MERCANTILE BANK CORP 10-K

Item 9A. Controls and Procedures. As of December 31, 2025, an evaluation was performed under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of December 31, 2025. There have been no significant changes in our internal control over financial reporting during the year ended December 31, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). There are inherent limitations in the effectiveness of any system of internal control. Accordingly, even an effective system of internal control can provide only reasonable assurance with respect to financial statement preparation. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2025. This evaluation was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Based on our evaluation under the COSO framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2025. Refer to page F-26 for management’s report. The Report by Mercantile Bank Corporation’s Management on Internal Control Over Financial Reporting included in this Annual Report is incorporated here by reference. Our independent registered public accounting firm has issued an audit report on our internal control over financial reporting which is included on page F-25 of this report. The Reports of the Independent Registered Public Accounting Firm included in this Annual Report are incorporated here by reference. Item 9B. Other Information. None . Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections. Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance. The information presented under the captions “Information About Our Directors,” “Information About Our Executive Officers,” “Section 16 (a) Beneficial Ownership Reporting Compliance”, “Corporate Governance – Code of Ethics and Insider Trading Policy”, and "Board Committees -- Audit Committee" in the definitive Proxy Statement of Mercantile Bank Corporation for our May 21, 2026 Annual Meeting of Shareholders (the “Proxy Statement”), a copy of which will be filed with the Securities and Exchange Commission before April 30, 2026 , is incorporated here by reference. Item 11. Executive Compensation. The information presented under the captions “Executive Compensation,” “Corporate Governance – Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report” in the Proxy Statement is incorporated here by reference. 24 Table of Contents Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The information presented under the caption “Stock Ownership of Certain Beneficial Owners and Management” in the Proxy Statement is incorporated here by reference. Equity Compensation Plan Information The following table summarizes information, as of December 31, 2025, relating to compensation plans under which equity securities are authorized for issuance. Number of securities remaining available for Number of future issuance securities to be Weighted- under equity issued upon average compensation exercise of exercise price plans outstanding of outstanding (excluding options, options, securities warrants and warrants and reflected in Plan Category rights rights column (a)) (a) (b) (c) Equity compensation plans approved by security holders 0 $ 0 292,612 (1) Equity compensation plans not approved by security holders 0 $ 0 0 Total 0 $ 0 292,612 (1) These securities are available under the Stock Incentive Plan of 2023. Incentive awards may include, but are not limited to, stock options, restricted stock, stock appreciation rights and stock awards. Item 13. Certain Relationships and Related Transactions, and Director Independence. The information presented under the captions “Transactions with Related Persons” and “Corporate Governance – Director Independence” in the Proxy Statement is incorporated here by reference. Item 14. Principal Accountant Fees and Services. The information presented under the caption “Audit Committee Matters - Principal Accountant Fees and Services” in the Proxy Statement is incorporated here by reference. 25 Table of Contents PART IV Item 15. Exhibits and Financial Statement Schedules (a) (1) Financial Statements. The following financial statements and reports of the independent registered public accounting firm of Mercantile Bank Corporation and its subsidiaries are filed as part of this report: Report of Independent Registered Public Accounting Firm Consolidated Balance Sheets --- December 31, 2025 and 2024 Consolidated Statements of Income for each of the three years in the period ended December 31, 2025 Consolidated Statements of Comprehensive Income (Loss) for each of the three years in the period ended December 31, 2025 Consolidated Statements of Changes in Shareholders’ Equity for each of the three years in the period ended December 31, 2025 Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2025 Notes to Consolidated Financial Statements The Consolidated Financial Statements, the Notes to Consolidated Financial Statements, and the Reports of Independent Registered Public Accounting Firm listed above are incorporated by reference in Item 8 of this report. (2) Financial Statement Schedules Not applicable. (b) Exhibits: The Exhibit Index immediately preceding the Signatures Page hereto is incorporated by reference under this item. (c) Financial Statements Not Included In Annual Report Not applicable. Item 16. Form 10-K Summary None. 26 Table of Contents MERCANTILE BANK CORPORATION FINANCIAL INFORMATION December 31, 2025 and 2024 F-1 Table of Contents MERCANTILE BANK CORPORATION FINANCIAL INFORMATION December 31, 2025 and 2024 CONTENTS MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS F-3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 166 , PLANTE & MORAN, PLLC , GRAND RAPIDS, MICHIGAN ) F-23 REPORT BY MERCANTILE BANK CORPORATION’S MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING F-26 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS F-27 CONSOLIDATED STATEMENTS OF INCOME F-28 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) F-29 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY F-30 CONSOLIDATED STATEMENTS OF CASH FLOWS F-33 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-35 F-2 Table of Contents MANAGEMENT ’ S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS The following discussion and other portions of this Annual Report contain forward-looking statements that are based on management’s beliefs, assumptions, current expectations, estimates, and projections about the financial services industry, the economy, and our company. Words such as “anticipates,” “believes,” "could," “estimates,” “expects,” “intends,” “plans,” “projects,” “indicates,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions (“Future Factors”) that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements. We undertake no obligation to update, amend, or clarify forward-looking statements, whether as a result of new information, future events (whether anticipated or unanticipated), or otherwise. Future Factors include, among others, adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and non-traditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches, and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the national and local economies, and unstable political and economic environments; difficulties integrating the business of Eastern Michigan Financial Corporation; focus of time and effort of our management team toward integration efforts; the anticipated benefits of the acquisition may not be realized; risks related to the indebtedness incurred to finance the merger; risks associated with the ongoing conversion of the core processing systems; and risk factors described in this Annual Report. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement. Discussions of 2023 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report for the fiscal year ended December 31, 2024. CRITICAL ACCOUNTING ESTIMATES Management’s Discussion and Analysis of Financial Condition and Results of Operations (“Management’s Discussion and Analysis”) is based on Mercantile Bank Corporation’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our critical accounting estimates are highly dependent upon subjective or complex judgments and assumptions, and changes in such may have a significant impact on the financial statements, just as actual results may differ. We have reviewed the application of our critical accounting estimates with the Audit Committee of our Board of Directors. F-3 Table of Contents Allowance For Credit Losses ( “ allowance ” ) : The allowance is maintained at a level we believe is adequate to absorb estimated credit losses identified and expected in the loan portfolio. Our evaluation of the adequacy of the allowance is an estimate based on historical credit loss experience, the nature and volume of the loan portfolio, information about specific borrower situations and estimated collateral values, guidance from bank regulatory agencies, and assessments of the impact of current and anticipated economic conditions on the loan portfolio. While historical credit loss experience provides the basis for the estimation of expected credit losses, our qualitative model adjusts for risk factors that are not inherently considered in the quantitative modeling process, but are nonetheless relevant in assessing the expected credit losses within the loan portfolio. These adjustments may increase or decrease the estimate of expected credit losses based upon the assessed level of risk for each qualitative factor. The various risks that may be considered in making qualitative adjustments include, among other things, the impact of (i) changes in lending policies and procedures, (ii) changes in the nature and volume of the loan portfolio and in the terms of loans, (iii) changes in the experience, ability and depth of lending management and staff, (iv) changes in the volume and severity of past due loans, nonaccrual loans and adversely classified loans, (v) changes in the quality of the credit review function, (vi) changes in the value of underlying collateral dependent loans, (vii) existence and effect of any concentrations of credit and any changes in such, and (viii) effect of other factors such as competition and legal and regulatory requirements. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in our judgment, should be charged-off. Credit losses are charged against the allowance when we believe the uncollectibility of a loan is likely. The balance of the allowance represents our best estimate, but significant downturns in circumstances relating to loan quality or economic conditions could result in a requirement for an increased allowance in the future. Likewise, an upturn in loan quality or improved economic conditions may result in a decline in the required allowance in the future. In either instance, unanticipated changes could have a significant impact on the allowance and operating results. The allowance is increased through a provision charged to operating expense. Uncollectible loans are charged-off through the allowance, while recoveries of loans previously charged-off are added to the allowance. See Note 1 – Significant Accounting Policies in the Notes to our Consolidated Financial Statements in this Annual Report for additional information on our estimation process and methodology related to the allowance. See also Note 3 – Loans and Allowance for Credit Losses in the Notes to our Consolidated Financial Statements in this Annual Report for further information regarding our loan portfolio and allowance. Mortgage Servicing Rights : Mortgage servicing rights are recognized as assets based on the allocated fair value of retained servicing rights on loans sold. Servicing rights are carried at the lower of amortized cost or fair value and are expensed in proportion to, and over the period of, estimated net servicing income. We utilize a discounted cash flow model to determine the value of our servicing rights. The valuation model utilizes mortgage loan prepayment speeds, the remaining lives of the mortgage loan pools, delinquency rates, our cost to service loans, and other factors to determine the cash flow that we will receive from servicing each grouping of loans. These cash flows are then discounted based on current interest rate assumptions to arrive at the fair value of the right to service those loans. Impairment is evaluated quarterly based on the fair value of the servicing rights, using groupings of the underlying loans classified by interest rates. Any impairment of a grouping is reported as a valuation allowance. F-4 Table of Contents Core Deposit Intangible: In whole bank or bank branch acquisitions, the primary identifiable intangible asset recorded is the value of core deposit intangibles, representing the estimated value of long-term deposit relationships acquired. The determination involves assumptions and estimates, typically determined through discounted cash flow analysis, considering customer attrition/runoff, alternative funding costs, deposit servicing costs, and discount rates. Amortization of core deposit intangibles occurs over estimated useful lives reviewed periodically for reasonableness. These estimated useful lives, typically ranging from seven to 10 years with an accelerated rate of amortization, are periodically reviewed for reasonableness. Identifiable intangible assets, including core deposit intangibles, are assessed for impairment when events or changes suggest the carrying value may not be recoverable. Our policy dictates recognition of an impairment loss equal to the difference between the asset’s carrying amount and fair value if the expected undiscounted future cash flows are less than the carrying amount. Estimating future cash flows involves multiple estimates and assumptions, as previously mentioned. Goodwill : Accounting rules require us to determine the fair value of all the assets and liabilities of an acquired entity, and to record their fair value on the date of acquisition. We employ a variety of means in determining fair value, including the use of discounted cash flow analysis, market comparisons and projected future revenue streams. For those items for which we conclude that we have the appropriate expertise to determine fair value, we may choose to use our own calculation of fair value. In other cases, where the fair value is not readily determined, consultation with outside parties is used to determine fair value. Once valuations have been determined, the net difference between the price paid for the acquired entity and the fair value of the balance sheet is recorded as goodwill. Goodwill is assessed at least annually for impairment, with any such impairment recognized in the period identified. A more frequent assessment is performed if there are material changes in the market place or within the organizational structure. INTRODUCTION This Management’s Discussion and Analysis should be read in conjunction with the consolidated financial statements contained in this Annual Report. This discussion provides information about the consolidated financial condition and results of operations of Mercantile Bank Corporation and its consolidated subsidiaries, Mercantile Bank, Eastern Michigan Bank (collectively “our banks”), Mercantile Community Partners LLC ("MCP"), and Mercantile Insurance Center, Inc. (“our insurance company”), a subsidiary of Mercantile Bank. Unless the text clearly suggests otherwise, references to “us,” “we,” “our,” or “the company” include Mercantile Bank Corporation and its wholly owned subsidiaries referred to above. CLIMATE CHANGE The potential impact of climate change on our operations and the needs of our customers remains uncertain. Scientists have proposed that the impacts of climate change could include changes in rainfall patterns, water shortages, changes to the water levels of lakes and other bodies of water, changing storm patterns and intensities, and changing temperature levels. These changes could be severe and vary by geographic location. Climate change may also affect the occurrence of certain natural events, the incidence and severity of which are inherently unpredictable, and may impact our borrowers or the value of our loan collateral. ENVIRONMENTAL, SOCIAL, AND GOVERNANCE MATTERS Our Enterprise Excellence 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 Enterprise Excellence 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) establishing a cadence of improvement throughout our banks for process efficiency and effectiveness, (2) monitoring and assessing developments related to improving our banks' understanding and execution of governance, environment, and community matters, and (3) recommending communications with employees, investors and stakeholders with respect to governance, environment, and community matters. The Enterprise Excellence Committee met three times during 2025. Highlights for 2025 included continued growth of MCP to facilitate low-income housing tax credits and our investment in energy tax credits, completion of the Enterprise Excellence Report, full utilization of a sustainability reporting platform for data tracking, continued support of first-time home buyer mortgage programs, and over 28,000 hours of volunteering in the community completed by employees. We also maintain a Clawback Policy; an Insider Trading Policy; Code of Ethics; Corporate Governance Guidelines; an Anti-Bribery and Anti-Corruption Policy; 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 Community Supplier Program Policy, which are reviewed and approved by our Board of Directors at least annually and can be found on our website. F-5 Table of Contents FINANCIAL OVERVIEW On December 31, 2025, we consummated the acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, headquartered in Croswell, Michigan. The newly acquired Eastern Michigan Bank will operate alongside our existing bank, Mercantile Bank, until the first quarter of 2027, at which time we plan to consolidate Eastern Michigan Bank into Mercantile Bank in conjunction with a conversion of our core operating system to a new provider. Consideration totaled $95.8 million, consisting of 924,999 shares of common stock with an aggregate value of $44.9 million and cash totaling $50.9 million. The aggregate fair value of assets acquired was $549 million, consisting largely of loans ($201 million) and securities ($198 million). The aggregate value of liabilities acquired was $476 million, comprised almost exclusively of deposits. We recorded goodwill of $23.2 million and a core deposit intangible asset of $20.4 million. We use the word “our” throughout the following discussion to represent Mercantile Bank Corporation’s balance sheets as of December 31, 2024, and December 31, 2025, excluding the impact of the Eastern Michigan Financial Corporation acquisition consummated as of close of business on December 31, 2025. This format provides for a delineation of Mercantile Bank Corporation’s results during 2025 and the acquisition impact. We recorded net income of $88.8 million, or $5.47 per basic and diluted share, for 2025, compared with net income of $79.6 million, or $4.93 per basic and diluted share, for 2024. Growth in net income largely reflected increased net interest income and noninterest income, lower provision expense and reduced federal income tax expense, which more than offset increased noninterest expenses. Commercial loans increased $211 million, or approximately 6%, during 2025. Our commercial loans grew $58.6 million during 2025, with Eastern Michigan Bank’s commercial loans aggregating $153 million at year-end 2025. Our commercial loan growth during 2025 was impacted by increased payoffs and partial paydowns of larger commercial loan relationships totaling $312 million during the year, compared to $194 million during 2024. As a percentage of total commercial loans, commercial and industrial loans and owner-occupied commercial real estate ("CRE") loans combined equaled 55.0% at December 31, 2025, compared to 54.9% at year-end 2024. The new commercial loan pipeline remains strong, and at year-end 2025, we had $237 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase. Residential mortgage loans decreased $36.7 million, or approximately 4%, during 2025. Our residential mortgage loans declined $60.7 million during 2025, with Eastern Michigan Bank’s residential mortgage loans aggregating $24.0 million at year-end 2025. Residential mortgage loan originations totaled $521 million during 2025, compared to $485 million in 2024. Approximately 81% of the residential mortgage loans originated during 2025 were done so with the intent to sell, compared to about 78% and 53% in 2024 and 2023, respectively. Combined with increased prepayments speeds of our residential mortgage loan portfolio during the past two years, the increase in the percentage of loans sold has resulted in a declining portfolio balance. The increases in volume of loans originated and percentage of loans sold have had a positive impact on mortgage banking income. The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $7.9 million, or 0.16% of total loans, as of December 31, 2025. Our nonperforming loans totaled $6.9 million with Eastern Michigan Bank’s nonperforming loans aggregating $1.0 million at year-end 2025. Accruing loans past due 30 to 89 days remain very low with very limited foreclosed property activity throughout 2025 at both banks. Our loan charge-offs totaled $3.1 million during 2025, while recoveries of prior period loan charge-offs totaled $1.2 million, providing for net loan charge-offs of $1.9 million, or 0.04% of average total loans, for the year. F-6 Table of Contents Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, are used to manage daily liquidity needs and interest rate risk sensitivity. The average balance of these funds equaled $309 million during 2025, compared to $237 million in 2024. The higher average balance primarily reflects an increase in deposits associated with our strategic initiative to lower the loan-to-deposit ratio. Total deposits increased $586 million during 2025, or approximately 12%. Our deposits grew $111 million during 2025, with Eastern Michigan Bank’s deposits aggregating $475 million at year-end 2025. A majority of the growth was in money market, interest checking and local time deposit products. Securities sold under agreements to repurchase (“sweep accounts”) grew $111 million, while Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $60.9 million during 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $457 million, or about 8% of total funds, as of December 31, 2025. Net interest income increased $10.0 million during 2025 compared to 2024. Interest income was up $8.7 million, in large part reflecting $460 million growth in average earning assets, which more than offset a 32 basis point decline in the yield on average earning assets. Interest expense was down $1.3 million, primarily reflecting a 35 basis point decline in the cost of interest-bearing liabilities which more than offset growth in interest-bearing liabilities aggregating $415 million. We recorded a credit loss provision expense of $3.2 million during 2025, compared to $7.4 million during 2024. The provision expense recorded during 2025 in large part reflected a reserve increase related to changes in the economic forecast, a net increase in specific reserve allocations and a net increase from changes in several qualitative factors, which were partially mitigated by reductions to the allowance for credit losses stemming from faster residential mortgage and consumer loan prepayment speeds that shortened the average durations of the portfolios and lower baseline loss rates. Noninterest income increased $1.2 million during 2025 compared to 2024, primarily reflecting growth in service charges on deposit accounts, mortgage banking income, credit and debit card income, and payroll service fees, as well as benefit claims on bank owned life insurance policies. Swap income declined in large part due to a lower volume of new swap transactions. Noninterest expense increased $10.2 million during 2025 compared to 2024. Aggregate salary and benefit costs grew $5.3 million, primarily reflecting annual merit pay increases, market adjustments and lower residential mortgage loan deferred salary costs. Increased data processing costs were also recorded during 2025, largely reflecting higher transaction volumes and software support costs, along with the introduction of new treasury management products and services. Higher allocations to the reserve for unfunded loan commitments were also recorded, largely reflecting a higher level of committed and accepted commercial loans. Professional fees associated with the acquisition of Eastern Michigan Financial Corporation totaled $1.8 million during 2025. Despite increased pre-tax income during 2025 compared to 2024, federal income tax expense was $4.0 million lower. The reduction primarily reflects the acquisition of transferable energy tax credits, combined with net benefits associated with our low-income housing and historical tax credit activities. FINANCIAL CONDITION Total assets increased $783 million during 2025, totaling $6.84 billion as of December 31, 2025. Our total assets increased $211 million during 2025, with Eastern Michigan Bank’s assets totaling $572 million at year-end 2025. Total loans increased $221 million, securities available for sale were up $372 million and interest-earning deposits grew $82.6 million. Our loans increased $17.4 million, securities available for sale were up $174 million and interest-earning deposits grew $40.5 million during 2025, with Eastern Michigan Bank’s loans, securities available for sale and interest-earning deposits totaling $204 million, $198 million and $42.1 million at year-end 2025, respectively. Total deposits increased $586 million during 2025, with our deposits growing $111 million during the year and Eastern Michigan Bank’s deposits aggregating $475 million at year-end 2025. Sweep accounts grew $111 million, while FHLBI advances declined $60.9 million during 2025. Shareholders’ equity was up $140 million during 2025. F-7 Table of Contents Earning Assets Average earning assets equaled 94.5% of average total assets during 2025, compared to 94.7% during 2024. The loan portfolio continued to comprise a majority of earning assets, followed by securities and other interest-earning assets. Average total loans equaled 79.9% of average earning assets during 2025, compared to 82.6% in 2024, while average securities and other interest-earning assets comprised 14.1% and 6.0% of average earning assets during 2025 and 12.2% and 5.2% of average earning assets during 2024, respectively. The decline in the percentage of loans to average earning assets and similar increase in the percentage of securities to average earning assets largely reflect our strategic initiative to reduce our loan-to-deposit ratio. Our loan portfolio has historically been primarily comprised of commercial loans. Commercial loans increased $211 million during 2025, and totaled $3.92 billion at year-end 2025. Our commercial loans grew $58.6 million during 2025, with Eastern Michigan Bank’s commercial loans aggregating $153 million at year-end 2025. Our multi-family and residential rental property loans were up $59.9 million, commercial and industrial loans increased $47.7 million and vacant land, land development and residential construction loans were up $12.5 million. Nonowner-occupied CRE loans declined $43.0 million and owner-occupied CRE loans were down $18.5 million. Our commercial loan growth during 2025 was impacted by increased payoffs and partial paydowns of larger commercial loan relationships totaling $312 million during the year, compared to $194 million during 2024. Eastern Michigan Bank’s commercial loan portfolio is well-diversified, with owner-occupied CRE loans totaling $48.5 million, commercial and industrial loans aggregating $39.4 million, vacant land, land development and residential construction loans totaling $37.9 million, nonowner-occupied CRE loans aggregating $25.3 million and multi-family and residential rental property loans totaling $1.5 million as of December 31, 2025. As a percentage of total commercial loans, commercial and industrial loans and owner-occupied CRE loans combined equaled 55.0% as of December 31, 2025, compared to 54.9% at year-end 2024. Availability on commercial construction and development loans that are in the construction phase totaled $237 million as of December 31, 2025, with most of the funds expected to be drawn over the next 12 to 18 months. Our current pipeline reports indicate continued strong commercial loan funding opportunities in future periods, including $298 million in new lending commitments, a majority of which we expect to be accepted and funded over the next 12 to 18 months. Our commercial lenders also report additional opportunities they are currently discussing with existing borrowers and potential new customers. We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits we have established within our commercial loan portfolio. Usage of existing commercial lines of credit was relatively stable during 2025 at approximately 44%, a small increase from 2024 but similar to our historical average. Residential mortgage loans decreased $36.7 million during 2025, and totaled $791 million at year-end 2025. Our residential mortgage loans declined $60.7 million during 2025, with Eastern Michigan Bank’s residential mortgage loans aggregating $24.0 million at year-end 2025. Residential mortgage loan originations totaled $521 million during 2025, compared to $485 million in 2024. Approximately 81% of the residential mortgage loans originated during 2025 were done so with the intent to sell, compared to about 78% and 53% in 2024 and 2023, respectively. Combined with increased prepayments speeds of our residential mortgage loan portfolio during the past two years, the increase in the percentage of loans sold has resulted in a declining portfolio balance. The increases in volume of loans originated and percentage of loans sold have had a positive impact on mortgage banking income. Other consumer-related loans increased $46.5 million during 2025, and totaled $112 million at year-end 2025 with about 74% comprised of home equity lines of credit. Our consumer loans increased $19.5 million during 2025, with Eastern Michigan Bank’s other consumer-related loans aggregating $27.0 million at year-end 2025. We expect this loan portfolio segment to remain relatively steady in dollar amount but decline as a percent of total loans in future periods as the commercial loan segment grows. F-8 Table of Contents The following table presents total loans outstanding as of December 31, 2025, according to scheduled repayments of principal on fixed rate loans and repricing frequency on variable rate loans. Floating rate commercial loans that are currently at interest rate floors are treated as fixed rate loans and are reflected using maturity date and not repricing frequency. Less Than One Through After (Dollars in thousands) One Year Five Years Five Years Total Construction and land development $ 322,222 $ 42,447 $ 18,830 $ 383,499 Real estate - residential properties 168,718 430,199 298,070 896,987 Real estate - multi-family properties 308,169 49,928 2,653 360,750 Real estate - commercial properties 1,334,504 432,061 69,710 1,836,275 Commercial and industrial 1,167,431 120,458 27,350 1,315,239 Consumer 2,594 20,380 6,164 29,138 Total loans $ 3,303,638 $ 1,095,473 $ 422,777 $ 4,821,888 Fixed rate loans $ 229,553 $ 666,800 $ 194,728 $ 1,091,081 Floating rate loans 3,074,085 428,673 228,049 3,730,807 Total loans $ 3,303,638 $ 1,095,473 $ 422,777 $ 4,821,888 Our credit policies establish guidelines to manage credit risk and asset quality. These guidelines include loan review and early identification of problem loans to provide effective loan portfolio administration. The credit policies and procedures are meant to minimize the risk and uncertainties inherent in lending. In following these policies and procedures, we must rely on estimates, appraisals and evaluations of loans and the possibility that changes in these items could occur quickly because of changing economic conditions or other factors. Identified problem loans, which exhibit characteristics (financial or otherwise) that could cause the loans to become nonperforming or require restructuring in the future, are included on the internal loan watch list. Senior management and the Board of Directors review this list regularly. Market value estimates of collateral on nonperforming loans, as well as on foreclosed and repossessed assets, are reviewed periodically. We have a process in place to monitor whether value estimates at each quarter-end are reflective of current market conditions. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust outside and internal valuations based on identifiable trends within our markets, such as recent sales of similar properties or assets, listing prices, and offers received. In addition, we may discount certain appraised and internal value estimates to address distressed market conditions. The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $7.9 million, or 0.16% of total loans, as of December 31, 2025. Our nonperforming loans totaled $6.9 million with Eastern Michigan Bank’s nonperforming loans aggregating $1.0 million at year-end 2025. The volume of nonperforming assets has remained under 0.3% of total assets since year-end 2015 and has averaged 0.1% over the past seven years. Accruing loans past due 30 to 89 days remain very low with very limited foreclosed property activity throughout 2025 at both banks. Given the low level of nonperforming loans and accruing loans 30 to 89 days delinquent, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio. Our loan charge-offs totaled $3.1 million during 2025, while recoveries of prior period loan charge-offs totaled $1.2 million, providing for net loan charge-offs of $1.9 million, or 0.04% of average total loans, for the year. Loan charge-offs totaled $3.8 million during 2024, while recoveries of prior period loan charge-offs totaled $0.9 million, providing for net loan charge-offs of $2.9 million, or 0.06% of average total loans, for the year. We continue our collection efforts on charged-off loans, and we expect to record recoveries in future periods; however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries. F-9 Table of Contents The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the year ended December 31, 2025. (Dollars in thousands) Allowance for Credit Losses Total Loans Allowance for Credit Losses to Total Loans Nonaccrual Loans Nonaccrual Loans to Total Loans Allowance for Credit Losses to Nonaccrual Loans Net Charge-Offs Net Charge-Offs to Average Loans Commercial: Commercial and industrial $ 12,576 $ 1,374,522 0.91 % $ 1,393 0.10 % 902.80 % $ (674 ) (0.05 )% Vacant land, land development and residential construction 478 117,373 0.41 201 0.17 237.81 (5 ) (0.01 ) Real estate – owner occupied 7,629 778,869 0.98 517 0.07 1,475.63 (6 ) (0.00 ) Real estate – non-owner occupied 15,074 1,110,674 1.36 2,732 0.25 551.76 2,800 0.25 Real estate – multi-family and residential rental 5,514 537,224 1.03 0 NA NA (17 ) (0.00 ) Total commercial 41,271 3,918,662 1.05 4,843 0.12 852.18 2,098 0.06 Retail: 1-4 family mortgages 14,199 790,857 1.80 2,946 0.37 481.98 (170 ) (0.02 ) Other consumer 2,638 112,369 2.35 81 0.07 3,256.79 (67 ) (0.09 ) Total retail 16,837 903,226 1.86 3,027 0.34 556.23 (237 ) (0.03 ) Unallocated 83 NA NA NA NA NA NA NA Total $ 58,191 $ 4,821,888 1.21 % $ 7,870 0.16 % 739.40 % $ 1,861 0.04 % The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the year ended December 31, 2024. (Dollars in thousands) Allowance for Credit Losses Total Loans Allowance for Credit Losses to Total Loans Nonaccrual Loans Nonaccrual Loans to Total Loans Allowance for Credit Losses to Nonaccrual Loans Net Charge-Offs Net Charge-Offs to Average Loans Commercial: Commercial and industrial $ 11,165 $ 1,287,308 0.87 % $ 2,725 0.21 % 409.72 % $ 3,385 0.27 % Vacant land, land development and residential construction 367 66,936 0.55 0 0 NA (5 ) (0.01 ) Real estate – owner occupied 7,671 748,837 1.02 42 0.01 18,264.29 (171 ) (0.02 ) Real estate – non-owner occupied 10,919 1,128,404 0.97 0 0 NA 0 0 Real estate – multi-family and residential rental 3,667 475,819 0.77 0 0 NA (15 ) (0.00 ) Total commercial 33,789 3,707,304 0.91 2,767 0.07 1,221.14 3,194 0.09 Retail: 1-4 family mortgages 18,702 827,597 2.26 2,975 0.36 628.64 (190 ) (0.02 ) Other consumer 1,936 65,880 2.94 0 0 NA (144 ) (0.25 ) Total retail 20,638 893,477 2.31 2,975 0.33 693.71 (334 ) (0.04 ) Unallocated 27 NA NA NA NA NA NA NA Total $ 54,454 $ 4,600,781 1.18 % $ 5,742 0.12 % 948.35 % $ 2,860 0.06 % The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the year ended December 31, 2023. (Dollars in thousands) Allowance for Credit Losses Total Loans Allowance for Credit Losses to Total Loans Nonaccrual Loans Nonaccrual Loans to Total Loans Allowance for Credit Losses to Nonaccrual Loans Net Charge-Offs Net Charge-Offs to Average Loans Commercial: Commercial and industrial $ 7,441 $ 1,254,586 0.59 % $ 249 0.02 % 2,988.35 % $ 30 0.00 % Vacant land, land development and residential construction 384 74,753 0.51 0 0 NA (35 ) (0.05 ) Real estate – owner occupied 7,186 717,667 1.00 70 0.01 10,265.71 (17 ) (0.00 ) Real estate – non-owner occupied 9,852 1,035,684 0.95 0 0 NA 0 0 Real estate – multi-family and residential rental 3,184 332,609 0.96 0 0 NA (26 ) (0.01 ) Total commercial 28,047 3,415,299 0.82 319 0.01 8,792.16 (48 ) (0.00 ) Retail: 1-4 family mortgages 18,986 837,406 2.27 3,096 0.37 613.24 (18 ) (0.00 ) Home equity and other 2,881 51,053 5.64 0 0 NA 98 0.19 Total retail 21,867 888,459 2.46 3,096 0.35 706.30 80 0.01 Unallocated 0 NA NA NA NA NA NA NA Total $ 49,914 $ 4,303,758 1.16 % $ 3,415 0.08 % 1,461.61 % $ 32 0.00 % F-10 Table of Contents The following table depicts the ratio of our allowance to nonperforming loans: 12/31/25 12/31/24 12/31/23 Ratio of allowance to nonperforming loans 739.4 % 948.3 % 1,461.7 % The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers, and we have a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential mortgage loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position. See Note 1 - Significant Accounting Policies in this Annual Report for further detailed descriptions of our estimation process and methodology related to the allowance. See also Note 3 - Loans and Allowance for Credit Losses in this Annual Report for further information regarding our loan portfolio and allowance. The allowance equaled $58.2 million, or 1.21% of total loans, and over 700% of nonperforming loans, as of December 31, 2025. The allowance was comprised of $54.2 million in general reserves relating to performing loans and $4.0 million in specific reserves on other loans, primarily nonperforming loans, at year-end 2025. Loans with an aggregate carrying value of $3.2 million as of December 31, 2025, had been subject to previous partial charge-offs aggregating $3.5 million over the past several years, including $2.8 million during 2025. As of December 31, 2025, there were $2.7 million of specific reserves allocated to loans that had been subject to a previous partial charge-off. Although we believe the allowance is adequate to absorb loan losses in our originated loan portfolio as they arise, there can be no assurance that we will not sustain loan losses in any given period that could be substantial in relation to, or greater than, the size of the allowance. Securities available for sale increased $372 million during 2025, totaling $1.10 billion as of December 31, 2025. Our securities available for sale increased $174 million, with Eastern Michigan Bank’s securities available for sale totaling $198 million at year-end 2025. Our purchases of U.S. Government agency bonds during 2025 aggregated $167 million, while proceeds from matured and called U.S. Government agency bonds totaled $54.0 million. There were no purchases of U.S. Government agency guaranteed mortgage-backed securities during 2025; principal paydowns on U.S. Government agency guaranteed mortgage-backed securities totaled $3.4 million. Our purchases of municipal bonds totaled $35.9 million during 2025; proceeds from matured municipal bonds totaled $9.9 million. The portfolio was primarily comprised of U.S. Government agency bonds (58%), municipal bonds (25%), U.S. Government agency guaranteed mortgage-backed securities (7%), U.S. Treasury securities (5%) and corporate bonds (4%) as of December 31, 2025. All of our securities are currently designated as available for sale and are therefore stated at fair value. The fair value of securities designated as available for sale as of December 31, 2025 totaled $1.10 billion, including a net unrealized loss of $30.4 million. The net unrealized loss equaled $63.1 million as of December 31, 2024. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. We maintain the securities portfolio at levels to provide adequate pledging and secondary liquidity for our daily operations. In addition, the securities portfolio serves a primary interest rate risk management function. We expect upcoming purchases to generally consist of U.S. Government agency and municipal bonds, with the securities portfolio maintained at about 15% to 17% of total assets. Market values on our U.S. Government agency bonds, mortgage-backed securities issued or guaranteed by U.S. Government agencies, U.S. Treasury securities, corporate bonds and municipal bonds are generally determined on a monthly basis with the assistance of a third-party vendor. Evaluated pricing models that vary by type of security and incorporate available market data are utilized. Standard inputs include issuer and type of security, benchmark yields, reported trades, broker/dealer quotes, and issuer spreads. The market value of certain non-rated securities issued by relatively small municipalities generally located within our markets is estimated at carrying value. We believe our valuation methodology provides for a reasonable estimation of market value, and that it is consistent with the requirements of accounting guidelines. FHLBI stock totaled $22.1 million as of December 31, 2025, an increase of $0.6 million during 2025 reflecting Eastern Michigan Bank’s stock investment as of year-end 2025. Our investment in FHLBI stock is necessary to engage in their advance and other financing programs. We have regularly received quarterly cash dividends, and we expect a cash dividend will continue to be paid in future quarterly periods. Other interest-earning assets, a vast majority of which is comprised of a deposit with the Federal Reserve Bank of Chicago, are used to manage daily liquidity needs and interest rate risk sensitivity. The average deposit balance at the Federal Reserve Bank of Chicago equaled $286 million during 2025 compared to $221 million in 2024. F-11 Table of Contents The following table shows by class of maturities as of December 31, 2025, the amounts and weighted average yields (on a fully taxable-equivalent basis) of investment securities: Carrying Average (Dollars in thousands) Value Yield Obligations of U.S. Treasury: One year or less $ 10,268 3.58 % Over one through five years 45,233 3.59 Over five through ten years 0 0 Over ten years 0 0 55,501 3.59 Obligations of U.S. Government agencies: One year or less 55,076 1.28 Over one through five years 357,012 2.68 Over five through ten years 227,685 3.42 Over ten years 0 0 639,773 2.82 Obligations of states and political subdivisions: One year or less 19,045 3.20 Over one through five years 114,379 3.02 Over five through ten years 75,623 3.41 Over ten years 71,020 4.71 280,067 3.56 Mortgage-backed securities 75,762 4.50 Other investments 51,127 4.57 Totals $ 1,102,230 4.71 % Non-Earning Assets Cash and due from bank balances averaged 0.9% of total assets during 2025, similar to the average level during 2024, with no significant changes expected in future periods. Net premises and equipment equaled $62.5 million as of December 31, 2025, representing an increase of $9.0 million during 2025. Our aggregate investments in new and existing offices totaled $6.7 million, while depreciation expense aggregated $5.2 million. Eastern Michigan Bank’s fixed assets totaled $7.5 million at year-end 2025. We had no other real estate owned as of December 31, 2025. Other assets equaled $218 million as of December 31, 2025, reflecting an increase of $48.0 million from year-end 2024. Our other assets increased $32.7 million during 2025, with Eastern Michigan Bank’s other assets totaling $15.3 million as of December 31, 2025. The increase is primarily associated with an increase of $35.5 million in receivables from the U.S. Department of Treasury largely reflecting activity in transferrable energy tax credit investments and net growth of $12.2 million in low-income housing and historical tax credit investments. F-12 Table of Contents Source of Funds Total deposits increased $586 million during 2025, or approximately 12%. Our deposits grew $111 million during 2025, with Eastern Michigan Bank’s deposits aggregating $475 million at year-end 2025. A majority of the growth was in money market, interest checking and local time deposit products. Sweep accounts grew $111 million, while FHLBI advances declined $60.9 million during 2025. Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $457 million, or about 8% of total funds, as of December 31, 2025. Our money market, interest-bearing checking and local time deposit accounts increased $124 million, $45.3 million and $24.2 million, respectively, during 2025, largely reflecting growth in deposits from existing customers and initial deposits from new customers stemming from our strategic initiative to grow local deposits to lower the loan-to-deposit ratio. Our noninterest-bearing checking accounts declined $58.1 million; however, that includes an expected business deposit withdrawal of approximately $90 million made in early 2025 that had been deposited near the end of 2024. Out-of-area deposits declined $19.2 million, and savings deposits were down $5.2 million as of December 31, 2025. Eastern Michigan Bank’s deposits were comprised of interest checking accounts totaling $174 million, noninterest-checking accounts aggregating $133 million, savings accounts equaling $93.5 million, money market accounts totaling $57.0 million and time deposits aggregating $17.1 million as of December 31, 2025. Uninsured deposits totaled approximately $2.9 billion, or about 54% of total deposits, as of December 31, 2025, compared to approximately $2.5 billion, or about 54% of total deposits, as of December 31, 2024. The uninsured amounts are estimates based on the methodologies and assumptions we use for regulatory reporting requirements. Our level of uninsured deposits, which has remained relatively stable as a percentage of total deposits, is generally higher than industry averages given our focus on commercial lending. The balance of certificates of deposit exceeding the FDIC insured limit and their maturity profile as of December 31, 2025 are as follows: (Dollars in thousands) Up to three months $ 88,138 Three months to six months 103,213 Six months to twelve months 108,745 Over twelve months 74,395 Total certificates of deposit $ 374,491 Sweep accounts increased $111 million during 2025, totaling $232 million as of December 31, 2025. The aggregate balance of this funding type can be subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that several of the customers maintain. In addition, we had one customer withdraw a large amount of funds near the end of 2024 that were returned in early 2025. The average balance of sweep accounts equaled $239 million during 2025, with a high balance of $286 million and a low balance of $115 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts to overnight interest-bearing repurchase agreements. Such repurchase agreements are not deposit accounts and are not afforded federal deposit insurance. All of our sweep accounts are accounted for as secured borrowings. FHLBI advances declined $60.9 million during 2025, totaling $326 million as of December 31, 2025. Bullet advances aggregating $20.0 million were obtained during 2025, while bullet advance maturities aggregated $80.0 million. Payments on amortizing advances totaled $0.9 million during 2025. Bullet advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. Advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on certain commercial real estate property loans, and substantially all other assets of Mercantile Bank under a blanket lien arrangement. Our borrowing line of credit at year-end 2025 totaled $1.08 billion, with remaining availability based on collateral of $777 million. F-13 Table of Contents Shareholders’ equity increased $140 million during 2025, totaling $725 million as of December 31, 2025. Positively impacting shareholders’ equity was net income of $88.8 million, while negatively affecting shareholders’ equity were cash dividends on our common stock totaling $24.0 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by a total of $4.8 million. Positively impacting shareholders’ equity during 2025 was a $25.8 million decline in the after-tax net unrealized loss on available for sale securities. Common stock issued in conjunction with the acquisition of Eastern Michigan Financial Corporation totaled $44.9 million. RESULTS OF OPERATIONS FOR THE YEARS ENDED December 31, 2025 and 2024 Summary We recorded net income of $88.8 million, or $5.47 per basic and diluted share, for 2025, compared to net income of $79.6 million, or $4.93 per basic and diluted share, for 2024. Diluted earnings per share increased $0.54, or 11.0%, during 2025 compared to 2024. The increase in net income during 2025 compared to 2024 primarily reflected growth in net interest income and lower levels of provisions for credit losses and federal income tax expense, which more than offset increased noninterest expense. A higher level of noninterest income, mainly reflecting growth in treasury management fees, bank owned life insurance income, mortgage banking income, and payroll services fees, also contributed to the increase in net income. Net interest income increased during 2025 as growth in earning assets and a decline in the cost of funds more than offset a lower yield on earning assets and growth in interest-bearing liabilities. The provision expense recorded during 2025 primarily reflected a reserve increase related to changes in the economic forecast, a net increase in specific allocations driven by a significant allocation for a deteriorated commercial construction loan relationship, and a net increase in qualitative factor allocations. The impacts of these factors were partially offset by reductions in the reserve related to faster residential mortgage and consumer loan prepayment speeds and the associated reduced average lives of the portfolios and changes in baseline loss rates. The decrease in federal income tax expense during 2025 primarily reflected the recording of tax benefits associated with the acquisition of transferable energy tax credits and investments in low-income housing and historic tax credit structures. The higher level of noninterest expense during 2025 mainly resulted from increased salary and benefit costs, mainly reflecting annual merit pay increases, market adjustments, and lower residential mortgage loan deferred salary costs, the recording of costs related to the Eastern Michigan Financial Corporation acquisition, growth in data processing costs, and higher allocations to the reserve for unfunded loan commitments. Net Interest Income Net interest income, the difference between revenue generated from earning assets and the interest cost of funding those assets, is our primary source of earnings. Interest income (adjusted for tax-exempt income) and interest expense totaled $331 million and $129 million, respectively, during 2025, providing for net interest income of $202 million. During 2024, interest income and interest expense equaled $322 million and $130 million, respectively, providing for net interest income of $192 million. In comparing 2025 with 2024, interest income increased 2.7%, interest expense decreased 1.0%, and net interest income was up 5.2%. The level of net interest income is primarily a function of asset size, as the weighted average interest rate received on earning assets is greater than the weighted average interest cost of funding sources; however, factors such as types and levels of assets and liabilities, the interest rate environment, interest rate risk, asset quality, liquidity, and customer behavior also impact net interest income as well as the net interest margin. The $10.0 million increase in net interest income in 2025 compared to 2024 resulted from growth in earning assets, which more than offset a decreased net interest margin. During 2025, earning assets averaged $5.83 billion, up $460 million, or 8.6%, from $5.37 billion during 2024. Average loans increased $222 million, average securities grew $165 million, and average other interest-earning assets were up $73.3 million. During 2025, the net interest margin equaled 3.47%, down from 3.58% during 2024 due to a lower yield on average earning assets, which more than offset a decreased cost of funds. The yield on average earning assets was 5.69% during 2025, a decline from 6.01% during 2024. The decreased yield resulted from a lower yield on loans, a change in earning asset mix, and a reduced yield on other interest-earning assets, which more than offset an improved yield on securities reflecting the reinvestment of relatively low-yielding bonds and portfolio growth activities. The yield on loans was 6.26% during 2025, down from 6.59% during 2024 largely due to reduced interest rates on variable-rate commercial loans stemming from the FOMC lowering the targeted federal funds rate by 50 basis points in September of 2024 and 25 basis points in each of November and December of 2024 and September, October, and December of 2025, during which time average variable-rate commercial loans represented approximately 75% of average total commercial loans. Signifying the success of a strategic initiative to lower the loan-to-deposit ratio and increase on-balance sheet liquidity, higher-yielding loans accounted for a decreased percentage of earning assets and lower-yielding securities represented an increased percentage of earning assets in 2025 compared to 2024. The decreased yield on other interest-earning assets during 2025 primarily reflected the lower interest rate environment. The yield on securities equaled 2.86% during 2025, up from 2.29% during 2024. The cost of funds was 2.22% during 2025, down from 2.43% during 2024, mainly due to decreased rates paid on money market accounts and time deposits, reflecting the reduced interest rate environment that began in September of 2024 in conjunction with the FOMC’s lowering of the targeted federal funds rate. F-14 Table of Contents The following table depicts the average balance, interest earned and paid, and weighted average rate of our assets, liabilities, and shareholders’ equity during 2025, 2024, and 2023. The subsequent table portrays the dollar amount of change in interest income and interest expense of interest-earning assets and interest-bearing liabilities, respectively, segregated between change due to volume and change due to rate. Tax-exempt securities interest income and yield for 2025, 2024, and 2023 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%. Securities interest income was increased by $1.0 million in 2025, 2024, and 2023 for this non-GAAP, but industry standard, adjustment. These adjustments equated to increases in our net interest margin of less than two basis points in 2025 and 2024 and slightly over two basis points in 2023. Years ended December 31, (Dollars in thousands) 2025 2024 2023 Average Average Average Average Average Average Balance Interest Rate Balance Interest Rate Balance Interest Rate Taxable securities $ 650,067 $ 17,544 2.70 % $ 500,588 $ 9,917 1.98 % $ 458,401 $ 7,611 1.66 % Tax-exempt securities 172,517 5,975 3.46 157,313 5,143 3.27 148,082 4,683 3.16 Total securities 822,584 23,519 2.86 657,901 15,060 2.29 606,483 12,294 2.03 Loans 4,655,077 291,355 6.26 4,432,671 291,921 6.59 4,046,815 252,393 6.24 Other interest-earning assets 350,589 16,340 4.66 277,247 15,541 5.61 137,006 7,691 5.61 Total earning assets 5,828,250 331,214 5.69 5,367,819 322,522 6.01 4,790,304 272,378 5.69 Allowance for credit losses (58,142 ) (54,396 ) (45,590 ) Cash and due from banks 58,338 60,223 61,797 Other non-earning assets 340,194 294,009 257,182 Total assets $ 6,168,640 $ 5,667,655 $ 5,063,693 Interest-bearing checking accounts $ 716,456 $ 10,838 1.51 % $ 666,814 $ 9,493 1.42 % $ 605,220 $ 5,740 0.95 % Savings deposits 220,450 334 0.15 244,387 368 0.15 310,940 392 0.13 Money market accounts 1,604,297 49,393 3.08 1,279,559 50,596 3.95 899,927 29,149 3.24 Time deposits 988,245 41,945 4.24 867,391 40,938 4.72 567,988 20,163 3.55 Total interest-bearing deposits 3,529,448 102,510 2.90 3,058,151 101,395 3.32 2,384,075 55,444 2.33 Short-term borrowings 239,128 7,464 3.12 224,897 7,717 3.43 206,728 2,847 1.38 Federal Home Loan Bank advances 358,191 11,404 3.18 430,767 13,018 3.02 425,363 11,367 2.67 Other borrowings 142,312 7,772 5.46 140,352 8,286 5.90 139,195 8,155 5.86 Total interest-bearing liabilities 4,269,079 129,150 3.03 3,854,167 130,416 3.38 3,155,361 77,813 2.47 Noninterest checking accounts 1,185,730 1,174,082 1,372,840 Other liabilities 83,378 84,862 58,465 Total liabilities 5,538,187 5,113,111 4,586,666 Average equity 630,453 554,544 477,027 Total liabilities and equity $ 6,168,640 $ 5,667,655 $ 5,063,693 Net interest income $ 202,064 $ 192,106 $ 194,565 Rate spread 2.66 % 2.63 % 3.22 % Net interest margin 3.47 % 3.58 % 4.06 % F-15 Table of Contents Years ended December 31, (Dollars in thousands) 2025 over 2024 2024 over 2023 Total Volume Rate Total Volume Rate Increase (decrease) in interest income Taxable securities $ 7,627 $ 3,446 $ 4,181 $ 2,306 $ 744 $ 1,562 Tax exempt securities 832 515 317 460 298 162 Loans (566 ) 14,282 (14,848 ) 39,528 24,914 14,614 Other interest-earning assets 799 3,688 (2,889 ) 7,850 7,861 (11 ) Net change in tax-equivalent interest income 8,692 21,931 (13,239 ) 50,144 33,817 16,327 Increase (decrease) in interest expense Interest-bearing checking deposits 1,345 731 614 3,753 634 3,119 Savings deposits (34 ) (36 ) 2 (24 ) (92 ) 68 Money market accounts (1,203 ) 11,322 (12,525 ) 21,447 14,079 7,368 Time deposits 1,007 5,370 (4,363 ) 20,775 12,784 7,991 Short-term borrowings (253 ) 470 (723 ) 4,870 271 4,599 Federal Home Loan Bank advances (1,614 ) (2,282 ) 668 1,651 146 1,505 Other borrowings (514 ) 114 (628 ) 131 68 63 Net change in interest expense (1,266 ) 15,689 (16,955 ) 52,603 27,890 24,713 Net change in tax-equivalent net interest income $ 9,958 $ 6,242 $ 3,716 $ (2,459 ) $ 5,927 $ (8,386 ) Interest income, which is primarily generated from the loan portfolio, increased $8.7 million during 2025 from that earned in 2024, totaling $331 million in 2025 compared to $322 million in 2024. The increase in interest income is attributable to growth in average earning assets, which more than offset a lower yield on average earning assets. During 2025 and 2024, earning assets had an average yield (tax equivalent-adjusted basis) of 5.69% and 6.01%, respectively. The decreased yield on average earning assets primarily resulted from a lower yield on loans, mainly reflecting reduced interest rates on variable-rate commercial loans stemming from the previously mentioned FOMC rate cuts, a change in earning asset mix, reflecting a decrease in higher-yielding loans and an increase in lower-yielding securities as a percentage of earning assets, and a lower yield on other interest-earning assets, reflecting the decreased interest rate environment. An enhanced yield on securities, reflecting the reinvestment of relatively low-yielding bonds and portfolio growth activities, positively impacted the yield on average earning assets during 2025. Interest income generated from the loan portfolio decreased $0.6 million in 2025 compared to the level earned in 2024. A reduction in the loan yield from 6.59% in 2024 to 6.26% in 2025 resulted in a $14.9 million decrease in interest income, while growth in the loan portfolio during 2025 resulted in a $14.3 million increase in interest income. The lower yield on loans primarily resulted from a decreased yield on commercial loans, which declined from 7.13% during 2024 to 6.63% during 2025 mainly due to the aforementioned FOMC rate cuts. Interest income generated from the securities portfolio increased $8.5 million in 2025 compared to the level earned in 2024. A rise in the yield on securities from 2.29% during 2024 to 2.86% during 2025 resulted in a $4.5 million increase in interest income, while growth in the average balance of the securities portfolio during 2025 resulted in an increase in interest income of $4.0 million. Interest income generated from other interest-earning assets was up $0.8 million in 2025 compared to 2024, reflecting the net impact of a $3.7 million increase in interest income resulting from growth in these assets and a $2.9 million decrease in interest income resulting from a decreased yield on these assets. The growth in average securities and other interest-earning assets during 2025 compared to 2024 primarily reflected the ongoing success of our strategic initiatives to grow local