Financial Data and Key Metrics Changes - The company reported net income of $22.6 million or $1.39 per diluted share for Q2 2025, compared to $18.8 million or $1.17 per diluted share for Q2 2024, reflecting a strong year-over-year growth [13] - Net income for the first half of 2025 totaled $42.2 million or $2.6 per diluted share, compared to $40.3 million or $2.5 per diluted share for the same period in 2024 [13] - Interest income on loans increased by $3.1 million during Q2 2025 compared to the prior year, driven by strong loan growth [15] - Average loans grew to $4.7 billion in Q2 2025, a nearly 7% increase from $4.4 billion in Q2 2024 [14] - The net interest margin declined by 14 basis points in 2025 compared to Q2 2024, impacted by a 100 basis point decline in the federal funds rate [17] Business Line Data and Key Metrics Changes - Mortgage banking income increased by 23.4% in 2025 compared to 2024, with a significant reduction of $50 million in residential mortgages on the balance sheet [6][8] - Service charges on accounts grew by 18.1%, reflecting growth in the deposit base and increased activity levels [8] - Payroll services revenue increased by 15.2%, indicating a successful high-service model [8] - Credit and debit card income grew by 3.7%, while interest rate swap income recovered significantly in Q2 2025 compared to Q1 2025 [9] Market Data and Key Metrics Changes - The company experienced a 13% increase in local deposits as of June 30, 2025, compared to the same date in 2024, which helped reduce the loan-to-deposit ratio from 107% to just under 100% [9] - The strategic partnership with Eastern Michigan Bank is expected to enhance deposit gathering activities and provide entry into new markets [10] Company Strategy and Development Direction - The company announced a strategic partnership with Eastern Michigan Bank, which is expected to provide cost savings and enhance balance sheet liquidity [10][11] - The transition to a new core provider, Jack Henry, is scheduled for early 2027, with expected cost savings and improved service delivery [11] - The company aims to grow its loan portfolio, particularly in mortgage banking and larger commercial loans, leveraging the strengths of Eastern Michigan Bank [34] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainty, with expectations of loan growth of 1% to 2% in Q3 and 3% to 5% in Q4 2025 [21] - The company is focused on maintaining a strong balance sheet and minimizing the impact of changing interest rates on net interest margin [18] - Management noted that customers continue to report strong results despite the challenging operating environment [8] Other Important Information - The company recorded a provision expense of $1.6 million in Q2 2025, reflecting increased allocations on specific financially stressed lending relationships [18] - The effective tax rate for Q2 2025 was about 13%, significantly lower than the projected rate of 19%, due to the acquisition of transferable energy tax credits [19] - The total risk-based capital ratio was 13.9% as of June 30, 2025, indicating a well-capitalized position [20] Q&A Session Summary Question: Can you provide details on cost savings related to the core system change? - Management expects cost savings of approximately $5.5 million, with about 50% realized in 2026 and over 90% in 2027, following the core conversion [28][30] Question: What are the growth opportunities in the Eastern Michigan loan portfolio? - The loan book is of high quality, and management sees opportunities to grow in mortgage banking and larger commercial loans [34] Question: How does the company plan to manage deposit and loan growth? - The company aims for loan growth of 5% to 8% annually and will continue to focus on local deposit growth to support this [42][44] Question: What is the outlook for fee income in the second half of the year? - Management anticipates a step down in fee income from strong Q2 results, particularly in mortgage banking and interest rate swaps [54] Question: What is the expected timing for the closing of the Eastern Michigan Bank acquisition? - The acquisition is expected to close in the back half of Q4 2025, likely around November 30 or year-end, pending regulatory approval [55] Question: Are there additional M&A opportunities on the horizon? - Management remains open to pursuing additional M&A opportunities if they find a partner with similar strengths as Eastern Michigan Bank [64]

Financial Data and Key Metrics Changes - The company reported net income of $22.6 million or $1.39 per diluted share for Q2 2025, compared to $18.8 million or $1.17 per diluted share for Q2 2024, reflecting a strong year-over-year growth [12] - Total net income for the first half of 2025 was $42.2 million or $2.6 per diluted share, up from $40.3 million or $2.5 per diluted share in the same period of 2024 [12] - Interest income on loans increased significantly, with average loans totaling $4.7 billion in 2025, a growth rate of almost 7% compared to the previous year [13] Business Line Data and Key Metrics Changes - Mortgage banking income increased by 23.4% in 2025 compared to 2024, with a notable decrease of $50 million in residential mortgages on the balance sheet [6][7] - Service charges on accounts grew by 18.1%, reflecting growth in the deposit base and increased activity levels [7] - Payroll services revenue grew by 15.2%, indicating a strong service model [7] Market Data and Key Metrics Changes - The deposit base increased by 13% as of June 30, 2025, compared to the same date in 2024, which helped reduce the loan-to-deposit ratio from 107% to just under 100% [8] - The company expects loan growth of 1% to 2% in Q3 and 3% to 5% in Q4 of 2025, influenced by larger balance commercial real estate payoffs [21] Company