MERCANTILE BANK CORP [MBWM] Filings

10-Q 1 mbwm20240630_10q.htm FORM 10-Q mbwm20240630_10q.htm

Table of Contents

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File No. 000-26719

MERCANTILE BANK CORPORATION

(Exact name of registrant as specified in its charter)

Michigan	38-3360865
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

310 Leonard Street, NW, Grand Rapids, MI 49504

(Address of principal executive offices) (Zip Code)

(616) 406-3000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	MBWM	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☒
Non-accelerated filer ☐	Smaller reporting company ☐
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Yes ☐ No ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☒

At July 31, 2024, there were 16,137,666 shares of common stock outstanding.

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MERCANTILE BANK CORPORATION

INDEX

PART I.	Financial Information	Page No.

	Item 1. Financial Statements

	Consolidated Balance Sheets (Unaudited) – June 30, 2024 and December 31, 2023	1

	Consolidated Statements of Income (Unaudited) - Three and Six Months Ended June 30, 2024 and June 30, 2023	2

	Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - Three and Six Months Ended June 30, 2024 and June 30, 2023	3

	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) – Three and Six Months Ended June 30, 2024 and June 30, 2023	4

	Consolidated Statements of Cash Flows (Unaudited) – Six Months Ended June 30, 2024 and June 30, 2023	8

	Notes to Consolidated Financial Statements (Unaudited)	10

	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	47

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	63

	Item 4. Controls and Procedures	65

PART II.	Other Information

	Item 1. Legal Proceedings	66

	Item 1A. Risk Factors	66

	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66

	Item 3. Defaults Upon Senior Securities	66

	Item 4. Mine Safety Disclosures	66

	Item 5. Other Information	66

	Item 6. Exhibits	67

	Signatures	68

Table of Contents

MERCANTILE BANK CORPORATION

PART I --- FINANCIAL INFORMATION

Item 1. Financial Statements

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30,			December 31,
(Dollars in thousands)	2024			2023
ASSETS
Cash and due from banks	$	61,863		$	70,408
Interest-earning deposits		135,766			60,125
Total cash and cash equivalents		197,629			130,533

Securities available for sale		647,907			617,092
Federal Home Loan Bank stock		21,513			21,513
Mortgage loans held for sale		22,126			18,607

Loans		4,438,245			4,303,758
Allowance for credit losses		(55,408	)		(49,914	)
Loans, net		4,382,837			4,253,844

Premises and equipment, net		50,158			50,928
Bank owned life insurance		86,001			85,668
Goodwill		49,473			49,473
Other assets		144,744			125,566
Total assets	$	5,602,388		$	5,353,224

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing	$	1,119,888		$	1,247,640
Interest-bearing		3,026,686			2,653,278
Total deposits		4,146,574			3,900,918

Securities sold under agreements to repurchase		221,898			229,734
Federal Home Loan Bank advances		427,083			467,910
Subordinated debentures		49,987			49,644
Subordinated notes		89,143			88,971
Accrued interest and other liabilities		116,552			93,902
Total liabilities		5,051,237			4,831,079

Commitments and contingent liabilities (Note 8)

Shareholders' equity
Preferred stock, no par value; 1,000,000 shares authorized; none issued		0			0
Common stock, no par value; 40,000,000 shares authorized; 16,137,646 shares issued and outstanding at June 30, 2024 and 16,125,662 shares issued and outstanding at December 31, 2023		297,591			295,106
Retained earnings		306,804			277,526
Accumulated other comprehensive gain (loss)		(53,244	)		(50,487	)
Total shareholders’ equity		551,151			522,145
Total liabilities and shareholders’ equity	$	5,602,388		$	5,353,224

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

	Three Months		Three Months		Six Months		Six Months
	Ended		Ended		Ended		Ended
(Dollars in thousands except per share amounts)	June 30, 2024		June 30, 2023		June 30, 2024		June 30, 2023

Interest income
Loans, including fees	$	72,819	$	62,006	$	144,089	$	119,159
Securities, taxable		2,656		2,207		5,101		4,338
Securities, tax-exempt		968		904		1,945		1,780
Interest-earning deposits		2,436		801		4,469		1,125
Total interest income		78,879		65,918		155,604		126,402

Interest expense
Deposits		24,710		12,379		46,934		20,286
Short-term borrowings		1,757		914		3,412		1,373
Federal Home Loan Bank advances		3,252		3,051		6,651		4,845
Subordinated debt and other borrowings		2,088		2,023		4,173		3,963
Total interest expense		31,807		18,367		61,170		30,467

Net interest income		47,072		47,551		94,434		95,935

Provision for credit losses		3,500		2,000		4,800		2,600

Net interest income after provision for credit losses		43,572		45,551		89,634		93,335

