What changed in this filing

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Item 1. Financial Statements

2026-07-31 compared with 2026-05-01 · 502 added, 327 removed, 1652 unchanged (33% of the section changed)

51 unchanged sentences

40,000,000 shares authorized;

17,274,356 shares issued and outstanding at March 31, 2026 and 17,181,096 shares issued and outstanding at December 31, 2025

17,285,911 shares issued and outstanding at June 30, 2026, and 17,181,096 shares issued and outstanding at December 31, 2025

352,339 349,431

11 unchanged sentences

(Dollars in thousands except per share amounts)

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

Interest income

2 unchanged sentences

Securities, taxable

7,714 4,233 15,122 8,019

Securities, tax-exempt

1,460 1,181 2,901 2,353

Other interest-earning assets

4,229 2,931 8,909 6,582

Total interest income

3 unchanged sentences

Short-term borrowings

1,488 1,919 2,967 3,682

Federal Home Loan Bank advances

2,595 2,897 5,151 5,795

Subordinated debt and other borrowings

2,215 1,938 4,459 3,875

Total interest expense

8 unchanged sentences

Service charges on deposit and sweep accounts

2,663 1,967 5,147 3,806

Mortgage banking income

3,188 3,969 6,168 6,620

Credit and debit card income

2,921 2,350 5,509 4,551

Interest rate swap fees

443 1,230 1,106 1,310

Payroll services income

854 783 1,948 1,823

Earnings on bank owned life insurance

776 561 1,441 1,104

653 602 1,868 950

Total noninterest income

11,498 11,462 23,187 20,164

Noninterest expense

1 unchanged sentence

24,608 20,711 48,287 40,268

2,261 2,155 4,677 4,273

Furniture and equipment depreciation, rent and maintenance

988 826 1,950 1,613

Data processing costs

4,617 3,599 9,044 7,369

Core conversion costs

536 0 3,458 0

Acquisition costs

Core deposit intangible amortization

865 0 1,731 0

Other expense

5,406 6,088 11,942 10,960

Total noninterest expense

4 unchanged sentences

5,254 3,344 9,851 7,853

$ 25,927 $ 22,618 $ 48,612 $ 42,155

Basic earnings per share

10 unchanged sentences

(Dollars in thousands)

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

$ 25,927 $ 22,618 $ 48,612 $ 42,155

16 unchanged sentences

Income (Loss)

Balances, January 1, 2026

Balances, April 1, 2026

$ 0 $ 350,645 $ 415,499 $ ( 29,197 ) $ 736,947

5 unchanged sentences

( 6,640 ) ( 6,640 )

Net income for the three months ended March 31, 2026

Net income for the three months ended June 30, 2026

25,927 25,927

1 unchanged sentence

( 2,804 ) ( 2,804 )

Balances, March 31, 2026

Balances, June 30, 2026

$ 0 $ 352,339 $ 434,786 $ ( 32,001 ) $ 755,124

14 unchanged sentences

Cash dividends ($ 0.78 per common share)

Net income for the six months ended June 30, 2026

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

( 8,006 ) ( 8,006 )

Net income for the three months ended March 31, 2025

Balances, June 30, 2026

$ 0 $ 352,339 $ 434,786 $ ( 32,001 ) $ 755,124

See accompanying notes to consolidated financial statements.

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

Comprehensive

Shareholders’

(Dollars in thousands except per share amounts)

Income (Loss)

Balances, April 1, 2025

$ 0 $ 300,732 $ 348,281 $ ( 40,667 ) $ 608,346

Employee stock purchase plan ( 322 shares)

Dividend reinvestment plan ( 4,687 shares)

Stock grants to directors for retainer fees ( 9,210 shares)

Stock-based compensation expense

Cash dividends ($ 0.37 per common share)

( 5,908 ) ( 5,908 )

Net income for the three months ended June 30, 2025

22,618 22,618

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

Balances, March 31, 2025

Balances, June 30, 2025

$ 0 $ 302,294 $ 364,991 $ ( 35,766 ) $ 631,519

1 unchanged sentence

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (Continued)

Comprehensive

Shareholders’

(Dollars in thousands except per share amounts)

Income (Loss)

Balances, January 1, 2025

$ 0 $ 299,705 $ 334,646 $ ( 49,825 ) $ 584,526

Employee stock purchase plan ( 598 shares)

Dividend reinvestment plan ( 9,257 shares)

Stock grants to directors for retainer fees ( 9,810 shares)

Stock-based compensation expense

Cash dividends ($ 0.74 per common share)

( 11,810 ) ( 11,810 )

Net income for the six months ended June 30, 2025

42,155 42,155

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

14,059 14,059

Balances, June 30, 2025

$ 0 $ 302,294 $ 364,991 $ ( 35,766 ) $ 631,519

See accompanying notes to consolidated financial statements.

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

March 31, 2026 March 31, 2025

June 30, 2026

June 30, 2025

Cash flows from operating activities

$ 22,685 $ 19,537

Adjustments to reconcile net income to net cash from operating activities

2 unchanged sentences

Provision for credit losses

( 1,800 ) 2,100

Stock-based compensation expense

1 unchanged sentence

Proceeds from sales of mortgage loans held for sale

101,204 84,337

Origination of mortgage loans held for sale

( 102,736 ) ( 81,241 )

Net gain from sales of mortgage loans held for sale

( 3,056 ) ( 2,464 )

Earnings on bank owned life insurance

( 665 ) ( 543 )

Net loss from sales and disposals of premises and equipment

Earnings on bank owned life insurance

Net loss (gain) on instruments designated at fair value and related derivatives

1 unchanged sentence

Accrued interest receivable

( 1,526 ) ( 1,500 )

18,650 ( 9,493 )

Accrued interest payable and other liabilities

( 7,022 ) ( 16,262 )

Net cash from (for) operating activities

28,309 ( 2,976 )

Cash flows from investing activities

Loan originations and payments, net

5,708 ( 35,656 )

Purchases of securities available for sale

( 42,926 ) ( 51,657 )

Purchases of federal reserve stock

Purchases of Federal Reserve Bank stock

Proceeds from maturities, calls and repayments of securities available for sale

Purchases of bank owned life insurance

Proceeds from bank owned life insurance claims

Net purchases of premises and equipment and lease activity

( 938 ) ( 1,537 )

Net cash for investing activities

( 24,738 ) ( 82,025 )

See accompanying notes to consolidated financial statements.

2 unchanged sentences

(Dollars in thousands)

March 31, 2026 March 31, 2025

June 30, 2026

June 30, 2025

Cash flows from financing activities

Net increase (decrease) in time deposits

( 33,716 ) 6,796

Net increase (decrease) in all other deposits

168,709 ( 23,377 )

Net increase (decrease) in securities sold under agreements to repurchase

( 12,778 ) 120,581

Payments on term note

Payoffs and paydowns of Federal Home Loan Bank advances

( 30,899 ) ( 20,862 )

Proceeds from Federal Home Loan Bank advances

2 unchanged sentences

Payment of cash dividends to common shareholders

( 6,634 ) ( 5,902 )

Net cash from financing activities

102,409 77,451

Net cash from (for) financing activities

Net change in cash and cash equivalents

105,980 ( 7,550 )

Cash and cash equivalents at beginning of period

473,324 393,010

Cash and cash equivalents at end of period

$ 579,304 $ 385,460

Supplemental disclosures of cash flows information

Cash paid (received) during the period for:

$ 30,891 $ 32,465

Federal income tax

Federal income taxes*

*Federal income taxes include amounts paid for the acquisition of transferable federal income tax credits.

See accompanying notes to consolidated financial statements.

3 unchanged sentences

Basis of Presentation :

The unaudited financial statements for the three months ended March 31, 2026 , include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries (unless text clearly suggests otherwise, collectively, "we," "us," "our," "the Company," and "Mercantile").

The unaudited financial statements for the six months ended June 30, 2026 , include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries (unless text clearly suggests otherwise, collectively, "we," "us," "our," "the Company," and "Mercantile").

These subsidiaries include Mercantile Bank and Eastern Michigan Bank (collectively "our banks"), Mercantile Community Partners LLC ("MCP"), and Mercantile Insurance Center, Inc.

2 unchanged sentences

In the opinion of management, the information reflects all adjustments (consisting only of normal recurring adjustments) which are necessary in order to make the financial statements not misleading and for a fair presentation of the results of operations for such periods.

The results for the period ended March 31, 2026 , should not be considered as indicative of results for a full year.

The results for the period ended June 30, 2026 , should not be considered as indicative of results for a full year.

For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10 -K for the year ended December 31, 2025 .

9 unchanged sentences

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 and are determined using the treasury stock method.

Diluted earnings per share includes the dilutive effect of additional potential common shares issuable under our stock-based compensation plans and is determined using the treasury stock method.

Our unvested restricted shares, which contain non-forfeitable rights to dividends whether paid or accrued (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 restricted shares are excluded from the calculation of both basic and diluted earnings per share.

Approximately 258,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three months ended March 31, 2026 .

Approximately 278,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three months ended March 31, 2025 .

Approximately 256,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three and six months ended June 30, 2026 .

Approximately 277,000 unvested restricted shares were included in determining both basic and diluted earnings per share for the three and six months ended June 30, 2025 .

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 available for sale consist of bonds that may 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.

For an available for sale debt security 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.

6 unchanged sentences

Losses are charged against the allowance when the collectability of an available for sale debt security is confirmed or when either of the criteria regarding intent or requirement to sell is met.

At March 31, 2026 , and December 31, 2025 , there was no allowance related to the available for sale debt securities portfolio.

At June 30, 2026 , and 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.

9 unchanged sentences

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 $ 1.2 million and $ 1.3 million at March 31, 2026 , and December 31, 2025 , respectively.