Strategy and Development Direction - The strategic partnership with Eastern Michigan Bank aims to enhance organic growth and improve the loan-to-deposit ratio, while also providing entry into new markets [9] - The company plans to transition to a new core provider, Jack Henry, in early 2027, which is expected to yield significant cost savings and operational efficiencies [10][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the current economic uncertainties, highlighting strong customer performance despite challenges [6] - The company anticipates continued growth in net interest income and a stable net interest margin, projecting a range of 3.5% to 3.6% for Q3 and 3.55% to 3.65% for Q4 [21] Other Important Information - Non-performing assets totaled $9.7 million as of June 30, 2025, representing 16 basis points of total assets, indicating strong asset quality [6] - The company recorded a provision expense of $1.6 million in Q2 2025, reflecting increased allocations on specific financially stressed lending relationships [18] Q&A Session Summary Question: Can you provide details on cost savings related to the core system change? - Management expects cost savings of approximately $5.5 million, with about 50% realized in 2026 and over 90% in 2027, aligning with the core conversion timeline [27][28] Question: What are the growth opportunities in the Eastern Michigan loan portfolio? - The loan book is of high quality, and the company plans to focus on growing the mortgage banking business and larger commercial loans in that region [34][35] Question: How does the company plan to manage deposit and loan growth? - The company aims to maintain a loan growth rate of 5% to 8% annually, with a focus on local deposit growth to support this [42][45] Question: What is the outlook for fee income in the second half of the year? - Management anticipates a step down in fee income from strong Q2 results, particularly in mortgage banking and interest rate swap income [55] Question: What is the expected timeline for the acquisition closing? - The acquisition is expected to close in the back half of Q4, around November 30 or year-end, pending regulatory approval [56]

Core Insights - Mercantile Bank reported revenue of $60.94 million for the quarter ended June 2025, marking a year-over-year increase of 7.4% and a surprise of +0.9% over the Zacks Consensus Estimate of $60.4 million [1] - The earnings per share (EPS) for the same period was $1.39, compared to $1.17 a year ago, resulting in an EPS surprise of +13.01% against the consensus estimate of $1.23 [1] Financial Performance Metrics - Efficiency Ratio stood at 54.8%, slightly better than the three-analyst average estimate of 54.9% [4] - Net Interest Margin was reported at 3.5%, matching the average estimate based on three analysts [4] - Net loan charge-offs to average loans were at -0%, compared to the average estimate of 0.1% [4] - Average Balances of Total earning assets (before allowance) were $5.71 billion, slightly below the two-analyst average estimate of $5.78 billion [4] - Total Noninterest Income reached $11.46 million, exceeding the average estimate of $9.96 million [4] - Net Interest Income was reported at $49.48 million, lower than the average estimate of $50.48 million [4] - Payroll services income was $0.78 million, below the average estimate of $0.95 million [4] - Interest rate swap income was $1.23 million, significantly higher than the average estimate of $0.55 million [4] - Credit and debit card income was $2.35 million, slightly above the average estimate of $2.21 million [4] - Earnings on bank-owned life insurance policies were $0.56 million, slightly above the average estimate of $0.53 million [4] - Mortgage banking income was reported at $3.97 million, exceeding the average estimate of $3.35 million [4] - Other income was $0.6 million, above the average estimate of $0.48 million [4] Stock Performance - Shares of Mercantile Bank have returned +8.5% over the past month, outperforming the Zacks S&P 500 composite's +5.9% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Performance - Net income increased to $22.6 million in 2Q25, compared to $18.8 million in 2Q24[11] - Earnings per share (EPS) rose to $1.39 in 2Q25, up from $1.17 in 2Q24[11] - Commercial loans experienced an annualized growth of 7% in 2Q25[11] - Total deposits grew by 2% (annualized) in 2Q25 and 13% over the last twelve months (LTM)[11] - The ratio of nonperforming assets to total assets stood at 0.16% at the end of 2Q25[11] - Total risk-based capital ratio was 14.4% at the end of 2Q25, compared to 14.1% at the end of 2Q24[11] Shareholder Value - Mercantile's 5-Year Tangible Book Value (TBV) Compound Annual Growth Rate (CAGR) is 8%, outperforming the proxy peer group's 4%[13, 15, 16] - Mercantile's 5-Year EPS CAGR is 10%, exceeding the proxy peers' 5%[17, 19, 20] Balance Sheet and Interest Rate Risk Management - Loan to deposit ratio decreased from 107% to below 100% over the last twelve months[21, 22] - The company closed two transferable energy tax credit deals, resulting in a tax benefit of $1.5 million in 2Q25[48] - Variable rate loans constitute 78% of the total loan portfolio[55]