Noninterest income
Service charges on deposit and sweep accounts		1,692		1,064		3,224		2,041
Mortgage banking income		3,023		1,835		5,365		3,050
Credit and debit card income		2,266		2,426		4,387		4,485
Interest rate swap fees		766		748		2,104		1,785
Payroll services income		686		572		1,582		1,317
Earnings on bank owned life insurance		437		402		1,609		802
Other income		811		598		2,277		1,117
Total noninterest income		9,681		7,645		20,548		14,597

Noninterest expense
Salaries and benefits		17,913		16,461		36,150		33,143
Occupancy		2,220		2,098		4,509		4,387
Furniture and equipment depreciation, rent and maintenance		923		878		1,852		1,700
Data processing costs		3,415		2,881		6,704		6,043
Charitable foundation contributions		4		2		707		12
Other expense		5,262		5,509		9,758		11,144
Total noninterest expense		29,737		27,829		59,680		56,429

Income before federal income tax expense		23,516		25,367		50,502		51,503

Federal income tax expense		4,730		5,010		10,154		10,171

Net income	$	18,786	$	20,357	$	40,348	$	41,332

Basic earnings per share	$	1.17	$	1.27	$	2.50	$	2.58
Diluted earnings per share	$	1.17	$	1.27	$	2.50	$	2.58

Average basic shares outstanding		16,122,813		16,003,372		16,120,836		15,999,775
Average diluted shares outstanding		16,122,813		16,003,372		16,120,836		15,999,775

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months			Three Months			Six Months			Six Months
	Ended			Ended			Ended			Ended
(Dollars in thousands)	June 30, 2024			June 30, 2023			June 30, 2024			June 30, 2023


Net income	$	18,786		$	20,357		$	40,348		$	41,332

Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale		(342	)		(6,645	)		(3,491	)		4,841
Tax effect of unrealized holding gains (losses) on securities available for sale		73			1,395			734			(1,017	)
Other comprehensive income (loss), net of tax		(269	)		(5,250	)		(2,757	)		3,824

Comprehensive income (loss)	$	18,517		$	15,107		$	37,591		$	45,156

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

								Accumulated
								Other			Total
	Preferred		Common		Retained			Comprehensive			Shareholders’
(Dollars in thousands except per share amounts)	Stock		Stock		Earnings			Income (Loss)			Equity

Balances, March 31, 2024	$	0	$	296,065	$	293,554		$	(52,975	)	$	536,644

Employee stock purchase plan (320 shares)				13								13

Dividend reinvestment plan (5,423 shares)				201								201

Stock grants to directors for retainer fees (11,247 shares)				421								421

Stock-based compensation expense				891								891

Cash dividends ($0.35 per common share)						(5,536	)					(5,536	)

Net income for the three months ended June 30, 2024						18,786						18,786

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect									(269	)		(269	)

Balances, June 30, 2024	$	0	$	297,591	$	306,804		$	(53,244	)	$	551,151

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

(Unaudited)

								Accumulated
								Other			Total
	Preferred		Common		Retained			Comprehensive			Shareholders’
(Dollars in thousands except per share amounts)	Stock		Stock		Earnings			Income (Loss)			Equity

Balances, January 1, 2024	$	0	$	295,106	$	277,526		$	(50,487	)	$	522,145

Employee stock purchase plan (610 shares)				24								24

Dividend reinvestment plan (10,990 shares)				405								405

Stock grants to directors for retainer fees (11,316 shares)				423								423

Stock-based compensation expense				1,633								1,633

Cash dividends ($0.70 per common share)						(11,070	)					(11,070	)

Net income for the six months ended June 30, 2024						40,348						40,348

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect									(2,757	)		(2,757	)

Balances, June 30, 2024	$	0	$	297,591	$	306,804		$	(53,244	)	$	551,151

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

(Unaudited)

								Accumulated
								Other			Total
	Preferred		Common		Retained			Comprehensive			Shareholders’
(Dollars in thousands except per share amounts)	Stock		Stock		Earnings			Income (Loss)			Equity

Balances, March 31, 2023	$	0	$	291,516	$	232,123		$	(56,267	)	$	467,372

Employee stock purchase plan (443 shares)				13								13

Dividend reinvestment plan (7,821 shares)				232								232

Stock grants to directors for retainer fees (10,455 shares)				317								317

Stock-based compensation expense				828								828

Cash dividends ($0.33 per common share)						(5,167	)					(5,167	)

Net income for the three months ended June 30, 2023						20,357						20,357

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect									(5,250	)		(5,250	)

Balances, June 30, 2023	$	0	$	292,906	$	247,313		$	(61,517	)	$	478,702

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

(Unaudited)

