | :---------- | :---------- | | Total Noninterest Expense | $34.8 million | $32.3 million | - Increase primarily resulted from higher salary and benefit costs (annual merit pay, market adjustments, lower residential mortgage loan deferred salary costs)[8](index=8&type=chunk) - Acquisition costs related to the Eastern Michigan Bank Corporation partnership and increased data processing costs also contributed to the rise[8](index=8&type=chunk) [Federal Income Tax Expense](index=3&type=section&id=Federal%20Income%20Tax%20Expense) Federal income tax expense decreased significantly to $3.7 million in Q3 2025 from $4.9 million in Q3 2024, resulting in a lower effective tax rate of 13.4% (down from 20.1%) due to the acquisition of transferable energy tax credits and net benefits from investments in tax credit structures | Metric | Q3 2025 | Q3 2024 | | :-------------------------- | :---------- | :---------- | | Federal Income Tax Expense | $3.7 million | $4.9 million | | Effective Tax Rate | 13.4% | 20.1% | - Aggregate tax benefits of **$1.0 million** from transferable energy tax credits and **$0.7 million** from investments in tax credit structures[9](index=9&type=chunk) Balance Sheet Analysis Mercantile Bank Corporation's balance sheet as of September 30, 2025, shows growth in total assets and loans, an increase in deposits, a reduced loan-to-deposit ratio, and consistent commercial loan portfolio composition [Total Assets & Loans](index=3&type=section&id=Total%20Assets%20%26%20Loans) Total assets grew to $6.31 billion as of September 30, 2025, an increase of $256 million from December 31, 2024. Total loans increased by $14.4 million during the first nine months of 2025, primarily reflecting net growth in commercial loans despite significant payoffs and paydowns | Metric | Sep 30, 2025 | Dec 31, 2024 | Change (9M 2025) | | :-------------------- | :----------- | :----------- | :--------------- | | Total Assets | $6.31 billion | $6.05 billion | +$256 million | | Total Loans | $4.615 billion | $4.601 billion | +$14.4 million | | Commercial Loans (net growth) | | | +$43.0 million | | Residential Mortgage Loans | | | -$46.7 million | | Other Consumer Loans | | | +$18.1 million | - Commercial loans grew an annualized **1.6%** during the first nine months of 2025, despite **$255 million** in full payoffs and partial paydowns of certain larger relationships[11](index=11&type=chunk) [Deposits & Loan-to-Deposit Ratio](index=4&type=section&id=Deposits%20%26%20Loan-to-Deposit%20Ratio) Total deposits reached $4.81 billion as of September 30, 2025, with local deposits increasing by $84.2 million (1.9%) during the first nine months. This growth, along with expansion of the securities portfolio, contributed to a reduction in the loan-to-deposit ratio to 96% from 98% at year-end 2024 | Metric | Sep 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :-------------------- | :----------- | :----------- | :----------- | | Total Deposits | $4.81 billion | $4.70 billion | $4.46 billion | | Local Deposits (9M 2025) | | | +$84.2 million (1.9%) | | Loan-to-Deposit Ratio | 96% | 98% | 102% | - Noninterest-bearing checking accounts represented approximately **25%** of total deposits as of September 30, 2025[15](index=15&type=chunk) [Unfunded Commitments](index=4&type=section&id=Unfunded%20Commitments) Unfunded commitments for commercial construction and development loans decreased to $216 million as of September 30, 2025, from $241 million in the prior year. Residential construction loan commitments increased slightly to $37.0 million | Commitment Type | Sep 30, 2025 | Sep 30, 2024 | | :------------------------------------ | :----------- | :----------- | | Commercial Construction & Development | $216 million | $241 million | | Residential Construction | $37.0 million | $34.0 million | [Loan Portfolio Composition](index=4&type=section&id=Loan%20Portfolio%20Composition) Commercial and industrial loans combined with owner-occupied commercial real estate loans represented approximately 55% of total commercial loans as of September 30, 2025, a level that has remained relatively consistent with prior periods - Commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately **55%** of total commercial loans as of September 30, 2025[14](index=14&type=chunk) | Loan Type (Commercial) | Sep 30, 2025 (in thousands) | | :--------------------- | :-------------------------- | | Commercial & industrial | $1,337,729 | | Land development & construction | $70,806 | | Owner occupied comm'l R/E | $729,451 | | Non-owner occupied comm'l R/E | $1,091,210 | | Multi-family & residential rental | $521,111 | | **Total commercial** | **$3,750,307** | Asset Quality Mercantile Bank Corporation maintained robust asset quality as of September 30, 2025, despite an increase in nonperforming assets primarily due to a specific commercial construction loan, while recording net loan recoveries [Nonperforming Assets](index=4&type=section&id=Nonperforming%20Assets) Nonperforming assets totaled $9.8 million, or 0.2% of total assets, as of September 30, 2025. The increase during the first nine months of 2025 mainly reflected the weakening of a specific nonperforming commercial construction loan, which accounted for approximately 56% of total nonperforming assets | Metric | Sep 30, 2025 | Dec 31, 2024 | Sep 30, 2024 | | :-------------------------- | :----------- | :----------- | :----------- | | Nonperforming Assets | $9.8 million | $5.7 million | $9.9 million | | % of Total Assets | 0.2% | <0.1% | 0.2% | - A nonperforming commercial construction loan accounted for approximately **56%** of total nonperforming assets as of September 30, 2025, necessitating specific reserve allocations totaling **$5.5 million**[17](index=17&type=chunk) - The level of past due loans remains nominal, and the quality of the asset base remained robust[17](index=17&type=chunk)[18](index=18&type=chunk) [Loan Charge-offs and Recoveries](index=4&type=section&id=Loan%20Charge-offs%20and%20Recoveries) During the first nine months of 2025, Mercantile Bank recorded net loan recoveries of $0.8 million, or an annualized 0.02% of average total loans, reflecting sustained strength in loan quality metrics | Metric | 9M 2025 | | :------------------------------------ | :---------- | | Loan Charge-offs | $0.3 million | | Recoveries of prior period loan charge-offs | $1.1 million | | Net Loan Recoveries | $0.8 million | | Net Loan Recoveries to Average Loans (annualized) | 0.02% | Capital Position Mercantile Bank Corporation maintained a strong capital position as of September 30, 2025, with increased shareholders' equity and "well-capitalized" regulatory ratios, despite some unrealized losses on investments [Shareholders' Equity & Regulatory Capital](index=5&type=section&id=Shareholders'%20Equity%20%26%20Regulatory%20Capital) Shareholders' equity increased to $658 million as of September 30, 2025, up $73.1 million from year-end 2024. Mercantile Bank maintained "well-capitalized" positions with a total risk-based capital ratio of 14.87% and approximately $236 million in excess of the minimum regulatory threshold | Metric | Sep 30, 2025 | Dec 31, 2024 | | :-------------------------- | :----------- | :----------- | | Shareholders' Equity | $658 million | $584.5 million | | Total Risk-Based Capital Ratio | 14.87% | 14.17% | - Mercantile Bank maintained "well-capitalized" positions, with approximately **$236 million** in excess of the **10%** minimum regulatory threshold[19](index=19&type=chunk) [Unrealized Losses on Investments](index=5&type=section&id=Unrealized%20Losses%20on%20Investments) The net unrealized loss on available-for-sale investments decreased to $36.1 million as of September 30, 2025, resulting in an after-tax reduction to equity capital of $28.5 million, an improvement from year-end 2024 | Metric | Sep 30, 2025 | Dec 31, 2024 | | :------------------------------------ | :----------- | :----------- | | Net Unrealized Loss on AFS Investments | $36.1 million | $63.1 million | | After-tax Reduction to Equity Capital | $28.5 million | $49.8 million | - Adjusted excess capital over the "well-capitalized" threshold, considering unrealized losses, would approximate **$208 million** as of September 30, 2025[20](index=20&type=chunk) [Shares Outstanding](index=5&type=section&id=Shares%20Outstanding) Mercantile Bank Corporation reported 16,253,544 total shares outstanding as of September 30, 2025 - Total Shares Outstanding (Sep 30, 2025): **16,253,544**[21](index=21&type=chunk) Company Information & Disclosures This section provides essential company information, including investor presentation availability, a corporate overview, a forward-looking statements disclaimer, and contact details for key executives [Investor