Net unamortized deferred loan costs amounted to $ 1.1 million and $ 1.3 million at June 30, 2026 , and December 31, 2025 , respectively.

The December 31, 2025, acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, resulted in the recognition of $ 1.5 million in net purchased loan discounts.

1 unchanged sentence

The premiums and discounts will be amortized into interest income over the lives of the loans.

Premiums and discounts amortized into interest income totaled $ 0.2 million during the three months ended March 31, 2026 .

Net discounts amortized into interest income totaled $ 0.3 million during the six months ended June 30, 2026 .

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.

9 unchanged sentences

Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

As of March 31, 2026 , and December 31, 2025 , we determined that the fair value of our mortgage loans held for sale totaled $ 21.9 million and $ 17.3 million, respectively.

As of June 30, 2026 , and December 31, 2025 , we determined that the fair value of our mortgage loans held for sale totaled $ 31.8 million and $ 17.3 million, respectively.

Mortgage loans held for sale are generally sold with servicing rights retained.

40 unchanged sentences

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, or that had ever been past due three or more times, consumer loans with borrower credit scores below 600, and commercial loans rated monitor, special mention, substandard or doubtful to be PCD loans.

We considered all loans that were currently 60 days or more past due, were ever on nonaccrual status, or had ever been past due three or more times, consumer loans with borrower credit scores below 600, and commercial loans rated monitor, special mention, substandard or doubtful to be PCD loans.

PSL and PCD loans are accounted for using the gross-up approach prescribed in Accounting Standards Codification 326, Financial Instruments - Credit Losses.

1 unchanged sentence

The allowance is recorded with an offsetting gross-up adjustment to the purchase price of the acquired financial asset.

We recorded a provision for credit losses of negative $ 1.8 million and positive $ 2.1 million during the three months ended March 31, 2026 and 2025 , respectively.

The negative provision recorded during the first three months of 2026 primarily reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations.

The provision expense recorded during the first three months of 2025 primarily reflected an increased allocation necessitated by changes to the economic forecast and loan growth.

Accrued interest receivable on loans totaling $ 17.3 million and $ 17.5 million as of March 31, 2026 and December 31, 2025 , respectively, is included in other assets on the Consolidated Balance Sheets.

We recorded a provision for credit losses of negative $ 3.6 million and positive $ 3.7 million during the six months ended June 30, 2026, and 2025 , respectively.

The negative provision recorded during the first six months of 2026 primarily reflected a decline in specific allocations and changes in loan mix, which more than offset allocations necessitated by changes in qualitative factors and net loan growth.

The positive provision expense recorded during the first six months of 2025 mainly reflected an individual allocation, allocations necessitated by net loan growth, and the net impact of changes to the economic forecast.

Accrued interest receivable on loans totaling $ 17.4 million and $ 17.5 million as of June 30, 2026 , and December 31, 2025 , 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 loans become 90 days past due, or earlier if we believe the collection of interest is doubtful.

8 unchanged sentences

SIGNIFICANT ACCOUNTING POLICIES (Continued)

For individually analyzed loans which are deemed to be collateral dependent loans, we adopted the practical expedient to measure the allowance based on the fair value of collateral.

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 the recorded principal balance.

10 unchanged sentences

Mortgage Banking Activities :

Mortgage loans serviced for others totaled $ 1.70 billion and $ 1.69 billion as of March 31, 2026 and December 31, 2025 , respectively.

Mortgage loan servicing rights, which are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold, totaled $ 13.6 million as of both March 31, 2026 and December 31, 2025 , respectively.

Mortgage loans serviced for others totaled $ 1.71 billion and $ 1.69 billion as of June 30, 2026 , and December 31, 2025 , respectively.

Mortgage loan servicing rights, which are recognized as assets based on the allocated value of retained servicing rights on mortgage loans sold, totaled $ 13.7 million and $ 13.6 million as of June 30, 2026 , and December 31, 2025 , respectively.

Mortgage loan 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 revenues.

1 unchanged sentence

Any impairment of a grouping is reported as a valuation allowance.

The fair value of mortgage servicing rights totaled $ 22.0 million and $ 21.4 million as of March 31, 2026 and December 31, 2025 , respectively.

The fair value of mortgage servicing rights totaled $ 23.4 million and $ 21.4 million as of June 30, 2026 , and December 31, 2025 , respectively.

Servicing fee income is recorded for fees earned for servicing mortgage loans.

9 unchanged sentences

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 March 31, 2026 , and December 31, 2025 .

We had no derivative instruments designated as hedges as of June 30, 2026 , and December 31, 2025 .

The acquisition method of accounting requires that assets and liabilities acquired in a business combination be recorded at fair value as of the acquisition date.

19 unchanged sentences

(Dollars in thousands)

March 31, 2026

March 31, 2025

June 30, 2026

June 30, 2025

June 30, 2026

June 30, 2025

Service charges on deposit and sweep accounts

1 unchanged sentence

Credit and debit card income

2,921 2,350 5,509 4,551

Interest rate swap fees

443 1,230 1,106 1,310

Payroll services income

854 783 1,948 1,823

Customer service fees

274 179 540 376

Service Charges on Deposit and Sweep Accounts:

28 unchanged sentences

Cost Gains Losses Value

March 31, 2026

June 30, 2026

Treasury notes and bonds

30 unchanged sentences

Value Loss Value Loss Value Loss

March 31, 2026

June 30, 2026

Treasury notes and bonds

31 unchanged sentences

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 March 31, 2026 , 935 debt securities with estimated fair values totaling $ 824 million had unrealized losses aggregating $ 40.7 million.

At June 30, 2026 , 893 debt securities with estimated fair values totaling $ 900 million had unrealized losses aggregating $ 43.5 million.

At December 31, 2025 , 607 debt securities with estimated fair values totaling $ 545 million had unrealized losses aggregating $ 36.9 million.

At March 31, 2026 , unrealized losses aggregating $ 33.3 million were attributable to bonds issued or guaranteed by agencies of the U.S.

At June 30, 2026 , unrealized losses aggregating $ 36.6 million were attributable to bonds issued or guaranteed by agencies of the U.S.

Federal Government, while unrealized losses totaling $ 6.6 million were associated with bonds issued by state-based municipalities.

3 unchanged sentences

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.

The amortized cost and fair value of debt securities as of March 31, 2026 , by maturity, are shown in the following table.

The amortized cost and fair value of debt securities as of June 30, 2026 , by maturity, are shown in the following table.

The contractual maturity is utilized for U.S.

15 unchanged sentences

$ 1,166,037 $ 1,125,529

No securities were sold during the first three months of 2026 or the full-year 2025 .

Securities issued by the State of Michigan and all its political subdivisions had combined amortized costs of $ 257 million and $ 252 million as of March 31, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 251 million and $ 249 million at the respective dates.

Securities issued by all other states and their political subdivisions had combined amortized costs of $ 31.4 million and $ 31.3 million as of March 31, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 31.2 million and $ 31.3 million at the respective dates.

No securities were sold during the first six months of 2026 or the full-year 2025 .

Securities issued by the State of Michigan and all its political subdivisions had combined amortized costs of $ 249 million and $ 252 million as of June 30, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 245 million and $ 249 million at the respective dates.

Securities issued by all other states and their political subdivisions had combined amortized costs of $ 30.8 million and $ 31.3 million as of June 30, 2026 , and December 31, 2025 , respectively, with estimated market values of $ 30.4 million and $ 31.3 million at the respective dates.

Total securities of any other specific issuer, other than the U.S.

1 unchanged sentence

The carrying value of U.S.

Government agency debt obligation securities that are pledged to secure repurchase agreements was $ 220 million and $ 232 million at March 31, 2026 , and December 31, 2025 , respectively.

Government agency debt obligation securities that are pledged to secure repurchase agreements was $ 217 million and $ 232 million at June 30, 2026 , and December 31, 2025 , respectively.

The carrying value of U.S.

Government agency debt obligation securities that are pledged to secure specific customer deposits was $ 12.5 million and $ 12.6 million at March 31, 2026 , and December 31, 2025 , respectively.

Government agency debt obligation securities that are pledged to secure specific customer deposits was $ 12.5 million and $ 12.6 million at June 30, 2026 , and December 31, 2025 , respectively.

MERCANTILE BANK CORPORATION

5 unchanged sentences

Our allowance for credit loss pools are consistent with those used for loan note disclosure purposes.

Our loan portfolio segments as of both March 31, 2026 , and December 31, 2025 , were as follows:

Our loan portfolio segments as of both June 30, 2026 , and December 31, 2025 , were as follows:

Commercial Loans

25 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Our total loans at March 31, 2026 , were $ 4.82 billion, a decrease of $ 5.2 million, or 0.1 %, compared to December 31, 2025 .

The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at March 31, 2026 , and December 31, 2025 , and the percentage change in loans from the end of 2025 to the end of the first quarter of 2026 , are as follows:

March 31, 2026

Our total loans at June 30, 2026 , were $ 4.92 billion, an increase of $ 93.7 million, or 1.9 %, compared to December 31, 2025 .

The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at June 30, 2026 , and December 31, 2025 , and the percentage change in loans from the end of 2025 to the end of the second quarter of 2026 , are as follows:

June 30, 2026

December 31, 2025

25 unchanged sentences

Past Due Past Due Past Due Past Due Current Loans Accruing

March 31, 2026

June 30, 2026

Commercial and industrial

41 unchanged sentences

Nonaccrual loans were as follows:

March 31, 2026

June 30, 2026

December 31, 2025

8 unchanged sentences

Total commercial

1,112 0 888 0

1-4 family mortgages

26 unchanged sentences

Nonaccrual loans represent the entire balance of collateral dependent loans.