								Accumulated
								Other			Total
	Preferred		Common		Retained			Comprehensive			Shareholders’
(Dollars in thousands except per share amounts)	Stock		Stock		Earnings			Income (Loss)			Equity

Balances, January 1, 2023	$	0	$	290,436	$	216,313		$	(65,341	)	$	441,408

Employee stock purchase plan (770 shares)				23								23

Dividend reinvestment plan (14,701shares)				449								449

Stock grants to directors for retainer fees (10,455 shares)				317								317

Stock-based compensation expense				1,681								1,681

Cash dividends ($0.66 per common share)						(10,332	)					(10,332	)

Net income for the six months ended June 30, 2023						41,332						41,332

Change in net unrealized holding gain (loss) on securities available for sale, net of tax effect									3,824			3,824

Balances, June 30, 2023	$	0	$	292,906	$	247,313		$	(61,517	)	$	478,702

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months			Six Months
	Ended			Ended
(Dollars in thousands)	June 30, 2024			June 30, 2023

Cash flows from operating activities
Net income	$	40,348		$	41,332
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		5,480			5,930
Provision for credit losses		4,800			2,600
Stock-based compensation expense		1,633			1,681
Stock grants to directors for retainer fees		423			317
Proceeds from sales of mortgage loans held for sale		147,849			70,280
Origination of mortgage loans held for sale		(146,731	)		(76,088	)
Net gain from sales of mortgage loans held for sale		(4,637	)		(2,569	)
Net gain from sales and valuation write-downs of foreclosed assets		(290	)		0
Net gain from sale and write-down of former bank premises		(78	)		0
Net loss from sales and write-downs of fixed assets		0			377
Earnings on bank owned life insurance		(1,609	)		(802	)
Net (gain) loss on instruments designated at fair value and related derivatives		(104	)		106
Net change in:
Accrued interest receivable		(1,169	)		(1,486	)
Other assets		(16,679	)		(1,338	)
Accrued interest payable and other liabilities		20,113			(2,873	)
Net cash from operating activities		49,349			37,467

Cash flows from investing activities
Loan originations and payments, net		(133,793	)		(135,410	)
Purchases of securities available for sale		(57,592	)		(11,641	)
Proceeds from maturities, calls and repayments of securities available for sale		23,185			10,198
Proceeds from sales of foreclosed assets		290			0
Proceeds from sales of fomer bank premises		278			0
Purchases of Federal Home Loan Bank stock		0			(3,792	)
Proceeds from bank owned life insurance death benefits claim		1,357			0
Net purchases of premises and equipment and lease activity		(2,330	)		(4,680	)
Net cash for investing activities		(168,605	)		(145,325	)

See accompanying notes to consolidated financial statements.

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MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

	Six Months		Six Months
	Ended		Ended
(Dollars in thousands)	June 30, 2024		June 30, 2023

Cash flows from financing activities
Net increase in time deposits		71,902

MERCANTILE BANK CORP [MBWM] Filings
10-Q	[2024-08-02]
10-Q	[2024-05-03]
10-K	[2024-03-01]
10-Q	[2023-11-03]
10-Q	[2023-08-04]
10-Q	[2023-05-05]
10-K	[2023-03-03]
10-Q	[2022-11-04]
10-Q	[2022-08-05]
10-Q	[2022-05-06]
10-K	[2022-03-04]
10-Q	[2021-11-05]
10-Q	[2021-08-06]
10-Q	[2021-05-07]
10-K	[2021-03-05]
10-Q	[2020-11-06]
10-Q	[2020-08-07]
10-Q	[2020-05-11]
10-K	[2020-03-02]
10-Q	[2019-11-06]
10-Q	[2019-08-05]
10-Q	[2019-05-06]
10-K	[2019-03-04]
10-Q	[2018-11-05]
10-Q	[2018-08-06]
10-Q	[2018-05-07]
10-K	[2018-03-05]
10-Q	[2017-11-06]
10-Q	[2017-08-07]
10-Q	[2017-05-05]
10-K	[2017-03-06]
10-Q	[2016-11-04]
10-Q	[2016-08-05]
10-Q	[2016-05-06]
10-K	[2016-03-07]
10-Q	[2015-11-06]
10-Q	[2015-08-07]
10-Q	[2015-05-07]
10-K	[2015-03-10]
10-Q	[2014-11-07]
10-Q	[2014-08-08]
10-Q	[2014-04-30]
10-K	[2014-02-28]
10-Q	[2013-11-12]
10-Q	[2013-08-05]
10-Q	[2013-05-09]
10-K	[2013-03-14]
10-Q	[2012-11-08]
10-Q	[2012-08-08]
10-Q	[2012-05-09]
10-K	[2012-03-14]