deposits and decrease our loan-to-deposit ratio. F-16 Table of Contents Interest expense is generated from interest-bearing deposits and borrowed funds. Interest expense decreased $1.3 million during 2025 compared to 2024, totaling $129 million and $130 million in the respective periods. A decline in the cost of interest-bearing liabilities from 3.38% during 2024 to 3.03% during 2025 resulted in a decrease in interest expense of $17.0 million, while growth in the average balance of these liabilities during 2025 compared to 2024 resulted in an increase in interest expense of $15.7 million. The reduced average cost of interest-bearing liabilities mainly resulted from decreased costs of money market accounts and time deposits, reflecting the lower interest rate environment that began in September of 2024 in conjunction with the FOMC’s lowering of the targeted federal funds rate. A change in interest-bearing liability mix, consisting of average higher-cost money market accounts and time deposits representing an increased percentage of average interest-bearing liabilities, negatively impacted the cost of interest-bearing liabilities during 2025 compared to 2024. The growth in these deposits reflected new deposit relationships, increases in existing deposit relationships, and deposit migration. During 2025, interest-bearing liabilities averaged $4.27 billion, representing an increase of $415 million, or 10.8%, from the $3.85 billion average during 2024; average interest-bearing deposits were up $471 million, while average borrowings declined $56.4 million. Growth in the average balance of interest-bearing non-time deposits during 2025 compared to 2024 resulted in a $12.0 million increase in interest expense, while a lower average rate paid on these deposits during 2025 compared to 2024 resulted in an $11.9 million decrease in interest expense. An increase in the average balance of time deposits during 2025 compared to 2024 resulted in a $5.4 million increase in interest expense, while a reduced average rate paid on these deposits during 2025 compared to 2024 resulted in a $4.4 million decrease in interest expense. A lower average rate paid on short-term borrowings during 2025 compared to 2024 resulted in a $0.7 million reduction in interest expense, while growth in the average balance of these borrowings during 2025 compared to 2024 equated to a $0.5 million increase in interest expense. A decrease in the average balance of FHLBI advances during 2025 compared to 2024 resulted in a decline in interest expense of $2.3 million, while a higher average rate paid on these borrowings during 2025 compared to 2024 resulted in an increase in interest expense of $0.7 million. The $0.5 million decrease in interest expense on other borrowings in 2025 compared to 2024 resulted from a lower average rate paid on these borrowings, which was partially mitigated by a slight increase in the average balance of these borrowings. Provision for Credit Losses Provisions for credit losses of $3.2 million and $7.4 million were recorded during 2025 and 2024, respectively. The provision expense recorded during 2025 primarily reflected a $1.9 million reserve increase related to changes in the economic forecast, a $1.8 million net increase in specific allocations driven by a $5.5 million allocation for a commercial construction loan relationship that was placed on nonaccrual during the second quarter of 2025, and a $1.5 million net increase in qualitative factor allocations. The impacts of these factors were partially offset by $2.3 million and $1.3 million reductions in the reserve related to faster residential mortgage and consumer loan prepayment speeds and the associated reduced average lives of the portfolios and changes in baseline loss rates, respectively. The provision expense recorded during 2024 mainly reflected allocations necessitated by net loan growth, individual allocations made for two deteriorated commercial loan relationships, changes in qualitative factors, and an increased allocation stemming from slower prepayments speeds on residential mortgage loans, which were partially offset by lower loan loss rates. Continued strength in loan quality metrics, including low levels of loan charge-offs, during 2025 and 2024 significantly mitigated the amounts of additional reserves imposed by the previously mentioned factors. Noninterest Income Noninterest income totaled $41.6 million during 2025, compared to $40.4 million during 2024. Noninterest income during 2025 included bank owned life insurance death benefit claims of $1.0 million. Noninterest income during 2024 included bank owned life insurance death benefit claims and gains on the sales of other real estate owned totaling $0.7 million and $0.4 million, respectively. Excluding these transactions, noninterest income increased $1.3 million in 2025 compared to 2024. The higher level of noninterest income primarily reflected increased treasury management fees, mortgage banking income, and payroll services fees. Growth in treasury management and payroll services fees mainly stemmed from new commercial relationships and successful marketing efforts leading to customers’ expanded use of products and services. The increase in mortgage banking income primarily resulted from rises in the percentage of loans originated with the intent to sell, which equaled approximately 81% in 2025 compared to approximately 78% in 2024, and total loan originations, which were up approximately 7% in 2025 compared to 2024. Interest rate swap income declined during 2025 compared to 2024, generally reflecting a lower volume of new swap transactions. F-17 Table of Contents Noninterest Expense Noninterest expense during 2025 was $136 million, compared to $126 million during 2024. The increase in noninterest expense during 2025 primarily resulted from higher salary and benefit costs, mainly reflecting annual merit pay increases, market adjustments, and lower residential mortgage loan deferred salary costs. Costs associated with the acquisition of Eastern Michigan Financial Corporation, growth in data processing costs, primarily reflecting increased software support costs, and higher allocations to the reserve for unfunded loan commitments, largely stemming from an increase in commercial loan commitments, also contributed to the higher level of noninterest expense. Lower depreciation expense, mainly reflecting facility expansion and leasehold improvement projects becoming fully depreciated during 2024, positively impacted noninterest expense during 2025. Contributions to The Mercantile Bank Foundation totaled $1.1 million and $1.7 million during 2025 and 2024, respectively. Federal Income Tax Expense During 2025, we recorded income before federal income tax of $103 million and a federal income tax expense of $14.7 million, compared to income before federal income tax of $98.3 million and a federal income tax expense of $18.7 million during 2024. The $4.0 million decrease in federal income tax expense in 2025 compared to 2024 primarily resulted from the acquisition of transferable energy tax credits and the net benefits from investments in low-income housing and historic tax credit structures, which provided for aggregate tax benefits of $3.5 million and $1.8 million, respectively, the impacts of which were partially offset by a higher level of income before federal income tax. We recorded net benefits from investments in tax credit structures of $0.2 million during 2024. The recording of the tax benefits positively impacted our effective tax rate, which equaled 14.2% during 2025, compared to 19.0% during 2024. The aforementioned bank owned life insurance death benefit claims, substantially all of which were nontaxable, positively impacted the effective tax rates in 2025 and 2024. CAPITAL RESOURCES Shareholders’ equity increased $140 million during 2025, totaling $725 million as of December 31, 2025. Positively impacting shareholders’ equity was net income of $88.8 million, while negatively affecting shareholders’ equity were cash dividends on our common stock totaling $24.0 million. Activity relating to the issuance and sale of common stock through various stock-based compensation programs and our dividend reinvestment plan positively impacted shareholders’ equity by a total of $4.8 million. Positively impacting shareholders’ equity during 2025 was a $25.8 million decline in the after-tax net unrealized loss on available for sale securities. Common stock issued in conjunction with the acquisition of Eastern Michigan Financial Corporation totaled $44.9 million. We and our banks are subject to regulatory capital requirements administered by state and federal banking agencies. Failure to meet the various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. As of December 31, 2025, Mercantile Bank’s total risk-based capital ratio was 13.8%, compared to 13.9% at December 31, 2024. Mercantile Bank’s total regulatory capital increased $16.5 million during 2025, primarily reflecting the net impact of net income totaling $98.7 million and cash dividends paid to us aggregating $84.8 million. Mercantile Bank’s total risk-based capital ratio was also impacted by a $174 million increase in total risk-weighted assets. As of December 31, 2025, Mercantile Bank’s total regulatory capital equaled $776 million, or approximately $214 million in excess of the amount necessary to attain the 10.0% minimum total risk-based capital ratio, which is among the requirements to be categorized as “well capitalized.” Eastern Michigan Bank’s total risk-based capital ratio was 19.0%, or approximately $26 million in excess of the “well capitalized” threshold, as of December 31, 2025. We maintain a stock repurchase program, which is discussed in Part II, Item 5 “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” in this Annual Report. F-18 Table of Contents LIQUIDITY Liquidity is measured by our ability to raise funds through deposits, borrowed funds, capital or cash flow from the repayment of loans and securities. These funds are used to fund loans, meet deposit withdrawals, and operate our company. Liquidity is essential to our business. An inability to maintain sufficient funds through deposits, borrowings, the sale of assets, and other sources could have a material adverse effect on our liquidity. Our access to funding sources in amounts adequate to finance our activities could be impaired by factors that affect us specifically or the financial services industry in general. Liquidity is primarily achieved through local and out-of-area deposits and liquid assets such as securities available for sale, matured and called securities, federal funds sold, and interest-earning deposit balances. Asset and liability management is the process of managing the balance sheet to achieve a mix of earning assets and liabilities that maximizes profitability, while providing adequate liquidity. To assist in providing needed funds, we have regularly obtained monies from wholesale funding sources. Wholesale funds, comprised of deposits from customers outside of our market areas and advances from the FHLBI, totaled $457 million, or approximately 8% of combined deposits and borrowed funds, as of December 31, 2025, compared to $537 million, or about 10% of combined deposits and borrowed funds, as of December 31, 2024. Sweep accounts increased $111 million during 2025, totaling $232 million as of December 31, 2025. The aggregate balance of this funding type can be subject to relatively large daily fluctuations given the nature of the customers utilizing this product and the sizable balances that several of the customers maintain. In addition, we had one customer withdraw a large amount of funds near the end of 2024 that were returned in early 2025. The average balance of sweep accounts equaled $239 million during 2025, with a high balance of $286 million and a low balance of $115 million. Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts to overnight interest-bearing repurchase agreements. Such repurchase agreements are not deposit accounts and are not afforded federal deposit insurance. All of our sweep accounts are accounted for as secured borrowings. Information regarding our repurchase agreements as of December 31, 2025 and during 2025 is as follows: (Dollars in thousands) Outstanding balance at December 31, 2025 $ 232,291 Weighted average interest rate at December 31, 2025 2.80 % Maximum daily balance twelve months ended December 31, 2025 $ 285,679 Average daily balance for twelve months ended December 31, 2025 $ 239,089 Weighted average interest rate for twelve months ended December 31, 2025 3.12 % FHLBI advances declined $60.9 million during 2025, totaling $326 million as of December 31, 2025. Bullet advances aggregating $20.0 million were obtained during 2025, while bullet advance maturities aggregated $80.0 million. Payments on amortizing advances totaled $0.9 million during 2025. Bullet advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing advances are generally acquired to match-fund specific longer-term fixed rate commercial loans, with the dollar amount and amortization structure of the underlying advances reflective of the associated commercial loans. Advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on certain commercial real estate property loans, and substantially all other assets of Mercantile Bank under a blanket lien arrangement. Our borrowing line of credit at year-end 2025 totaled $1.08 billion, with remaining availability based on collateral of $777 million. We also have the ability to borrow up to $50.0 million on a daily basis through a correspondent bank using an established unsecured federal funds purchased line of credit; the average balance of these borrowings was less than $0.1 million during 2025. In contrast, our interest-earning deposit account at the Federal Reserve Bank of Chicago averaged $286 million during 2025. Both banks have lines of credit through the Discount Window of the Federal Reserve Bank of Chicago. Based on pledged municipal bonds, we could have borrowed up to an aggregate $199 million as of December 31, 2025. Except for periodic line testing, we have not utilized these lines and we do not plan to access these line of credit in future periods. F-19 Table of Contents The following table reflects, as of December 31, 2025, significant fixed and determinable contractual obligations to third parties by payment date, excluding accrued interest: One Year One to Three to Over (Dollars in thousands) or Less Three Years Five Years Five Years Total Deposits without a stated maturity $ 4,305,095 $ 0 $ 0 $ 0 $ 4,305,095 Time deposits 914,764 52,774 11,819 0 979,357 Short-term borrowings 232,291 0 0 0 232,291 Federal Home Loan Bank advances 80,900 191,917 32,087 21,317 326,221 Subordinated debentures 0 0 0 51,015 51,015 Subordinated notes 0 0 0 89,657 89,657 Term note 10,000 20,000 0 0 30,000 Premises and equipment leases 1,191 2,061 811 1,141 5,204 In addition to normal loan funding and deposit flow, we must maintain liquidity to meet the demands of certain unfunded loan commitments and standby letters of credit. As of December 31, 2025, we had a total of $2.47 billion in unfunded loan commitments and $26.8 million in unfunded standby letters of credit. Of the total unfunded loan commitments, $2.15 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $296 million were for loan commitments generally expected to be accepted and become funded within the next 12 to 18 months. We regularly monitor fluctuations in loan balances and commitment levels and include such data in our liquidity management. The following table depicts our loan commitments at the end of the past three years: (Dollars in thousands) 12/31/25 12/31/24 12/31/23 Commercial unused lines of credit $ 1,755,132 $ 1,488,782 $ 1,557,429 Unused lines of credit secured by 1-4 family residential properties 135,021 84,298 74,120 Credit card unused lines of credit 204,783 172,273 142,096 Other consumer unused lines of credit 53,124 33,892 50,063 Commitments to make loans 297,730 295,566 270,403 Standby letters of credit 26,813 26,491 19,393 Total $ 2,472,603 $ 2,101,302 $ 2,113,504 We monitor our liquidity position and funding strategies on an ongoing basis, but recognize that unexpected events, economic or market conditions, reductions in earnings performance, declining capital levels, or situations beyond our control could cause liquidity challenges. While we believe it is unlikely that a funding crisis of any significant degree is likely to materialize, we have developed a comprehensive contingency funding plan that provides a framework for meeting liquidity disruptions. MARKET RISK ANALYSIS Our primary market risk exposure is interest rate risk and, to a lesser extent, liquidity risk and inflation risk. All of our transactions are denominated in U.S. dollars with no specific foreign exchange exposure. We have only limited agricultural-related loan assets and therefore have no significant exposure to changes in commodity prices. Any impact that changes in foreign exchange rates and commodity prices would have on interest rates is assumed to be insignificant. Interest rate risk is the exposure of our financial condition to adverse movements in interest rates. We derive our income primarily from the excess of interest collected on interest-earning assets over the interest paid on interest-bearing liabilities. The rates of interest we earn on our assets and owe on our liabilities generally are established contractually for a period of time. Since market interest rates change over time, we are exposed to lower profitability if we cannot adapt to interest rate changes. Accepting interest rate risk can be an important source of profitability and shareholder value; however, excessive levels of interest rate risk could pose a significant threat to our earnings and capital base. Accordingly, effective risk management that maintains interest rate risk at prudent levels is essential to our safety and soundness. F-20 Table of Contents Evaluating the exposure to changes in interest rates includes assessing both the adequacy of the process used to control interest rate risk and the quantitative level of exposure. Our interest rate risk management process seeks to ensure that appropriate policies, procedures, management information systems, and internal controls are in place to maintain interest rate risk at prudent levels with consistency and continuity. In evaluating the quantitative level of interest rate risk, we assess the existing and potential future effects of changes in interest rates on our financial condition, including capital adequacy, earnings, liquidity, and asset quality. We use two interest rate risk measurement techniques. The first, which is commonly referred to as GAP analysis, measures the difference between the dollar amounts of interest-sensitive assets and liabilities that will be refinanced or repriced during a given time period. A significant repricing gap could result in a negative impact to the net interest margin during periods of changing market interest rates. The following table depicts our GAP position as of December 31, 2025: Within Three to One to After Three Twelve Five Five (Dollars in thousands) Months Months Years Years Total Assets: Loans (1) $ 3,089,850 $ 214,762 $ 1,094,499 $ 422,777 $ 4,821,888 Securities available for sale (2) 15,701 90,983 571,220 424,326 1,102,230 Interest-earning deposits 417,319 1,000 250 0 418,569 Mortgage loans held for sale 17,160 0 0 0 17,160 Allowance for credit losses 0 0 0 0 (58,191 ) Other assets 0 0 0 0 533,563 Total assets $ 3,540,030 $ 306,745 $ 1,665,969 $ 847,103 $ 6,835,219 Liabilities: Interest-bearing deposits 3,254,773 625,420 64,593 0 3,944,786 Short-term borrowings 232,291 0 0 0 232,291 Federal Home Loan Bank advances 30,900 50,000 224,004 21,317 326,221 Term note 2,500 7,500 20,000 0 30,000 Other borrowed money 51,015 0 89,657 0 140,672 Noninterest-bearing deposits 0 0 0 0 1,339,666 Other liabilities 0 0 0 0 96,699 Total liabilities 3,571,479 682,920 398,254 21,317 6,110,335 Shareholders' equity 0 0 0 0 724,884 Total liabilities & shareholders' equity $ 3,571,479 $ 682,920 $ 398,254 $ 21,317 $ 6,835,219 Net asset (liability) GAP $ (31,449 ) $ (376,175 ) $ 1,267,715 $ 825,786 Cumulative GAP $ (31,449 ) $ (407,624 ) $ 860,091 $ 1,685,877 Percent of cumulative GAP to total assets (0.5 )% (6.0 )% 12.6 % 24.7 % (1) Floating rate loans that are currently at interest rate floors are treated as fixed rate loans and are reflected using maturity date and not repricing frequency. (2) Mortgage-backed securities are categorized by expected maturities based upon prepayment trends as of December 31, 2025. F-21 Table of Contents The second interest rate risk measurement used is commonly referred to as net interest income simulation analysis. We believe that this methodology provides a more accurate measurement of interest rate risk than the GAP analysis, and therefore, it serves as our primary interest rate risk measurement technique. The simulation model assesses the direction and magnitude of variations in net interest income resulting from potential changes in market interest rates. Key assumptions in the model include prepayment speeds on various loan and investment assets; cash flows and maturities of interest-sensitive assets and liabilities; and changes in market conditions impacting loan and deposit volume and pricing. These assumptions are inherently uncertain and subject to fluctuation and revision in a dynamic environment; therefore, the model cannot precisely estimate net interest income or exactly predict the impact of higher or lower interest rates on net interest income. Actual results will differ from simulated results due to timing, magnitude, and frequency of interest rate changes and changes in market conditions and our strategies, among other factors. We conducted multiple simulations as of December 31, 2025, in which it was assumed that changes in market interest rates occurred ranging from up 300 basis points to down 400 basis points in equal quarterly instalments over the next twelve months. The following table reflects the suggested dollar and percentage changes in net interest income over the next twelve months in comparison to the $234 million in net interest income projected using our balance sheet amounts and anticipated replacement rates as of December 31, 2025. The resulting estimates are generally within our policy parameters established to manage and monitor interest rate risk. (Dollars in thousands) Dollar Change Percent Change In Net In Net Interest Rate Scenario Interest Income Interest Income Interest rates down 400 basis points $ 13,500 5.8 % Interest rates down 300 basis points 20,000 8.5 Interest rates down 200 basis points (4,900 ) (2.1 ) Interest rates down 100 basis points (5,400 ) (2.3 ) Interest rates up 100 basis points 5,900 2.5 Interest rates up 200 basis points 12,100 5.2 Interest rates up 300 basis points 18,400 7.9 In addition to changes in interest rates, the level of future net interest income is also dependent on a number of other variables, including: the growth, composition, and absolute levels of loans, deposits, and interest-earning deposits and interest-bearing liabilities; level of nonperforming assets; economic and competitive conditions; potential changes in lending, investing, and deposit gathering strategies; client preferences; and other factors. F-22 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Mercantile Bank Corporation Grand Rapids, Michigan Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Mercantile Bank Corporation (the “Company”) as of December 31, 2025 and 2024, and the related consolidated statements of income, comprehensive income (loss), changes in shareholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the “financial statements”). In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (the “PCAOB”), the Company’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework (2013) , issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Our report dated February 27, 2026, expressed an unqualified opinion thereon. Basis for Opinion The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Allowance for Credit Losses – Qualitative Adjustment Critical Audit Matter Description As described in Notes 1 and 3 to the consolidated financial statements, management’s estimate of the allowance for credit losses (ACL) at December 31, 2025, includes a reserve on collectively evaluated loans. The reserve on collectively evaluated loans is based on the bank’s historical loss rate adjusted for changes in macroeconomic conditions and qualitative factors. The reserve is based on an institution-specific historical average loss rate applied over the remaining life of loans. During each reporting period, management considers the need to adjust the historical loss rates to reflect the extent to which they expect current conditions and reasonable and supportable economic forecasts to differ from the conditions that existed for the period over which the historical loss information was determined. Management’s adjustment for qualitative factors is based on the impact of changes in lending policies and procedures; changes in the nature and volume of the loan portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past-due loans, nonaccrual loans, and adversely classified loans; changes in the quality of the credit review function; changes in the value of underlying collateral dependent loans and existence and effect of any concentrations of credit; and any changes in the effect of other factors, such as competition, legal and regulatory requirements, and historical loss rate information. F-23 Table of Contents Significant judgment was required by management in the selection and measurement of qualitative factor adjustments. Accordingly, performing audit procedures to evaluate the Company’s estimated ACL involved a high degree of auditor judgment and required significant effort, including the involvement of professionals with specialized skill and knowledge. How the Critical Audit Matter was Addressed in the Audit Our audit procedures related to the Company’s estimate of the ACL included, but were not limited to, the following: ● We tested the design and operating effectiveness of management’s controls over the determination of the qualitative factor adjustments. ● We obtained an understanding of management’s process for determining the need for qualitative factor adjustments, identifying appropriate factors, and measuring the direction and magnitude of the adjustment. ● We evaluated management's rationale for determining qualitative adjustments were relevant and warranted for each loan segment and assessed the measurement of qualitative factor adjustments applied by management to segments with significant qualitative factors. ● Where applicable, we tested the accuracy and completeness of data used by management in the measurement of qualitative factor adjustments or vouched factors to relevant external data sources. ● We assessed changes in qualitative factors against overall trends in credit quality within the Company and broader trends within the industry and local and national economies to evaluate reasonableness of management’s qualitative factor adjustments. ● We performed an independent calculation of the expected credit losses based on company specific loss history over the expected remaining life. /s/ Plante & Moran, PLLC Plante & Moran, PLLC We have served as the Company’s auditor since 2023. Grand Rapids, Michigan February 27, 2026 F-24 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Shareholders and Board of Directors Mercantile Bank Corporation Grand Rapids, Michigan Opinion on Internal Control over Financial Reporting We have audited the internal control over financial reporting as of December 31, 2025 of Mercantile Bank Corporation (the "Company"), based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO framework”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on the criteria established in the COSO framework. We also have audited the accompanying consolidated balance sheets of the Company as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income (loss), changes in stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively referred to as the “consolidated financial statements”), in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"). Our report dated February 27, 2026, expresses an unqualified opinion. Basis for Opinion The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Report by Mercantile Bank Corporation’s Management on internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws, the applicable rules and regulations of the Securities and Exchange Commission, and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Plante & Moran, PLLC Plante & Moran, PLLC We have served as the Company’s auditor since 2023. Grand Rapids, Michigan February 27, 2026 F-25 Table of Contents REPORT BY MERCANTILE BANK CORPORATION’S MANAGEMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining an effective system of internal control over financial reporting that is designed to produce reliable financial statements presented in conformity with generally accepted accounting principles. There are inherent limitations in the effectiveness of any system of internal control. Accordingly, even an effective system of internal control can provide only reasonable assurance with respect to financial statement preparation. On December 31, 2025, the Company completed the merger with Eastern Michigan Financial Corporation. The Company is in the process of evaluating the existing controls and procedures of Easter Michigan Financial Corporation and integrating Eastern Michigan Financial Corporation into the Company’s internal controls over financial reporting. In accordance with the SEC Staff guidance permitting a company to exclude an acquired business from management’s assessment of the effectiveness of internal controls over financial reporting for the year in which the acquisition is completed, the Company has excluded Eastern Michigan Financial Corporation from the assessment of the effectiveness of internal controls over financial reporting as of December 31, 2025. Eastern Michigan Financial Corporation represented 8.4% of the Company’s total assets as of December 31, 2025. Management assessed the Company’s system of internal control over financial reporting that is designed to produce reliable financial statements presented in conformity with generally accepted accounting principles as of December 31, 2025. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management believes that, as of December 31, 2025, Mercantile Bank Corporation maintained an effective system of internal control over financial reporting that is designed to produce reliable financial statements presented in conformity with generally accepted accounting principles based on those criteria. The Company’s independent auditors have issued an audit report on the effectiveness of the Company’s internal control over financial reporting as found on page F-25. Mercantile Bank Corporation /s/ Raymond E. Reitsma Raymond E. Reitsma President and Chief Executive Officer /s/ Charles E. Christmas Charles E. Christmas Executive Vice President, Chief Financial Officer and Treasurer F-26 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED BALANCE SHEETS December 31, 2025 and 2024 (Dollars in thousands) 2025 2024 ASSETS Cash and due from banks $ 54,755 $ 56,991 Interest-earning deposits 418,569 336,019 Total cash and cash equivalents 473,324 393,010 Securities available for sale 1,102,230 730,352 Mortgage loans held for sale 17,160 15,824 Loans 4,821,888 4,600,781 Allowance for credit losses ( 58,191 ) ( 54,454 ) Loans, net 4,763,697 4,546,327 Premises and equipment, net 62,468 53,427 Bank owned life insurance 105,342 93,839 Goodwill 72,656 49,473 Core deposit intangible 20,388 0 Other assets 217,954 169,909 Total assets $ 6,835,219 $ 6,052,161 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 1,339,666 $ 1,264,523 Interest-bearing 3,944,786 3,433,843 Total deposits 5,284,452 4,698,366 Securities sold under agreements to repurchase 232,291 121,521 Federal Home Loan Bank advances 326,221 387,083 Subordinated debentures 51,015 50,330 Subordinated notes 89,657 89,314 Term note 30,000 0 Accrued interest and other liabilities 96,699 121,021 Total liabilities 6,110,335 5,467,635 Commitments and contingent liabilities (Note 12) Shareholders' equity Preferred stock, no par value; 1,000,000 shares authorized; 0 shares outstanding at December 31, 2025 and December 31, 2024 0 0 Common stock, no par value; 40,000,000 shares authorized; 17,181,096 shares outstanding at December 31, 2025 and 16,146,374 shares outstanding at December 31, 2024 349,431 299,705 Retained earnings 399,448 334,646 Accumulated other comprehensive gain/(loss) ( 23,995 ) ( 49,825 ) Total shareholders’ equity 724,884 584,526 Total liabilities and shareholders’ equity $ 6,835,219 $ 6,052,161 See accompanying notes to consolidated financial statements. F-27 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME Years ended December 31, 2025, 2024 and 2023 (Dollars in thousands, except per share data) 2025 2024 2023 Interest income Loans, including fees $ 291,355 $ 291,921 $ 252,393 Securities, taxable 17,544 9,917 7,611 Securities, tax-exempt 4,955 4,123 3,663 Interest-earning deposits 16,340 15,541 7,691 Total interest income 330,194 321,502 271,358 Interest expense Deposits 102,510 101,395 55,444 Short-term borrowings 7,464 7,717 2,847 Federal Home Loan Bank advances 11,404 13,018 11,367 Subordinated debentures and other borrowings 7,772 8,286 8,155 Total interest expense 129,150 130,416 77,813 Net interest income 201,044 191,086 193,545 Provision for credit losses 3,200 7,400 7,700 Net interest income after provision for credit losses 197,844 183,686 185,845 Noninterest income Mortgage banking activities 13,021 12,301 7,595 Credit and debit card fees 9,207 8,821 8,914 Service charges on deposit and sweep accounts 8,134 6,842 4,954 Payroll processing 3,473 3,058 2,509 Earnings on bank owned life insurance 3,293 2,555 1,500 Interest rate swap program fees 1,957 3,210 3,946 Other income 2,523 3,602 2,725 Total noninterest income 41,608 40,389 32,143 Noninterest expense Salaries and benefits 83,198 77,924 68,801 Data processing 15,273 13,772 11,618 Occupancy 8,511 8,643 9,150 Furniture and equipment rent, depreciation and maintenance 3,357 3,716 3,464 FDIC insurance costs 2,715 2,497 2,258 Advertising 1,664 1,604 1,565 Charitable foundation contributions 1,066 1,708 666 Acquisition costs 1,815 0 0 Other expense 18,360 15,925 17,767 Total noninterest expense 135,959 125,789 115,289 Income before federal income tax expense 103,493 98,286 102,699 Federal income tax expense 14,740 18,693 20,482 Net income $ 88,753 $ 79,593 $ 82,217 Earnings per common share: Basic $ 5.47 $ 4.93 $ 5.13 Diluted $ 5.47 $ 4.93 $ 5.13 See accompanying notes to consolidated financial statements. F-28 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Years ended December 31, 2025, 2024 and 2023 (Dollars in thousands) 2025 2024 2023 Net income $ 88,753 $ 79,593 $ 82,217 Other comprehensive income (loss): Unrealized holding gains (losses) on securities available for sale 32,697 836 18,804 Total other comprehensive income (loss) 32,697 836 18,804 Tax effect of unrealized holding gains (losses) on securities available for sale ( 6,867 ) ( 174 ) ( 3,950 ) Total tax effect of other comprehensive income (loss) ( 6,867 ) ( 174 ) ( 3,950 ) Other comprehensive income (loss), net of tax effect 25,830 662 14,854 Comprehensive income (loss) $ 114,583 $ 80,255 $ 97,071 See accompanying notes to consolidated financial statements. F-29 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY Years ended December 31, 2025, 2024 and 2023 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 ( 1,410 shares) 45 45 Dividend reinvestment plan ( 27,306 shares) 891 891 Stock grants to directors for retainer fees ( 11,529 shares) 350 350 Stock-based compensation expense 3,384 3,384 Cash dividends ($ 1.34 per common share) ( 21,004 ) ( 21,004 ) Net income for 2023 82,217 82,217 Change in net unrealized gain/(loss) on securities available for sale, net of tax effect 14,854 14,854 Balances, December 31, 2023 $ 0 $ 295,106 $ 277,526 $ ( 50,487 ) $ 522,145 See accompanying notes to consolidated financial statements. F-30 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued) Years ended December 31, 2025, 2024 and 2023 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 ( 1,194 shares) 50 50 Dividend reinvestment plan ( 19,684 shares) 810 810 Stock grants to directors for retainer fees ( 11,316 shares) 423 423 Stock-based compensation expense 3,316 3,316 Cash dividends ($ 1.40 per common share) ( 22,473 ) ( 22,473 ) Net income for 2024 79,593 79,593 Change in net unrealized gain/(loss) on securities available for sale, net of tax effect 662 662 Balances, December 31, 2024 $ 0 $ 299,705 $ 334,646 $ ( 49,825 ) $ 584,526 See accompanying notes to consolidated financial statements. F-31 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Continued) Years ended December 31, 2025, 2024 and 2023 Accumulated Other Total Preferred Common Retained Comprehensive Shareholders’ (Dollars in thousands except per share amounts) Stock Stock Earnings Income/(Loss) Equity Balances, January 1, 2025 $ 0 $ 299,705 $ 334,646 $ ( 49,825 ) $ 584,526 Employee stock purchase plan ( 2,954 shares) 128 128 Dividend reinvestment plan ( 16,848 shares) 772 772 Stock grants to directors for retainer fees ( 10,007 shares) 444 444 Stock-based compensation expense 3,473 3,473 Common stock issued to acquire Eastern Michigan Financial Corp. ( 924,999 shares) 44,909 44,909 Cash dividends ($ 1.50 per common share) ( 23,951 ) ( 23,951 ) Net income for 2025 88,753 88,753 Change in net unrealized gain/(loss) on securities available for sale, net of tax effect 25,830 25,830 Balances, December 31, 2025 $ 0 $ 349,431 $ 399,448 $ ( 23,995 ) $ 724,884 See accompanying notes to consolidated financial statements. F-32 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended December 31, 2025, 2024 and 2023 (Dollars in thousands) 2025 2024 2023 Cash flows from operating activities Net income $ 88,753 $ 79,593 $ 82,217 Adjustments to reconcile net income to net cash from operating activities: Depreciation and amortization 5,797 10,505 11,496 Provision for credit losses 3,200 7,400 7,700 Deferred income tax expense (benefit) 2,085 ( 397 ) ( 2,036 ) Stock-based compensation expense 3,473 3,316 3,384 Stock grants to directors for retainer fees 444 423 350 Proceeds from sales of mortgage loans held for sale 435,121 384,784 196,217 Origination of mortgage loans held for sale ( 423,868 ) ( 370,201 ) ( 204,727 ) Net gain on sales of mortgage loans held for sale ( 12,589 ) ( 11,800 ) ( 6,532 ) Loss from sale of mortgage loans 0 112 0 Net gain from sales and valuation write-downs of foreclosed assets 0 ( 290 ) ( 419 ) Net (gain) loss from sale and write-downs on former bank premises 0 ( 83 ) 2 Net loss from sales and disposals of premises and equipment 24 13 471 Earnings on bank owned life insurance ( 3,293 ) ( 2,555 ) ( 1,500 ) Net (gain) loss on instruments designated at fair value and related derivatives 63 ( 203 ) 257 Net change in: Accrued interest receivable ( 130 ) ( 1,595 ) ( 4,330 ) Other assets ( 59,097 ) ( 25,797 ) ( 30,189 ) Accrued interest and other liabilities ( 22,010 ) 27,893 14,252 Net cash from operating activities 17,973 101,118 66,613 Cash flows from investing activities Purchases of securities available for sale ( 203,366 ) ( 173,618 ) ( 19,941 ) Proceeds from maturities, calls and repayments of securities available for sale 67,317 61,777 24,142 Loan originations and payments, net ( 19,250 ) ( 309,834 ) ( 387,283 ) Proceeds from sale of mortgage loans 0 9,839 0 Net cash received from acquisition of Eastern Michigan Financial Corp. 53,569 0 0 Purchases of Federal Home Loan Bank stock 0 0 ( 3,792 ) Purchases of bank owned life insurance 0 ( 7,000 ) ( 3,500 ) Proceeds from bank owned life insurance death benefit claims 2,790 1,357 0 Purchases of premises and equipment and lease activity ( 6,764 ) ( 8,530 ) ( 6,687 ) Proceeds from sales of former bank premises 0 283 598 Proceeds from sales of foreclosed assets 0 290 531 Net cash for investing activities ( 105,704 ) ( 425,436 ) ( 395,932 ) Cash flows from financing activities Net increase in time deposits 5,048 159,727 422,781 Net (decrease) increase in all other deposits 106,140 637,721 ( 234,674 ) Net (decrease) increase in securities sold under agreements to repurchase 110,770 ( 108,213 ) 35,394 Proceeds from term note issuance 30,000 0 0 Proceeds from Federal Home Loan Bank advances 20,000 10,000 240,000 Maturities of Federal Home Loan Bank advances ( 80,862 ) ( 90,827 ) ( 80,353 ) Employee stock purchase plan 128 50 45 Dividend reinvestment plan 772 810 891 Payment of cash dividends to common shareholders ( 23,951 ) ( 22,473 ) ( 21,004 ) Net cash from financing activities 168,045 586,795 363,080 See accompanying notes to consolidated financial statements. F-33 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) Years ended December 31, 2025, 2024 and 2023 (Dollars in thousands) 2025 2024 2023 Net change in cash and cash equivalents 80,314 262,477 33,761 Cash and cash equivalents at beginning of period 393,010 130,533 96,772 Cash and cash equivalents at end of period $ 473,324 $ 393,010 $ 130,533 Supplemental disclosures of cash flows information Cash paid during the year for: Interest $ 129,430 $ 129,228 $ 72,024 Federal income taxes* 44,842 21,400 24,850 Noncash financing and investing activities: Common stock issued in connection with acquisition of Eastern Michigan Financial Corp. 44,909 0 0 Transfers from loans to foreclosed assets 0 0 112 Transfers from bank premises to other real estate owned 0 0 800 *Federal income taxes include amounts paid for the acquisition of transferable federal income tax credits. See accompanying notes to consolidated financial statements. F-34 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation : The consolidated financial statements include the accounts of Mercantile Bank Corporation (“Mercantile”) and its subsidiaries, Mercantile Bank and Eastern Michigan Bank (collectively "our banks"), and Mercantile Community Partners LLC ("MCP"), and of Mercantile Insurance Center, Inc. (“our insurance company”), a subsidiary of Mercantile Bank, after elimination of significant intercompany transactions and accounts. Mercantile has five separate business trusts: Mercantile Bank Capital Trust I, Firstbank Capital Trust I, Firstbank Capital Trust II, Firstbank Capital Trust III and Firstbank Capital Trust IV (“our trusts”). Our trusts were formed to issue trust preferred securities. We issued subordinated debentures to our trusts in return for the proceeds raised from the issuance of the trust preferred securities. Our trusts are not consolidated, but instead we report the subordinated debentures issued to the trusts as liabilities. Nature of Operations : Mercantile was incorporated on July 15, 1997, to establish and own Mercantile Bank based in Grand Rapids, Michigan. Mercantile Bank began operations on December 15, 1997. Mercantile Bank completed the merger of Firstbank Corporation, a Michigan corporation with approximately $ 1.5 billion in total assets and 46 branch locations, into Mercantile as of June 1, 2014. On December 31, 2025, Mercantile completed the merger of Eastern Michigan Financial Corporation, and its wholly owned banking subsidiary, Eastern Michigan Bank, with approximately $ 572 million in total assets and 11 branch locations. Mercantile will operate for a period of time as a two -bank holding company. The newly acquired Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank. Mercantile is a financial holding company whose principal activity is the ownership and management of Mercantile Bank and Eastern Michigan Bank. Both Mercantile Bank and Eastern Michigan Bank are community-based financial institutions. Their primary deposit products are checking, saving, and term certificate accounts, and their primary lending products are commercial loans, residential mortgage loans, and instalment loans. Substantially all loans are secured by specific items of collateral, including business assets, real estate or consumer assets. Commercial loans are expected to be repaid from cash flow from operations of businesses. Real estate loans are secured by commercial or residential real estate. We have no material foreign loans or significant overdraft balances. Our banks' loan accounts and retail deposits are primarily with customers located in the communities in which we have bank office locations. As an alternative source of funds, our banks have also issued certificates of deposit to depositors outside of their primary market areas. Our insurance company acquired an existing shelf insurance agency effective April 15, 2002. An Agency and Institution Agreement was entered into among our insurance company, Mercantile Bank and Hub International for the purpose of providing programs of mass marketed personal lines of insurance. Insurance product offerings include private passenger automobile, homeowners, personal inland marine, boat owners, recreational vehicle, dwelling fire, umbrella policies, small business and life insurance products, all of which are provided by and written through companies that have appointed Hub International as their agent. To date, we have not provided the insurance products noted above and currently have no plans to do so. We have evaluated subsequent events for potential recognition and/or disclosure through the date these financial statements were issued. Use of Estimates : To prepare financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. The allowance for credit losses and the fair value measurements are particularly subject to change. Cash and Cash Equivalents and Cash Flow Reporting : Cash and cash equivalents include cash on hand, demand deposits with other financial institutions, short-term investments and federal funds sold. Cash flows are reported net for customer loan and deposit transactions, interest-earning deposits invested with other financial institutions and short-term borrowings with maturities of 90 days or less. (Continued) F- 35 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Debt Securities : Debt securities classified as held to maturity are carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities available for sale consist of bonds which might be sold prior to maturity due to a number of factors, including changes in interest rates, prepayment risks, yield, availability of alternative investments or liquidity needs. Debt securities classified as available for sale are reported at their fair value. For available for sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the debt security’s amortized cost basis is written down to fair value through income with the establishment of an allowance. For debt securities available for sale that do not meet the aforementioned criteria, we evaluate whether any decline in fair value is due to credit loss factors. In making this assessment, we consider any changes to the rating of the security by a rating agency and adverse conditions specifically related to the issuer of the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance is recognized in other comprehensive income. Changes in the allowance are recorded as provisions for (or reversals of) credit loss expense. Losses are charged against the allowance when the collectibility of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2025 , there was no allowance related to the available for sale debt securities portfolio. Interest income includes amortization of purchase premiums and accretion of discounts. Premiums and discounts on securities are amortized or accreted on the level-yield method without anticipating prepayments, except for mortgage-backed securities where prepayments are anticipated. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. Accrued interest receivable on available for sale debt securities totaling $ 5.5 million and $ 3.6 million at December 31, 2025 and 2024 , respectively, was reported in other assets on the Consolidated Balance Sheets. Management has made the accounting policy election to exclude accrued interest receivable on available for sale securities from the estimate of credit losses as accrued interest is written off in a timely manner when deemed uncollectible. Loans : Loans that we have the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding adjusted for partial charge-offs and the allowance, net of deferred loan fees and costs and purchase premiums and discounts. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Accrued interest is included in other assets in the Consolidated Balance Sheets. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield. The December 31, 2025, acquisition of Eastern Michigan Bank resulted in the recognition of $ 1.5 million of net purchased loan discounts. Purchased loan discounts were measured at the time of acquisition based upon the difference between the initial amortized cost basis and the par value of the loan. The premiums and discounts will be amortized into interest income over the life of the loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments. Net unamortized deferred loan costs amounted to $ 1.3 million and $ 2.2 million at December 31, 2025 and 2024 , respectively. Interest income on commercial loans and mortgage loans is discontinued at the time the loan is 90 days delinquent unless the loan is well-secured and in process of collection. Consumer and credit card loans are typically charged off no later than when they are 120 days past due. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on nonaccrual or charged off at an earlier date if collection of principal and interest is considered doubtful. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest received on such loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Commercial Loan Participations : As part of our credit risk administration practices and to manage exposure limits, we engage in commercial loan participations with other financial institutions from time-to-time. In all instances, the commercial loans are participated at par with no loan yield adjustments; therefore, no gain or loss on sale, or servicing right, is recorded. We retain a large portion of the loan exposure and continue to service the lending relationship. Commercial loan participations aggregated $ 71.8 million and $ 48.6 million as of December 31, 2025 and 2024 , respectively. (Continued) F- 36 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Loans Held for Sale : Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. Mortgage loans held for sale are generally sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related mortgage loan sold, which is reduced by the cost allocated to the servicing right. Year-end mortgage loans held for sale were as follows: (Dollars in thousands) 2025 2024 Mortgage loans held for sale $ 17,160 $ 15,824 Less: Allowance to adjust to lower of cost or market 0 0 Mortgage loans held for sale, net $ 17,160 $ 15,824 Mortgage Loan Derivatives : We enter into forward contracts and interest rate lock commitments in the ordinary course of business, which are accounted for as derivatives. The derivatives are not designated as hedges and are carried at fair value. The net gain or loss on derivatives is included in mortgage banking activities in the Consolidated Statements of Income. The net balance of mortgage loan derivatives aggregated to an asset of $ 0.3 million as of December 31, 2025 , and an asset of $ 0.1 million as of December 31, 2024 . Mortgage Banking Activities : Income derived from mortgage banking activities include the net gain on sale of mortgage loans, originated mortgage servicing rights, and servicing fee income net of mortgage servicing rights amortization expense. The net gain on sale of mortgage loans represents the premium received in excess of the unpaid principal balance plus net origination fees. Originated mortgage loan servicing rights are recorded at fair value at the time of sale and amortized in proportion to, and over the period of, estimated net servicing revenues. At each period end, impairment is evaluated based on the fair value of the rights using groupings of the underlying mortgage loans as to interest rates. Any impairment of a grouping is reported as a valuation allowance. We have identified four classes of mortgage servicing rights based on the initial term of the underlying mortgage loans: 10 years, 15 years, 20 years and 30 years. We distinguish between these classes based on the differing sensitivities to the change in value from changes in mortgage interest rates. Any impairment of a grouping is reported as a valuation allowance. Servicing fees are earned for servicing mortgage loans and are based on a contractual percentage of the outstanding principal or a fixed amount per loan and are recorded as income when earned. Interest rate risk, prepayment risk and default risk are inherent in mortgage servicing rights valuations. Interest rate changes largely drive prepayment rates. Refinance activity generally increases as interest rates decline. A significant decrease in interest rates beyond expectation could cause a decline in the value of mortgage servicing rights. On the contrary, borrowers are less likely to refinance or prepay their mortgage loans if interest rates increase, which would extend the duration of the underlying mortgage loans and the associated mortgage servicing rights value would likely rise. Because of these risks, discount rates and prepayment speeds are used to estimate the fair value of mortgage servicing rights. (Continued) F- 37 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Allowance for Credit Losses ( “a llowance ” ) : The allowance is a valuation account that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. The allowance is increased by provision expense and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged-off against the allowance when we believe the uncollectibility of a loan balance is confirmed. The allowance is measured on a collective pool basis when similar risk characteristics exist and on an individual basis when a loan exhibits unique risk characteristics that differentiate the loan from other loans within the loan segments. Loan segments are further discussed in Note 3 - Loans and Allowance for Credit Losses. The “remaining life methodology” is utilized for substantially all loan pools. This non-discounted cash flow approach projects an estimated future amortized cost basis based on current loan balance and repayment terms. Our historical loss rate is then applied to future loan balances at the instrument level based on remaining contractual life adjusted for amortization, prepayment and default to develop a baseline lifetime loss. The baseline lifetime loss is adjusted for changes in macroeconomic conditions over the reasonable and supportable forecast and reversion periods via a series of macroeconomic forecast inputs, such as gross domestic product, unemployment rates, interest rates, credit spreads, stock market volatility and property price indices, to quantify the impact of current and forecasted economic conditions on expected loan performance. Reasonable and supportable economic forecasts have to be incorporated in determining expected credit losses. The forecast period represents the time frame from the current period end through the point in time that we can reasonably forecast and support entity and environmental factors that are expected to impact the performance of our loan portfolio. Ideally, the economic forecast period would encompass the contractual terms of all loans; however, the ability to produce a forecast that is considered reasonable and supportable becomes more difficult or may not be possible in later periods. The contractual term generally excludes potential extensions, renewals and modifications. Subsequent to the end of the forecast period, we revert to historical loan data based on an ongoing evaluation of each economic forecast in relation to then current economic conditions as well as any developing loan loss activity and resulting historical data. We are not required to develop and use our own economic forecast model, and elect to utilize economic forecasts from third -party providers that analyze and develop forecasts of the economy for the entire United States at least quarterly. During each reporting period, we also consider the need to adjust the historical loss rates as determined to reflect the extent to which we expect current conditions and reasonable and supportable economic forecasts to differ from the conditions that existed for the period over which the historical loss information was determined. These qualitative adjustments may increase or decrease our estimate of expected future credit losses. Our qualitative factors include: o Changes in lending policies and procedures o Changes in the nature and volume of the loan portfolio and in the terms of loans o Changes in the experience, ability and depth of lending management and other relevant staff o Changes in the volume and severity of past due loans, nonaccrual loans and adversely classified loans o Changes in the quality of the loan review program o Changes in the value of underlying collateral dependent loans o Existence and effect of any concentrations of credit and any changes in such o Effect of other factors such as competition and legal and regulatory requirements o Local or regional conditions that depart from the conditions and forecasts for the entire country The estimation of future credit losses should reflect consideration of all significant factors that affect the collectibility of the loan portfolio at each evaluation date. While our methodology considers both the historical loss rates as well as the traditional qualitative factors, there may be instances or situations where additional qualitative factors need to be considered. Effective January 1, 2022, we established a historical loss information factor to address the relatively low level of loan losses during the look-back period. (Continued) F- 38 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Purchased loans are recorded at fair value at the time of acquisition and distinguished between purchased seasoned loans ("PSL"), purchased credit deteriorated loans ("PCD loans"), and non-seasoned new acquisitions. PSL are loans purchased at least 90 days after its original origination date and without significant credit deterioration. PCD loans are acquired loans that have experienced a more-than-insignificant decline in credit quality since their origination. We considered all loans that were currently 60 days or more past due, ever on nonaccrual status, had ever been past due three or more times, consumer loans with borrower credit scores below 600, or commercial loans rated monitor, special mention, substandard or doubtful to be PCD loans. There were no non-seasoned new acquisition loans during 2025, 2024 and 2023. PSL and PCD loans are accounted for using the gross-up approach prescribed in Accounting Standards Codification 326, Financial Instruments - Credit Losses. The gross-up approach requires recognition of an allowance for the estimate of credit losses at the acquisition date. The allowance is recorded with an offsetting gross-up adjustment to the purchase price of the acquired financial asset. Accrued interest receivable on loans totaling $ 17.5 million and $ 17.3 million as of December 31, 2025 and 2024 , respectively, is included in other assets on the Consolidated Balance Sheets. We elected not to measure an allowance for accrued interest receivable and instead elected to reverse interest income on loans that are placed on nonaccrual status, which is generally when the loan becomes 90 days past due, or earlier if we believe the collection of interest is doubtful. We believe this policy results in the timely reversal of uncollectible interest. Identified problem loans, which exhibit characteristics (financial or otherwise) that could cause the loans to become nonperforming or require restructuring in the future, are included on an internal watch list. Senior management and the Board of Directors review this list regularly. In some cases, we may determine that an individual loan exhibits unique risk characteristics that differentiate the loan from other loans within the loan segments. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific reserve allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed and collateral deficiencies, among other things. For individually analyzed loans that are deemed to be collateral dependent loans, we adopted the practical expedient to measure the allowance based on the fair value of collateral. The allowance is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral and its recorded principal balance. If the fair value of the collateral exceeds the recorded principal balance, no allowance is required. Fair value estimates of collateral on individually analyzed loans, as well as on foreclosed and repossessed assets, are reviewed periodically. We also have a process in place to monitor whether value estimates at each quarter-end are reflective of current market conditions. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust outside and internal valuations based on identifiable trends within our markets, such as recent sales of similar properties or assets, listing prices and offers received. In addition, we may discount certain appraised and internal value estimates to address distressed market conditions. We are also required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us. Any allowance for off-balance sheet credit exposures is reported as an other liability on our Consolidated Balance Sheets and is increased or decreased via other noninterest expense on our Consolidated Statement of Income. The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives. The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to be funded. (Continued) F- 39 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Transfers of Financial Assets : Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: ( 1 ) the assets have been isolated from our banks and put presumptively beyond the reach of the transferor and its creditors, even in bankruptcy or other receivership, ( 2 ) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and ( 3 ) our banks do not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Our transfers of financial assets are generally limited to commercial loan participations sold and residential mortgage loans sold in the secondary market. Premises and Equipment : Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Buildings and related components are depreciated using the straight-line method with useful lives ranging from 5 to 33 years. Furniture, fixtures and equipment are depreciated using the straight-line method with useful lives ranging from 3 to 7 years. Maintenance, repairs and minor alterations are charged to current operations as expenditures occur and major improvements are capitalized. Premises and equipment are reviewed for impairment when events indicate their carrying amount may not be recoverable based on future undiscounted cash flows. If impaired, the assets are recorded at the lower of carrying value or fair value. Foreclosed Assets: Assets acquired through or in lieu of foreclosure are initially recorded at their estimated fair value net of estimated selling costs, establishing a new cost basis. If fair value subsequently declines, a valuation allowance is recorded through noninterest expense, as are collection and operating costs after acquisition. We had no foreclosed assets as of December 31, 2025 and 2024. Bank Owned Life Insurance: Our banks have purchased life insurance policies on certain key officers. Bank owned life insurance is recorded at its cash surrender value, or the amount that can be realized. Increases in the net cash surrender value of the policies, as well as insurance proceeds received, are recorded as noninterest income on the Consolidated Statements of Income and are not subject to income taxes. Goodwill : The acquisition method of accounting requires that assets and liabilities acquired in a business combination to be recorded at fair value as of the acquisition date. The valuation of assets and liabilities often involves estimates based on third -party valuations or internal valuations based on discounted cash flow analyses or other valuation techniques, all of which are inherently subjective. This typically results in goodwill, the amount by which the cost of net assets acquired in a business combination exceeds their fair value, which is subject to impairment testing at least annually. We review goodwill for impairment on an annual basis as of October 1 or more often if events or circumstances indicate that it is more-likely-than- not that the fair value of a reporting unit is below its carrying value. Based on our annual impairment analysis of goodwill as of October 1, it was determined that the fair value was in excess of its respective carrying value as of October 1, 2025; therefore, goodwill was considered not impaired. Subsequent to the analysis of goodwill, on December 31, 2025, we acquired Eastern Michigan Financial Corporation, resulting in the recognition of $ 23.2 million of goodwill. Goodwill recognized from the acquisition of Eastern Michigan Financial Corporation is further discussed in Note 17 - Business Combinations. Repurchase Agreements : Our banks sell certain securities under agreements to repurchase. The agreements are treated as collateralized financing transactions, with the obligations to repurchase the securities sold reflected as liabilities and the securities underlying the agreements remaining in assets in the Consolidated Balance Sheets. Financial Instruments and Loan Commitments : Financial instruments include off-balance-sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs. The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. Instruments, such as standby letters of credit, that are considered financial guarantees are recorded at fair value. Reserves for unfunded commitments are recorded as an other liability on our Consolidated Balance Sheets. Stock-Based Compensation : Compensation cost for equity-based awards is measured on the grant date based on the fair value of the award on that date and recognized over the requisite service period, net of estimated forfeitures. Fair value of stock option awards is estimated using a closed option valuation (Black-Scholes) model. Fair value of restricted stock awards is based upon the quoted market price of the common stock on the date of grant. (Continued) F- 40 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue from Contracts with Customers : We record revenue from contracts with customers in accordance with Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers” (“Topic 606” ). Under Topic 606, we must identify the contract with a customer, identify the performance obligations in the contract, determine the transaction price, allocate the transaction price to the performance obligations in the contract, and recognize revenue when (or as) we satisfy a performance obligation. Significant revenue has not been recognized in the current reporting period that results from performance obligations satisfied in previous periods. Our primary sources of revenue are derived from interest and dividends earned on loans, securities and other financial instruments that are not within the scope of Topic 606. We have evaluated the nature of our contracts with customers and determined that further disaggregation of revenue from contracts with customers into more granular categories beyond what is presented in the Consolidated Statements of Income was not necessary. We generally satisfy our performance obligations on contracts with customers as services are rendered, and the transaction prices are typically fixed and charged either on a periodic basis (generally monthly) or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers. The following table depicts our sources of noninterest income presented in the Consolidated Statements of Income for the years ended December 31, 2025, 2024 and 2023 that are scoped within Topic 606: (Dollars in thousands) 2025 2024 2023 Credit and debit card fees $ 9,207 $ 8,821 $ 8,914 Service charges on deposit and sweep accounts 8,134 6,842 4,954 Payroll processing 3,473 3,058 2,509 Customer service fees 876 797 801 Service Charges on Deposit and Sweep Accounts: We earn fees from deposit and sweep customers for account maintenance, transaction-based and overdraft services. Account maintenance fees, which relate primarily to monthly maintenance, are earned over the course of the month reflecting the period over which we satisfy the performance obligation. Transaction-based fees, which include services such as stop payment and returned item charges, are recognized at the time the transaction is executed as that is the point in time we fulfill the customer request. Service charges on deposit and sweep accounts are withdrawn from the customer account balance. Credit and Debit Card Fees: We earn interchange income on our cardholder debit and credit card usage. Interchange income is primarily comprised of fees whenever our debit and credit cards are processed through card payment networks such as Visa. Interchange fees from cardholder transactions represent a percentage of the underlying transaction value and are recognized daily, concurrently with the transaction processing services provided to the cardholder. Payroll Processing Fees: We earn fees from providing payroll processing services for our commercial clients. Fees are assessed for processing weekly or bi-weekly payroll files, reports and documents, as well as year-end tax-related files, reports and documents. Fees are recognized and collected as payroll processing services are completed for each payroll run and year-end processing activities. Customer Service Fees: We earn fees by providing a variety of other services to our customers, such as wire transfers, check ordering, sales of cashier checks, and rentals of safe deposit boxes. Generally, fees are recognized and collected daily, concurrently with the point in time we fulfill the customer request. Safe deposit box rentals are on annual contracts, with fees generally earned at the time of the contract signing or renewal. Customer service fees are recorded as other noninterest income on our Consolidated Statements of Income. Advertising Costs : Advertising costs are expensed as incurred. Income Taxes : Income tax expense is the total of the current year income tax due or refundable, the change in deferred income tax assets and liabilities, and any adjustments related to unrecognized tax benefits. Deferred income tax assets and liabilities are recognized for the tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates applicable to future years. A valuation allowance, if needed, reduces deferred income tax assets to the amount expected to be realized. (Continued) F- 41 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Values of Financial Instruments : Fair values of financial instruments are estimated using relevant market information and other assumptions. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. The fair value estimates of existing on- and off-balance sheet financial instruments do not include the value of anticipated future business or the values of assets and liabilities not considered financial instruments. Earnings Per Share : Basic earnings per share is based on the weighted average number of common shares and participating securities outstanding during the period. Diluted earnings per share include the dilutive effect of additional potential common shares issuable under our stock-based compensation plans using the treasury stock method. Our unvested stock awards, which contain non-forfeitable rights to dividends whether paid or unpaid (i.e., participating securities), are included in the number of shares outstanding for both basic and diluted earnings per share calculations. In the event of a net loss, our unvested stock awards are excluded from the calculations of both basic and diluted earnings per share. There were no dilutive shares outstanding during the years ended December 31, 2025, 2024 and 2023 . Weighted average common shares outstanding were 16,237,974 , 16,130,696 , and 16,015,678 during the years ended December 31, 2025, 2024 and 2023 . Comprehensive Income (Loss) : Comprehensive income (loss) consists of net income and other comprehensive income (loss). Accumulated other comprehensive gain/(loss) includes unrealized gains and losses on securities available for sale. Accumulated other comprehensive gain/(loss) was comprised of the following as of December 31, 2025, 2024 and 2023 : (Dollars in thousands) 2025 2024 2023 Unrealized gains (losses) on securities available for sale $ ( 30,373 ) $ ( 63,070 ) $ ( 63,906 ) Tax effect 6,378 13,245 13,419 Accumulated other comprehensive gain/(loss) $ ( 23,995 ) $ ( 49,825 ) $ ( 50,487 ) Derivatives : Derivative financial instruments are recognized as assets or liabilities at fair value. The accounting for changes in the fair value of derivatives depends on the use of the derivatives and whether the derivatives qualify for hedge accounting. Used as part of our asset and liability management to help manage interest rate risk, our derivatives have historically generally consisted of interest rate swap agreements that qualified for hedge accounting. We do not use derivatives for trading purposes. Changes in the fair value of derivatives that are designated, for accounting purposes, as a hedge of the variability of cash flows to be received on various assets and liabilities and are effective are reported in other comprehensive income. They are later reclassified into earnings in the same periods during which the hedged transaction affects earnings and are included in the line item in which the hedged cash flows are recorded. If hedge accounting does not apply, changes in the fair value of derivatives are recognized immediately in current earnings as interest income or expense. We had no derivative instruments designated as hedges as of December 31, 2025 and 2024 . Contingencies: Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. We do not believe there are any such matters outstanding that would have a material effect on the financial statements. Recent Accounting Changes Adopted : Accounting Standards Updated No. 2025 - 08, Financial Instruments - Credit Losses (Topic 326 ): Purchased Loans. This update expands the population of acquired financial instruments subject to the gross-up approach in Topic 326. In accordance with the amendments in this update, loans (excluding credit cards) acquired without credit deterioration and deemed "seasoned" are purchased seasoned loans and accounted for using the gross-up approach at acquisition. This update takes effect for annual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods with adoption being applied prospectively to loans that are acquired on or after the initial application date. We have adopted the standard and included the required disclosures in our financial statements. (Continued) F- 42 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 2 – SECURITIES The amortized cost and fair value of available for sale securities and the related pre-tax gross unrealized gains and losses recognized in accumulated other comprehensive gain/(loss) were as follows at year-end 2025 and 2024 : Gross Gross Amortized Unrealized Unrealized Fair (Dollars in thousands) Cost Gains Losses Value 2025 U.S. Treasury notes and bonds $ 55,501 $ 0 $ 0 $ 55,501 U.S. Government agency debt obligations 661,841 4,343 ( 26,411 ) 639,773 Mortgage-backed securities 80,475 14 ( 4,727 ) 75,762 Municipal general obligation bonds 217,283 1,946 ( 4,166 ) 215,063 Municipal revenue bonds 66,376 180 ( 1,552 ) 65,004 Other investments 51,127 0 0 51,127 $ 1,132,603 $ 6,483 $ ( 36,856 ) $ 1,102,230 2024 U.S. Government agency debt obligations $ 542,676 $ 131 $ ( 47,226 ) $ 495,581 Mortgage-backed securities 31,696 4 ( 6,332 ) 25,368 Municipal general obligation bonds 187,484 513 ( 7,827 ) 180,170 Municipal revenue bonds 31,066 89 ( 2,422 ) 28,733 Other investments 500 0 0 500 $ 793,422 $ 737 $ ( 63,807 ) $ 730,352 Securities with unrealized losses at year-end 2025 and 2024 , aggregated by investment category and length of time that individual securities have been in a continuous loss position, are as follows: Less than 12 Months 12 Months or More Total (Dollars in thousands) Fair Unrealized Fair Unrealized Fair Unrealized Description of Securities Value Loss Value Loss Value Loss 2025 U.S. Treasury notes and bonds $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 U.S. Government agency debt obligations 41,380 234 350,926 26,177 392,306 26,411 Mortgage-backed securities 0 0 22,945 4,727 22,945 4,727 Municipal general obligation bonds 4,465 23 102,736 4,143 107,201 4,166 Municipal revenue bonds 2,956 13 19,893 1,539 22,849 1,552 Other investments 0 0 0 0 0 0 $ 48,801 $ 270 $ 496,500 $ 36,586 $ 545,301 $ 36,856 2024 U.S. Government agency debt obligations $ 113,942 $ 2,379 $ 361,171 $ 44,847 $ 475,113 $ 47,226 Mortgage-backed securities 194 1 24,865 6,331 25,059 6,332 Municipal general obligation bonds 63,387 1,117 92,153 6,710 155,540 7,827 Municipal revenue bonds 2,840 28 21,865 2,394 24,705 2,422 Other investments 0 0 0 0 0 0 $ 180,363 $ 3,525 $ 500,054 $ 60,282 $ 680,417 $ 63,807 (Continued) F- 43 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 2 – SECURITIES (Continued) We evaluate securities in an unrealized loss position at least quarterly. Consideration is given to the financial condition of the issuer, and the intent and ability we have to retain our investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value. For those debt securities whose fair value is less than their amortized cost basis, we also consider our intent to sell the security, whether it is more likely than not that we will be required to sell the security before recovery and if we do not expect to recover the entire amortized cost basis of the security. In analyzing an issuer’s financial condition, we may consider whether the securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred and the results of reviews of the issuer’s financial condition. At December 31, 2025 , 607 debt securities with estimated fair values totaling $ 545 million had unrealized losses aggregating $ 36.9 million. At December 31, 2024 , 843 debt securities with estimated fair values totaling $ 680 million had unrealized losses aggregating $ 63.8 million. At December 31, 2025 , unrealized losses aggregating $ 31.1 million were attributable to bonds issued or guaranteed by agencies of the U.S. federal government, while unrealized losses totaling $ 5.7 million were associated with bonds issued by state-based municipalities. After considering the issuers of the bonds and taking into account the fact that no municipal issuer had been subject to a credit rating downgrade by bond credit rating agencies, we determined that the unrealized losses were due to changing interest rate environments. As we do not intend to sell our debt securities before recovery of their cost basis and we believe it is more likely than not that we will not be required to sell our debt securities before recovery of the cost basis, no unrealized losses are deemed to represent credit losses. The amortized cost and fair values of debt securities at December 31, 2025 , by maturity, are shown in the following table. The contractual maturity is utilized for U.S. Treasury notes and bonds, U.S. Government agency debt obligations and municipal bonds. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately. Amortized Fair (Dollars in thousands) Cost Value Due in one year or less $ 85,205 $ 84,389 Due from one to five years 529,700 516,624 Due from five to ten years 316,053 303,308 Due after ten years 70,043 71,020 Mortgage-backed securities 80,475 75,762 Other investments 51,127 51,127 $ 1,132,603 $ 1,102,230 No securities were sold during the last three years. Securities issued by the State of Michigan and all its political subdivisions had a combined amortized cost of $ 252 million and $ 219 million at December 31, 2025 and December 31, 2024 , respectively, with estimated market values of $ 249 million and $ 209 million at the respective dates. Securities issued by all other states and their political subdivisions had both a combined amortized cost and estimated fair value of $ 31.3 million as of December 31, 2025 . We had no securities issued by all other states and their political subdivisions as of December 31, 2024. Total securities of any other specific issuer, other than the U.S. Government and its agencies and the State of Michigan and all its political subdivisions, did not exceed 10% of shareholders’ equity. The carrying value of U.S. Government agency debt obligations and mortgage-backed securities that are pledged to secure repurchase agreements was $ 232 million and $ 122 million at December 31, 2025 and 2024 , respectively. The carrying value of U.S. Government agency debt obligations that are pledged to secure specific customer deposits was $ 12.6 million and $ 11.7 million as of December 31, 2025 and 2024 , respectively. (Continued) F- 44 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES Commercial loans are divided among five segments based primarily on collateral type, risk characteristics, and primary and secondary sources of repayment. These segments are then further stratified based on the commercial loan grade that is assigned using our standard loan grading paradigm. Retail loans are divided into one of two groups based on risk characteristics and source of repayment. Our allowance for credit loss pools are consistent with those used for loan note disclosure purposes. Our loan portfolio segments as of December 31, 2025 were as follows: o Commercial Loans ■ Commercial and Industrial : Risks to this loan category include industry concentration and the practical limitations associated with monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt. ■ Owner Occupied Commercial Real Estate : Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt. Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category. ■ Non-Owner Occupied Commercial Real Estate : Loans in this category are susceptible to declines in occupancy rates, business failure, and general economic conditions. Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category. ■ Multi-Family and Residential Rental : Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral. Loans in this category are susceptible to weakening general economic conditions and increases in unemployment rates, as well as market demand and supply of similar property and the resulting impact on occupancy rates, market rents, cash flow, and income-based real estate values. Also, the lack of a suitable alternative use for the properties is a risk for loans in this category. ■ Vacant Land, Land Development and Residential Construction : Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates. o Retail Loans ■ 1 - 4 Family Mortgages : Residential mortgage loans are susceptible to weakening general economic conditions and increases in unemployment rates and declining real estate values. ■ Other Consumer Loans : Risks common to these loans include regulatory risks, unemployment, and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property. (Continued) F- 45 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Year-end loans disaggregated by class of loan within the loan portfolio segments were as follows: Percent December 31, 2025 December 31, 2024 Increase (Dollars in thousands) Balance % Balance % (Decrease) Commercial: Commercial and industrial $ 1,374,522 28.5 % $ 1,287,308 28.0 % 6.8 % Vacant land, land development, and residential construction 117,373 2.4 66,936 1.5 75.4 Real estate – owner occupied 778,869 16.2 748,837 16.3 4.0 Real estate – non-owner occupied 1,110,674 23.0 1,128,404 24.5 ( 1.6 ) Real estate – multi-family and residential rental 537,224 11.2 475,819 10.3 12.9 Total commercial 3,918,662 81.3 3,707,304 80.6 5.7 Retail: 1-4 family mortgages 790,857 16.4 827,597 18.0 ( 4.4 ) Other consumer loans 112,369 2.3 65,880 1.4 70.6 Total retail 903,226 18.7 893,477 19.4 1.1 Total loans $ 4,821,888 100.0 % $ 4,600,781 100.0 % 4.8 % Concentrations within the loan portfolio were as follows at year end: 2025 2024 Percentage Percentage of of Loan Loan (Dollars in thousands) Balance Portfolio Balance Portfolio Commercial real estate loans to lessors of non-residential buildings $ 759,127 15.7 % $ 822,402 17.9 % (Continued) F- 46 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) An age analysis of past due loans is as follows as of December 31, 2025 : Recorded Greater Balance > 30 – 59 60 – 89 Than 89 89 Days Days Days Total Total Days and (Dollars in thousands) Past Due Past Due Past Due Past Due Current Loans Accruing Commercial: Commercial and industrial $ 294 $ 0 $ 0 $ 294 $ 1,374,228 $ 1,374,522 $ 0 Vacant land, land development, and residential construction 67 0 0 67 117,306 117,373 0 Real estate – owner occupied 219 0 29 248 778,621 778,869 0 Real estate – non-owner occupied 0 0 2,732 2,732 1,107,942 1,110,674 0 Real estate – multi-family and residential rental 0 0 0 0 537,224 537,224 0 Total commercial 580 0 2,761 3,341 3,915,321 3,918,662 0 Retail: 1-4 family mortgages 992 409 156 1,557 789,300 790,857 0 Other consumer loans 585 40 5 630 111,739 112,369 0 Total retail 1,577 449 161 2,187 901,039 903,226 0 Total past due loans $ 2,157 $ 449 $ 2,922 $ 5,528 $ 4,816,360 $ 4,821,888 $ 0 An age analysis of past due loans is as follows as of December 31, 2024 : Recorded Greater Balance > 30 – 59 60 – 89 Than 89 89 Days Days Days Total Total Days and (Dollars in thousands) Past Due Past Due Past Due Past Due Current Loans Accruing Commercial: Commercial and industrial $ 5 $ 0 $ 864 $ 869 $ 1,286,439 $ 1,287,308 $ 0 Vacant land, land development, and residential construction 12 0 0 12 66,924 66,936 0 Real estate – owner occupied 0 0 0 0 748,837 748,837 0 Real estate – non-owner occupied 0 0 0 0 1,128,404 1,128,404 0 Real estate – multi-family and residential rental 0 0 0 0 475,819 475,819 0 Total commercial 17 0 864 881 3,706,423 3,707,304 0 Retail: 1-4 family mortgages 2,365 713 182 3,260 824,337 827,597 0 Other consumer loans 112 0 0 112 65,768 65,880 0 Total retail 2,477 713 182 3,372 890,105 893,477 0 Total past due loans $ 2,494 $ 713 $ 1,046 $ 4,253 $ 4,596,528 $ 4,600,781 $ 0 (Continued) F- 47 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Nonaccrual loans as of December 31, 2025 were as follows: Recorded Principal Related (Dollars in thousands) Balance Allowance With no allowance recorded: Commercial: Commercial and industrial $ 170 $ 0 Vacant land, land development and residential construction 201 0 Real estate – owner occupied 517 0 Real estate – non-owner occupied 0 0 Real estate – multi-family and residential rental 0 0 Total commercial 888 0 Retail: 1-4 family mortgages 1,892 0 Other consumer loans 81 0 Total retail 1,973 0 Total with no allowance recorded $ 2,861 $ 0 With an allowance recorded: Commercial: Commercial and industrial $ 1,223 $ 1,063 Vacant land, land development and residential construction 0 0 Real estate – owner occupied 0 0 Real estate – non-owner occupied 2,732 2,732 Real estate – multi-family and residential rental 0 0 Total commercial 3,955 3,795 Retail: 1-4 family mortgages 1,054 224 Other consumer loans 0 0 Total retail 1,054 224 Total with an allowance recorded $ 5,009 $ 4,019 Total nonaccrual loans: Commercial $ 4,843 $ 3,795 Retail 3,027 224 Total nonaccrual loans $ 7,870 $ 4,019 Nonaccrual loans represent the entire balance of collateral dependent loans. As of December 31, 2025 and 2024 , all collateral dependent loans were secured by real estate, with the exception of those classified as commercial and industrial, which were secured by accounts receivable, inventory, and equipment. Interest income recognized on nonaccrual loans totaled $ 1.0 million in 2025 , $ 0.3 million in 2024 and $ 0.2 million in 2023 , reflecting the collection of interest at the time of principal pay-off. (Continued) F- 48 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Nonaccrual loans as of December 31, 2024 were as follows: Recorded Principal Related (Dollars in thousands) Balance Allowance With no allowance recorded: Commercial: Commercial and industrial $ 615 $ 0 Vacant land, land development and residential construction 0 0 Real estate – owner occupied 42 0 Real estate – non-owner occupied 0 0 Real estate – multi-family and residential rental 0 0 Total commercial 657 0 Retail: 1-4 family mortgages 1,167 0 Other consumer loans 0 0 Total retail 1,167 0 Total with no allowance recorded $ 1,824 $ 0 With an allowance recorded: Commercial: Commercial and industrial $ 2,110 $ 1,732 Vacant land, land development and residential construction 0 0 Real estate – owner occupied 0 0 Real estate – non-owner occupied 0 0 Real estate – multi-family and residential rental 0 0 Total commercial 2,110 1,732 Retail: 1-4 family mortgages 1,808 402 Other consumer loans 0 0 Total retail 1,808 402 Total with an allowance recorded $ 3,918 $ 2,134 Total nonaccrual loans: Commercial $ 2,767 $ 1,732 Retail 2,975 402 Total nonaccrual loans $ 5,742 $ 2,134 (Continued) F- 49 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Nonaccrual loans as of December 31, 2023 were as follows: Recorded Principal Related (Dollars in thousands) Balance Allowance With no allowance recorded: Commercial: Commercial and industrial $ 0 $ 0 Vacant land, land development and residential construction 0 0 Real estate – owner occupied 70 0 Real estate – non-owner occupied 0 0 Real estate – multi-family and residential rental 0 0 Total commercial 70 0 Retail: 1-4 family mortgages 2,272 0 Other consumer loans 0 0 Total retail 2,272 0 Total with no allowance recorded $ 2,342 $ 0 With an allowance recorded: Commercial: Commercial and industrial $ 249 $ 1 Vacant land, land development and residential construction 0 0 Real estate – owner occupied 0 0 Real estate – non-owner occupied 0 0 Real estate – multi-family and residential rental 0 0 Total commercial 249 1 Retail: 1-4 family mortgages 824 240 Other consumer loans 0 0 Total retail 824 240 Total with an allowance recorded $ 1,073 $ 241 Total nonaccrual loans: Commercial $ 319 $ 1 Retail 3,096 240 Total nonaccrual loans $ 3,415 $ 241 (Continued) F- 50 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are reviewed and graded at inception and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral. Loans by credit quality indicators were as follows as of December 31, 2025 : Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial Vacant Land, Commercial Land Commercial Commercial Real Estate - Commercial Development, Real Estate - Real Estate - Multi-Family and and Residential Owner Non-Owner and Residential (Dollars in thousands) Industrial Construction Occupied Occupied Rental Internal credit risk grade groupings: Grades 1 – 4 $ 655,390 $ 55,915 $ 493,696 $ 434,725 $ 151,521 Grades 5 – 7 704,704 61,257 277,700 673,217 385,703 Grades 8 – 9 14,428 201 7,473 2,732 0 Total commercial $ 1,374,522 $ 117,373 $ 778,869 $ 1,110,674 $ 537,224 Retail credit exposure – credit risk profiled by collateral type: Retail Retail 1-4 Family Other (Dollars in thousands) Mortgages Consumer Loans Performing $ 787,911 $ 112,288 Nonperforming 2,946 81 Total retail $ 790,857 $ 112,369 Loans by credit quality indicators were as follows as of December 31, 2024 : Commercial credit exposure – credit risk profiled by internal credit risk grades: Commercial Vacant Land, Commercial Land Commercial Commercial Real Estate - Commercial Development, Real Estate - Real Estate - Multi-Family and and Residential Owner Non-Owner and Residential (Dollars in thousands) Industrial Construction Occupied Occupied Rental Internal credit risk grade groupings: Grades 1 – 4 $ 629,851 $ 25,191 $ 466,400 $ 432,244 $ 173,109 Grades 5 – 7 637,183 41,740 275,506 688,178 302,100 Grades 8 – 9 20,274 5 6,931 7,982 610 Total commercial $ 1,287,308 $ 66,936 $ 748,837 $ 1,128,404 $ 475,819 Retail credit exposure – credit risk profiled by collateral type: Retail Retail 1-4 Family Other (Dollars in thousands) Mortgages Consumer Loans Performing $ 824,622 $ 65,880 Nonperforming 2,975 0 Total retail $ 827,597 $ 65,880 (Continued) F- 51 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) All commercial loans are graded using the following criteria: Grade 1. “Exceptional” Loans with this rating contain very little, if any, risk. Grade 2. “Outstanding” Loans with this rating have excellent and stable sources of repayment and conform to bank policy and regulatory requirements. Grade 3. “Very Good” Loans with this rating have strong sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are acceptable. Grade 4. “Good” Loans with this rating have solid sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are modest. Grade 5. “Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements. These are loans for which repayment risks are satisfactory. Grade 6. “Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if further deterioration is observed, these credits will be downgraded to the criticized asset report. Grade 7. “Special Mention” Loans with this rating have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date. Grade 8. “Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any. A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility of loss if the deficiencies are not corrected. Grade 9. “Doubtful” Loans with this rating exhibit all the weaknesses inherent in the Substandard classification and where collection or liquidation in full is highly questionable and improbable. Grade 10. “Loss” Loans with this rating are considered uncollectable, and of such little value that continuance as an active asset is not warranted. The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments; loans 90 days or more past due are considered nonperforming. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position. (Continued) F- 52 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The following table reflects loan balances as of December 31, 2025 based on year of origination: Revolving Grand (Dollars in thousands) 2025 2024 2023 2022 2021 Prior Term Total Loans Total Commercial: Commercial and Industrial: Grades 1 – 4 $ 82,163 $ 57,225 $ 38,063 $ 12,554 $ 35,423 $ 14,878 $ 240,306 $ 415,084 $ 655,390 Grades 5 – 7 143,638 125,617 46,445 23,137 5,396 3,092 347,325 357,379 704,704 Grades 8 – 9 2,189 0 732 0 0 327 3,248 11,180 14,428 Total $ 227,990 $ 182,842 $ 85,240 $ 35,691 $ 40,819 $ 18,297 $ 590,879 $ 783,643 $ 1,374,522 Current-period gross write-offs $ 0 $ 4 $ 84 $ 0 $ 0 $ 0 $ 88 $ 7 $ 95 Vacant Land, Land Development and Residential Construction: Grades 1 – 4 $ 22,242 $ 4,849 $ 1,703 $ 7,676 $ 2,410 $ 6,752 $ 45,632 $ 10,283 $ 55,915 Grades 5 – 7 37,052 13,281 1,635 2,295 520 5,743 60,526 731 61,257 Grades 8 – 9 0 0 0 0 201 0 201 0 201 Total $ 59,294 $ 18,130 $ 3,338 $ 9,971 $ 3,131 $ 12,495 $ 106,359 $ 11,014 $ 117,373 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Real Estate – Owner Occupied: Grades 1 – 4 $ 135,403 $ 137,672 $ 51,266 $ 77,169 $ 66,198 $ 18,302 $ 486,010 $ 7,686 $ 493,696 Grades 5 – 7 81,750 59,874 51,642 53,479 20,585 9,085 276,415 1,285 277,700 Grades 8 – 9 0 0 3,502 2,674 0 1,297 7,473 0 7,473 Total $ 217,153 $ 197,546 $ 106,410 $ 133,322 $ 86,783 $ 28,684 $ 769,898 $ 8,971 $ 778,869 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Real Estate – Non-Owner Occupied: Grades 1 – 4 $ 93,669 $ 83,447 $ 55,500 $ 65,525 $ 73,727 $ 53,148 $ 425,016 $ 9,709 $ 434,725 Grades 5 – 7 145,795 153,731 170,018 77,964 69,335 51,411 668,254 4,963 673,217 Grades 8 – 9 2,732 0 0 0 0 0 2,732 0 2,732 Total $ 242,196 $ 237,178 $ 225,518 $ 143,489 $ 143,062 $ 104,559 $ 1,096,002 $ 14,672 $ 1,110,674 Current-period gross write-offs $ 0 $ 0 $ 2,800 $ 0 $ 0 $ 0 $ 2,800 $ 0 $ 2,800 Real Estate – Multi-Family and Residential Rental: Grades 1 – 4 $ 40,264 $ 13,603 $ 32,341 $ 9,449 $ 32,465 $ 23,399 $ 151,521 $ 0 $ 151,521 Grades 5 – 7 165,703 55,785 128,190 27,959 1,862 6,204 385,703 0 385,703 Grades 8 – 9 0 0 0 0 0 0 0 0 0 Total $ 205,967 $ 69,388 $ 160,531 $ 37,408 $ 34,327 $ 29,603 $ 537,224 $ 0 $ 537,224 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Total Commercial $ 952,600 $ 705,084 $ 581,037 $ 359,881 $ 308,122 $ 193,638 $ 3,100,362 $ 818,300 $ 3,918,662 Current-period gross write-offs $ 0 $ 4 $ 2,884 $ 0 $ 0 $ 0 $ 2,888 $ 7 $ 2,895 Retail: 1-4 Family Mortgages: Performing $ 62,063 $ 52,546 $ 102,023 $ 280,078 $ 181,242 $ 107,389 $ 785,341 $ 2,570 $ 787,911 Nonperforming 0 241 451 1,047 347 860 2,946 0 2,946 Total $ 62,063 $ 52,787 $ 102,474 $ 281,125 $ 181,589 $ 108,249 $ 788,287 $ 2,570 $ 790,857 Current-period gross write-offs $ 0 $ 7 $ 85 $ 22 $ 61 $ 3 $ 178 $ 0 $ 178 Other Consumer Loans: Performing $ 6,574 $ 8,299 $ 7,056 $ 3,358 $ 1,274 $ 894 $ 27,455 $ 84,833 $ 112,288 Nonperforming 0 0 0 9 5 42 56 25 81 Total $ 6,574 $ 8,299 $ 7,056 $ 3,367 $ 1,279 $ 936 $ 27,511 $ 84,858 $ 112,369 Current-period gross write-offs $ 20 $ 2 $ 6 $ 0 $ 0 $ 0 $ 28 $ 14 $ 42 Total Retail $ 68,637 $ 61,086 $ 109,530 $ 284,492 $ 182,868 $ 109,185 $ 815,798 $ 87,428 $ 903,226 Current-period gross write-offs $ 20 $ 9 $ 91 $ 22 $ 61 $ 3 $ 206 $ 14 $ 220 Grand Total $ 1,021,237 $ 766,170 $ 690,567 $ 644,373 $ 490,990 $ 302,823 $ 3,916,160 $ 905,728 $ 4,821,888 Current-period gross write-offs $ 20 $ 13 $ 2,975 $ 22 $ 61 $ 3 $ 3,094 $ 21 $ 3,115 There were lines of credit with principal balances of $ 0.7 million as of December 31, 2024 that were converted to term loans during 2025 . (Continued) F- 53 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The following table reflects loan balances as of December 31, 2024 based on year of origination: Revolving Grand (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Term Total Loans Total Commercial: Commercial and Industrial: Grades 1 – 4 $ 102,898 $ 68,536 $ 41,609 $ 47,534 $ 9,551 $ 8,412 $ 278,540 $ 351,311 $ 629,851 Grades 5 – 7 188,267 88,471 31,755 13,513 3,298 2,019 327,323 309,860 637,183 Grades 8 – 9 4,813 401 3,436 262 69 0 8,981 11,293 20,274 Total $ 295,978 $ 157,408 $ 76,800 $ 61,309 $ 12,918 $ 10,431 $ 614,844 $ 672,464 $ 1,287,308 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 3,741 $ 0 $ 3,741 $ 9 $ 3,750 Vacant Land, Land Development and Residential Construction: Grades 1 – 4 $ 18,536 $ 4,997 $ 610 $ 645 $ 177 $ 226 $ 25,191 $ 0 $ 25,191 Grades 5 – 7 31,692 7,681 1,855 49 0 463 41,740 0 41,740 Grades 8 – 9 0 5 0 0 0 0 5 0 5 Total $ 50,228 $ 12,683 $ 2,465 $ 694 $ 177 $ 689 $ 66,936 $ 0 $ 66,936 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Real Estate – Owner Occupied: Grades 1 – 4 $ 179,763 $ 84,641 $ 88,794 $ 75,702 $ 34,031 $ 3,469 $ 466,400 $ 0 $ 466,400 Grades 5 – 7 108,316 61,998 52,072 21,833 12,386 5,611 262,216 13,290 275,506 Grades 8 – 9 714 0 6,184 0 33 0 6,931 0 6,931 Total $ 288,793 $ 146,639 $ 147,050 $ 97,535 $ 46,450 $ 9,080 $ 735,547 $ 13,290 $ 748,837 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Real Estate – Non-Owner Occupied: Grades 1 – 4 $ 84,773 $ 79,911 $ 76,468 $ 93,034 $ 84,355 $ 13,703 $ 432,244 $ 0 $ 432,244 Grades 5 – 7 194,634 220,681 84,897 91,569 85,828 10,569 688,178 0 688,178 Grades 8 – 9 7,982 0 0 0 0 0 7,982 0 7,982 Total $ 287,389 $ 300,592 $ 161,365 $ 184,603 $ 170,183 $ 24,272 $ 1,128,404 $ 0 $ 1,128,404 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Real Estate – Multi-Family and Residential Rental: Grades 1 – 4 $ 16,271 $ 46,870 $ 10,107 $ 62,744 $ 33,337 $ 3,780 $ 173,109 $ 0 $ 173,109 Grades 5 – 7 81,919 174,468 32,506 4,559 5,626 2,985 302,063 37 302,100 Grades 8 – 9 47 0 0 0 563 0 610 0 610 Total $ 98,237 $ 221,338 $ 42,613 $ 67,303 $ 39,526 $ 6,765 $ 475,782 $ 37 $ 475,819 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Total Commercial $ 1,020,625 $ 838,660 $ 430,293 $ 411,444 $ 269,254 $ 51,237 $ 3,021,513 $ 685,791 $ 3,707,304 Current-period gross write-offs $ 0 $ 0 $ 0 $ 0 $ 3,741 $ 0 $ 3,741 $ 9 $ 3,750 Retail: 1-4 Family Mortgages: Performing $ 72,349 $ 122,718 $ 307,161 $ 203,052 $ 73,052 $ 46,290 $ 824,622 $ 0 $ 824,622 Nonperforming 0 89 1,626 439 0 821 2,975 0 2,975 Total $ 72,349 $ 122,807 $ 308,787 $ 203,491 $ 73,052 $ 47,111 $ 827,597 $ 0 $ 827,597 Current-period gross write-offs $ 0 $ 0 $ 0 $ 33 $ 0 $ 0 $ 33 $ 0 $ 33 Other Consumer Loans: Performing $ 5,863 $ 3,008 $ 1,428 $ 732 $ 361 $ 653 $ 12,045 $ 53,835 $ 65,880 Nonperforming 0 0 0 0 0 0 0 0 0 Total $ 5,863 $ 3,008 $ 1,428 $ 732 $ 361 $ 653 $ 12,045 $ 53,835 $ 65,880 Current-period gross write-offs $ 10 $ 1 $ 19 $ 8 $ 0 $ 5 $ 43 $ 11 $ 54 Total Retail $ 78,212 $ 125,815 $ 310,215 $ 204,223 $ 73,413 $ 47,764 $ 839,642 $ 53,835 $ 893,477 Current-period gross write-offs $ 10 $ 1 $ 19 $ 41 $ 0 $ 5 $ 76 $ 11 $ 87 Grand Total $ 1,098,837 $ 964,475 $ 740,508 $ 615,667 $ 342,667 $ 99,001 $ 3,861,155 $ 739,626 $ 4,600,781 Current-period gross write-offs $ 10 $ 1 $ 19 $ 41 $ 3,741 $ 5 $ 3,817 $ 20 $ 3,837 There were lines of credit with principal balances of $ 9.1 million as of December 31, 2023 that were converted to term loans during 2024 . (Continued) F- 54 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Mercantile Bank uses a migration to loss methodology to determine historical loss rates for commercial loans given the comprehensive loan grading process employed by Mercantile Bank for over two decades, while an open pool approach is best suited for retail loans given the smaller dollar size of the segments. A baseline loss rate is produced at each reporting date for each loan portfolio segment using bank-specific loan charge-off and recovery data over a defined historical look-back period. The look-back period represents the number of data periods that will be used to calculate a baseline loss rate for each loan portfolio segment. We determined that the look-back period commencing on January 1, 2011 through the reporting date was reasonable and appropriate for the calculation of historical loss rates for both December 31, 2025 and 2024 . Mercantile Bank's historical loss rate is then applied to future loan balances at the instrument level based on remaining contractual life adjusted for amortization, prepayment and default to develop a baseline lifetime loss. Our prepayment speed assumptions are developed at the loan segment level based upon the consideration of all relevant data in which we believe will impact anticipated customer behavior including changes in interest rates, economic conditions, and underlying property valuations. For the commercial loan portfolio segments, we assumed a 2 % prepayment speed as of both December 31, 2025 and 2024 as we deemed there to be no considerable changes from historical experience. For the retail 1 - 4 family mortgage and retail other consumer portfolios, we increased the prepayment speed from 7.8 % as of December 31, 2024 to 9.5 % as of December 31, 2025 . This increase shortened the average lives of the portfolios in which the loss rates were applied, resulting in a decrease to the allowance of $ 2.3 million. This change in assumption was driven by lower long-term interest rates and the compositions of the underlying portfolios. During each reporting period, we also consider the need to adjust the historical loss rates as determined to reflect the extent to which we expect current conditions and reasonable and supportable economic forecasts to differ from the conditions that existed for the period over which the historical loss information was determined. These qualitative adjustments may increase or decrease our estimate of expected future credit losses. As of December 31, 2025 and 2024 , we used a one -year reasonable and supportable economic forecast period, with a six -month straight-line reversion period for all loan segments. The economic forecasts used for our December 31, 2025 and 2024 allowance calculations reflected allowance balance reductions of $ 0.3 million and $ 2.2 million, respectively. The allowance for PSL and PCD loans acquired from the acquisition of Eastern Michigan Bank were measured at the loan segment level using proxy expected lifetime loss rates adjusted for qualitative risk factors, including lending management experience, loan review and audit results, asset quality and portfolio trends, loan portfolio growth, industry concentrations, trends in underlying collateral, external factors, and economic conditions not already captured. Individual loans exhibiting unique risk characteristics, which differentiate the loans from other loans within the loan segments and are evaluated for expected credit losses on an individual basis, totaled $ 7.9 million and $ 7.4 million as of December 31, 2025 and 2024 , respectively. Individual allowance allocations totaled $ 4.0 million and $ 2.2 million as of December 31, 2025 and 2024 , respectively. (Continued) F- 55 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The allowance for credit losses for the year ended December 31, 2025 is as follows: Commercial vacant land, Commercial land real estate – development Commercial Commercial multi-family Commercial and real estate – real estate – and 1 - 4 Other and residential owner non-owner residential family consumer (Dollars in thousands) industrial construction occupied occupied rental mortgages loans Unallocated Total Beginning balance $ 11,165 $ 367 $ 7,671 $ 10,919 $ 3,667 $ 18,702 $ 1,936 $ 27 $ 54,454 Provision for credit losses 438 ( 418 ) ( 654 ) 6,626 1,810 ( 4,974 ) 316 56 3,200 Charge-offs ( 95 ) 0 0 ( 2,800 ) 0 ( 178 ) ( 42 ) 0 ( 3,115 ) Recoveries 769 5 6 0 17 348 109 0 1,254 Initial allowance on PSL 283 496 569 323 20 289 313 0 2,293 Initial allowance on PCD loans 16 28 37 6 0 12 6 0 105 Ending balance $ 12,576 $ 478 $ 7,629 $ 15,074 $ 5,514 $ 14,199 $ 2,638 $ 83 $ 58,191 The allowance for credit losses for the year ended December 31, 2024 is as follows: Commercial vacant land, Commercial land real estate – development Commercial Commercial multi-family Commercial and real estate – real estate – and 1 - 4 Other and residential owner non-owner residential family consumer (Dollars in thousands) industrial construction occupied occupied rental mortgages loans Unallocated Total Beginning balance $ 7,441 $ 384 $ 7,186 $ 9,852 $ 3,184 $ 18,986 $ 2,881 $ 0 $ 49,914 Provision for credit losses 7,109 ( 22 ) 314 1,067 468 ( 474 ) ( 1,089 ) 27 7,400 Charge-offs ( 3,750 ) 0 0 0 0 ( 33 ) ( 54 ) 0 ( 3,837 ) Recoveries 365 5 171 0 15 223 198 0 977 Ending balance $ 11,165 $ 367 $ 7,671 $ 10,919 $ 3,667 $ 18,702 $ 1,936 $ 27 $ 54,454 (Continued) F- 56 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The allowance for credit losses for the year ended December 31, 2023 is as follows: Commercial vacant land, Commercial land real estate – development Commercial Commercial multi-family Commercial and real estate – real estate – and Other and residential owner non-owner residential 1-4 family consumer (Dollars in thousands) industrial construction occupied occupied rental mortgages loans Unallocated Total Beginning balance $ 10,203 $ 490 $ 5,914 $ 9,242 $ 2,191 $ 14,027 $ 160 $ 19 $ 42,246 Credit risk reclassifications 90 0 0 0 0 ( 697 ) 607 0 0 Balances, December 31, 2022 after reclassifications 10,293 490 5,914 9,242 2,191 13,330 767 19 42,246 Provision for credit losses ( 2,822 ) ( 141 ) 1,255 610 967 5,638 2,212 ( 19 ) 7,700 Charge-offs ( 218 ) 0 ( 54 ) 0 0 ( 414 ) ( 177 ) 0 ( 863 ) Recoveries 188 35 71 0 26 432 79 0 831 Ending balance $ 7,441 $ 384 $ 7,186 $ 9,852 $ 3,184 $ 18,986 $ 2,881 $ 0 $ 49,914 (Continued) F- 57 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The following table presents the period-end amortized cost basis of modifications to borrowers experiencing financial difficulty by type of modification made during the year ended: December 31, 2025 December 31, 2024 Interest Rate Principal Interest Rate Principal (Dollars in thousands) Reduction Term Extension Forgiveness Reduction Term Extension Forgiveness Commercial: Commercial and industrial $ 0 $ 9,250 $ 0 $ 0 $ 6,574 $ 0 Vacant land, land development and residential construction 0 0 0 0 0 0 Real estate – owner occupied 0 0 0 0 42 0 Real estate – non-owner occupied 0 0 0 0 0 0 Real estate – multi-family and residential rental 0 0 0 0 0 0 Total commercial $ 0 $ 9,250 $ 0 $ 0 $ 6,616 $ 0 Retail: 1-4 family mortgages 0 0 0 0 0 0 Other consumer loans 0 0 0 0 0 0 Total retail $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Total loans $ 0 $ 9,250 $ 0 $ 0 $ 6,616 $ 0 Loans listed under Term Extension were generally granted a series of short-term maturity extensions as part of the workout process and associated forbearance agreement. The following table presents the period-end amortized cost basis of loans that have been modified in the past twelve months as of December 31, 2025, to borrowers experiencing financial difficulty by payment status and loan segment: 30 – 89 Days 90 + Days (Dollars in thousands) Current Past Due Past Due Total Commercial: Commercial and industrial $ 9,250 $ 0 $ 0 $ 9,250 Vacant land, land development and residential construction 0 0 0 0 Real estate – owner occupied 0 0 0 0 Real estate – non-owner occupied 0 0 0 0 Real estate – multi-family and residential rental 0 0 0 0 Total commercial $ 9,250 $ 0 $ 0 $ 9,250 Retail: 1-4 family mortgages 0 0 0 0 Other consumer loans 0 0 0 0 Total retail $ 0 $ 0 $ 0 $ 0 Total loans $ 9,250 $ 0 $ 0 $ 9,250 (Continued) F- 58 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 4 - PREMISES AND EQUIPMENT, NET Year-end premises and equipment were as follows: (Dollars in thousands) 2025 2024 Land and improvements $ 16,250 $ 14,021 Buildings 68,733 62,365 Furniture and equipment 31,585 26,657 116,568 103,043 Less: accumulated depreciation ( 54,100 ) ( 49,616 ) Total premises and equipment $ 62,468 $ 53,427 Depreciation expense totaled $ 5.2 million for 2025 , and $ 6.0 million for both 2024 and 2023 . We enter into facility leases in the normal course of business. As of December 31, 2025 , we were under lease contracts for eleven of our branch facilities. The leases have maturity dates ranging from August, 2026 through May, 2048, with a weighted average life of 9.4 years as of December 31, 2025 . All of our leases have multiple three - to five -year extensions; however, these were not factored in the lease maturities and weighted average lease term as it is not reasonably certain we will exercise the options. Leases are classified as either operating or finance leases at the lease commencement date, with all of our current leases determined to be operating leases. Lease expense for operating leases is recognized on a straight-line basis over the lease term. Right-of-use assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized at the lease commencement date at the estimated present value of lease payments over the lease term. We use our incremental borrowing rate, on a collateralized basis, at lease commencement to calculate the present value of lease payments. The weighted average discount rate for leases was 6.52 % as of December 31, 2025 . The right-of-use assets, included in premises and equipment, net on our Consolidated Balance Sheets, and the lease liabilities, included in other liabilities on our Consolidated Balance Sheets, totaled $ 3.9 million and $ 4.4 million as of December 31, 2025 , and December 31, 2024 , respectively. As permitted by applicable accounting standards, we have elected not to recognize short-term leases with original terms of twelve months or less on our Consolidated Balance Sheets. Total operating lease expense associated with the leases aggregated $ 1.6 million, $ 1.6 million and $ 2.0 million in 2025 , 2024 and 2023 , respectively. Future lease payments were as follows as of December 31, 2025 : (Dollars in thousands) 2026 $ 1,191 2027 1,119 2028 942 2029 738 2030 73 Thereafter 1,141 Total undiscounted lease payments 5,204 Less effect of discounting ( 1,312 ) Present value of future lease payments (lease liability) $ 3,892 (Continued) F- 59 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 5 – MORTGAGE LOAN SERVICING Mortgage loans serviced for others are not reported as assets on the Consolidated Balance Sheets. The year-end aggregate unpaid principal balances of mortgage loans serviced for others were as follows: (Dollars in thousands) 2025 2024 Mortgage loan portfolios serviced for: Federal Home Loan Mortgage Corporation $ 1,422,337 $ 1,364,485 Federal Home Loan Bank 264,517 176,540 Other 0 9,805 Total mortgage loans serviced for others $ 1,686,854 $ 1,550,830 Custodial escrow balances, which are reported as deposits on the Consolidated Balance Sheets, maintained in connection with serviced loans were $ 14.5 million and $ 10.9 million as of December 31, 2025 and 2024 , respectively. Activity for capitalized mortgage loan servicing rights, which are reported as other assets on the Consolidated Balance Sheets, during 2025 and 2024 was as follows: (Dollars in thousands) 2025 2024 Balance at beginning of year $ 12,475 $ 11,343 Additions 4,544 4,465 Acquired from Eastern Michigan Bank 439 0 Amortized to expense ( 3,854 ) ( 3,333 ) Balance at end of year $ 13,604 $ 12,475 Mortgage servicing rights result from our mortgage loan origination activities. Late and ancillary fees, included as part of mortgage banking income and reported as noninterest income in the Consolidated Statements of Income, aggregated less than $ 0.1 million during 2025 and 2024 . We determined that no valuation allowance was necessary as of December 31, 2025 or December 31, 2024 . The estimated fair value of mortgage servicing rights was $ 21.4 million and $ 21.0 million as of December 31, 2025 and 2024 , respectively. The fair value of mortgage servicing rights is estimated using a valuation model that calculates the present value of estimated future net servicing cash flows, taking into consideration expected mortgage loan prepayment rates, discount rates, servicing costs and other economic factors, which are determined based on current market conditions. As of December 31, 2025 , fair value was determined using a discount rate of 10.00 %, a weighted average constant prepayment rate of 9.13 %, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.76 %. As of December 31, 2024 , fair value was determined using a discount rate of 10.50 %, a weighted average constant prepayment rate of 7.81 %, depending on the stratification of the specific right, and a weighted average delinquency rate of 0.68 %. The weighted average amortization period was 8.2 years and 8.7 years as of December 31, 2025 and 2024 , respectively. (Continued) F- 60 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 6 – DEPOSITS Deposits at year end are summarized as follows: Percent (Dollars in thousands) December 31, 2025 December 31, 2024 Increase Balance % Balance % (Decrease) Noninterest-bearing checking $ 1,339,666 25.4 % $ 1,264,523 26.9 % 5.9 % Interest-bearing checking 957,598 18.1 738,291 15.7 29.7 Money market 1,697,604 32.1 1,516,436 32.3 11.9 Savings 310,227 5.9 221,900 4.7 39.8 Time deposits 848,844 16.1 807,517 17.2 5.1 Total local deposits 5,153,939 97.6 4,548,667 96.8 13.3 Out-of-area time, $100,000 and over 130,513 2.4 149,699 3.2 ( 12.8 ) Total deposits $ 5,284,452 100.0 % $ 4,698,366 100.0 % 12.5 % Out-of-area time deposits consist of deposits obtained from depositors outside of our primary market areas exclusively through deposit brokers. The following table depicts the maturity distribution for time deposits at year end: (Dollars in thousands) 2025 2024 In one year or less $ 914,764 $ 880,165 In one to two years 43,444 53,660 In two to three years 9,330 14,315 In three to four years 8,398 2,301 In four to five years 3,421 6,775 Total certificates of deposit $ 979,357 $ 957,216 (Continued) F- 61 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 6 – DEPOSITS (Continued) Time deposits of more than $250,000 totaled $ 551 million and $ 570 million at year-end 2025 and 2024 , respectively. Deposit overdrafts, which are reported as loans on the Consolidated Balance Sheets, totaled $ 0.6 million and $ 1.0 million as of December 31, 2025 and 2024 , respectively. NOTE 7 – SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE Information regarding securities sold under agreements to repurchase at year end is summarized below: (Dollars in thousands) 2025 2024 Outstanding balance at year end $ 232,291 $ 121,521 Weighted average interest rate at year end 2.80 % 2.17 % Average daily balance during the year $ 239,089 $ 224,878 Weighted average interest rate during the year 3.12 % 3.43 % Maximum daily balance during the year $ 285,679 $ 278,227 Securities sold under agreements to repurchase (“repurchase agreements”) generally have original maturities of less than one year. Repurchase agreements are treated as financings, and the obligations to repurchase securities sold are reflected as liabilities on our Consolidated Balance Sheets. Repurchase agreements are secured by securities with an aggregate fair value equal to the aggregate outstanding balance of the repurchase agreements. The securities, which are included in securities available for sale on our Consolidated Balance Sheets, are held in safekeeping by a correspondent bank. Repurchase agreements are offered principally to certain large deposit customers. NOTE 8 - OTHER BORROWINGS FHLBI bullet advances totaled $ 300 million at December 31, 2025 , and were expected to mature at varying dates from January 2026 through June 2030, with fixed rates of interest from 0.90 % to 4.50 % and averaging 3.27 %. FHLBI bullet advances totaled $ 360 million at December 31, 2024 , and were expected to mature at varying dates from January 2025 through January 2029, with fixed rates of interest from 0.70 % to 4.54 % and averaging 3.10 %. Maturities of FHLBI bullet advances as of December 31, 2025 were as follows: (Dollars in thousands) 2026 $ 80,000 2027 100,000 2028 90,000 2029 10,000 2030 20,000 Thereafter 0 (Continued) F- 62 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 8 - OTHER BORROWINGS (Continued) FHLBI amortizing advances totaled $ 26.2 million and $ 27.1 million as of December 31, 2025 and 2024 , respectively, with an average fixed rate of 2.52 % and maturities in 2042. FHLBI amortizing advances are obtained periodically to assist in managing interest rate risk associated with certain longer-term fixed rate commercial loans, with annual principal payments that closely align with the scheduled amortization of the underlying commercial loans. Scheduled principal payments on FHLBI amortizing advances as of December 31, 2025 were as follows: (Dollars in thousands) 2026 $ 900 2027 938 2028 979 2029 1,022 2030 1,065 Thereafter 21,317 Each advance is payable at its maturity date, and is subject to a prepayment fee if paid prior to the maturity date. The advances are collateralized by residential mortgage loans, first mortgage liens on multi-family residential property loans, first mortgage liens on commercial real estate property loans, and substantially all other assets of Mercantile Bank under a blanket lien arrangement. Our borrowing line of credit as of December 31, 2025 totaled $ 1.08 billion, with remaining availability based on collateral of $ 777 million. On December 15, 2021, we entered into Subordinated Note Purchase Agreements with certain institutional accredited investors pursuant to which we issued and sold $ 75.0 million in aggregate principal amount of 3.25 % fixed-to-floating rate subordinated notes (“Notes”). The Notes have a stated maturity of January 30, 2032, and are redeemable by us at our option, in whole or in part, on or after January 30, 2027 on any interest payment date at a redemption of price of 100 % of the principal amount of the Notes being redeemed. The Notes are not subject to redemption at the option of the holder. The Notes will bear interest at a fixed rate of 3.25 % per year until January 29, 2027. Commencing on January 30, 2027 and through the stated maturity date of January 30, 2032, the interest rate will reset quarterly at a variable rate equal to the then-current Three-Month Term SOFR plus 212 basis points. On December 15, 2021, we injected $ 70.0 million of the issuance proceeds into Mercantile Bank as an increase to equity capital. On January 14, 2022, we issued an additional $ 15.0 million of Notes to certain institutional accredited investors, reflecting an expansion of the $ 75.0 million issuance completed on December 15, 2021. The additional $ 15.0 million issuance was completed on the same terms as the prior offering and under the existing indenture. On January 14, 2022, we injected $ 15.0 million of the issuance proceeds into Mercantile Bank as an increase to equity capital. Our unamortized debt issuance costs were $ 0.3 million and $ 0.7 million as of December 31, 2025 and 2024 , respectively. On December 24, 2025, we entered into a credit agreement with U.S. Bank National Association for a $ 30.0 million term note. The term loan bears interest at an annual rate equal to 1.70 % plus the greater of (a) zero percent ( 0.0 %) and (b) the one -month forward-looking term rate based on SOFR. Interest and principal are payable beginning March 15, 2026, and on the same date of each third month thereafter, plus a final payment equal to all unpaid interest and principal. Principal shall be paid in installments of $ 2.5 million each. The term loan matures on December 24, 2028. Mercantile is permitted to prepay the term note evidencing the term loan in full or in part at any time without indemnity, premium or penalty. NOTE 9 - FEDERAL INCOME TAXES Pretax income is entirely related to domestic activities; we did not have any foreign operations, tax expense or tax benefits. The consolidated income tax expense was as follows: (Dollars in thousands) 2025 2024 2023 Current expense $ 12,655 $ 19,090 $ 22,518 Deferred expense (benefit) 2,085 ( 397 ) ( 2,036 ) Tax expense $ 14,740 $ 18,693 $ 20,482 (Continued) F- 63 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 9 - FEDERAL INCOME TAXES (Continued) A reconciliation of the differences between the federal income tax expense recorded and the amount computed by applying the federal statutory rate to income before income taxes were as follows: (Dollars in thousands) 2025 2024 2023 Amount Percent Amount Percent Amount Percent Tax at U.S. statutory rate $ 21,734 21.0 % $ 20,640 21.0 % $ 21,567 21.0 % Tax credits net of proportional amortization and tax losses ( 1,929 ) ( 1.9 ) ( 266 ) ( 0.3 ) 24 0.0 Discount of purchased tax credits ( 3,525 ) ( 3.4 ) 0 NA 0 NA Non-taxable or non-deductible items Tax-exempt interest, net of interest expense disallowance ( 1,265 ) ( 1.2 ) ( 1,027 ) ( 1.0 ) ( 862 ) ( 0.8 ) Bank owned life