What changed in this filing

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Item 1. Business

2025-03-03 compared with 2024-03-01 · 30 added, 39 removed, 228 unchanged (23% of the section changed)

13 unchanged sentences

Our bank, through its 43 office locations, provides commercial banking services primarily to small- to medium-sized businesses and retail banking services.

Our bank’s main office is located in Grand Rapids, and our operations are centered around the West and Central portions of Michigan.

We also have banking offices located in the metropolitan Detroit, Michigan area, Traverse City, Michigan, Saginaw, Michigan, and Midland, Michigan, as well as a residential mortgage loan production office in Petoskey, Michigan.

Our bank’s main office is located in Grand Rapids, Michigan, and our operations are centered around the West and Central portions of Michigan.

We also have banking offices located in the metropolitan Detroit, Michigan area, Traverse City, Michigan, Petoskey, Michigan, Saginaw, Michigan, and Midland, Michigan.

Our bank makes secured and unsecured commercial, construction, mortgage and consumer loans, and accepts checking, savings and time deposits.

49 unchanged sentences

Among other things, these restrictions limit the transactions our bank conducts with us, our other subsidiaries or other affiliates, limit our securities borrowing or lending, derivatives, and repurchase transactions with us, our other subsidiaries or other affiliates, limit investments in stock or other securities that we issue, limit the taking of such stock or securities as collateral for loans to any borrower, and limit acquisitions of assets or services from, and sales of certain types of assets to, us, our other subsidiaries or other affiliates.

Michigan banking laws place additional restrictions on various aspects of banking, including branching, payment of dividends, loan interest rates and capital and surplus requirements.

Michigan banking laws place additional restrictions on various aspects of banking, including branching, payment of dividends, and loan interest rates, in addition to capital and surplus requirements.

Federal law restricts our ability to borrow from our bank by limiting the aggregate amount we may borrow and by requiring that all loans to us be secured in designated amounts by specified forms of collateral.

19 unchanged sentences

Talent Acquisition .

We hire people who are able to connect, listen and deliver the best solutions to our customers and communicate with integrity every time.

We are devoted to attracting and retaining the best talent in the markets we serve and have implemented HireReach’s evidence-based selection process with all branch new hires.

The system utilizes a standardized, consistent process and relevant quantitative data to facilitate a multidimensional assessment of job candidates to create better matches between workers and jobs, decrease time-to-hire, reduce first-year turnover, increase workforce diversity and boost productivity.

We believe in leading through example in our communities and are proud to be part of a cohort of 15 local companies that have adopted this evidence-based hiring process to help increase diversity in the workforce.

We hire people who connect with, listen to and deliver the best solutions to customers and team members.

Through a personalized and systematic recruiting process, our experienced team of Human Resources Business Partners are devoted to working with Hiring Managers and matching candidate skills and experience to a position where they can thrive.

Hiring long-term successful team members is critical to our success.

We believe our successful hiring practices are reflected in our annual turnover rate of 10%, which is consistently below our peers.

Employee Safety and Health.

3 unchanged sentences

In addition, with obstacles in maintaining balance between work responsibilities and personal time, we have enabled staff to pursue a safe and healthy work-life balance by increasing paid time off benefits for our employees.

Diversity and Inclusion .

We believe in respecting, recognizing and valuing the importance of Diversity, Equity and Inclusion (“DEI”) as a natural part of our culture.

Our exceptional team members are committed to maintaining an environment of personal growth and development.

Our employees subscribe to a common goal:

To make this financial institution the best it can possibly be.

Diversity is an asset in the pursuit of this goal.

Employees with dissimilar backgrounds, perspectives, opinions and lifestyles help us understand the motivations and desires of the communities we serve.

We believe that each member of our workforce should be accorded the utmost respect and should be given equal opportunity and encouragement to achieve their full potential.

Cooperation and teamwork are valued as much as individual growth and contribution.

All employees are required to attend and complete foundational DEI training, and regular expanded learning opportunities are provided.

Throughout 2023, live webinars were offered to our staff as well as recorded video access to a wide variety of DEI topics along with resources such as books, group discussions and supervisor support materials.

In further support of our inclusion efforts, we have a Diversity Council comprised of members representing diverse perspectives across departments and viewpoints.