Presentation](index=6&type=section&id=Investor%20Presentation) Mercantile has prepared investor presentation materials for its third quarter 2025 conference call, which are available in the Investor Relations section of its website and have been furnished to the U.S. Securities and Exchange Commission - Presentation materials are available for viewing in the Investor Relations section of Mercantile's website at www.mercbank.com[23](index=23&type=chunk) - Materials have been furnished to the U.S. Securities and Exchange Commission concurrently with this press release[23](index=23&type=chunk) [About Mercantile Bank Corporation](index=6&type=section&id=About%20Mercantile%20Bank%20Corporation) Mercantile Bank Corporation, based in Grand Rapids, Michigan, is the bank holding company for Mercantile Bank, providing financial products and services to businesses, individuals, and governmental units. It is one of the largest Michigan-based banks with approximately $6.3 billion in assets and is listed on the NASDAQ Global Select Market under the symbol "MBWM" - Headquartered in Grand Rapids, Michigan[24](index=24&type=chunk) - Provides financial products and services to businesses, individuals, and governmental units[24](index=24&type=chunk) - Approximately **$6.3 billion** in assets[24](index=24&type=chunk) - Common stock listed on NASDAQ Global Select Market under "MBWM"[24](index=24&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, emphasizing that actual results may differ materially from expectations due to various risks and uncertainties, including economic conditions, interest rate changes, regulatory actions, and the planned acquisition of Eastern Michigan Financial Corporation - Statements are forward-looking and involve risks and uncertainties[25](index=25&type=chunk) - Actual results may differ materially due to factors such as the inability to complete the acquisition of Eastern Michigan Financial Corporation, changes in interest rates, inflation, market volatility, regulatory changes, and cyber-attacks[25](index=25&type=chunk) - Mercantile undertakes no obligation to update or clarify forward-looking statements[25](index=25&type=chunk) [Contact Information](index=6&type=section&id=Contact%20Information) Contact details for Raymond Reitsma, President and CEO, and Charles Christmas, Executive Vice President and CFO, are provided for further information regarding Mercantile Bank Corporation - Raymond Reitsma, President and CEO: 616-233-2349, rreitsma@mercbank.com[26](index=26&type=chunk) - Charles Christmas, Executive Vice President and CFO: 616-726-1202, cchristmas@mercbank.com[26](index=26&type=chunk) Consolidated Financial Statements This section presents Mercantile Bank Corporation's detailed consolidated financial statements, including balance sheets, reports of income, and comprehensive financial highlights for various reporting periods [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a detailed breakdown of Mercantile Bank Corporation's assets, liabilities, and shareholders' equity as of September 30, 2025, December 31, 2024, and September 30, 2024 | (dollars in thousands) | SEPTEMBER 30, 2025 | DECEMBER 31, 2024 | SEPTEMBER 30, 2024 | | :--------------------- | :----------------- | :---------------- | :----------------- | | **ASSETS** | | | | | Total assets | $ 6,308,487 | $ 6,052,161 | $ 5,917,127 | | Loans, net | $ 4,556,031 | $ 4,546,327 | $ 4,496,428 | | Securities available for sale | $ 855,138 | $ 730,352 | $ 703,375 | | **LIABILITIES** | | | | | Total deposits | $ 4,811,813 | $ 4,698,366 | $ 4,455,898 | | Total liabilities | $ 5,650,857 | $ 5,467,635 | $ 5,333,816 | | **SHAREHOLDERS' EQUITY** | | | | | Total shareholders' equity | $ 657,630 | $ 584,526 | $ 583,311 | [Consolidated Reports of Income](index=8&type=section&id=Consolidated%20Reports%20of%20Income) The consolidated reports of income present the company's financial performance for the three and nine months ended September 30, 2025, and 2024, detailing interest income, interest expense, net interest income, noninterest income, noninterest expense, and net income | (dollars in thousands except per share data) | THREE MONTHS ENDED Sep 30, 2025 | THREE MONTHS ENDED Sep 30, 2024 | NINE MONTHS ENDED Sep 30, 2025 | NINE MONTHS ENDED Sep 30, 2024 | | :----------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Total interest income | $ 85,643 | $ 83,412 | $ 