insurance ( 683 ) ( 0.7 ) ( 529 ) ( 0.5 ) ( 303 ) ( 0.3 ) Non-deductible expenses 538 0.5 241 0.2 213 0.2 Other ( 130 ) ( 0.1 ) ( 366 ) ( 0.4 ) ( 157 ) ( 0.2 ) Tax expense $ 14,740 14.2 % $ 18,693 19.0 % $ 20,482 19.9 % The statutory tax rate was 21 % for 2025 , 2024 and 2023 . We did not record any state income taxes. Significant components of deferred tax assets and liabilities, included in other assets on our Consolidated Balance Sheets, as of December 31, 2025 and 2024 were as follows: (Dollars in thousands) 2025 2024 Deferred income tax assets Allowance for credit losses $ 12,228 $ 11,435 Deferred compensation 375 269 Stock compensation 977 1,011 Nonaccrual loan interest income 220 192 Unrealized loss on securities 6,379 13,245 Lease liability 792 928 Net operating loss carryforward 1,525 0 Other 850 567 Deferred tax asset 23,346 27,647 Deferred income tax liabilities Depreciation 321 259 Prepaid expenses 780 685 Mortgage loan servicing rights 2,857 2,620 Deferred loan fees and costs 266 471 Right of use lease asset 792 928 Securities discount accretion 2,056 686 Business combination adjustments 4,849 1,626 Other 167 163 Deferred tax liability 12,088 7,438 Total net deferred tax asset $ 11,258 $ 20,209 As of December 31, 2025, we had net operating loss carryforwards of $ 7.3 million related to the acquisition of Eastern Michigan Financial Corporation. The ability to utilize the net operating loss in future periods is limited based on the value of Eastern Michigan Financial Corporation's value at the time of the ownership change and applicable federal rates. A valuation allowance related to deferred tax assets is required when it is considered more likely than not that all or part of the benefits related to such assets will not be realized. We determined that no valuation allowance was required at year-end 2025 or 2024 . We had no unrecognized tax benefits at any time during 2025 or 2024 . Should the accrual of any interest or penalties relative to unrecognized tax benefits be necessary, it is our policy to record such accruals in our income tax accounts; no such accruals existed at any time during 2025 or 2024 . We are no longer no longer subject to examination by taxing authorities for years before 2022. (Continued) F- 64 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 10 – STOCK-BASED COMPENSATION Stock-based compensation plans are used to provide directors and employees with an increased incentive to contribute to our long-term performance and growth, to align the interests of directors and employees with the interests of our shareholders through the opportunity for increased stock ownership and to attract and retain directors and employees. Stock-based compensation, reported as noninterest expense in the Consolidated Statements of Income, totaled $ 3.5 million, $ 3.3 million and $ 3.4 million in 2025, 2024 and 2023, respectively. The Stock Incentive Plan of 2023 that was approved by shareholders in May, 2023. Under the Stock Incentive Plan of 2023, incentive awards may include, but are not limited to, stock options, restricted stock, stock appreciation rights and stock awards. Incentive awards that are stock options or stock appreciation rights are granted with an exercise price not less than the closing price of our common stock on the date of grant. Price, vesting and expiration date parameters are determined by Mercantile’s Compensation Committee on a grant-by-grant basis. No payments are required from employees for restricted stock awards. The restricted stock awards granted during the years 2023 through 2025 fully vest after three years and, in the case of performance-based restricted stock issued to executive officers in 2023 through 2025, are subject to the attainment of pre-determined performance goals. At year-end 2025, there were approximately 292,600 shares authorized for future incentive awards. A summary of restricted stock activity during the year ended December 31, 2025 is as follows: Weighted Average Shares Fair Value Nonvested at beginning of year 228,646 $ 35.84 Grants 84,685 50.34 Vested ( 109,158 ) 32.10 Forfeited ( 4,771 ) 42.70 Nonvested at end of year 199,402 $ 43.31 (Continued) F- 65 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 10 – STOCK-BASED COMPENSATION (Continued) Of the restricted stock shares granted in 2025 and 2023 , a total of 16,589 shares and 25,239 shares, respectively, are performance-based awards made to our Named Executive Officers at the target level and are subject to the attainment of pre-determined performance goals. There were no shares granted in 2024. We periodically grant shares of common stock to our Corporate and Bank Board Directors for retainer payments with the related expense being recorded over the period of the Directors' service, as summarized below: Total Cost Grant Year Shares Granted (in thousands) Covered Period 2022 11,166 $ 359 June 1, 2022 - May 31, 2023 2023 11,529 350 June 1, 2023 - May 31, 2024 2024 11,316 423 June 1, 2024 - May 31, 2025 2025 10,007 444 June 1, 2025 - May 31, 2026 NOTE 11 – RELATED PARTIES Certain directors and executive officers of our banks, including their immediate families and companies in which they are principal owners, were loan customers of our banks. At year-end 2025 and 2024 , our banks had $ 11.3 million and $ 20.4 million in loan commitments to directors and executive officers, of which $ 6.3 million and $ 7.8 million were outstanding at year-end 2025 and 2024 , respectively, as reflected in the following table. (Dollars in thousands) 2025 2024 Beginning balance $ 7,770 $ 89,507 New loans 750 1,898 Repayments ( 2,201 ) ( 3,788 ) Effect of changes in related parties 0 ( 79,847 ) Ending balance $ 6,319 $ 7,770 Related party deposits and repurchase agreements totaled $ 36.6 million and $ 17.9 million at year-end 2025 and 2024 , respectively. (Continued) F- 66 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 12 – COMMITMENTS AND OFF-BALANCE-SHEET RISK We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Loan commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Standby letters of credit are conditional commitments issued by our banks to guarantee the performance of a customer to a third party. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized, if any, in the balance sheet. Our maximum exposure to loan loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual notional amount of those instruments. We use the same credit policies in making commitments and conditional obligations as we do for on-balance sheet instruments. Collateral, such as accounts receivable, securities, inventory, and property and equipment, is generally obtained based on management’s credit assessment of the borrower. We are required to consider expected credit losses associated with loan commitments over the contractual period in which we are exposed to credit risk on the underlying commitments unless the obligation is unconditionally cancellable by us. Any allowance for off-balance sheet credit exposures is reported as an other liability on our Consolidated Balance Sheets and is increased or decreased via other noninterest expense on our Consolidated Statements of Income. The calculation includes consideration of the likelihood that funding will occur and forecasted credit losses on commitments expected to be funded over their estimated lives. The allowance is calculated using the same aggregate reserve rates calculated for the funded portion of loans at the portfolio level applied to the amount of commitments expected to be funded. For commercial lines of credit, retail lines of credit and credit card average outstanding balances, we determined allowance requirements by calculating the difference between the average percent outstanding of the funded commitments over the past several years to actual percent outstanding at period end and applying the respective expected loss allocation factors to the difference as this difference represents the average of unfunded commitments we expect to eventually be drawn upon. For commitments to make loans, we determine an allowance by applying the expected loss allocation factor to the amount expected to fund. The calculated allowance aggregated $ 2.3 million and $ 1.0 million as of December 31, 2025 and 2024 , respectively. We do not reserve for residential mortgage construction loans, as the loans are for one year or less and draws are governed by the receipt and satisfactory review of contractor and subcontractor sworn statements, lien waivers and title insurance company endorsements. Letters of credit are rarely drawn. (Continued) F- 67 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 12 – COMMITMENTS AND OFF-BALANCE-SHEET RISK (Continued) At year-end 2025 and 2024 , the rates on existing off-balance sheet instruments were substantially equivalent to current market rates, considering the underlying credit standing of the counterparties. Our maximum exposure to credit losses for loan commitments and standby letters of credit outstanding at year end was as follows: (Dollars in thousands) 2025 2024 Commercial unused lines of credit $ 1,755,132 $ 1,488,782 Unused lines of credit secured by 1 – 4 family residential properties 135,021 84,298 Credit card unused lines of credit 204,783 172,273 Other consumer unused lines of credit 53,124 33,892 Commitments to make loans 297,730 295,566 Standby letters of credit 26,813 26,491 Total commitments $ 2,472,603 $ 2,101,302 Commitments to make commercial loans generally reflect our binding obligations to existing and prospective customers to extend credit, including line of credit facilities secured by accounts receivable and inventory, and term loans secured by either real estate or equipment. 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 SOFR. Commercial term loans secured by real estate are generally at a floating rates 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 FHLBI advance rates as a proxy and a credit spread as indicated by the credit rating we assign. 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. The following standby letters of credit are considered financial guarantees under current accounting guidance. These instruments are carried at fair value as an other liability on our Consolidated Balance Sheets. Standby letters of credit are generally cross collateralized with the borrowers’ other loans with us, and are included in our borrower collateral analyses. (Dollars in thousands) December 31, 2025 December 31, 2024 Contract Carrying Contract Carrying Amount Value Amount Value Standby letters of credit $ 26,813 $ 184 $ 26,491 $ 175 (Continued) F- 68 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 13 – BENEFIT PLANS We have a 401 (k) benefit plan that covers substantially all of our employees. The percent of our matching contributions to the 401 (k) benefit plan is determined annually by the Board of Directors. The matching contribution has been 5.00 % since April 1, 2018. Matching contributions, if made, are immediately vested. Our 2025 , 2024 and 2023 matching 401 (k) contributions charged to expense were $ 2.8 million, $ 2.6 million and $ 2.3 million, respectively. We have a deferred compensation plan in which all persons serving on the Board of Directors may defer all or portions of their annual retainer and meeting fees, with distributions to be paid upon termination of service as a director or specific dates selected by the director. We also have non-qualified deferred compensation programs in which selected officers may defer all or portions of salary and bonus payments. The deferred amounts, which totaled $ 1.8 million and $ 1.3 million as of December 31, 2025 and 2024 , respectively, are categorized as other liabilities in the Consolidated Balance Sheets. Interest expense was $ 0.1 million during 2025 , and less than $ 0.1 million during 2024 and 2023 . The Mercantile Bank Corporation Employee Stock Purchase Plan of 2025 is a non-compensatory plan intended to encourage full- and part-time employees of Mercantile and its subsidiaries to promote our best interests and to align employees’ interests with the interests of our shareholders by permitting employees to purchase shares of our common stock with 5 % discount through regular payroll deductions. Shares are purchased on the last business day of each calendar quarter at a price equal to the lower of 95 % of the closing price of our common stock reported on The Nasdaq Stock Market on the first business day of each quarter and last business day of the quarter. A total of 200,000 shares of common stock may be issued under the existing plan; however, the number of shares may be adjusted to reflect any stock dividends and other changes in our capitalization. The number of shares issued totaled 2,356 in 2025 . As of December 31, 2025 , there were approximately 198,000 shares available under our current plan. The Mercantile Bank Corporation Employee Stock Purchase Plan of 2014 was a non-compensatory plan intended to encourage full- and part-time employees of Mercantile and its subsidiaries to promote our best interests and to align employees’ interests with the interests of our shareholders by permitting employees to purchase shares of our common stock through regular payroll deductions. The number of shares issued totaled 598 and 1,194 in 2025 and 2024, respectively. NOTE 14 – DERIVATIVES AND HEDGING ACTIVITIES We are exposed to certain risks arising from both business operations and economic conditions. We principally manage the exposure to a wide variety of operational risks through core business activities. Economic risks, including interest rate, liquidity and credit risk, are primarily administered via the amount, sources and duration of assets and liabilities. Derivative financial instruments may also be used to assist in managing economic risks. Derivatives not designated as hedges are not speculative and result from a service provided to certain commercial loan borrowers. We execute interest rate swaps with commercial banking customers desiring longer-term fixed rate loans, while simultaneously entering into interest rate swaps with correspondent banks to offset the impact of the interest rate swaps with the commercial banking customers. The net result is the desired floating rate loans and a minimization of the risk exposure of the interest rate swap transactions. These swap agreements are cross collateralized with the underlying loans. As the interest rate swaps associated with this program do not meet the strict hedge accounting requirements, changes in the fair value of both the commercial banking customer interest rate swaps and the offsetting interest rate swaps with the correspondent banks are recognized directly to earnings. Fees paid to us by the correspondent banks are recognized as noninterest income on our Consolidated Statements of Income on the settlement date. (Continued) F- 69 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 14 – DERIVATIVES AND HEDGING ACTIVITIES (Continued) The fair values of derivative instruments as of December 31, 2025 , are reflected in the following table. (Dollars in thousands) Notional Amount Balance Sheet Location Fair Value Derivative Assets Interest rate swaps $ 961,474 Other Assets $ 23,212 Derivative Liabilities Interest rate swaps 959,447 Other Liabilities 23,532 The effect of interest rate swaps that are not designated as hedging instruments resulted in expense of less than $ 0.1 million during the year ended December 31, 2025 that was recorded in other noninterest expense on our Consolidated Statement of Income. We have master netting arrangements with our correspondent banks that allow us to net receivables and payables. The netting agreement also allows us to net related cash collateral received and transferred up to the fair value exposure amount. We have elected to not offset these transactions on the Consolidated Balance Sheets. The netting of derivative instruments as of December 31, 2025 is presented in the following table. Gross Amounts Not Offset on the Consolidated Balance Sheet (Dollars in thousands) Net Amounts Recognized Financial Instruments Cash Collateral Received or posted Net Amount Derivative Assets Interest rate swaps $ 23,212 $ 9,711 $ 1,540 $ 11,961 Derivative Liabilities Interest rate swaps 23,532 9,711 6,900 6,921 (Continued) F- 70 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 14 – DERIVATIVES AND HEDGING ACTIVITIES (Continued) The fair values of derivative instruments as of December 31, 2024 , are reflected in the following table. (Dollars in thousands) Notional Amount Balance Sheet Location Fair Value Derivative Assets Interest rate swaps $ 866,157 Other Assets $ 26,793 Derivative Liabilities Interest rate swaps 864,130 Other Liabilities 27,050 The effect of interest rate swaps that are not designated as hedging instruments resulted in expense of less than $ 0.1 million during the year ended December 31, 2024 that was recognized in other noninterest expense on our Consolidated Statement of Income. The netting of derivative instruments as of December 31, 2024 is presented in the following table. Gross Amounts Not Offset on the Consolidated Balance Sheet (Dollars in thousands) Net Amounts Recognized Financial Instruments Cash Collateral Received or posted Net Amount Derivative Assets Interest rate swaps $ 26,793 $ 3,064 $ 19,040 $ 4,689 Derivative Liabilities Interest rate swaps 27,050 2,915 1,640 22,495 (Continued) F- 71 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS Carrying amount, estimated fair value and level within the fair value hierarchy of financial instruments were as follows at year end: Level in 2025 2024 Fair Value Carrying Fair Carrying Fair (Dollars in thousands) Hierarchy Amount Value Amount Value Financial assets Cash and cash equivalents Level 1 $ 473,324 $ 473,324 $ 393,010 $ 393,010 Securities available for sale (1) 1,102,230 1,102,230 730,352 730,352 Loans, net Level 3 4,763,697 4,830,844 4,546,327 4,558,628 Mortgage loans held for sale Level 2 17,160 17,319 15,824 16,047 Federal Home Loan Bank stock (2) 22,099 22,099 21,513 21,513 Accrued interest receivable Level 2 23,638 23,638 21,401 21,401 Interest rate swaps Level 2 23,212 23,212 26,793 26,793 Financial liabilities Deposits Level 2 5,284,452 5,024,489 4,698,366 4,541,896 Securities sold under agreements to repurchase Level 2 232,291 232,291 121,521 121,521 Federal Home Loan Bank advances Level 2 326,221 321,069 387,083 374,499 Subordinated debentures Level 2 51,015 51,019 50,330 50,336 Subordinated notes Level 2 89,657 86,826 89,314 81,825 Term note Level 2 30,000 30,000 0 0 Accrued interest payable Level 2 9,921 9,921 10,201 10,201 Interest rate swaps Level 2 23,532 23,532 27,050 27,050 ( 1 ) See Note 16 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities. ( 2 ) It is not practical to determine the fair value of FHLBI stock due to transferability restrictions; therefore, fair value is estimated at carrying amount. Carrying amount is the estimated fair value for cash and cash equivalents, FHLBI stock, accrued interest receivable and payable, noninterest-bearing checking accounts and securities sold under agreements to repurchase. Security fair values are based on market prices or dealer quotes, and if no such information is available, on the rate and term of the security and information about the issuer. Fair value for loans is based on an exit price model as required by ASU 2016 - 01, taking into account inputs such as discounted cash flows, probability of default and loss given default assumptions. Fair value for deposit accounts other than noninterest-bearing checking accounts is based on discounted cash flows using current market rates applied to the estimated life. The fair values of subordinated debentures, subordinated notes, and FHLBI advances are based on current rates for similar financing. The fair values of interest rate swaps are based on discounted cash flows using forecasted yield curves, along with insignificant unobservable inputs, such as borrower credit spreads. The fair value of other off-balance sheet items is estimated to be nominal. (Continued) F- 72 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 16 – FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability, or in the absence of a principal market, the most advantageous market for the asset or liability. The price of the principal (or most advantageous) market used to measure the fair value of the asset or liability is not adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. We are required to use valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect our own estimates about the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. In that regard, we utilize a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that we have the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be derived from or corroborated by observable market data by correlation or other means. Level 3: Significant unobservable inputs that reflect our own estimates about the assumptions that market participants would use in pricing an asset or liability. The following is a description of our valuation methodologies used to measure and disclose the fair values of our financial assets and liabilities on a recurring or nonrecurring basis: Securities available for sale. Securities available for sale are recorded at fair value on a recurring basis. Fair value measurement is based on quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models. Level 2 securities include U.S. Government agency debt obligations, mortgage-backed securities issued or guaranteed by U.S. Government agencies, and municipal general obligation and revenue bonds. Level 3 securities include bonds issued by certain relatively small municipalities located within our markets that have very limited marketability due to their size and lack of ratings from a recognized rating service. We carry these bonds at historical cost, which we believe approximates fair value, unless our periodic financial analysis or other information that becomes known to us necessitates an impairment. There was no such impairment as of December 31, 2025 or 2024 . We have no Level 1 securities available for sale. (Continued) F- 73 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 16 – FAIR VALUE MEASUREMENTS (Continued) Derivatives. We measure fair value utilizing models that use primarily market observable inputs, such as forecasted yield curves. Insignificant unobservable inputs, such as borrower credit spreads, are also utilized. Mortgage loans held for sale. Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or market, as determined by outstanding commitments from investors, and are measured on a nonrecurring basis. Fair value is based on independent quoted market prices, where applicable, or the prices for other mortgage whole loans with similar characteristics. As of December 31, 2025 and 2024 , we determined the fair value of our mortgage loans held for sale to be $ 17.3 million and $ 16.0 million, respectively. Loans. We do not record loans at fair value on a recurring basis. However, from time to time, we record nonrecurring fair value adjustments to collateral dependent loans to reflect partial write-downs or specific reserves that are based on the observable market price or current estimated value of the collateral. These loans are reported in the nonrecurring table below at initial recognition of significant borrower distress and on an ongoing basis until recovery or charge-off. The fair values of distressed loans are determined using either the sales comparison approach or income approach; respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates. Foreclosed assets. At time of foreclosure or repossession, foreclosed and repossessed assets are adjusted to fair value less costs to sell upon transfer of the loans to foreclosed and repossessed assets, establishing a new cost basis. We subsequently adjust estimated fair value of foreclosed assets on a nonrecurring basis to reflect write-downs based on revised fair value estimates. The fair values of parcels of other real estate owned are determined using either the sales comparison approach or income approach; respective unobservable inputs for the approaches consist of adjustments for differences between comparable sales and the utilization of appropriate capitalization rates. (Continued) F- 74 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 16 – FAIR VALUE MEASUREMENTS (Continued) Assets and Liabilities Measured at Fair Value on a Recurring Basi s The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 are as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Dollars in thousands) Total (Level 1) (Level 2) (Level 3) Available for sale securities U.S. Treasury notes and bonds $ 55,501 $ 0 $ 55,501 $ 0 U.S. Government agency debt obligations 639,773 0 639,773 0 Mortgage-backed securities 75,762 0 75,762 0 Municipal general obligation bonds 215,063 0 215,063 0 Municipal revenue bonds 65,004 0 65,004 0 Other investments 51,127 0 51,127 0 Interest rate swaps 23,212 0 23,212 0 Total assets $ 1,125,442 $ 0 $ 1,125,442 $ 0 Interest rate swaps 23,532 0 23,532 0 Total liabilities $ 23,532 $ 0 $ 23,532 $ 0 There were no sales or purchases of Level 3 during 2025 . The $ 0.4 million reduction in Level 3 municipal general obligation bonds during 2025 reflects the transfer to Level 2 due to a change in observable inputs. The balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2024 are as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Dollars in thousands) Total (Level 1) (Level 2) (Level 3) Available for sale securities U.S. Government agency debt obligations $ 495,581 $ 0 $ 495,581 $ 0 Mortgage-backed securities 25,368 0 25,368 0 Municipal general obligation bonds 180,170 0 179,777 393 Municipal revenue bonds 28,733 0 28,733 0 Other investments 500 0 500 0 Interest rate swaps 26,793 0 26,793 0 Total assets $ 757,145 $ 0 $ 756,752 $ 393 Interest rate swaps 27,050 0 27,050 0 Total liabilities $ 27,050 $ 0 $ 27,050 $ 0 There were no sales, purchases or transfers in or out of Level 3 during 2024 . The $ 0.1 million reduction in Level 3 municipal general obligation bonds during 2024 reflects the scheduled maturities of such bonds. (Continued) F- 75 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 16 – FAIR VALUE MEASUREMENTS (Continued) Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2025 are as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Dollars in thousands) Total (Level 1) (Level 2) (Level 3) Collateral dependent loans $ 991 $ 0 $ 0 $ 991 Total $ 991 $ 0 $ 0 $ 991 The balances of assets and liabilities measured at fair value on a nonrecurring basis as of December 31, 2024 are as follows: Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Dollars in thousands) Total (Level 1) (Level 2) (Level 3) Collateral dependent loans $ 2,173 $ 0 $ 0 $ 2,173 Total $ 2,173 $ 0 $ 0 $ 2,173 The carrying values are based on the estimated value of the property or other assets. Fair value estimates of collateral on collateral dependent loans and foreclosed assets are review periodically. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust outside appraisals and internal evaluations based on identifiable trends within our markets, such as sales of similar properties or assets, listing prices and offers received. In addition, we may discount certain appraised and internal value estimates to address current distressed market conditions. Typically, for real estate dependent loans and foreclosed assets, we assign a discount factor range of 25 % to 50 %. During 2025, weighted average discount factors of 40.9 % and 25.8 % were used for commercial-related and residential-related properties, respectively. (Continued) F- 76 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 17 – BUSINESS COMBINATIONS On December 31, 2025, Mercantile completed its acquisition of Eastern Michigan Financial Corporation, and its wholly owned banking subsidiary, Eastern Michigan Bank, in accordance with the Agreement and Plan of Merger, as amended (the "Merger Agreement") by and between Mercantile, Eastern Michigan Financial Corporation, and Shamrock Merger Sub LLC, a wholly-owned special purpose subsidiary of Mercantile (“Merger Sub”) entered into on July 22, 2025. Pursuant to the Merger Agreement, Eastern Michigan Financial Corporation merged with and into Merger Sub, with Merger Sub continuing as the surviving entity (the “Merger”). Immediately following the Merger, and also effective as of December 31, 2025, Merger Sub merged with and into Mercantile, with Mercantile continuing as the surviving entity. The newly acquired Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank. Mercantile accounted for the Eastern Michigan Financial Corporation acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations ("ASC 805" ). ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values as of the date of acquisition. Mercantile determined the fair value of loans, core deposit intangibles, mortgage servicing rights, time deposits, and real property with the assistance of third -party valuations and appraisals. The following table summarizes the preliminary fair value of the total consideration transferred and the fair value of identifiable assets acquired, and liabilities assumed as of the effective date of the transaction: (Dollars in thousands) Consideration: Cash $ 50,876 Common stock ( 924,999 shares issued at $ 48.55 per share) 44,909 Total consideration $ 95,785 Identifiable assets acquired Cash and due from banks $ 62,361 Interest-earning deposits 42,084 Securities available for sale 198,365 Loans, net 201,320 Premises and equipment 7,482 Core deposit intangible 20,388 Other assets 16,593 Total identifiable assets acquired 548,593 Identifiable liabilities assumed Deposits $ 474,898 Other liabilities 1,093 Total identifiable liabilities acquired 475,991 Net identifiable assets acquired $ 72,602 Goodwill $ 23,183 As permitted by ASC 805, the above preliminary estimates may be refined during the measurement period (which cannot exceed one year from the Merger date), to reflect any new information obtained about facts and circumstances existing at the Merger date. Any changes in the above preliminary estimates will be recognized in the period identified. The following table presents supplemental pro-forma information as if the acquisition had occurred at the beginning of 2024. The unaudited pro forma information includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expenses on deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction effected on the assumed dates. (Dollars in thousands) 2025 2024 Net interest income $ 223,697 $ 212,864 Provision for credit losses 3,591 7,403 Noninterest income 43,691 42,555 Noninterest expense 153,391 142,451 Income before income taxes 110,406 105,565 Income tax expense 16,591 21,125 Net income $ 93,815 $ 84,440 Earnings per share $ 5.47 $ 4.98 (Continued) F- 77 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 18 – VARIABLE INTEREST ENTITIES Variable interest entities ("VIEs") are entities that either have a total equity investment that is insufficient to permit the entity to finance its activities without additional subordinated financial support or whose equity investors lack the characteristics of a controlling financial interest (i.e., ability to make significant decisions, through voting rights, right to receive the expected residual returns of the entity, and obligations to absorb the expected losses of the entity). Variable interest entities can be structured as corporations, trusts, partnerships, or other legal entities. We have relationships with certain variable interest entities related to the issuance of trust preferred securities and our tax credit investments. We have five business trusts that are wholly owned subsidiaries of Mercantile, four of which were assumed by Mercantile in conjunction with the Firstbank Corporation merger in 2014. A fair value discount of $ 15.0 million was recorded at the time of the merger, which is being amortized at $ 0.7 million annually over the following 21.5 years, 11 of which are remaining. Each of the trusts was solely formed to issue preferred securities that were sold in private sales. Through a small common stock investment, we own 100 % of the voting equity shares of each trust. The proceeds from the preferred securities and common stock sales were used by the trusts to purchase Floating Rate Notes issued by Mercantile. The rates of interest, interest payment dates, call features and maturity dates of each Floating Rate Note are identical to its respective Preferred Securities. The net proceeds from the issuance of the Floating Rate Notes were used for a variety of purposes, including contributions to Mercantile Bank as capital to provide support for asset growth and the funding of stock repurchase programs and certain acquisitions. The assets, liabilities, operations and cash flows of each trust are solely related to the issuance, administration and repayment of the preferred securities held by third -party investors. We fully and unconditionally guarantee the obligations of each trust and are obligated to redeem the junior subordinated debentures upon maturity. We do not consolidate the trusts as we are not the primary beneficiary of these entities because our wholly-owned and indirect wholly-owned statutory subsidiaries do not have the power to direct the activities of the variable interest entity that most significantly impact the variable interest entity’s economic performance and do not have an obligation to absorb losses or the right to receive benefits that could potentially be significant to the variable interest entity. As such, we do not have a controlling financial interest in the variable interest entities. The only significant assets of our trusts are the Floating Rate Notes, and the only significant liabilities of our trusts are the Preferred Securities. The Floating Rate Notes are categorized on our Consolidated Balance Sheets as subordinated debentures and the interest expense is recorded on our Consolidated Statements of Income under interest expense on other borrowings. On January 26, 2016, we closed on a repurchase of trust preferred securities that were auctioned as part of a pooled collateralized debt obligation (“Fund”). The Fund owned $ 11.0 million of the $ 32.0 million in trust preferred securities that had been issued by Mercantile Bank Capital Trust I. The $ 11.0 million in trust preferred securities was retired upon the repurchase, resulting in a commensurate reduction in the related Floating Rate Junior Subordinate Note, leaving $ 21.0 million outstanding. The following table depicts our five business trusts as of December 31, 2025 : (Dollars in thousands) Preferred Securities Trust Name Outstanding Interest Rate Maturity Date Mercantile Bank Capital Trust I $ 21,000 3 Month SOFR + 218 bps September 16, 2034 Firstbank Capital Trust I $ 10,000 3 Month SOFR + 199 bps October 18, 2034 Firstbank Capital Trust II $ 10,000 3 Month SOFR + 127 bps April 7, 2036 Firstbank Capital Trust III $ 7,500 3 Month SOFR + 135 bps July 30, 2037 Firstbank Capital Trust IV $ 7,500 3 Month SOFR + 135 bps July 30, 2037 (Continued) F- 78 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 18 – VARIABLE INTEREST ENTITIES (Continued) MCP makes equity investments as a limited liability member in affordable housing projects utilizing the Low-Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. Mercantile Bank also invests in multi-investor funds, which in turn invest in projects similar to that of MCP. The purpose of these investments is to achieve a satisfactory return on capital and to support our banks' community reinvestment initiatives. The activities of the limited liability entities include the identification, development, and operation of multi-family housing that is leased to qualifying residential tenants generally within our banks' primary geographic regions. MCP also makes equity investments via special purpose investment entities as a limited liability member in entities that receive Historic Tax Credits (“HTC”) pursuant to Section 47 of the Internal Revenue Code. The purpose of these investments is the rehabilitation of historic buildings with the tax credits provided to incent private investment in the historic cores of cities and towns. The LIHTC and HTC investment entities are considered VIEs as MCP, or our banks, whomever is the holder of the equity investment at risk, does not have the ability to direct the activities that most significantly affect the performance of the entity through voting rights or similar rights. MCP, or our banks, could absorb losses that are significant to the underlying entities as it has a risk of loss for its capital contributions and funding commitments to each. The general partners, or managing members, are considered the primary beneficiaries as managerial functions give them the power to direct the activities that most significantly impact the entities’ economic performances, and the managing members are exposed to all losses beyond MCP’s, or our banks', initial capital contributions and funding commitments. We account for these entities using the proportional amortization method with the investment assets amortized in proportion to the income tax credits received in the current period as compared to the total income tax credit benefits expected to be received over the life of the investment. Equity investments as a limited liability member in LIHTC and HTC investment entities, reported as other assets in the Consolidated Balance Sheets, totaled $ 51.5 million and $ 38.9 million as of December 31, 2025 and 2024 , respectively. Unfunded capital commitments, reported as other liabilities in the Consolidated Financial Statements, totaled $ 31.1 million and $ 34.4 million as of December 31, 2025 and 2024 , respectively. The following table summarizes quantitative information about our involvement in unconsolidated variable interest entities at year end: 2025 2024 Aggregate Aggregate Aggregate Aggregate (Dollars in thousands) Assets Liabilities Risk of Loss Assets Liabilities Risk of Loss Trust preferred securities $ 58,074 $ 56,000 $ 2,074 $ 58,074 $ 56,000 $ 2,074 Tax credit equity investments 51,467 31,090 20,377 38,902 34,428 4,474 As of December 31, 2025, our expected payments for unfunded contributions related to investments in tax credit equity investments were as follows: (Dollars in thousands) 2026 $ 30,965 2027 51 2028 11 2029 11 2030 11 Thereafter 39 (Continued) F- 79 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 19 - REGULATORY MATTERS We are subject to regulatory capital requirements administered by federal banking agencies. Capital adequacy guidelines and prompt corrective action regulations involve quantitative measures of assets, liabilities, and certain off-balance sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weightings, and other factors, and the regulators can lower classifications in certain cases. Failure to meet various capital requirements can initiate regulatory action that could have a direct material effect on the financial statements. The prompt corrective action regulations provide five classifications, including well capitalized, adequately capitalized, undercapitalized, significantly undercapitalized, and critically undercapitalized, although these terms are not used to represent overall financial condition. If an institution is not well capitalized, regulatory approval is required to accept brokered deposits. Subject to limited exceptions, no institution may make a capital distribution if, after making the distribution, it would be undercapitalized. If an institution is undercapitalized, it is subject to close monitoring by its principal federal regulator, its asset growth and expansion are restricted, and plans for capital restoration are required. In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator. At year-end 2025 and 2024 , our banks were in the well capitalized category under the regulatory framework for prompt corrective action. There are no conditions or events since December 31, 2025 that we believe have changed our banks' categorizations. Under the final BASEL III capital rules that became effective on January 1, 2015, there is a requirement for a common equity Tier 1 capital conservation buffer of 2.5 % of risk-weighted assets which is in addition to the other minimum risk-based capital standards in the rule. Institutions that do not meet this required capital buffer will become subject to progressively more stringent limitations on the percentage of earnings that can be paid out in cash dividends or used for stock repurchases and on the payment of discretionary bonuses to senior executive management. The capital buffer requirement was phased in over three years beginning in 2016. The capital buffer requirement raised the minimum required common equity Tier 1 capital ratio to 7.0 %, the Tier 1 capital ratio to 8.5 % and the total capital ratio to 10.5 % on a fully phased-in basis on January 1, 2019. We believe that, as of December 31, 2025 , our banks meet all capital adequacy requirements under the BASEL III capital rules on a fully phased-in basis. Federal and state banking laws and regulations place certain restrictions on the amount of dividends our banks can transfer to Mercantile and on the capital levels that must be maintained. At year-end 2025 , under the most restrictive of these regulations, Mercantile Bank could distribute $ 12.0 million and Eastern Michigan Bank could distribute $ 4.5 million to Mercantile as dividends without prior regulatory approval. Our and the ability of our banks to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices. On January 16, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.37 per share that was paid on March 19, 2025 , to shareholders of record as of March 7, 2025 . On April 17, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.37 per share that was paid on June 18, 2025 , to shareholders of record as of June 6, 2025 . On July 17, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.38 per share that was paid on September 17, 2025 , to shareholders of record as of September 5, 2025 . On October 16, 2025 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.38 per share that was paid on December 17, 2025 , to shareholders of record as of December 5, 2025 . As of December 31, 2025 , we had the ability to repurchase up to $ 6.8 million in common stock shares from time to time in open market transactions at prevailing market prices or by other means in accordance with applicable regulations as part of a $ 20.0 million common stock repurchase program announced in May 2021. No shares were repurchased during 2025 or 2024 . Historically, stock repurchases have been funded from cash dividends paid to us from Mercantile Bank. Additional repurchases may be made in future periods under the authorized plan or a new plan, which would also likely be funded from cash dividends paid to us from our banks. The actual timing, number and value of shares repurchased will be determined by us in our discretion and will depend on a number of factors, including the stock price, capital position, financial performance, general market and economic conditions, alternative uses of capital and applicable legal requirements. Our consolidated capital levels as of December 31, 2025 and 2024 include $ 48.9 million and $ 48.3 million, respectively, of trust preferred securities. Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element. The guidelines provide that the aggregate amount of restricted core capital elements that may be included in Tier 1 capital must not exceed 25 % of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. Our ability to include the trust preferred securities in Tier 1 capital in accordance with the guidelines is not affected by the provision of the Dodd-Frank Act generally restricting such treatment, because (i) the trust preferred securities were issued before May 19, 2010, and (ii) our total consolidated assets as of December 31, 2009 were less than $ 15.0 billion. At December 31, 2025 and 2024 , all $ 48.9 million and $ 48.3 million, respectively, of the trust preferred securities were included as Tier 1 capital of Mercantile. (Continued) F- 80 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 19 - REGULATORY MATTERS (Continued) Our actual capital levels and minimum required levels at year-end 2025 and 2024 were: Minimum Required to be Well Minimum Required Capitalized Under for Capital Prompt Corrective Actual Adequacy Purposes Action Regulations (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio 2025 Total capital (to risk weighted assets) Consolidated $ 854,876 14.3 % $ 476,702 8.0 % $ NA NA % Mercantile Bank 775,664 13.8 449,498 8.0 561,873 10.0 Eastern Michigan Bank 54,612 19.0 22,992 8.0 28,740 10.0 Tier 1 capital (to risk weighted assets) Consolidated 704,776 11.8 357,526 6.0 NA NA Mercantile Bank 717,619 12.8 337,124 6.0 449,498 8.0 Eastern Michigan Bank 52,214 18.2 17,244 6.0 22,992 8.0 Common equity (to risk weighted assets) Consolidated 655,835 11.0 268,145 4.5 NA NA Mercantile Bank 717,619 12.8 252,843 4.5 365,217 6.5 Eastern Michigan Bank 52,214 18.2 12,933 4.5 18,681 6.5 Tier 1 capital (to average assets) Consolidated 704,776 11.3 249,409 4.0 NA NA Mercantile Bank 717,619 11.5 248,738 4.0 310,922 5.0 Eastern Michigan Bank 52,214 10.7 19,450 4.0 24,313 5.0 2024 Total capital (to risk weighted assets) Consolidated $ 777,857 14.2 % $ 439,031 8.0 % $ NA NA % Mercantile Bank 759,146 13.9 435,793 8.0 544,741 10.0 Tier 1 capital (to risk weighted assets) Consolidated 633,134 11.5 329,274 6.0 NA NA Mercantile Bank 703,737 12.9 326,845 6.0 435,793 8.0 Common equity (to risk weighted assets) Consolidated 584,879 10.7 246,955 4.5 NA NA Mercantile Bank 703,737 12.9 245,134 4.5 354,082 6.5 Tier 1 capital (to average assets) Consolidated 633,134 10.6 238,934 4.0 NA NA Mercantile Bank 703,737 11.9 237,447 4.0 296,808 5.0 (Continued) F- 81 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 20 – MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS CONDENSED BALANCE SHEETS (Dollars in thousands) 2025 2024 ASSETS Cash and cash equivalents $ 27,088 $ 17,420 Investments in subsidiaries 849,962 691,563 Other assets 21,411 18,188 Total assets $ 898,461 $ 727,171 LIABILITIES AND SHAREHOLDERS’ EQUITY Liabilities $ 2,905 $ 3,001 Subordinated debentures 51,015 50,330 Subordinated notes 89,657 89,314 Term note 30,000 0 Shareholders’ equity 724,884 584,526 Total liabilities and shareholders’ equity $ 898,461 $ 727,171 CONDENSED STATEMENTS OF INCOME (Dollars in thousands) 2025 2024 2023 Income Interest and dividends from subsidiaries $ 85,774 $ 30,061 $ 26,660 Total income 85,774 30,061 26,660 Expenses Interest expense 7,671 8,203 8,091 Other operating expenses 7,885 5,647 5,674 Total expenses 15,556 13,850 13,765 Income before income tax benefit and equity in undistributed net income of subsidiary 70,218 16,211 12,895 Federal income tax benefit ( 3,251 ) ( 3,240 ) ( 2,858 ) Equity in undistributed net income of subsidiary 15,284 60,142 66,464 Net income $ 88,753 $ 79,593 $ 82,217 Other comprehensive income (loss) 25,830 662 14,854 Comprehensive income (loss) $ 114,583 $ 80,255 $ 97,071 (Continued) F- 82 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 20 – MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY) CONDENSED FINANCIAL STATEMENTS (Continued) CONDENSED STATEMENTS OF CASH FLOWS (Dollars in thousands) 2025 2024 2023 Cash flows from operating activities Net income $ 88,753 $ 79,593 $ 82,217 Adjustments to reconcile net income to net cash from operating activities: Equity in undistributed net income of subsidiary ( 15,284 ) ( 60,142 ) ( 66,464 ) Stock-based compensation expense 3,473 3,316 3,384 Stock grants to directors for retainer fees 444 423 350 Change in other assets ( 3,223 ) ( 4,116 ) ( 128 ) Change in other liabilities 932 990 1,045 Net cash from operating activities 75,095 20,064 20,404 Cash flows from investing activities Net capital investment into subsidiaries ( 72,376 ) 0 0 Net cash for investing activities ( 72,376 ) 0 0 Cash flows from financing activities Employee stock purchase plan 128 50 45 Dividend reinvestment plan 772 810 891 Proceeds from term note issuance 30,000 0 0 Cash dividends on common stock ( 23,951 ) ( 22,473 ) ( 21,004 ) Net cash for financing activities 6,949 ( 21,613 ) ( 20,068 ) Net change in cash and cash equivalents 9,668 ( 1,549 ) 336 Cash and cash equivalents at beginning of period 17,420 18,969 18,633 Cash and cash equivalents at end of period $ 27,088 $ 17,420 $ 18,969 (Continued) F-83 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 21 – BUSINESS SEGMENT INFORMATION Pursuant to Financial Accounting Standards Codification 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision makers in determining how to allocate resources and assessing performance. Prior to our acquisition of Eastern Michigan Financial Corporation on December 31, 2025, our chief operating decision makers, which include our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, evaluated interest and noninterest income streams and credit losses from our various products and services, while expense activities, including interest expense and noninterest expense, were managed, and financial performance was evaluated, on a Company-wide basis. As a result, detailed profitability information for each interest and noninterest income stream was not used by our chief operating decision makers to allocate resources or in assessing performance. Rather, our chief operating decision makers used consolidated net income to assess performance by comparing it to and monitoring against budgeted and prior-year results. This information was used to manage resources to drive business and net income growth, including investment in key strategic priorities, as well as determine our ability to return capital to shareholders. Subsequent to our acquisition of Eastern Michigan Financial Corporation on December 31, 2025, our chief operating decision makers now evaluate interest and noninterest income streams, credit losses, expense activities, and financial performance through our two wholly owned subsidiary banks, Mercantile Bank and Eastern Michigan Bank. Each of these operating segments offer similar products and services, but are managed separately due to different pricing, product demand, and consumer markets. Both segments derive interest and noninterest income through their banking products and services and investment securities. All of our income relates to our operations in the United States. Our chief operating decision makers use subsidiary level net income to assess performance by comparing it to and monitoring against budgeted and prior-year results. This information is used to manage resources to drive business and net income growth, including investment in key strategic priorities, as well as determine our ability to return capital to shareholders. Segment net income represented net income on our Consolidated Statements of Income during and for the years ended December 31, 2025, 2024 and 2023. Segment assets represented total assets and goodwill represented total goodwill on our Consolidated Balance Sheets as of December 31, 2024. Goodwill, core deposit intangible, and total assets by segment as of December 31, 2025 were as follows: (Dollars in thousands) Mercantile Bank Eastern Michigan Bank All Other Intercompany Eliminations Consolidated Total Goodwill $ 32,171 $ 23,183 $ 17,302 $ - $ 72,656 Core deposit intangible - 20,388 - - 20,388 Total assets 6,241,994 571,776 1,014,523 ( 993,074 ) 6,835,219 (Continued) F- 84 MERCANTILE BANK CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 Table of Contents NOTE 22 – SUBSEQUENT EVENTS On January 15, 2026 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.39 per share that will be paid on March 18, 2026 , to shareholders of record as of March 6, 2026 . F-85 Table of Contents EXHIBIT INDEX EXHIBIT NO. EXHIBIT DESCRIPTION 2.1 Agreement and Plan of Merger dated July 22, 2025, between Mercantile Bank Corporation, Eastern Michigan Financial Corporation and Shamrock Merger Sub Inc., included as Annex A to the proxy statement/prospectus, which forms a part of the Registration Statement on Form S-4, as amended, filed with the SEC on October 21, 2025† 2.2 First Amendment to Agreement and Plan of Merger dated October 2, 2025, included as Annex A-2 to the proxy statement/prospectus, which forms a part of the Registration Statement on Form S-4, as amended, filed with the SEC on October 21, 2025† 3.1 Articles of Incorporation of Mercantile Bank Corporation, including all amendments thereto, incorporated by reference to Exhibit 3.1 of our Form S-4 Registration Statement filed February 16, 2022 3.2 Our Amended and Restated By-laws dated as of February 26, 2015 are incorporated by reference to exhibit 3.1 to our Current Report on Form 8-K filed February 26, 2015 4.1 Instruments defining the Rights of Security Holders – reference is made to Exhibits 3.1 and 3.2. In accordance with Regulation S-K Item 601(b)(4), Mercantile Bank Corporation is not filing copies of instruments defining the rights of holders of long-term debt because none of those instruments authorizes debt in excess of 10% of the total assets of Mercantile Bank Corporation and its subsidiaries on a consolidated basis. Mercantile Bank Corporation hereby agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request. 4.2 Subordinated indenture, dated December 15, 2021, by and between Mercantile Bank Corporation and Wilmington Trust, National Association, as trustee, incorporated by reference to our Current Report on Form 8-K filed December 17, 2021 4.3 First Supplemental Indenture to Subordinated indenture, dated December 15, 2021, by and between Mercantile Bank Corporation and Wilmington Trust, National Association, as trustee, incorporated by reference to our Current Report on Form 8-K filed December 17, 2021 4.4 Form of 3.25% Fixed-to-Floating Rate Subordinated Note due 2032, incorporated by reference to our Current Report on Form 8-K filed December 17, 2021 4.5 Form of Subordinated Note Purchase Agreement dated December 15, 2021, by and among Mercantile Bank Corporation and the Purchasers, incorporated by reference to our Current Report on Form 8-K filed December 17, 2021 4.6 Form of Registration Rights Agreement dated December 15, 2021, by and among Mercantile Bank Corporation and the Purchasers, incorporated by reference to our Current Report on Form 8-K filed December 17, 2021 4.7 Description of Securities Registered Under Section 12 of the Exchange Act# 10.1 Form of Mercantile Bank Split Dollar Agreement that has been entered into between Mercantile Bank and each of Robert B. Kaminski, Jr., Charles E. Christmas, and certain other officers of Mercantile Bank is incorporated by reference to exhibit 10.33 of our Form 10-K for the year ended December 31, 2005* 10.2 Mercantile Bank Corporation Employee Stock Purchase Plan of 2014 is incorporated by reference to exhibit 4(b) of our Registration Statement on Form S-8 that became effective on June 27, 2014 10.3 Amended and Restated Employment Agreement of Robert B. Kaminski, Jr. dated November 29, 2018, effective December 31, 2018, incorporated by reference to exhibit 10.1 of our Form 8-K filed December 3, 2018* 10.4 Amended and Restated Employment Agreement of Charles E. Christmas dated December 19, 2024, effective January 1, 2025, incorporated by reference to exhibit 10.3 of our Form 8-K filed December 19, 2024* 10.5 Amended and Restated Employment Agreement of Raymond E. Reitsma dated December 19, 2024, effective January 1, 2025, incorporated by reference to exhibit 10.2 of our Form 8-K filed December 19, 2024* 10.6 Amended and Restated Employment Agreement of Robert T. Worthington dated December 19, 2024, effective January 1, 2025, incorporated by reference to exhibit 10.5 of our Form 8-K filed December 19, 2024* F-86 Table of Contents EXHIBIT NO. EXHIBIT DESCRIPTION 10.7 Amended and Restated Employment Agreement of Brett E. Hoover dated December 19, 2024, effective January 1, 2025, incorporated by reference to exhibit 10.4 of our Form 8-K filed December 19, 2024* 10.8 Amended and Restated Change in Control Agreement of Robert B. Kaminski, Jr. dated November 29, 2018, effective December 31, 2018, incorporated by reference to exhibit 10.6 of our Form 8-K filed December 3, 2018* 10.9 Amended and Restated Change in Control Agreement of Charles E. Christmas dated November 29, 2018, effective December 31, 2018, incorporated by reference to exhibit 10.7 of our Form 8-K filed December 3, 2018* 10.10 Amended and Restated Employment Agreement of Scott P. Setlock effective January 1, 2024, incorporated by reference to exhibit 10.3 of our Form 8-K filed June 3, 2024* 10.11 First Amendment to Amended and Restated Employment Agreement of Scott P. Setlock dated May 31, 2024, incorporated by reference to exhibit 10.4 of our Form 8-K filed June 3, 2024* 10.12 2023 Mercantile Executive Officer Bonus Plan, incorporated by reference to exhibit 10.1 of our Form 8-K filed June 22, 2023* 10.13 2024 Mercantile Executive Officer Bonus Plan, incorporated by reference to exhibit 10.1 of our Form 8-K filed July 11, 2024* 10.14 2024 Mercantile Bank Nonqualified Deferred Compensation Plan #2, incorporated by reference to exhibit 10.1 of our Form 8-K filed with the SEC on November 25, 2024* 10.15 Second Amendment to the Mercantile Bank Amended and Restated Deferred Compensation Plan, incorporated by reference to exhibit 10.2 of our Form 8-K filed with the SEC on November 25, 2024* 10.16 Mercantile Bank Rabbi Directed Trust Agreement, incorporated by reference to exhibit 10.3 of our Form 8-K filed with the SEC on November 25, 2024* 10.17 Mercantile Bank Corporation Stock Incentive Plan of 2020, incorporated by reference to Appendix A to Mercantile’s Definitive Proxy Statement on Schedule 14A filed April 9, 2020* 10.18 Mercantile Bank Corporation Stock Incentive Plan of 2023, incorporated by reference to exhibit 99 of our Form S-8 filed June 12, 2023* 10.19 Form of Performance-Based Restricted Stock Award Agreement, in connection with the Mercantile Bank Corporation Stock Incentive Plan of 2020, incorporated by reference to exhibit 10.17 of our Form 10-K for the year ended December 31, 2020* 10.20 Form of Performance-Based Restricted Stock Award Agreement, in connection with the Mercantile Bank Corporation Stock Incentive Plan of 2023, incorporated by reference to exhibit 10.1 of our Form 8-K filed February 6, 2025* 10.21 Form of Standard Restricted Stock Award Agreement, in connection with the Mercantile Bank Corporation Stock Incentive Plan of 2023, incorporated by reference to exhibit 10.2 of our Form 8-K filed on February 6, 2025* 10.22 Director Fee Summary*# 10.23 2025 Mercantile Executive Officer Bonus Plan, incorporated by reference to exhibit 10.1 of our Form 8-K filed March 20, 2025* 10.24 Mercantile Bank Corporation Employee Stock Purchase Plan of 2025 (incorporated by reference to Appendix A of Mercantile's Proxy Statement for its 2025 Annual Shareholders Meeting, filed with the Commission on April 4, 2025) 10.25 Form of Voting Agreement, incorporated by reference to our Form 8-K filed July 22, 2025 10.26 Credit Agreement, dated December 24, 2025, by and between Mercantile Bank Corporation and U.S. Bank National Association, incorporated by reference to exhibit 10.1 of our Form 8-K filed December 31, 2025† 14 Code of Ethics# 19 Policy on Insider Trading# 21 Subsidiaries of the Company# 23.1 Consent of Plante & Moran, PLLC# 31 Rule 13a-14(a) Certifications# 32.1 Section 1350 Chief Executive Officer Certification+ 32.2 Section 1350 Chief Financial Officer Certification+ 97 Clawback Policy# F-87 Table of Contents EXHIBIT NO. EXHIBIT DESCRIPTION 101 The following information from Mercantile’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted in Inline XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income (Loss), (iv) the Consolidated Statements of Changes in Shareholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Consolidated Financial Statements 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Management contract or compensatory plan. # Filed herewith. + Furnished herewith. † Exhibits, schedules and similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Registrant will furnish supplementally a copy of any omitted schedules or similar attachment to the SEC upon request on a confidential basis. F-88 Table of Contents SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on February 27, 2026. MERCANTILE BANK CORPORATION /s/ Raymond E. Reitsma Raymond E. Reitsma President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on February 27, 2026. /s/ Michael S. Davenport Michael S. Davenport, Director /s/ Nelson F. Sanchez Nelson F. Sanchez, Director /s/ Michelle L. Eldridge Michelle L. Eldridge, Director /s/ Sara A. Schmidt Sara A. Schmidt, Director /s/ Joseph D. Jones Joseph D. Jones, Director /s/ Steven J. Schweihofer Steven J. Schweihofer, Director /s/ Richard D. MacDonald Richard D. MacDonald, Director /s/ Amy L. Sparks Amy L. Sparks, Director /s/ Michael H. Price Michael H. Price, Chairman of the Board /s/ Shoran R. Williams Shoran R. Williams, Director /s/ David B. Ramaker David B. Ramaker, Director /s/ Charles E. Christmas Charles E. Christmas, Executive Vice President, Chief Financial Officer and Treasurer (principal financial and accounting officer) /s/ Raymond E. Reitsma Raymond E. Reitsma Director, President and Chief Executive Officer (principal executive officer) F-89