The Diversity Council is designed to bring together ideas and experiences from various backgrounds to nurture respect and an appreciation for differences among employees.

Climate Change

6 unchanged sentences

We continue to strive for the reduction of mail and paper usage through the promotion of customer eStatement adoption.

The eStatement adoption rate continues to grow, and we were approaching 60% adoption at year-end 2023.

The eStatement adoption rate continues to grow, and we were approaching above 61% adoption at year-end 2024.

Our online accounts payable system has also enabled us to significantly reduce paper and printing, and saves time.

2 unchanged sentences

Water bottle refill stations also aid to reduce plastic bottle usage.

Our Environmental, Social, and Governance ("ESG") Committee supports our ongoing commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to our organization.

The ESG Committee is a cross-functional management committee, led by the Chief Risk Officer, that assists us in:

Our Sustainability Committee supports our ongoing commitment to environmental, health and safety, corporate social responsibility, corporate governance, sustainability, and other public policy matters relevant to our organization.

The Sustainability Committee is a cross-functional management committee, with oversight from the Governance and Nominating Committee and the Board of Directors, that assists us in:

(1) setting general strategies relating to ESG matters;

(2) developing, implementing, and monitoring initiatives and polices based on those strategies;

(2) developing, implementing, and monitoring initiatives and policies based on those strategies;

(3) recommending communications with employees, investors, and shareholders with respect to ESG matters;

1 unchanged sentence

The committee met three times during 2024.

Highlights for 2023 included establishing Mercantile Community Partners LLC to facilitate low-income housing tax credits, hiring a full-time Director of Learning to better develop our employees, engaging a new provider to improve our ESG data gathering and reporting, incorporating a member of our bank’s Young Professional resource group as a member of the ESG Committee, and rolling out a new Green Mortgage Lending Program to support homeowners looking to make environmentally sustainable home improvements.

Our bank also developed a Clawback Policy;

Highlights for 2024 included expanding the impact of Mercantile Community Partners LLC to facilitate low-income housing tax credits, completion and posting of the 2024 Corporate Sustainability Report, hiring a fulltime Director of Enterprise Excellence at the end of 2024 to oversee all ongoing ESG and sustainability efforts, implementation of a sustainability reporting platform, increased support of first-time home buyers mortgage programs, and over 27,500 hours of volunteering in the community completed by employees.

Our bank maintains a Clawback Policy;

an Insider Trading Policy;

Code of Ethics;

Corporate Governance Guidelines;

an Anti-Bribery and Anti-Corruption Policy;

and an Anti-Money Laundering, Bank Secrecy Act, Customer Identification and Due Diligence Programs Letter.

These and our other policies (including our Vendor and Supplier Code of Conduct, Environmental Policy, Diversity, Equity and Inclusion Policy, Human Rights Policy, and Supplier Diversity Program Policy), are reviewed and approved by our Board of Directors at least annually and can be found on our website.

an Anti-Money Laundering, Bank Secrecy Act, Customer Identification and Due Diligence Programs Letter;

Vendor and Supplier Code of Conduct;

Environmental Policy;

Human Rights Policy;

and Supplier Diversity Program Policy, which are reviewed and approved by our Board of Directors at least annually and can be found on our website.

Lending Policy

22 unchanged sentences

Our loan officers and loan managers are generally able to approve loans ranging from $0.25 million to $2.5 million.

We have established higher approval limits for our bank’s Chief Lending Officer, President and Chief Executive Officer ranging from $4.0 million up to $10.0 million.

We have established higher approval limits for our bank’s President and Chief Executive Officer and Chief Lending Officer, ranging from $4.0 million up to $10.0 million.

These lending authorities, however, are typically used only in rare circumstances where timing is of the essence.

7 unchanged sentences

In most instances, commercial line of credit facilities have terms ranging from 12 to 24 months with floating rates tied to the Wall Street Journal Prime Rate or 30-Day Secured Overnight Funding Rate (“SOFR”).

Commercial term debt secured by real estate are generally at a floating rate tied to the Wall Street Journal Prime Rate or 30-Day SOFR.

Since the fourth quarter of 2020, a fixed rate option for commercial term debt loans secured by real estate is generally not offered for loans over $2.5 million;

Commercial term loans secured by real estate are generally at a floating rate tied to the Wall Street Journal Prime Rate or 30-Day SOFR.