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Mercantile Bank Corporation reported strong Q2 2025 financial results, driven by net income growth and strategic initiatives to enhance liquidity and market position [Q2 2025 Financial Performance Overview](index=1&type=section&id=Q2%202025%20Financial%20Performance%20Overview) Mercantile Bank Corporation reported robust financial results for Q2 2025, with significant increases in net income and diluted EPS compared to the prior year. The strong performance was driven by net interest income growth, substantial noninterest income growth, and a notable reduction in federal income tax expense | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :--------------------- | :-------- | :-------- | :--------- | :----------- | | Net Income | $22.6 million | $18.8 million | +$3.8 million | +20.2% | | Diluted EPS | $1.39 | $1.17 | +$0.22 | +18.8% | | Net Revenue | $60.9 million | $56.7 million | +$4.2 million | +7.4% | | Net Interest Income | $49.5 million | $47.1 million | +$2.4 million | +5.1% | | Noninterest Income | $11.5 million | $9.7 million | +$1.8 million | +18.4% | - Key drivers of strong operating performance included net interest income growth, a stabilizing net interest margin, increases in core noninterest income, a significant decline in federal income tax expense, robust commercial loan expansion, and sustained strength in asset quality and capital levels[2](index=2&type=chunk) [Key Strategic Initiatives & Outlook](index=1&type=section&id=Key%20Strategic%20Initiatives%20%26%20Outlook) Mercantile is focused on lowering its loan-to-deposit ratio through local deposit generation and strengthening on-balance sheet liquidity. The announced partnership with Eastern Michigan Financial Corporation is a key strategic move to enhance its position as Michigan's largest bank and expand its footprint - Strategic goals include lowering the loan-to-deposit ratio through local deposit generation (expanding existing relationships and new client acquisition) and strengthening on-balance sheet liquidity[2](index=2&type=chunk) - The partnership with Eastern Michigan Financial Corporation will enhance Mercantile's position as the largest bank founded, headquartered, and operated in Michigan, and help achieve strategic goals like lowering the loan-to-deposit ratio, strengthening liquidity, and expanding its footprint in Eastern and Southeastern Michigan[2](index=2&type=chunk) - Second quarter highlights included net interest income growth, notable increases in mortgage banking, interest rate swap, treasury management, and payroll services income, reduction in federal income tax expense, solid commercial loan portfolio expansion, and robust capital position[4](index=4&type=chunk) [Operating Results](index=1&type=section&id=Operating%20Results) Mercantile's Q2 2025 operating results show increased net interest income and noninterest income, alongside higher expenses and a reduced tax burden, contributing to overall profitability [Net Interest Income & Margin](index=1&type=section&id=Net%20Interest%20Income%20%26%20Margin) Net interest income increased by 5.1% year-over-year, primarily due to growth in earning assets, which offset a lower net interest margin. The net interest margin declined to 3.49% in Q2 2025, mainly due to a reduced yield on loans and a change in earning asset mix, despite a decrease in the cost of funds | Metric | Q2 2025 | Q2 2024 | YoY Change | | :---------------------- | :-------- | :-------- | :--------- | | Net Interest Income | $49.5 million | $47.1 million | +$2.4 million | | Net Interest Margin | 3.49% | 3.63% | -0.14% | | Yield on Average Earning Assets | 5.77% | 6.07% | -0.30% | | Yield on Loans | 6.32% | 6.64% | -0.32% | | Cost of Funds | 2.28% | 2.44% | -0.16% | - The lower yield on loans was mainly due to lower interest rates on variable-rate commercial loans, following FOMC rate decreases in late 2024[5](index=5&type=chunk) - The decrease in cost of funds was primarily due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment[6](index=6&type=chunk) [Noninterest Income](index=1&type=section&id=Noninterest%20Income) Noninterest income saw an 18.4% increase in Q2 2025, driven by higher mortgage banking income, interest rate swap income, treasury management fees, bank owned life insurance earnings, and payroll service fees, along with tax credit syndication fees | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :---------------------- | :-------- | :-------- | :--------- | :----------- | | Total Noninterest Income | $11.5 million | $9.7 million | +$1.8 million | +18.4% | | Mortgage Banking Income | $3.969 million | $3.023 million | +$0.946 million | +31.3% | | Interest Rate Swap Income | $1.230 million | $0.766 million | +$0.464 million | +60.6% | | Treasury Management Fees (part of Other Income) | Increased | Increased | - | - | | Payroll Service Fees | $0.783 million | $0.686 million | +$0.097 million | +14.1% | - Mortgage banking income increased due to a higher percentage of loans originated with intent to sell (**79%** in Q2 2025 vs. **75%** in Q2 2024) and a **16%** increase in total loan originations[8](index=8&type=chunk) - The recognition of tax credit syndication fees also contributed to the increase in noninterest income[8](index=8&type=chunk) [Provision for Credit Losses](index=2&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased significantly in Q2 2025 compared to Q2 2024. The current quarter's provision was mainly driven by an individual allocation for a nonaccrual commercial construction loan and net loan growth, partially offset by reductions from nonperforming loan payoffs | Metric | Q2 2025 | Q2 2024 | YoY Change | | :-------------------------- | :-------- | :-------- | :--------- | | Provision for Credit Losses | $1.6 million | $3.5 million | -$1.9 million | - The Q2 2025 provision included a **$2.5 million** individual allocation for a commercial construction loan placed on nonaccrual and **$0.7 million** for net loan growth, offset by a **$1.0 million** reduction from nonperforming loan payoffs/paydowns[7](index=7&type=chunk) - Changes in loan portfolio composition and an improved economic forecast positively impacted provision expense[7](index=7&type=chunk) [Noninterest Expense](index=3&type=section&id=Noninterest%20Expense) Noninterest expense increased in Q2 2025, primarily