As of March 31, 2026 and December 31, 2025 , 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 $ 0.2 million and $ 0.3 million during the three months ended March 31, 2026 and 2025 , respectively, reflecting the collection of interest at the time of principal pay off.

As of June 30, 2026 , and December 31, 2025 , 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 $ 0.5 million and $ 0.3 million during the six months ended June 30, 2026, and 2025 , respectively, reflecting the collection of interest at the time of principal pay off.

MERCANTILE BANK CORPORATION

32 unchanged sentences

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The following table reflects amortized cost basis of loans as of March 31, 2026 , and loan charge-offs during the three months ended March 31, 2026 , based on year of origination:

The following table reflects amortized cost basis of loans as of June 30, 2026 , and loan charge-offs during the six months ended June 30, 2026 , based on year of origination:

(Dollars in thousands)

59 unchanged sentences

$ 0 $ 2 $ 0 $ 8 $ 0 $ 0 $ 10 $ 5 $ 15

There were lines of credit with principal balances of $ 5.6 million that were converted to term loans during the first three months of 2026 .

There were lines of credit with principal balances of $ 5.6 million as of December 31, 2025, that were converted to term loans during the first six months of 2026 .

MERCANTILE BANK CORPORATION

1 unchanged sentence

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

The following table reflects amortized cost basis of loans as of December 31, 2025 , and loan charge-offs during the three months ended March 31, 2025 , based on year of origination:

The following table reflects amortized cost basis of loans as of December 31, 2025 , and loan charge-offs during the six months ended June 30, 2025 , based on year of origination:

(Dollars in thousands)

66 unchanged sentences

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 current reporting date was reasonable and appropriate, which was used in the calculation of both the March 31, 2026 , and December 31, 2025 , allowance for credit losses.

We determined that the look-back period commencing on January 1, 2011, through the current reporting date was reasonable and appropriate, which was used in the calculation of both the June 30, 2026 , and December 31, 2025 , allowance for credit losses.

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.

Our prepayment speed assumptions are developed at the loan segment level based upon the consideration of all relevant data which we believe could impact anticipated customer behavior, including changes in interest rates, economic conditions, and underlying property valuations.

For the commercial portfolio segments, we assumed a 2.0 % prepayment speed as of both March 31, 2026 , and December 31, 2025 , 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 used a prepayment speed of 9.5 % as of both March 31, 2026 , and December 31, 2025 .

For the commercial portfolio segments, we assumed a 2.0 % prepayment speed as of both June 30, 2026 , and December 31, 2025 , 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 used a prepayment speed of 9.5 % as of both June 30, 2026 , and December 31, 2025 .

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 March 31, 2026 , and December 31, 2025 , 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 March 31, 2026 , allowance calculation reflected a $ 0.9 million allowance balance reduction.

As of June 30, 2026 , and December 31, 2025 , 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 June 30, 2026 , allowance calculation reflected a $ 0.4 million allowance balance reduction.

The forecasts used for our December 31, 2025 , allowance calculation reflected a $ 0.3 million allowance balance reduction.

The allowance for PSL and PCD loans acquired from the acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, was 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 differentiated the loans from other loans within the loan segments and were evaluated for expected credit losses on an individual basis, totaled $ 6.8 million and $ 7.9 million as of March 31, 2026 , and December 31, 2025 , respectively.

Individual allowance allocations totaled $ 3.9 million and $ 4.0 million as of March 31, 2026 , and December 31, 2025 , respectively.

Activity in the allowance for credit losses during the three months ended March 31, 2026 and 2025 were as follows:

Individual loans exhibiting unique risk characteristics, which differentiated the loans from other loans within the loan segments and were evaluated for expected credit losses on an individual basis, totaled $ 4.6 million and $ 7.9 million as of June 30, 2026 , and December 31, 2025 , respectively.

Individual allowance allocations totaled $ 0.9 million and $ 4.0 million as of June 30, 2026 , and December 31, 2025 , respectively.

Activity in the allowance for credit losses during the three and six months ended June 30, 2026, and 2025 , were as follows:

(Dollars in thousands)

17 unchanged sentences

$ 13,773 $ 546 $ 8,048 $ 12,404 $ 5,057 $ 12,699 $ 2,806 $ 108 $ 55,441

Balance at 3-31-2025

$ 11,798 $ 386 $ 7,679 $ 11,946 $ 3,878 $ 18,874 $ 2,102 $ 3 $ 56,666

Provision for credit losses

( 39 ) 0 11 1,854 416 ( 989 ) 207 140 1,600

( 11 ) 0 0 0 0 ( 25 ) ( 2 ) 0 ( 38 )

23 1 1 0 3 105 14 0 147

Balance at 6-30-2025

$ 11,771 $ 387 $ 7,691 $ 13,800 $ 4,297 $ 17,965 $ 2,321 $ 143 $ 58,375

Balance at 12-31-2024

$ 11,165 $ 367 $ 7,671 $ 10,919 $ 3,667 $ 18,702 $ 1,936 $ 27 $ 54,454

Provision for credit losses

559 18 17 2,881 622 ( 803 ) 290 116 3,700

( 11 ) 0 0 0 0 ( 86 ) ( 4 ) 0 ( 101 )

58 2 3 0 8 152 99 0 322

Balance at 6-30-2025

$ 11,771 $ 387 $ 7,691 $ 13,800 $ 4,297 $ 17,965 $ 2,321 $ 143 $ 58,375

MERCANTILE BANK CORPORATION

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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 three months ended March 31, 2026 :

Interest Rate

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$ 0 $ 7,941 $ 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 agreements.

There were no modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2025 .

The following table presents the amortized cost basis of loans that have been modified in the past twelve months to borrowers experiencing financial difficulty by payment status and loan segment as of March 31, 2026 :

The following table presents the period-end amortized cost basis of modifications to borrowers experiencing financial difficulty by type of modification made during the six months ended June 30, 2026 :

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

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$ 0 $ 9,118 $ 0

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

1-4 family mortgages

Other consumer loans

MERCANTILE BANK CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

Interest Rate

(Dollars in thousands)

Term Extension

Commercial and industrial

Vacant land, land development and residential construction

Real estate – owner occupied

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

1-4 family mortgages

Other consumer loans

(Dollars in thousands)

Commercial and industrial

$ 11,712 $ 0 $ 0 $ 11,712

Vacant land, land development and residential construction

Real estate – owner occupied

2,346 0 0 2,346

Real estate – non-owner occupied

Real estate – multi-family and residential rental

Total commercial

$ 14,058 $ 0 $ 0 $ 14,058

1-4 family mortgages

Other consumer loans

$ 0 $ 0 $ 0 $ 0

$ 14,058 $ 0 $ 0 $ 14,058

MERCANTILE BANK CORPORATION

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$ 60,727 $ 62,468

Depreciation expense totaled $ 1.5 million and $ 1.3 million during the first quarters of 2026 and 2025 , respectively.

Depreciation expense totaled $ 1.5 million and $ 1.3 million during the second quarters of 2026 and 2025 , respectively, and $ 2.9 million and $ 2.5 million during the six months ended June 30, 2026, and 2025 , respectively.

We enter into facility leases in the normal course of business.

As of March 31, 2026 , we were under lease contracts for eleven of our banking facilities.

The leases have maturity dates ranging from August, 2026 through May, 2048, with a weighted average life of 9.4 years as of March 31, 2026 .

As of June 30, 2026 , we were under lease contracts for eleven of our banking facilities.

The leases have maturity dates ranging from August, 2026 through May, 2048, with a weighted average life of 9.5 years as of June 30, 2026 .

All of our leases have multiple three - to five -year extensions;

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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 March 31, 2026 .

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 $ 3.7 million and $ 3.9 million as of March 31, 2026 , and December 31, 2025 , respectively.

The weighted average discount rate for leases was 6.52 % as of June 30, 2026 .

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 $ 3.4 million and $ 3.9 million as of June 30, 2026 , and December 31, 2025 , 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 $ 0.3 million during the first quarters of both 2026 and 2025 .

Future lease payments were as follows as of March 31, 2026 :

Total operating lease expense associated with the leases aggregated $ 0.3 million during the second quarters of both 2026 and 2025 and $ 0.6 million during both the six months ended June 30, 2026, and 2025 .

Future lease payments were as follows as of June 30, 2026 :

(Dollars in thousands)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Our total deposits at March 31, 2026 , were $ 5.42 billion, an increase of $ 135 million, or 2.6 %, from December 31, 2025 .

The components of our outstanding balances at March 31, 2026 , and December 31, 2025 , and percentage change in deposits from the end of 2025 to the end of the first quarter of 2026 , are as follows:

March 31, 2026

Our total deposits at June 30, 2026 , were $ 5.30 billion, an increase of $ 11.9 million, or 0.2 %, from December 31, 2025 .

The components of our outstanding balances at June 30, 2026 , and December 31, 2025 , and percentage change in deposits from the end of 2025 to the end of the second quarter of 2026 , are as follows:

June 30, 2026

December 31, 2025

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Information relating to our repurchase agreements is as follows:

Three Months Ended

Six Months Ended

Twelve Months Ended

(Dollars in thousands)

March 31, 2026

June 30, 2026

December 31, 2025

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OTHER BORROWINGS

FHLBI bullet advances totaled $ 290 million at March 31, 2026 , and were scheduled to mature at varying dates from April 2026 through March 2031 , with fixed rates of interest from 0.93 % to 4.50 % and averaging 3.33 %.

FHLBI bullet advances totaled $ 280 million at June 30, 2026 , and were scheduled to mature at varying dates from September 2026 through April 2031 , with fixed rates of interest from 0.95 % to 4.50 % and averaging 3.41 %.

FHLBI bullet advances totaled $ 300 million at December 31, 2025 , and were scheduled 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 %.