Since the fourth quarter of 2020, a fixed rate option for commercial term loans secured by real estate is generally not offered for loans over $2.5 million;

instead, customers are offered participation in our back-to-back interest rate swap program to achieve a desired fixed rate.

For loans under $2.5 million, we offer a rate primarily equal to the commensurate cost of funds using Federal Home Loan Bank of Indianapolis (“FHLBI”) advance rates as a proxy and a credit spread as indicated by the credit rating we assign.

Commercial term debt secured by real estate generally balloon within five years, with payments based on amortizations ranging from 10 to 25 years.

Commercial term debt secured by non-real estate collateral are generally at a floating rate tied to the Wall Street Journal Prime Rate or 30-Day SOFR, or a fixed rate primarily equal to the commensurate cost of funds using FHLBI advance rates as a proxy and a credit spread as indicated by the credit rating we assign, and generally mature and fully amortize within three to seven years.

Commercial term loans secured by real estate generally balloon within five years, with payments based on amortizations ranging from 10 to 25 years.

Commercial term loans secured by non-real estate collateral are generally at a floating rate tied to the Wall Street Journal Prime Rate or 30-Day SOFR, or a fixed rate primarily equal to the commensurate cost of funds using FHLBI advance rates as a proxy and a credit spread as indicated by the credit rating we assign, and generally mature and fully amortize within three to seven years.

We evaluate many aspects of a commercial loan transaction in order to minimize credit and interest rate risk.

1 unchanged sentence

This analysis includes a review of the borrower’s historical and projected financial results.

Appraisals are generally required to be performed by certified independent appraisers where real estate is the primary collateral, and in some cases, where equipment is the primary collateral.

Appraisals are generally required to be performed by state-certified independent appraisers where real estate is the primary collateral, and in some cases, where equipment is the primary collateral.

In certain situations, for creditworthy customers, we may accept title reports instead of requiring lenders’ policies of title insurance.

1 unchanged sentence

Commercial Real Estate loans.

Commercial real estate loans, consisting of non-owner occupied, owner occupied, multi-family and residential rental, and vacant land, land development, and residential construction totaled 50.2% and 49.7% of our total loans as of December 31, 2023 and 2022, respectively.

Commercial real estate loans, consisting of non-owner occupied, owner occupied, multi-family and residential rental, and vacant land, land development, and residential construction loans, totaled 52.6% and 50.2% of our total loans as of December 31, 2024 and 2023, respectively.

We also adhere to the FDIC’s commercial real estate lending concentration guidelines specified in the Joint Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices .

Total commercial real estate loans (as defined in the guidance) represented 247% of total regulatory capital as of both December 31, 2023 and 2022, with both ratios being below the maximum guideline of 300%.

Total commercial real estate loans (as defined in the guidance) represented 256% and 247% of total regulatory capital as of December 31, 2024 and 2023, respectively, with both ratios being below the maximum guideline of 300%.

Commercial real estate lending involves more risk than residential lending because loan balances are typically greater and repayment is dependent upon the borrower’s business operations.

4 unchanged sentences

The majority of our commercial real estate portfolio is located within our primary geographic footprint within the state of Michigan.

As of December 31, 2023 and 2022, 90.3% and 92.3% of our commercial real estate loans were for projects located within the state of Michigan.

As of December 31, 2024 and 2023, 90.7% and 90.3%, respectively, of our commercial real estate loans were for projects located within the state of Michigan.

Loans made outside the state of Michigan are usually to customers located or headquartered within our footprint doing business in other states.

37 unchanged sentences

We had no loans past due 90 days or more and still accruing interest at year-end 2024 or 2023.

Additional detail and information relative to the loan portfolio is incorporated by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) and Note 3 of the Notes to Consolidated Financial Statements in this Annual Report.

Additional information relative to the loan portfolio is incorporated by reference to Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) and Note 3 of the Notes to Consolidated Financial Statements in this Annual Report.

Allowance for Credit Losses

10 unchanged sentences

Bank Holding Company Investments .

The principal investments of our bank holding company are the investments in the common stock of our bank and the common securities of our trusts.

The principal investments of our bank holding company are the investments in the common stock of our bank, the common securities of our trusts, and the community development tax credit investments made by MCP.

Other funds of our bank holding company may be invested from time to time in various debt instruments.

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business