due to higher salary and benefit costs resulting from annual merit increases, market adjustments, a larger bonus accrual, and increased health insurance claims and payroll taxes. Higher allocations to the reserve for unfunded loan commitments also contributed | Metric | Q2 2025 | Q2 2024 | YoY Change | YoY % Change | | :------------------- | :-------- | :-------- | :--------- | :----------- | | Total Noninterest Expense | $33.4 million | $29.7 million | +$3.7 million | +12.5% | | Salaries and Benefits | $20.711 million | $17.913 million | +$2.798 million | +15.6% | - The increase in salary and benefit costs reflected annual merit pay increases, market adjustments, a larger bonus accrual, lower residential mortgage loan deferred salary costs, higher health insurance claims, and increased payroll taxes[9](index=9&type=chunk) - Higher allocations to the reserve for unfunded loan commitments, mainly from increased commercial loan commitments, also contributed to the rise[9](index=9&type=chunk) [Federal Income Tax Expense](index=3&type=section&id=Federal%20Income%20Tax%20Expense) Federal income tax expense decreased significantly in Q2 2025, primarily due to a $1.5 million tax benefit from the acquisition of transferable energy tax credits, which lowered the effective tax rate | Metric | Q2 2025 | Q2 2024 | YoY Change | | :------------------------ | :-------- | :-------- | :--------- | | Federal Income Tax Expense | $3.3 million | $4.7 million | -$1.4 million | | Effective Tax Rate | 12.9% | 20.1% | -7.2% | | Tax Benefit from Energy Tax Credits | $1.5 million | N/A | N/A | - The acquisition of transferable energy tax credits provided an aggregate **$1.5 million** tax benefit during the period, positively impacting the effective tax rate[10](index=10&type=chunk) [Balance Sheet Analysis](index=3&type=section&id=Balance%20Sheet%20Analysis) Total assets grew, driven by commercial loan expansion and increased securities, while deposits remained stable, leading to a higher loan-to-deposit ratio [Assets](index=3&type=section&id=Assets) Total assets increased to $6.18 billion as of June 30, 2025, up from year-end 2024. This growth was primarily driven by an increase in total loans, particularly commercial loans, and an increase in securities available for sale | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------- | :-------------- | :------------- | :----------- | | Total Assets | $6.18 billion | $6.05 billion | +$129 million | | Total Loans | $4.698 billion | $4.601 billion | +$97.2 million | | Commercial Loans Growth (annualized H1 2025) | +6.2% | N/A | N/A | | Securities Available for Sale | $826.4 million | $730.4 million | +$96.1 million | - Commercial loans grew an annualized **6.2%** during the first half of 2025, despite significant payoffs and paydowns totaling approximately **$154 million**[12](index=12&type=chunk) - Unfunded commitments on commercial construction and development loans totaled **$237 million**, and residential construction loans totaled **$35 million**, expected to be funded over the next **12-18 months**[14](index=14&type=chunk) [Liabilities (Deposits & Borrowings)](index=4&type=section&id=Liabilities%20(Deposits%20%26%20Borrowings)) Total deposits remained relatively stable at $4.71 billion. While local deposits saw a slight reduction due to seasonal withdrawals, this was largely offset by growth in existing relationships and new client acquisitions. The loan-to-deposit ratio increased to 100% as of June 30, 2025 | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------- | :-------------- | :------------- | :----------- | | Total Deposits | $4.71 billion | $4.70 billion | +$12.1 million | | Local Deposits | Down $37.1 million | N/A | -0.8% | | Brokered Deposits | Up $49.2 million | N/A | N/A | | Loan-to-Deposit Ratio | 100% | 98% | +2% | | Wholesale Funds | $555 million | $537 million | +$18 million | - The slight reduction in local deposits was primarily due to seasonal withdrawals for bonus and tax payments, largely offset by net growth in existing deposit relationships and new client acquisitions[16](index=16&type=chunk) - Noninterest-bearing checking accounts represented approximately **25%** of total deposits[16](index=16&type=chunk) [Loan Portfolio Composition](index=4&type=section&id=Loan%20Portfolio%20Composition) Commercial loans continued to expand, with commercial and industrial loans and owner-occupied commercial real estate loans representing approximately 55% of total commercial loans. The company noted accelerated commercial loan growth in Q2 2025 as economic uncertainties eased - Commercial and industrial loans and owner-occupied commercial real estate loans combined represented approximately **55%** of total commercial loans as of June 30, 2025[15](index=15&type=chunk) - Commercial loan growth accelerated during Q2 2025 as tariff-induced concerns eased, leading to the commencement of previously delayed construction projects and business expansion activities[17](index=17&type=chunk) - Management believes abundant opportunities exist for booking commercial loans in future periods, supported by the current pipeline and ongoing discussions with borrowers[17](index=17&type=chunk) [Asset Quality](index=4&type=section&id=Asset%20Quality) Nonperforming assets increased due to a specific commercial construction loan, yet overall asset quality remained strong with nominal past due loans and net loan recoveries [Nonperforming Assets](index=4&type=section&id=Nonperforming%20Assets) Nonperforming assets increased to $9.7 million, or 0.2% of total assets, as of June 30, 2025. This increase was primarily due to the deterioration of a commercial construction loan, which represented approximately 57% of total nonperforming assets | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :-------------------------- | :-------------- | :------------- | :-------------- | | Nonperforming Assets | $9.7 million | $5.7 million | $9.1 million | | Nonperforming Assets to Total Assets | 0.2% | <0.1% | 0.2% | | Commercial Construction Loan (NPA) | ~57% of total NPA | N/A | N/A | - The increase in nonperforming assets during the first six months of 2025 mainly reflected the deterioration of a previously mentioned nonperforming commercial construction loan[18](index=18&type=chunk) - The level of past due loans remained nominal, and asset quality metrics remained strong due to cautious underwriting and customers' ability to operate effectively[18](index=18&type=chunk)[19](index=19&type=chunk) [Loan Charge-offs and Recoveries](index=4&type=section&id=Loan%20Charge-offs%20and%20Recoveries) Mercantile reported net loan recoveries of $0.1 million, or an annualized 0.01% of average total loans, during the first six months of 2025, indicating strong loan quality | Metric | H1 2025 | H1 2024 | | :------------------------------------ | :-------- | :-------- | | Loan Charge-offs | <$0.1 million | N/A | | Recoveries of Prior Period Loan Charge-offs | >$0.1 million | N/A | | Net Loan Recoveries | $0.1 million | N/A | | Net Loan Recoveries to Average Total Loans (annualized) | 0.01% | N/A | - The residential mortgage loan and consumer loan portfolios continued to exhibit strong performance, as evidenced by ongoing low past due and charge-off levels[19](index=19&type=chunk) [Capital Position](index=5&type=section&id=Capital%20Position) Mercantile maintained a strong 'well-capitalized' position with increased shareholders' equity, despite a reduction in net unrealized losses on investments [Shareholders' Equity & Capital Ratios](index=5&type=section&id=Shareholders'%20Equity%20%26%20Capital%20Ratios) Shareholders' equity increased to $632 million as of June 30, 2025. Mercantile Bank maintained a 'well-capitalized' position with a total risk-based capital ratio of 13.9%, exceeding the minimum regulatory threshold by approximately $218 million | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :-------------------------- | :-------------- | :------------- | :----------- | | Shareholders' Equity | $632 million | $584.5 million | +$47.0 million | | Total Risk-Based Capital Ratio | 13.9% | 13.9% | 0% | | Excess Capital over 10% Regulatory Threshold | ~$218 million | N/A | N/A | - Mercantile Bank maintained 'well-capitalized' positions at the end of Q2 2025 and year-end 2024[20](index=20&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 $45.3 million as of June 30, 2025, resulting in a lower after-tax reduction to equity capital compared to year-end 2024. Even with this adjustment, the bank's excess capital remains robust | Metric | June 30, 2025 | Dec 31, 2024 | Change | | :------------------------------------ | :-------------- | :------------- | :----------- | | Net Unrealized Loss on Investments | $45.3 million | $63.1 million | -$17.8 million | | After-Tax Reduction to Equity Capital | $35.8 million | $49.8 million | -$14.0 million | | Adjusted Excess Capital (over 10% regulatory threshold) | ~$183 million | N/A | N/A | - Unrealized gains and losses on investments are excluded from regulatory capital ratio calculations[21](index=21&type=chunk) [Strategic Partnership](index=5&type=section&id=Strategic%20Partnership) Mercantile announced a strategic merger with Eastern Michigan Financial Corporation, aiming to expand its market presence and enhance liquidity [Eastern Michigan Financial Corporation Merger](index=5&type=section&id=Eastern%20Michigan%20Financial%20Corporation%20Merger) Mercantile Bank Corporation announced a definitive agreement to combine with Eastern Michigan Financial Corporation in a cash and stock transaction. This partnership is expected to strengthen Mercantile's position as Michigan's largest bank, expand its operating footprint, and enhance liquidity through Eastern Michigan's strong deposit franchise - Mercantile and Eastern Michigan Financial Corporation entered into a definitive agreement for a cash and stock transaction[24](index=24&type=chunk) - The partnership will strengthen Mercantile's position as the largest bank headquartered in Michigan by total assets[24](index=24&type=chunk) - The merger is expected to strategically expand Mercantile's operating footprint and leverage Eastern Michigan's exceptional deposit franchise with substantial excess liquidity[24](index=24&type=chunk) [Company Information & Disclosures](index=6&type=section&id=Company%20Information%20%26%20Disclosures) This section provides an overview of Mercantile Bank Corporation, its services, and important disclaimers regarding forward-looking statements and investor communication [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. It provides financial products and services to businesses, individuals, and governmental units, distinguished by exceptional service and community commitment. With approximately $6.2 billion in assets, it is one of Michigan's largest banks - Mercantile Bank Corporation is based in Grand Rapids, Michigan, and serves businesses, individuals, and governmental units[27](index=27&type=chunk) - The company is one of the largest Michigan-based banks with approximately **$6.2 billion** in assets[27](index=27&type=chunk) - Mercantile Bank Corporation's common stock is listed on the NASDAQ Global Select Market under the symbol 'MBWM'[27](index=27&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) This section contains a standard disclaimer regarding forward-looking statements, highlighting that actual results may differ materially due to various risks and uncertainties, including changes in interest rates, economic conditions, competition, and regulatory