Maturities of FHLBI bullet advances as of March 31, 2026 , were as follows:

Maturities of FHLBI bullet advances as of June 30, 2026 , were as follows:

(Dollars in thousands)

FHLBI amortizing advances totaled $ 25.3 million as of March 31, 2026 , with an average rate of 2.52 % and with final maturities in 2042 .

FHLBI amortizing advances totaled $ 25.3 million as of June 30, 2026 , with an average rate of 2.52 % and with final maturities in 2042 .

FHLBI amortizing advances totaled $ 26.2 million as of December 31, 2025 , with an average rate of 2.52 % and with final 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 March 31, 2026 , were as follows:

Scheduled principal payments on FHLBI amortizing advances as of June 30, 2026 , were as follows:

(Dollars in thousands)

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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 March 31, 2026 , totaled $ 1.16 billion, with remaining availability based on collateral of $ 837 million.

Our borrowing line of credit as of June 30, 2026 , totaled $ 1.16 billion, with remaining availability based on collateral of $ 847 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”).

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$ 1.7 million during the

three months ended March 31, 2026 and 2025 , respectively.

six months ended June 30, 2026, and 2025 , respectively.

The Stock Incentive Plan of

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three years and, in the case of performance-based restricted stock issued to executive officers issued under the plan, are subject to the attainment of pre-determined performance goals.

A summary of restricted stock activity during the three months ended March 31, 2026 , is as follows:

A summary of restricted stock activity during the six months ended June 30, 2026 , is as follows:

Nonvested at beginning of the period

4 unchanged sentences

256,355 $ 48.33

Of the restricted stock shares granted during the three months ended March 31, 2026 , 17,422 shares 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.

As of March 31, 2026 , there were approximately 204,000 shares authorized for future incentive awards, and as of December 31, 2025 , there were approximately 293,000 shares authorized for future incentive awards.

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:

Of the restricted stock shares granted during the six months ended June 30, 2026 , 17,422 shares 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.

As of June 30, 2026 , there were approximately 197,000 shares authorized for future incentive awards, and as of December 31, 2025 , there were approximately 293,000 shares authorized for future incentive awards.

We periodically grant shares of common stock to our corporate and bank Directors for retainer payments with the related expense being recorded over the period of the Directors' service, as summarized below:

Shares Granted

4 unchanged sentences

321 16 Jan 1, 2026 - May 31, 2026

8,676 456 June 1, 2026 - May 31, 2027

In March 2025, the Company adopted the 2025 Employee Stock Purchase Plan ("ESPP"), offering a 5 % discount on the market price of the Company's common stock.

5 unchanged sentences

Each offering period spans three months, with the first offering period beginning on July 1, 2025.

As of March 31, 2026 , 198,000 shares were reserved for future issuance under the ESPP.

As of June 30, 2026 , 195,000 shares were reserved for future issuance under the ESPP.

MERCANTILE BANK CORPORATION

17 unchanged sentences

For commitments to make loans, we determine an allowance by applying the expected loss allocation factor to the amount expected to be funded.

The calculated allowance aggregated $ 2.8 million and $ 2.3 million as of March 31, 2026 , and December 31, 2025 , respectively.

The calculated allowance aggregated $ 1.9 million and $ 2.3 million as of June 30, 2026 , and December 31, 2025 , 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.

At March 31, 2026 , and December 31, 2025 , the rates on existing off-balance sheet instruments were substantially equivalent to current market rates, considering the underlying credit standing of the counterparties.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at March 31, 2026 , and December 31, 2025 , is as follows:

At June 30, 2026 , and December 31, 2025 , the rates on existing off-balance sheet instruments were substantially equivalent to current market rates, considering the underlying credit standing of the counterparties.

A summary of the contractual amounts of our financial instruments with off-balance sheet risk at June 30, 2026 , and December 31, 2025 , is as follows:

(Dollars in thousands)

28 unchanged sentences

Notional Amount Location

March 31, 2026

June 30, 2026

Derivative Assets

11 unchanged sentences

959,447 Other Liabilities

The effect of interest rate swaps that are not designated as hedging instruments resulted in income of less than $ 0.1 million and expense of $ 0.1 million during the three months ended March 31, 2026 and 2025 , respectively, that were recorded in other noninterest expense on our Consolidated Statements of Income.

The effect of interest rate swaps that are not designated as hedging instruments resulted in income of $ 0.1 million and expense of $ 0.2 million during the six months ended June 30, 2026, and 2025 , respectively, that were recorded in other noninterest expense on our Consolidated Statements of Income.

We have master netting arrangements with our correspondent banks that allow us to net receivables and payables.

7 unchanged sentences

Cash Collateral Received or Posted

March 31, 2026

June 30, 2026

Derivative Assets

15 unchanged sentences

The carrying amounts, estimated fair values and level within the fair value hierarchy of financial instruments were as follows:

March 31, 2026

June 30, 2026

December 31, 2025

71 unchanged sentences

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 March 31, 2026 , or December 31, 2025 .

There was no such impairment as of June 30, 2026 , or December 31, 2025 .

We have no Level 1 securities available for sale.

5 unchanged sentences

Fair value is based on independent quoted market prices, where applicable, or the prices for other mortgage whole loans with similar characteristics.

As of March 31, 2026 and December 31, 2025 , we determined the fair value of our mortgage loans held for sale to be $ 21.9 million and $ 17.3 million, respectively.

As of June 30, 2026 , and December 31, 2025 , we determined the fair value of our mortgage loans held for sale to be $ 31.8 million and $ 17.3 million, respectively.

We do not record loans at fair value on a recurring basis.

15 unchanged sentences

Total (Level 1) (Level 2) (Level 3)

March 31, 2026

June 30, 2026

Available for sale securities

39 unchanged sentences

$ 23,532 $ 0 $ 23,532 $ 0

There were no sales, purchases or transfers in or out of Level 3 during the three months ended March 31, 2026 and 2025 .

There were no sales, purchases or transfers in or out of Level 3 during the six months ended June 30, 2026, and 2025 .

MERCANTILE BANK CORPORATION

2 unchanged sentences

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 March 31, 2026 , and December 31, 2025 , are as follows:

The balances of assets and liabilities measured at fair value on a nonrecurring basis as of June 30, 2026 , and December 31, 2025 , are as follows:

(Dollars in thousands)

Total (Level 1) (Level 2) (Level 3)

March 31, 2026

June 30, 2026

Collateral dependent loans

42 unchanged sentences

The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(Dollars in thousands, except per share data)

4 unchanged sentences

Noninterest income

11,498 11,968 23,189 21,149

Noninterest expense

4 unchanged sentences

5,222 3,925 9,745 8,918

$ 26,110 $ 23,866 $ 49,228 $ 44,342

Earnings per share

12 unchanged sentences

In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator.

As of March 31, 2026 , and December 31, 2025 , our banks were in the well capitalized category under the regulatory framework for prompt corrective action.

There are no conditions or events since March 31, 2026 , that we believe have changed our banks' categorizations.

As of June 30, 2026 , and December 31, 2025 , our banks were in the well capitalized category under the regulatory framework for prompt corrective action.

There are no conditions or events since June 30, 2026 , that we believe have changed our banks' categorizations.

Our actual capital levels and the minimum levels required to be categorized as adequately and well capitalized were:

6 unchanged sentences

(Dollars in thousands)

March 31, 2026

June 30, 2026

Total capital (to risk weighted assets)

50 unchanged sentences

REGULATORY MATTERS (Continued)

Our consolidated capital levels as of March 31, 2026 , and December 31, 2025 , include $ 49.1 million and $ 48.9 million of trust preferred securities, respectively.

Our consolidated capital levels as of June 30, 2026 , and December 31, 2025 , include $ 49.3 million and $ 48.9 million of trust preferred securities, respectively.

Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element.

1 unchanged sentence

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.

As of March 31, 2026 , and December 31, 2025 , all $ 49.1 million and $ 48.9 million of the trust preferred securities, respectively, were included in our consolidated Tier 1 capital.

As of June 30, 2026 , and December 31, 2025 , all $ 49.3 million and $ 48.9 million of the trust preferred securities, respectively, were included in our consolidated Tier 1 capital.

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.

2 unchanged sentences

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 March 31, 2026 , our banks meet all capital adequacy requirements under the BASEL III capital rules on a fully phased-in basis.

We believe that, as of June 30, 2026 , our banks meet all capital adequacy requirements under the BASEL III capital rules on a fully phased-in basis.

Our and our banks' ability to pay cash and stock dividends is subject to limitations under various laws and regulations and to prudent and sound banking practices.

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 was paid on March 18, 2026 , to shareholders of record as of March 6, 2026 .

As of March 31, 2026 , 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 the first three months of 2026 .

On April 16, 2026 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.39 per share that was paid on June 17, 2026 , to shareholders of record as of June 5, 2026 .

As of June 30, 2026 , 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 the first six months of 2026 .

Historically, stock repurchases have been funded from cash dividends paid to us from Mercantile Bank.

16 unchanged sentences

BUSINESS SEGMENT INFORMATION (continued)

Selected financial information on our business segments is presented as follows as of and for the three months ended March 31, 2026 :

Selected financial information on our business segments is presented as follows as of and for the six months ended June 30, 2026 :

(Dollars in thousands)

27 unchanged sentences

SUBSEQUENT EVENTS

On April 16, 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 June 17, 2026, to shareholders of record as of June 5, 2026.

On July 16, 2026 , our Board of Directors declared a cash dividend on our common stock in the amount of $ 0.40 per share that will be paid on September 16, 2026 , to shareholders of record as of September 4, 2026 .