247,940 | $ 239,016 | | Total interest expense | $ 33,641 | $ 35,120 | $ 97,911 | $ 96,291 | | Net interest income | $ 52,002 | $ 48,292 | $ 150,029 | $ 142,725 | | Provision for credit losses | $ 200 | $ 1,100 | $ 3,900 | $ 5,900 | | Total noninterest income | $ 10,388 | $ 9,667 | $ 30,552 | $ 30,217 | | Total noninterest expense | $ 34,750 | $ 32,303 | $ 99,233 | $ 91,983 | | Federal income tax expense | $ 3,682 | $ 4,938 | $ 11,535 | $ 15,092 | | Net Income | $ 23,758 | $ 19,618 | $ 65,913 | $ 59,967 | | Diluted earnings per share | $ 1.46 | $ 1.22 | $ 4.06 | $ 3.72 | [Consolidated Financial Highlights](index=9&type=section&id=Consolidated%20Financial%20Highlights) This section provides a comprehensive table of quarterly and year-to-date financial highlights, including earnings, performance ratios, yield on assets/cost of funds, mortgage banking activity, capital metrics, and asset quality indicators for various periods | (dollars in thousands except per share data) | 2025 3rd Qtr | 2024 3rd Qtr | 2025 Year-To-Date | 2024 Year-To-Date | | :----------------------------------------- | :----------- | :----------- | :---------------- | :---------------- | | **EARNINGS** | | | | | | Net interest income | $ 52,002 | $ 48,292 | $ 150,029 | $ 142,725 | | Net income | $ 23,758 | $ 19,618 | $ 65,913 | $ 59,967 | | Diluted earnings per share | $ 1.46 | $ 1.22 | $ 4.06 | $ 3.72 | | **PERFORMANCE RATIOS** | | | | | | Return on average assets | 1.50% | 1.35% | 1.44% | 1.43% | | Return on average equity | 14.72% | 13.73% | 14.28% | 14.66% | | Net interest margin (fully tax equivalent) | 3.50% | 3.52% | 3.49% | 3.62% | | Efficiency ratio | 55.70% | 55.73% | 54.95% | 53.19% | | **YIELD ON ASSETS / COST OF FUNDS** | | | | | | Yield on loans | 6.38% | 6.69% | 6.33% | 6.66% | | Cost of funds (total earning assets) | 2.25% | 2.56% | 2.27% | 2.44% | | **CAPITAL** | | | | | | Total risk-based capital ratio | 14.87% | 14.13% | 14.87% | 14.13% | | Tangible book value per common share | $ 37.41 | $ 33.07 | $ 37.41 | $ 33.07 | | **ASSET QUALITY** | | | | | | Nonperforming loans to total loans | 0.21% | 0.22% | 0.21% | 0.22% | | Net loan charge-offs (recoveries) | $ (554) | $ (82) | $ (775) | $ (776) |

Core Insights - Mercantile Bank Corporation reported a net income of $23.8 million, or $1.46 per diluted share, for Q3 2025, an increase from $19.6 million, or $1.22 per diluted share, in Q3 2024 [1][3][30] - The bank's net income for the first nine months of 2025 totaled $65.9 million, compared to $60.0 million in the same period of 2024 [1][30] Financial Performance - Net revenue for Q3 2025 was $62.4 million, up $4.4 million, or 7.6%, from $58.0 million in Q3 2024 [3] - Net interest income increased to $52.0 million, a rise of $3.7 million, or 7.7%, from $48.3 million in the prior year [3][30] - Noninterest income reached $10.4 million, compared to $9.7 million in Q3 2024, driven by higher treasury management and payroll services fees [3][8] Interest Margin and Yield - The net interest margin was 3.50% in Q3 2025, slightly down from 3.52% in Q3 2024 [4] - The yield on average earning assets decreased to 5.75% from 6.08% year-over-year, primarily due to lower loan yields [4][5] - The yield on loans was 6.38% in Q3 2025, down from 6.69% in Q3 2024, influenced by lower interest rates on variable-rate commercial loans [4][5] Asset Quality - Nonperforming assets totaled $9.8 million, or 0.2% of total assets, as of September 30, 2025, compared to $5.7 million, or less than 0.1%, at year-end 2024 [18] - Loan charge-offs were $0.3 million, with recoveries totaling $1.1 million, resulting in net recoveries of $0.8 million [18][19] Capital Position - Shareholders' equity increased to $658 million as of September 30, 2025, up $73.1 million from December 31, 2024 [20] - The bank maintained a total risk-based capital ratio of 14.3%, indicating a "well-capitalized" status [20][21] Deposits and Loans - Total deposits reached $4.81 billion, an increase from $4.70 billion at year-end 2024, with local deposits up $84.2 million [16] - The loan-to-deposit ratio decreased from 102% as of September 30, 2024, to 96% as of September 30, 2025, reflecting strong local deposit growth [5][16] Strategic Initiatives - The bank announced a planned partnership with Eastern Michigan Financial Corporation, aimed at enhancing liquidity and achieving strategic goals [5][23]