actions. Mercantile undertakes no obligation to update these statements - The news release contains forward-looking statements subject to risks and uncertainties, which may cause actual results to differ materially[28](index=28&type=chunk) - Factors influencing actual results include changes in interest rates, inflation, real estate values, market volatility, demand for services, regulatory changes, and technological advances[28](index=28&type=chunk) - Mercantile undertakes no obligation to update or clarify forward-looking statements, and investors are cautioned not to place undue reliance on them[28](index=28&type=chunk) [Investor Presentation & Contact Information](index=6&type=section&id=Investor%20Presentation%20%26%20Contact%20Information) Mercantile has prepared investor presentation materials for its Q2 2025 conference call, available on its Investor Relations website. Contact information for the President and CEO, and Executive Vice President and CFO, is provided for further inquiries - Investor presentation materials for the Q2 2025 conference call are available in the Investor Relations section of Mercantile's website[26](index=26&type=chunk) - Contact information for Raymond Reitsma (President and CEO) and Charles Christmas (Executive Vice President and CFO) is provided for further information[29](index=29&type=chunk) [Consolidated Financial Statements](index=7&type=section&id=Consolidated%20Financial%20Statements) This section presents the detailed consolidated balance sheets, reports of income, and financial highlights for Mercantile Bank Corporation [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets provide a snapshot of Mercantile Bank Corporation's financial position as of June 30, 2025, compared to December 31, 2024, and June 30, 2024, detailing assets, liabilities, and shareholders' equity | (dollars in thousands) | JUNE 30, 2025 | DECEMBER 31, 2024 | JUNE 30, 2024 | | :--------------------------------- | :-------------- | :---------------- | :-------------- | | **ASSETS** | | | | | Cash and due from banks | $98,900 | $56,991 | $61,863 | | Interest-earning assets | 197,172 | 336,019 | 135,766 | | Total cash and cash equivalents | 296,072 | 393,010 | 197,629 | | Securities available for sale | 826,415 | 730,352 | 647,907 | | Federal Home Loan Bank stock | 21,513 | 21,513 | 21,513 | | Mortgage loans held for sale | 27,569 | 15,824 | 22,126 | | Loans | 4,698,019 | 4,600,781 | 4,438,245 | | Allowance for credit losses | (58,375) | (54,454) | (55,408) | | Loans, net | 4,639,644 | 4,546,327 | 4,382,837 | | Premises and equipment, net | 54,792 | 53,427 | 50,158 | | Bank owned life insurance | 95,012 | 93,839 | 86,001 | | Goodwill | 49,473 | 49,473 | 49,473 | | Other assets | 170,498 | 148,396 | 144,744 | | **Total assets** | **$6,180,988** | **$6,052,161** | **$5,602,388** | | **LIABILITIES AND SHAREHOLDERS' EQUITY** | | | | | Deposits: | | | | | Noninterest-bearing | $1,180,801 | $1,264,523 | $1,119,888 | | Interest-bearing | 3,529,671 | 3,433,843 | 3,026,686 | | Total deposits | 4,710,472 | 4,698,366 | 4,146,574 | | Securities sold under agreements to repurchase | 242,785 | 121,521 | 221,898 | | Federal Home Loan Bank advances | 356,221 | 387,083 | 427,083 | | Subordinated debentures | 50,672 | 50,330 | 49,987 | | Subordinated notes | 89,486 | 89,314 | 89,143 | | Accrued interest and other liabilities | 99,833 | 121,021 | 116,552 | | **Total liabilities** | **5,549,469** | **5,467,635** | **5,051,237** | | **SHAREHOLDERS' EQUITY** | | | | | Common stock | 302,294 | 299,705 | 297,591 | | Retained earnings | 364,991 | 334,646 | 306,804 | | Accumulated other comprehensive income/(loss) | (35,766) | (49,825) | (53,244) | | **Total shareholders' equity** | **631,519** | **584,526** | **551,151** | | **Total liabilities and shareholders' equity** | **$6,180,988** | **$6,052,161** | **$5,602,388** | [Consolidated Reports of Income](index=8&type=section&id=Consolidated%20Reports%20of%20Income) The consolidated reports of income present Mercantile Bank Corporation's financial performance for the three and six months ended June 30, 2025, compared to the same periods in 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 June 30, 2025 | THREE MONTHS ENDED June 30, 2024 | SIX MONTHS ENDED June 30, 2025 | SIX MONTHS ENDED June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | **INTEREST INCOME** | | | | | | Loans, including fees | $73,962 | $72,819 | $145,954 | $144,089 | | Investment securities | 5,860 | 3,624 | 11,272 | 7,046 | | Interest-earning assets | 2,136 | 2,436 | 5,071 | 4,469 | | **Total interest income** | **81,958** | **78,879** | **162,297** | **155,604** | | **INTEREST EXPENSE** | | | | | | Deposits | 25,725 | 24,710 | 50,918 | 46,934 | | Short-term borrowings | 1,919 | 1,757 | 3,682 | 3,412 | | Federal Home Loan Bank advances | 2,897 | 3,252 | 5,795 | 6,651 | | Other borrowed money | 1,938 | 2,088 | 3,875 | 4,173 | | **Total interest expense** | **32,479** | **31,807** | **64,270** | **61,170** | | **Net interest income** | **49,479** | **47,072** | **98,027** | **94,434** | | Provision for credit losses | 1,600 | 3,500 | 3,700 | 4,800 | | **Net interest income after provision for credit losses** | **47,879** | **43,572** | **94,327** | **89,634** | | **NONINTEREST INCOME** | | | | | | Service charges on accounts | 1,967 | 1,692 | 3,806 | 3,224 | | Mortgage banking income | 3,969 | 3,023 | 6,620 | 5,365 | | Credit and debit card income | 2,350 | 2,266 | 4,551 | 4,387 | | Interest rate swap income | 1,230 | 766 | 1,310 | 2,104 | | Payroll services | 783 | 686 | 1,823 | 1,582 | | Earnings on bank owned life insurance | 561 | 437 | 1,104 | 1,609 | | Other income | 602 | 811 | 950 | 2,277 | | **Total noninterest income** | **11,462** | **9,681** | **20,164** | **20,548** | | **NONINTEREST