MERCANTILE BANK CORPORATION

6 unchanged sentences

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, our ability to successfully integrate the business of Eastern Michigan Financial Corporation;

our ability to successfully consolidate Eastern Michigan Bank into Mercantile Bank;

our ability to successfully convert our core processing system;

Future Factors include, among others, difficulties and delays in the ongoing integration of Mercantile Bank and Eastern Michigan Bank and achieving anticipated synergies, cost savings and other benefits from the transaction;

our ability to obtain timely regulatory approval for the consolidation of Eastern Michigan Bank into Mercantile Bank; our ability to successfully complete and integrate our core processing system conversion, including managing operational disruptions, customer impacts, data conversion issues, and implementation costs;

our ability to maintain adequate levels of allowance for credit losses;

25 unchanged sentences

GAAP to Non-GAAP Financial Measures

This report contains certain non-GAAP financial measures, including adjusted net income, adjusted noninterest expense, and adjusted diluted earnings per share, each of which excludes after-tax costs associated with (i) Mercantile’s acquisition of Eastern Michigan Financial Corporation that was completed during the fourth quarter of 2025 ($0.2 million), and (ii) the previously announced core and digital banking system conversion ($2.3 million).

This report contains certain non-GAAP financial measures, including adjusted net income, adjusted noninterest expense, and adjusted diluted earnings per share, each of which excludes after-tax costs associated with (i) Mercantile’s acquisition of Eastern Michigan Financial Corporation that was completed during the fourth quarter of 2025 ($0.1 million and $0.4 million during the second quarter and first six months of 2026, respectively) , and (ii) the previously announced core and digital banking system conversion ($0.5 million and $3.5 million during the second quarter and first six months of 2026, respectively).

These non-GAAP financial measures are identified in this report where they appear.

We believe that presenting these non-GAAP financial measures provides investors, analysts, and other interested parties with meaningful supplementary information to assess Mecantile’s underlying operational performance by removing the effect of costs we consider to be non-recurring in nature and not reflective of Mercantile’s core operating results.

We believe that presenting these non-GAAP financial measures provides investors, analysts, and other interested parties with meaningful supplementary information to assess Mercantile’s underlying operational performance by removing the effect of costs we consider to be non-recurring in nature and not reflective of Mercantile’s core operating results.

These non-GAAP financial measures are used by management to evaluate Mercantile’s ongoing operations, for internal planning and forecasting purposes, and to assess period-over-period comparability.

2 unchanged sentences

These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for our GAAP measures.

The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Bank, Eastern Michigan Bank (collectively “our banks”), Mercantile Community Partners, LLC ("MCP"), and Mercantile Insurance Center, Inc., a subsidiary of Mercantile Bank, at March 31, 2026, and December 31, 2025, and the results of operations for the three months ended March 31, 2026 and 2025.

The following discussion compares the financial condition of Mercantile Bank Corporation and its consolidated subsidiaries, including Mercantile Bank, Eastern Michigan Bank (collectively “our banks”), Mercantile Community Partners, LLC ("MCP"), and Mercantile Insurance Center, Inc., a subsidiary of Mercantile Bank, at June 30, 2026, and December 31, 2025, and the results of operations for the three and six months ended June 30, 2026, and 2025.

This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included in this report.

46 unchanged sentences

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 Crosswell, Michigan.

On December 31, 2025, we consummated the acquisition of Eastern Michigan Financial Corporation (“Eastern Michigan”), and its wholly owned banking subsidiary, Eastern Michigan Bank, headquartered in Crosswell, Michigan.

Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027 at which time we plan to consolidate Eastern Michigan Bank into Mercantile Bank in conjunction with the completion of the conversion of our core operating system to a new provider.

The first quarter of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.

We reported net income of $22.7 million, or $1.32 per diluted share, for the first quarter of 2026, compared with net income of $19.5 million, or $1.21 per diluted share, during the first quarter of 2025.

Higher net interest income and noninterest income combined with lower provision expense more than offset increased noninterest costs.

Commercial loans increased $16.7 million during the first three months of 2026, providing for an annualized growth rate of about 2%.

As had been the case during most of 2025, commercial loan growth during the first quarter of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Commercial loan payoffs, largely reflecting business sales, sales of assets and secondary market refinancings, and line of credit paydowns on larger commercial loan relationships totaled $180 million during the first three months of 2026, after aggregating $363 million, or an average of $91 million per quarter, in 2025.

The first six months of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.

We reported net income of $25.9 million, or $1.50 per diluted share, for the second quarter of 2026, compared with net income of $22.6 million, or $1.39 per diluted share, during the second quarter of 2025.

Net income during the first six months of 2026 totaled $48.6 million, or $2.82 per diluted share, compared to $42.2 million, or $2.60 per diluted share, during the first six months of 2025.

Growth in net income during both time periods primarily reflected increased net interest income and lower provision expense that more than offset higher noninterest expense costs and federal income tax expense.

Excluding after-tax one-time costs associated with the year-end 2025 acquisition of Eastern Michigan and previously announced core and digital banking system conversion (a non-GAAP measurement), net income improved to $26.4 million, or $1.53 per diluted share, for the second quarter of 2026, and $51.7 million, or $2.99 per diluted share, for the first six months of 2026.

Earnings increased $0.14 per diluted share, or approximately 10%, in the second quarter of 2026 compared to the second quarter of 2025, and $0.39 per diluted share, or approximately 15%, during the first six months of 2026 compared to the first six months of 2025.

We believe using these non-GAAP measurements reflects our core earnings performance and provides for more accurate current-period versus prior-period comparisons.

Commercial loans increased $132 million during the first six months of 2026, providing for an annualized growth rate of approximately 7%.

As had been the case during most of 2025, commercial loan growth during the first six months of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Commercial loan payoffs, largely reflecting business sales, sales of assets and secondary market refinancings, and line of credit paydowns on larger commercial loan relationships, totaled $121 million and $180 million during the second and first quarters of 2026, respectively, after aggregating $363 million, or an average of $91 million per quarter, in 2025.

Our typical level of such payoffs and line paydowns average around $50 million per quarter.

As a percentage of total commercial loans, commercial and industrial and owner-occupied commercial real estate (“CRE”) loans equaled 56.6% as of March 31, 2026, compared to 55.0% as of December 31, 2025.

The commercial loan pipeline remains strong, and as of March 31, 2026, we had $240 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.

Residential mortgage loans decreased $22.6 million during the first three months of 2026, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio during the quarter.

Residential mortgage loan originations totaled $128 million during the first quarter of 2026, reflecting an increase of over 27% compared to the first three months of 2025.

Approximately 83% of the residential mortgage loans originated during the first quarter of 2026 were with the intent to sell, compared to about 80% during the first three months of 2025.

Combined with increased prepayment speeds of our residential mortgage loan portfolio during the past two years, the increased percentage of loans sold has resulted in a declining portfolio balance.

The increased volume of residential mortgage loans originated and percentage of loans sold has had a positive impact on mortgage banking income.

The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $7.5 million, or 0.16% of total loans, as of March 31, 2026.

As a percentage of total commercial loans, commercial and industrial and owner-occupied commercial real estate (“CRE”) loans equaled 57.8% as of June 30, 2026, compared to 55.0% as of December 31, 2025.

The commercial loan pipeline remains strong, and as of June 30, 2026, we had $236 million in unfunded loan commitments on commercial construction and development loans that are in the construction phase.

Residential mortgage loans decreased $40.3 million during the first six months of 2026, as aggregate payoffs and scheduled monthly payments exceeded new loans added to the portfolio during the quarter.

Residential mortgage loan originations totaled $287 million during the first six months of 2026, reflecting an increase of over 18% compared to the first six months of 2025.

Approximately 74% of the residential mortgage loans originated during the first six months of 2026 were with the intent to sell, compared to approximately 80% during the first six months of 2025.

Combined with increased prepayment speeds of our residential mortgage loan portfolio during the past two years, the relatively high percentage of loans sold has resulted in a declining portfolio balance.

The increased volume of residential mortgage loans originated and sold has had a positive impact on mortgage banking income.

The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $5.8 million, or 0.1% of total loans, as of June 30, 2026.

Accruing loans past due 30 to 89 days remain very low with no foreclosed properties at quarter-end.

Gross loan charge-offs were nominal during the first three months of 2026, while recoveries of prior period loan charge-offs aggregated $0.4 million, providing for a net loan recovery of $0.3 million.

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago, averaged $423 million during the first three months of 2026, compared to $267 million during the first three months of 2025.

The higher average balance primarily reflects strong deposit growth during the first quarter of 2026 and our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth.

Gross loan charge-offs were nominal during the first six months of 2026, while recoveries of prior period loan charge-offs aggregated $0.9 million, providing for a net loan recovery of $0.9 million.

Interest-earning deposits, a vast majority of which is comprised of funds on deposit with the Federal Reserve Bank of Chicago (“FRB Chicago”), averaged $391 million during the first six months of 2026, compared to $230 million during the first six months of 2025.

The higher average balance primarily reflects strong deposit growth during the first six months of 2026 and our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth.

MERCANTILE BANK CORPORATION

Total deposits increased $135 million during the first three months of 2026.

Aggregate net growth in almost all interest-bearing deposit types more than offset a decline of $50.4 million in out-of-area deposits and reductions in most business transaction deposit products from customers’ customary tax and bonus payments and partnership distributions during the early part of each first quarter.

Securities sold under agreements to repurchase (“sweep accounts”) decreased $12.8 million and Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $10.9 million during the first three months of 2026.

Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $395 million, or about 7% of total funds, as of March 31, 2026, compared to $457 million, or approximately 8% of total funds, as of December 31, 2025.

Net interest income grew $7.4 million during the first three months of 2026 compared to the first quarter of 2025, reflecting the combined impact of a $5.1 million increase in interest income and a $2.3 million decrease in interest expense.

Our net interest margin during the first quarter of 2026 was 8 basis points higher than during the first quarter of 2025, with our yield on earning assets declining 31 basis points and our cost of funds decreasing 39 basis points during that time period.

The lower yield on earning assets largely reflected the aggregate 75 basis point reduction in the federal funds rate during the last four months of 2025, with the lower cost of funds being primarily attributed to the decline in the interest rate environment and the onboarding of Eastern Michigan Bank’s relatively low-cost deposit base.

Total deposits increased $11.9 million during the first six months of 2026, consisting of a $122 million increase in local deposits and $110 million reduction in out-of-area deposits.

The increase in local deposits occurred despite seasonal and customary customers’ tax and bonus payments and partnership distributions during that time period.

Securities sold under agreements to repurchase (“sweep accounts”) decreased $14.8 million and Federal Home Loan Bank of Indianapolis (“FHLBI”) advances declined $20.9 million during the first six months of 2026.

Wholesale funds, comprised of out-of-area deposits and FHLBI advances, totaled $325 million, or approximately 6% of total funds, as of June 30, 2026, compared to $457 million, or approximately 8% of total funds, as of December 31, 2025.

Net interest income grew $7.8 million and $15.1 million during the second quarter and first six months of 2026, respectively, compared to the prior-year time periods, reflecting the combined impact of $4.7 million and $9.8 million increases in interest income and $3.1 million and $5.3 million decreases in interest expense, during the respective time periods.

Our net interest margin during the second quarter of 2026 was eleven basis points higher than during the second quarter of 2025 and was eight basis points higher during the first six months of 2026 compared to the first six months of 2025.

Although our yield on earning assets declined during the 2026 time periods compared to the respective 2025 time periods, largely reflecting the aggregate 75 basis point reduction in the federal funds rate during the last four months of 2025, our cost of funds declined more primarily due to the decline in the interest rate environment and the onboarding of Eastern Michigan Bank’s relative low-cost deposit base.

Also contributing to higher net interest income was growth in earning assets.

Average earning assets during the first quarter of 2026 totaled $6.42 billion, compared to $5.70 billion during the first quarter of 2025.

We recorded a negative provision for credit losses of $1.8 million during the first three months of 2026, compared to a positive provision for credit losses of $2.1 million during the first quarter of 2025.

The negative provision expense mainly reflected improvements to the economic forecast, changes in loan mix, a lower residential mortgage loan portfolio balance and a decline in specific allocations.

Noninterest income totaled $11.7 million during the first three months of 2026, compared to $8.7 million during the first quarter of 2025.

We recorded improvements in virtually all noninterest income categories, including solid growth in treasury management fees, mortgage banking income, card income, interest rate swap income and payroll service fees.

We also recorded $0.4 million in interest from the Internal Revenue Service on federal income tax payments made during 2024 that were subsequently refunded due to offsetting purchased energy tax credits.

Noninterest expense totaled $42.1 million during the first quarter of 2026, compared to $31.1 million during the first quarter of 2025.

Excluding one-time costs aggregating $2.9 million related to the core and digital banking system conversion and $0.3 million associated with the acquisition of Eastern Michigan Financial Corporation, noninterest expense increased $7.8 million, or 25.0%, during the first three months of 2026 compared to the respective 2025 period using this non-GAAP measurement.

The increase in noninterest expense mainly resulted from higher salary and benefit costs.

A $1.2 million increase in allocations to the reserve for unfunded loan commitments, largely reflecting a significantly higher level of commercial loan commitments that have been accepted by customers, also contributed to the increase in noninterest expense.

The remaining increase in noninterest expense largely reflects cost inflation and the increased cost of a larger balance sheet and branch network.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million during the first three months of 2026, including salary and benefit costs of $1.7 million, core deposit intangible asset amortization of $0.9 million, and data processing costs of $0.4 million.

Federal income tax expense was $4.6 million during the first three months of 2026, compared to $4.5 million during the first quarter of 2025.

Federal income tax expense rose $0.1 million, while income before federal income tax expense increased $3.2 million.

The acquisition of transferable energy tax credits and the benefits from low-income housing and historic tax credits provided for aggregate tax benefits of $0.8 million and $0.3 million during the first three months of 2026 and 2025, respectively.

The effective tax rate was 16.9% and 18.8% during the first quarter of 2026 and 2025, respectively.

Average earning assets during the first six months of 2026 totaled $6.42 billion, compared to $5.72 billion during the first six months of 2025.

Eastern Michigan Bank’s net interest income totaled $5.9 million and $11.7 million during the second quarter and first six months of 2026, respectively.

We recorded negative provisions for credit losses of $1.8 million and $3.6 million during the second quarter and first six months of 2026, respectively, compared to positive provisions for credit losses of $1.6 million and $3.7 million during the respective time periods in 2025.

We eliminated a $2.7 million specific reserve and recorded a $0.2 million recovery associated with the resolution of a nonperforming commercial construction loan during the second quarter of 2026.

The recording of net loan recoveries and sustained strength in loan quality metrics positively impacted necessary provision levels and helped to mitigate required provision levels from loan growth.

Noninterest income totaled $11.5 million and $23.2 million during the second quarter and first six months of 2026, respectively, compared to $11.5 million and $20.2 million during the respective time periods in 2025.

We recorded strong growth in treasury management fees, card income, and payroll service fees, but lower mortgage banking and interest rate swap income.

Eastern Michigan Bank’s noninterest income totaled $0.6 million and $1.1 million during the second quarter and first six months of 2026, respectively.

Noninterest expense totaled $39.4 million and $81.5 million during the second quarter and first six months of 2026, respectively, compared to $33.4 million and $64.5 million during the respective time periods in 2025.

Excluding one-time costs aggregating related to the core and digital banking system conversions and the acquisition of Eastern Michigan, noninterest expense increased $5.4 million and $13.1 million during the second quarter and first six months of 2026, respectively, compared to the respective time periods in 2025.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million and $8.0 million during the second quarter and first six months of 2026, respectively.

Increases in noninterest expenses during the two periods largely reflect higher salary and benefit costs and the impact of a larger balance sheet and branch network.

Federal income tax expense totaled $5.3 million and $9.9 million during the second quarter and first six months of 2026, respectively, compared to $3.3 million and $7.9 million during the respective time periods in 2025.

The increases during the 2026 time periods largely reflect growth in income before federal income tax expense.

The effective tax rate was 16.9% in both the second quarter and first six months of 2026, compared to 12.9% and 15.7% during the respective time periods in 2025.

The higher effective tax rate in the 2026 time periods primarily reflects lower tax benefits from the acquisition of transferrable energy tax credits due to lower activity levels.

MERCANTILE BANK CORPORATION

Financial Condition

Total assets increased $110 million during the first three months of 2026, totaling $6.95 billion as of March 31, 2026.

Interest-earning deposits increased $111 million and securities available for sale grew $23.2 million, while total loans declined $5.2 million during the first quarter of 2026.

Deposits increased $135 million, while sweep accounts declined $12.8 million and FHLBI advances were down $10.9 million during the first three months of 2026.

Total assets decreased $15.7 million during the first six months of 2026, totaling $6.82 billion as of June 30, 2026.

Total loans increased $93.7 million and securities available for sale grew $23.3 million, while interest-earning deposit balances declined $147 million during the first six months of 2026.

Total deposits increased $11.9 million, while sweep accounts declined $14.8 million and FHLBI advances were down $20.9 million during the first six months of 2026.

Our loan portfolio has historically been primarily comprised of commercial loans.

Commercial loans totaled $3.94 billion, or 81.7% of total loans, as of March 31, 2026.

Commercial loans increased $16.7 million during the first three months of 2026, providing for an annualized growth rate of about 2%.

As had been the case during most of 2025, commercial loan growth during the first quarter of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Commercial loans totaled $4.05 billion, or 82.4% of total loans, as of June 30, 2026.

Commercial loans increased $132 million during the first six months of 2026, providing for an annualized growth rate of approximately 7%.

As had been the case during most of 2025, commercial loan growth during the first six months of 2026 was negatively impacted by a higher than typical level of payoffs and line of credit paydowns.

Commercial loan payoffs, largely reflecting business sales, sales of assets and secondary market refinancings, and line of credit paydowns on larger commercial loan relationships, totaled $121 million and $180 million during the second and first quarters of 2026, respectively, after aggregating $363 million, or an average of $91 million per quarter, in 2025.

Our typical level of such payoffs and line paydowns average around $50 million per quarter.

During the first quarter of 2026, commercial and industrial loans increased $55.3 million, owner-occupied CRE loans were up $20.2 million and land development and construction loans expanded by $2.2 million, while multi-family and residential rental property loans declined $52.0 million and non-owner occupied CRE loans were down $8.9 million.

As a percentage of total commercial loans, commercial and industrial and owner-occupied CRE loans equaled 56.6% as of March 31, 2026, compared to 55.0% as of December 31, 2025.

Availability on commercial construction and development loans that are in the construction phase totaled $240 million as of March 31, 2026, with most of the funds expected to be drawn over the next 12 to 18 months.

As a percentage of total commercial loans, commercial and industrial and owner-occupied CRE loans equaled 57.8% as of June 30, 2026, compared to 55.0% as of December 31, 2025.

Commercial and industrial loans increased $163 million, owner-occupied CRE loans were up $25.0 million and land development and construction loans expanded by $2.0 million, while multi-family and residential rental property loans declined $39.0 million and non-owner occupied CRE loans were down $18.8 million during the first six months of 2026.

Availability on commercial construction and development loans that are in the construction phase totaled $236 million as of June 30, 2026, 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 $234 million in committed and accepted new lending commitments, a majority of which we expect to be accepted and funded over the next 12 to 18 months.