EXPENSE** | | | | | | Salaries and benefits | 20,711 | 17,913 | 40,268 | 36,150 | | Occupancy | 2,155 | 2,220 | 4,273 | 4,509 | | Furniture and equipment | 826 | 923 | 1,613 | 1,852 | | Data processing costs | 3,599 | 3,415 | 7,369 | 6,704 | | Charitable foundation contributions | 2 | 4 | 5 | 707 | | Other expense | 6,086 | 5,262 | 10,955 | 9,758 | | **Total noninterest expense** | **33,379** | **29,737** | **64,483** | **59,680** | | Income before federal income tax expense | 25,962 | 23,516 | 50,008 | 50,502 | | Federal income tax expense | 3,344 | 4,730 | 7,853 | 10,154 | | **Net Income** | **$22,618** | **$18,786** | **$42,155** | **$40,348** | | Basic earnings per share | $1.39 | $1.17 | $2.60 | $2.50 | | Diluted earnings per share | $1.39 | $1.17 | $2.60 | $2.50 | | Average basic shares outstanding | 16,239,919 | 16,122,813 | 16,219,064 | 16,120,836 | | Average diluted shares outstanding | 16,239,919 | 16,122,813 | 16,219,064 | 16,120,836 | [Consolidated Financial Highlights](index=9&type=section&id=Consolidated%20Financial%20Highlights) This section provides detailed quarterly and year-to-date financial highlights, including earnings, performance ratios, yield on assets, cost of funds, mortgage banking activity, capital ratios, and asset quality metrics, offering a comprehensive view of the company's trends | (dollars in thousands except per share data) | 2nd Qtr 2025 | 1st Qtr 2025 | 4th Qtr 2024 | 3rd Qtr 2024 | 2nd Qtr 2024 | YTD 2025 | YTD 2024 | | :----------------------------------------- | :----------- | :----------- | :----------- | :----------- | :----------- | :------- | :------- | | **EARNINGS** | | | | | | | | | Net interest income | $49,479 | $48,548 | $48,361 | $48,292 | $47,072 | $98,027 | $94,434 | | Provision for credit losses | $1,600 | $2,100 | $1,500 | $1,100 | $3,500 | $3,700 | $4,800 | | Noninterest income | $11,462 | $8,702 | $10,172 | $9,667 | $9,681 | $20,164 | $20,548 | | Noninterest expense | $33,379 | $31,104 | $33,806 | $32,303 | $29,737 | $64,483 | $59,680 | | Net income | $22,618 | $19,537 | $19,626 | $19,618 | $18,786 | $42,155 | $40,348 | | Diluted earnings per share | $1.39 | $1.21 | $1.22 | $1.22 | $1.17 | $2.60 | $2.50 | | **PERFORMANCE RATIOS** | | | | | | | | | Return on average assets | 1.50% | 1.32% | 1.30% | 1.35% | 1.36% | 1.41% | 1.48% | | Return on average equity | 14.72% | 13.34% | 13.36% | 13.73% | 13.93% | 14.05% | 15.15% | | Net interest margin (fully tax-equivalent) | 3.49% | 3.47% | 3.41% | 3.52% | 3.63% | 3.49% | 3.68% | | Efficiency ratio | 54.77% | 54.33% | 57.76% | 55.73% | 52.40% | 54.56% | 51.90% | | **YIELD ON ASSETS / COST OF FUNDS** | | | | | | | | | Yield on loans | 6.32% | 6.31% | 6.41% | 6.69% | 6.64% | 6.31% | 6.65% | | Yield on total earning assets | 5.77% | 5.74% | 5.81% | 6.08% | 6.07% | 5.76% | 6.06% | | Cost of funds (total earning assets) | 2.28% | 2.27% | 2.40% | 2.56% | 2.44% | 2.27% | 2.38% | | **MORTGAGE BANKING ACTIVITY** | | | | | | | | | Total mortgage loans originated | $141,921 | $100,396 | $121,010 | $160,944 | $122,728 | $242,317 | $202,658 | | Income on sale of mortgage loans | $3,219 | $2,455 | $3,768 | $3,376 | $2,487 | $5,674 | $4,551 | | **CAPITAL** | | | | | | | | | Tangible equity to tangible assets | 9.49% | 9.17% | 8.91% | 9.10% | 9.03% | 9.49% | 9.03% | | Total risk-based capital ratio | 14.37% | 14.44% | 14.17% | 14.13% | 14.10% | 14.37% | 14.10% | | Book value per common share | $38.87 | $37.47 | $36.20 | $36.14 | $34.15 | $38.87 | $34.15 | | Cash dividend per common share | $0.37 | $0.37 | $0.36 | $0.36 | $0.35 | $0.74 | $0.70 | | **ASSET QUALITY** | | | | | | | | | Net loan charge-offs (recoveries) | $(109) | $(112) | $3,637 | $(82) | $(270) | $(221) | $(694) | | Allowance to loans | 1.24% | 1.22% | 1.18% | 1.24% | 1.25% | 1.24% | 1.25% | | Nonperforming loans to total loans | 0.21% | 0.12% | 0.12% | 0.22% | 0.21% | 0.21% | 0.21% | | Nonperforming assets to total assets | 0.16% | 0.09% | 0.09% | 0.17% | 0.16% | 0.16% | 0.16% | | **LOAN PORTFOLIO COMPOSITION (Total loans)** | | | | | | | | | Commercial | $3,821,158 | $3,751,591 | $3,707,304 | $3,648,288 | $3,533,278 | $3,821,158 | $3,533,278 | | Retail | $876,861 | $884,958 | $893,477 | $904,730 | $904,967 | $876,861 | $904,967 | | **END OF PERIOD BALANCES** | | | | | | | | | Total assets | $6,180,988 | $6,141,200 | $6,052,161 | $5,917,127 | $5,602,388 | $6,180,988 | $5,602,388 | | Total deposits | $4,710,472 | $4,681,785 | $4,698,366 | $4,455,898 | $4,146,574 | $4,710,472 | $4,146,574 | | Shareholders' equity | $631,519 | $608,346 | $584,526 | $583,311 | $551,151 | $631,519 | $551,151 |

Core Insights - Mercantile Bank (MBWM) reported quarterly earnings of $1.39 per share, exceeding the Zacks Consensus Estimate of $1.23 per share, and up from $1.17 per share a year ago, representing an earnings surprise of +13.01% [1] - The bank's revenues for the quarter ended June 2025 were $60.94 million, surpassing the Zacks Consensus Estimate by 0.90% and increasing from $56.75 million year-over-year [2] - The stock has gained approximately 9.6% since the beginning of the year, outperforming the S&P 500's gain of 7.2% [3] Earnings Performance - Over the last four quarters, Mercantile Bank has consistently surpassed consensus EPS estimates [2] - The company has topped consensus revenue estimates three times in the last four quarters [2] Future Outlook - The sustainability of the stock's price movement will depend on management's commentary during the earnings call [3] - Current consensus EPS estimate for the upcoming quarter is $1.23 on revenues of $61.17 million, and for the current fiscal year, it is $4.85 on revenues of $239.5 million [7] Industry Context - The Zacks Industry Rank for Banks - Midwest is in the top 31% of over 250 Zacks industries, indicating a favorable outlook for the sector [8] - Farmers National Banc (FMNB), another bank in the same industry, is expected to report quarterly earnings of $0.37 per share, reflecting a year-over-year change of +12.1% [9]