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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 averaged about 40% during the first three months of 2026, compared to approximately 44% during all of 2025.

Residential mortgage loans totaled $768 million, or 15.9% of total loans, as of March 31, 2026.

Residential mortgage loan originations totaled $128 million during the first quarter of 2026, reflecting an increase of over 27% compared to the first three months of 2025.

Approximately 83% of the residential mortgage loans originated during the first quarter of 2026 were with the intent to sell, compared to about 80% during the first three months of 2026.

Combined with increased prepayment speeds of our residential mortgage loan portfolio during the past two years, the increased percentage of loans sold has resulted in a declining portfolio balance.

The increased volume of residential mortgage loans originated and percentage of loans sold has had a positive impact on mortgage banking income.

Other consumer-related loans totaled $113 million, or 2.4% of total loans, as of March 31, 2026.

Home equity lines of credit comprised approximately 76% of that total balance.

Usage of existing commercial lines of credit averaged approximately 41% during the first six months of 2026, compared to approximately 44% during all of 2025.

Residential mortgage loans totaled $751 million, or 15.3% of total loans, as of June 30, 2026.

Residential mortgage loan originations totaled $287 million during the first six months of 2026, reflecting an increase of over 18% compared to the first six months of 2025.

Approximately 74% of the residential mortgage loans originated during the first six months of 2026 were with the intent to sell, compared to approximately 80% during the first six months of 2025.

The increased volume of residential mortgage loans originated and sold has had a positive impact on mortgage banking income.

Other consumer-related loans totaled $115 million, or 2.3% of total loans, as of June 30, 2026.

We expect this loan portfolio segment to remain relatively stable in dollar amount but decline as a percentage of total loans in future periods as the commercial loan segment grows.

Home equity lines of credit comprised approximately 79% of other consumer-related loans as of June 30, 2026.

MERCANTILE BANK CORPORATION

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These guidelines include loan review and early identification of problem loans to provide effective loan portfolio administration.

The credit policies and procedures are designed to minimize the risk and uncertainties inherent in lending.

In following these policies and procedures, we rely on estimates, appraisals and evaluations of loans and the possibility that changes in these could occur quickly because of changing economic conditions or other factors.

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 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 modification in the future, are included on an internal watch list.

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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.

We may also adjust external 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 $7.5 million, or 0.2% of total loans, as of March 31, 2026.

The overall quality of our loan portfolio remains strong, with nonperforming loans totaling $5.8 million, or 0.1% of total loans, as of June 30, 2026.

The volume of nonperforming loans has remained under 0.3% of total loans 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 no foreclosed properties at quarter-end.

Given the low levels of nonperforming and delinquent loans, combined with what we believe are strong credit administration practices, we are pleased with the overall quality of the loan portfolio.

Gross loan charge-offs were nominal during the first six months of 2026, while recoveries of prior period loan charge-offs aggregated $0.9 million, providing for a net loan recovery of $0.9 million.

We continue our collection efforts on charged-off loans and expect to record recoveries in future periods;

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MERCANTILE BANK CORPORATION

The allowance equaled $56.7 million, or 1.18% of total loans and 752% of nonperforming loans, as of March 31, 2026.

The allowance was comprised of $52.9 million in general reserves relating to performing loans and $3.8 million in specific reserves on other loans, primarily nonperforming loans, as of March 31, 2026.

Loans with an aggregate carrying value of $3.4 million as of March 31, 2026, had been subject to previous partial charge-offs aggregating $3.1 million over the past several years.

The allowance equaled $55.4 million, or 1.13% of total loans and 955% of nonperforming loans, as of June 30, 2026.

The allowance was comprised of $54.5 million in general reserves relating to performing loans and $0.9 million in specific reserves on other loans, primarily nonperforming loans, as of June 30, 2026.

Loans with an aggregate carrying value of $0.6 million as of June 30, 2026, had been subject to previous partial charge-offs aggregating $0.2 million over the past several years.

There were no specific reserves allocated to loans that had been subject to a previous partial charge-off as of June 30, 2026.

Although we believe the allowance is adequate to absorb loan losses in our 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.

The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the three months ended March 31, 2026.

The following table reflects the composition of our allowance for credit losses, nonaccrual loans, and net charge-offs as of and for the six months ended June 30, 2026.

(Dollars in thousands)

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MERCANTILE BANK CORPORATION

Securities available for sale increased $23.2 million during the first three months of 2026, totaling $1.13 billion as of March 31, 2026.

Securities available for sale increased $23.3 million during the first six months of 2026, totaling $1.13 billion as of June 30, 2026.

There were no purchases or maturities of U.S.

Treasury securities during the first six months of 2026.

Purchases of U.S.

Government agency bonds during the first three months of 2026 aggregated $38.5 million, while proceeds from maturities totaled $10.0 million.

Government agency bonds during the first six months of 2026 aggregated $68.1 million, while proceeds from maturities totaled $18.0 million.

There were no purchases of U.S.

Government agency guaranteed mortgage-backed securities during the first three months of 2026, while proceeds from principal paydowns aggregated $4.3 million.

Purchases of municipal bonds totaled $4.4 million during the first three months of 2026;

there were no maturities or calls.

As of March 31, 2026, the portfolio was primarily comprised of U.S.

Government agency guaranteed mortgage-backed securities during the first six months of 2026, while proceeds from principal paydowns aggregated $9.3 million.

Purchases of municipal bonds totaled $13.2 million during the first six months of 2026, while proceeds from maturities and calls aggregated $17.4 million.

As of June 30, 2026, the portfolio was primarily comprised of U.S.

Treasury and U.S.

Government agency bonds (66%), municipal bonds (24%), U.S.

Government agency guaranteed mortgage-backed securities (7%) and domestic bonds (4%).

Government agency guaranteed mortgage-backed securities (7%) and other bonds (3%).

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 March 31, 2026, totaled $1.13 billion, including a net unrealized loss of $37.0 million.

The fair value of securities designated as available for sale totaled $1.13 billion as of June 30, 2026, including a net unrealized loss of $40.5 million.

The net unrealized loss equaled $30.4 million as of December 31, 2025.

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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 March 31, 2026, unchanged from December 31, 2025.

FHLBI stock totaled $22.1 million as of June 30, 2026, unchanged from December 31, 2025.

Our investment in FHLBI stock is necessary to engage in the FHLBI’s 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.

Net premises and equipment equaled $61.9 million as of March 31, 2026, compared to $62.5 million as of December 31, 2025.

Depreciation expense totaled $1.5 million during the first three months of 2026, while investments associated with renovations of existing facilities and equipment purchases aggregated $0.9 million.

Interest-earning deposits, a vast majority of which are comprised of funds on deposit with the Federal Reserve Bank of Chicago, totaled $267 million as of June 30, 2026.

Interest-earning deposits averaged $391 million during the first six months of 2026, compared to $230 million during the first six months of 2025.

The higher average balance primarily reflects strong local deposit growth throughout 2025 and into 2026, and our strategy to reduce the loan-to-deposit ratio via local deposit growth exceeding loan and investment growth.

Strong commercial loan growth and out-of-area deposit maturities during the second quarter of 2026 were largely funded by monies on deposit with the Federal Reserve Bank of Chicago, resulting in a June 30, 2026, balance that was lower than the average during the first six months of 2026.

Net premises and equipment equaled $60.7 million as of June 30, 2026, compared to $62.5 million as of December 31, 2025.

Depreciation expense totaled $2.9 million during the first six months of 2026, while investments associated with renovations of existing facilities and equipment purchases aggregated $1.1 million.

MERCANTILE BANK CORPORATION

Total deposits increased $135 million during the first three months of 2026, totaling $5.42 billion as of March 31, 2026.

Money market deposit accounts increased by $109 million, interest checking accounts were up $56.9 million, local time deposits grew $16.7 million, and savings deposits increased $10.3 million, while noninterest-bearing checking accounts declined $7.7 million during the first three months of 2026.

Total deposits increased $11.9 million during the first six months of 2026, consisting of a $122 million increase in local deposits and $110 million reduction in out-of-area deposits.

The increase in local deposits occurred despite seasonal and customary customers’ tax and bonus payments and partnership distributions during that time period.

Noninterest-bearing checking accounts increased $80.9 million, money market accounts were up $41.6 million, and savings deposits grew $11.2 million, while interest-bearing checking accounts decreased $10.6 million and local time deposits declined $0.8 million.

The deposit balance increases reflect new deposit account relationships and additional funds from existing deposit customers, largely from business and public units.

Uninsured deposits totaled approximately $2.8 billion, or about 52% of total deposits, as of March 31, 2026, compared to approximately $2.9 billion, or about 54% of total deposits, as of December 31, 2025.

Uninsured deposits totaled approximately $3.01 billion, or about 57% of total deposits, as of June 30, 2026, compared to approximately $2.91 billion, or about 54% of total deposits, as of December 31, 2025.

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 steady as a percentage of total deposits, is generally higher than banking industry averages given our commercial lending focus.

Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 2026.

Sweep accounts decreased $14.8 million during the first six months of 2026, totaling $217 million as of June 30, 2026.

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.

The average balance of sweep accounts equaled $222 million during the first three months of 2026, with a high daily balance of $243 million and a low daily balance of $211 million.

The average balance of sweep accounts equaled $223 million during the first six months of 2026, with a high daily balance of $257 million and a low daily balance of $211 million.

Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements.

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All of our repurchase agreements are accounted for as secured borrowings.

FHLBI advances declined $10.9 million during the first three months of 2026, totaling $315 million as of March 31, 2026.

Bullet advances aggregating $20.0 million were obtained during the first quarter of 2026, while bullet advance maturities aggregated $30.0 million.

FHLBI advances declined $20.9 million during the first six months of 2026, totaling $305 million as of June 30, 2026.