Transaction Overview - The acquisition of Eastern Michigan Financial Corporation (EFIN) by Mercantile Bank Corporation (MBWM) is valued at approximately $95.8 million[22] - The consideration mix is approximately 52% stock and 48% cash[22] - Cost savings are expected to be approximately $5.4 million pre-tax, representing ~40% of EFIN's noninterest expense[22] Financial Highlights of EFIN - EFIN has total assets of $505 million[12] - Gross loans amount to $208 million[12] - Total deposits are $449 million[12] - EFIN's loans-to-deposits ratio is 46%[12] - The cost of deposits is 0.42%[12] - Core deposits represent 99% of total deposits[12] Strategic Rationale - Eastern's superior deposit franchise, ranked 1 in Michigan, addresses Mercantile's key strategic priorities[9, 10] - The acquisition provides market expansion into Eastern Michigan[9] - The transaction is expected to result in strong double-digit earnings accretion[9]

Core Insights - Mercantile Bank Corporation reported a net income of $22.6 million, or $1.39 per diluted share, for Q2 2025, an increase from $18.8 million, or $1.17 per diluted share, in Q2 2024 [1][2] - The bank's total assets reached $6.18 billion as of June 30, 2025, reflecting a growth of $129 million from December 31, 2024 [12] - The partnership with Eastern Michigan Financial Corporation is expected to enhance Mercantile's position as the largest bank headquartered in Michigan and support strategic goals [25] Financial Performance - Net revenue for Q2 2025 was $60.9 million, up 7.4% from $56.7 million in Q2 2024 [3] - Net interest income increased to $49.5 million, a rise of 5.1% from $47.1 million in the same quarter last year [3][4] - Noninterest income grew to $11.5 million, an increase of 18.4% from $9.7 million in Q2 2024, driven by higher mortgage banking income and other service fees [7][8] Asset Quality - Nonperforming assets totaled $9.7 million, or 0.2% of total assets, as of June 30, 2025, compared to $5.7 million, or less than 0.1%, at the end of 2024 [18][19] - The bank recorded provisions for credit losses of $1.6 million in Q2 2025, down from $3.5 million in Q2 2024, indicating improved asset quality [6][19] Capital Position - Shareholders' equity increased to $632 million as of June 30, 2025, up $47 million from December 31, 2024 [20] - The bank maintained a total risk-based capital ratio of 13.9%, categorizing it as "well-capitalized" [20][21] Loan and Deposit Trends - Total loans increased by $97.2 million, or an annualized 4.3%, during the first half of 2025, primarily due to growth in commercial loans [12] - Total deposits were $4.71 billion as of June 30, 2025, with local deposits down slightly but offset by an increase in brokered deposits [16] Strategic Initiatives - The bank aims to lower its loan-to-deposit ratio through local deposit generation and has seen success in expanding existing deposit relationships [2][17] - The partnership with Eastern Michigan Financial Corporation is expected to provide substantial excess liquidity and enhance Mercantile's operational footprint [25]

Core Insights - Mercantile Bank Corporation and Eastern Michigan Financial Corporation have entered into a definitive merger agreement valued at approximately $95.8 million, enhancing Mercantile's position as Michigan's largest bank by total assets [1][2][10] - The merger will result in a combined company with total assets of $6.7 billion, total loans of $4.9 billion, and total deposits of $5.2 billion [1][10] Partnership Benefits - The merger strategically expands Mercantile Bank's operating footprint, adding 12 Eastern branches to its existing 45-location network, particularly in Eastern and Southeast Michigan [2][3] - Eastern Michigan Bank has a strong deposit base with a cost of deposits of 42 basis points and a loan-to-deposit ratio of 46%, providing substantial liquidity to the combined entity [2][3] Financial Details - The transaction involves Mercantile issuing 0.7116 shares of its common stock plus $32.32 in cash for each outstanding share of EFIN, resulting in an aggregate consideration of $95.8 million [9][10] - The merger is expected to be approximately 11% accretive to Mercantile's dilutive earnings per share once cost savings are fully realized, with tangible book value dilution at closing expected to be around 5.8% [10][11] Operational Integration - Mercantile Bank plans a full core banking system transformation in partnership with Jack Henry, leveraging Eastern's 40 years of operational experience on the platform to ensure a smooth transition [5][6] - The system transformation is scheduled for completion within the first quarter of 2027, with Eastern operating under its existing charter until then [6][11] Cultural Alignment - Both institutions share a commitment to their Michigan roots and community service, which will facilitate a seamless integration process [7][8] - Eastern's executive leadership will remain in place, with Oldford serving as Regional Market President, ensuring continuity in operations [8][11]

GRAND RAPIDS, Mich., June 30, 2025 /PRNewswire/ -- Mercantile Bank Corporation (NASDAQ: MBWM) will host a conference call and webcast at 10 a.m. ET on Tuesday, July 22, 2025, to discuss second quarter 2025 financial results.The Company's second quarter 2025 earnings release will be released before markets open on Tuesday, July 22, 2025, and available in the "Investor Relations" section of the Company's website, ir.mercbank.com.Participants may access the live conference call on July 22, 2025, at 10 a.m. ET ...