Bullet advances aggregating $30.0 million were obtained during the first six months of 2026, while bullet advance maturities aggregated $50.0 million.

Payments on amortizing FHLBI advances totaled $0.9 million.

Bullet FHLBI advances are generally obtained to provide funds for loan growth and are used to assist in managing interest rate risk, while amortizing FHLBI 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.

FHLBI 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 totaled $1.16 billion, with remaining availability based on collateral equaling $837 million, as of March 31, 2026.

Shareholders’ equity increased $12.1 million during the first three months of 2026, equaling $737 million as of March 31, 2026.

Positively impacting shareholders’ equity during the first three months of 2026 was net income of $22.7 million, which was partially offset by the payment of cash dividends totaling $6.6 million.

Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $847 million, as of June 30, 2026.

Shareholders’ equity increased $30.2 million during the first six months of 2026, equaling $755 million as of June 30, 2026.

Positively impacting shareholders’ equity during the first six months of 2026 was net income of $48.6 million, which was partially offset by the payment of cash dividends totaling $13.3 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 $2.9 million.

A $5.2 million after-tax decrease in the market value of our available for sale securities portfolio, generally reflecting an increase in market interest rates, negatively impacted shareholders’ equity during the first three months of 2026.

An $8.0 million after-tax decrease in the market value of our available for sale securities portfolio, generally reflecting an increase in market interest rates, negatively impacted shareholders’ equity during the first six months of 2026.

MERCANTILE BANK CORPORATION

Liquidity is measured by our ability to raise funds through deposits, borrowed funds, and capital, or cash flow from the repayment of loans and securities.

These funds are used to fund loans, meet deposit withdrawals, and operate the Company.

These funds are used to fund loans, meet deposit withdrawals, and operate our company.

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 deposits.

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To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources.

Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 2026.

Sweep accounts decreased $14.8 million during the first six months of 2026, totaling $217 million as of June 30, 2026.

The average balance of sweep accounts equaled $222 million during the first three months of 2026, with a high daily balance of $243 million and a low daily balance of $211 million.

The average balance of sweep accounts equaled $223 million during the first six months of 2026, with a high daily balance of $257 million and a low daily balance of $211 million.

Our sweep account program entails transferring collected funds from certain business noninterest-bearing checking accounts and savings deposits into overnight interest-bearing repurchase agreements.

Such sweep accounts are not deposit accounts and are not afforded federal deposit insurance.

All of our repurchase agreements are accounted for as secured borrowings.

Information regarding our repurchase agreements as of March 31, 2026, and during the first three months of 2026 is as follows:

All our repurchase agreements are accounted for as secured borrowings.

Information regarding our repurchase agreements as of June 30, 2026, and during the first six months of 2026 is as follows:

(Dollars in thousands)

Outstanding balance at March 31, 2026

Weighted average interest rate at March 31, 2026

Maximum daily balance three months ended March 31, 2026

Average daily balance for three months ended March 31, 2026

Weighted average interest rate for three months ended March 31, 2026

FHLBI advances declined $10.9 million during the first three months of 2026, totaling $315 million as of March 31, 2026.

Bullet advances aggregating $20.0 million were obtained during the first quarter of 2026, while bullet advance maturities aggregated $30.0 million.

Outstanding balance at June 30, 2026

Weighted average interest rate at June 30, 2026

Maximum daily balance six months ended June 30, 2026

Average daily balance for six months ended June 30, 2026

Weighted average interest rate for six months ended June 30, 2026

FHLBI advances declined $20.9 million during the first six months of 2026, totaling $305 million as of June 30, 2026.

Bullet advances aggregating $30.0 million were obtained during the first six months of 2026, while bullet advance maturities aggregated $50.0 million.

Payments on amortizing FHLBI advances totaled $0.9 million.

Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $837 million, as of March 31, 2026.

Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $847 million, as of June 30, 2026.

We also have the ability to borrow up to $50.0 million on a daily basis through a correspondent bank using an unsecured federal funds purchased line of credit.

We did not access this line of credit during the first three months of 2026.

In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $400 million during the first three months of 2026.

Our average balance was nominal during the first six months of 2026.

In contrast, our interest-earning deposit balance with the Federal Reserve Bank of Chicago averaged $369 million during the first six months of 2026.

We also have a line of credit through the Discount Window of the Federal Reserve Bank of Chicago.

Using certain municipal bonds as collateral, we could have borrowed up to $153 million as of March 31, 2026.

We did not utilize this line of credit during the first three months of 2026 or at any time during the previous 17 fiscal years, and do not plan to access this line of credit in future periods.

Using certain municipal bonds as collateral, we could have borrowed up to $149 million as of June 30, 2026.

We did not utilize this line of credit during the first six months of 2026 or at any time during the previous 17 fiscal years, and do not plan to access this line of credit in future periods.

MERCANTILE BANK CORPORATION

The following table reflects, as of March 31, 2026, significant fixed and determinable contractual obligations to third parties by payment date, excluding accrued interest:

The following table reflects, as of June 30, 2026, significant fixed and determinable contractual obligations to third parties by payment date, excluding accrued interest:

(Dollars in thousands)

7 unchanged sentences

Premises and equipment leases

The balance of certificates of deposit exceeding the FDIC insured limit and their maturity profile as of March 31, 2026, and December 31, 2025, were as follows:

The balance of certificates of deposit exceeding the FDIC insured limit and their maturity profile as of June 30, 2026, and December 31, 2025, were as follows:

(Dollars in thousands)

March 31, 2026

June 30, 2026

December 31, 2025

5 unchanged sentences

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 March 31, 2026, we had a total of $2.47 billion in unfunded loan commitments and $30.9 million in unfunded standby letters of credit.

As of June 30, 2026, we had a total of $2.23 billion in unfunded loan commitments and $34.1 million in unfunded standby letters of credit.

Of the total unfunded loan commitments, $2.00 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $234 million were for loan commitments generally expected to close and become funded within the next 12 to 18 months.

3 unchanged sentences

Capital Resources

Shareholders’ equity increased $12.1 million during the first three months of 2026, equaling $737 million as of March 31, 2026.

Positively impacting shareholders’ equity during the first three months of 2026 was net income of $22.7 million, which was partially offset by the payment of cash dividends totaling $6.6 million.

Shareholders’ equity increased $30.2 million during the first six months of 2026, equaling $755 million as of June 30, 2026.

Positively impacting shareholders’ equity during the first six months of 2026 was net income of $48.6 million, which was partially offset by the payment of cash dividends totaling $13.3 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.

Mercantile Bank’s total risk-based capital ratio was 13.8% as of both March 31, 2026, and December 31, 2025.

Mercantile Bank’s total regulatory capital increased $3.5 million during the first three months of 2026, in large part reflecting net income totaling $23.8 million, which was partially offset by cash dividends paid to us aggregating $19.5 million.

As of March 31, 2026, Mercantile Bank’s total regulatory capital equaled $779 million, or $215 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Eastern Michigan Bank’s total risk-based capital ratio was 21.6% as of March 31, 2026, compared to 20.2% as of December 31, 2025.

Eastern Michigan Bank’s total regulatory capital increased $2.6 million during the first three months of 2026, partially reflecting net income totaling $2.0 million and a $0.9 million reduction in the ineligible core deposit intangible balance due to amortization during the first quarter.

As of March 31, 2026, Eastern Michigan Bank’s total regulatory capital equaled $61.5 million, or $33.0 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.”

Our and our banks’ capital ratios as of March 31, 2026, and December 31, 2025, are disclosed in Note 14 of the Notes to Consolidated Financial Statements.

Mercantile Bank’s total risk-based capital ratio was 13.5% as of June 30, 2026, compared to 13.8% as of December 31, 2025.

Mercantile Bank’s total regulatory capital increased $8.7 million during the first six months of 2026, in large part reflecting net income totaling $50.6 million, which was partially offset by cash dividends paid to us aggregating $39.0 million.

As of June 30, 2026, Mercantile Bank’s total regulatory capital equaled $784 million, or $205 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.” Eastern Michigan Bank’s total risk-based capital ratio was 23.1% as of June 30, 2026, compared to 20.2% as of December 31, 2025.

Eastern Michigan Bank’s total regulatory capital increased $5.3 million during the first six months of 2026, in large part reflecting net income totaling $4.0 million and a $2.4 million reduction in the ineligible core deposit intangible balance due to amortization during the first six months of 2026.

As of June 30, 2026, Eastern Michigan Bank’s total regulatory capital equaled $64.2 million, or $36.3 million in excess of the 10.0% minimum that is among the requirements to be categorized as “well capitalized.”

Our and our banks’ capital ratios as of June 30, 2026, and December 31, 2025, are disclosed in Note 14 of the Notes to Consolidated Financial Statements.

MERCANTILE BANK CORPORATION

Results of Operations

We recorded net income of $22.7 million, or $1.32 per basic and diluted share, for the first quarter of 2026, compared with net income of $19.5 million, or $1.21 per basic and diluted share, for the first quarter of 2025.

Excluding after-tax one-time costs associated with the year-end 2025 acquisition of Eastern Michigan Financial Corporation and previously announced core and digital banking system conversion (a non-GAAP measurement), net income improved to $25.2 million, or $1.46 per diluted share, for the first quarter of 2026.

Diluted earnings per share increased $0.25, or approximately 21%, in the first quarter of 2026 compared to the first quarter of 2025 using this non-GAAP measure.

The first quarter of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.

The increase in net income during the first three months of 2026 compared to the respective prior-year period reflected growth in net interest income and noninterest income and a lower provision for credit losses, which more than offset a higher level of noninterest expense.

Net interest income increased as earning asset expansion and a decrease in the cost of funds outweighed a lower yield on earning assets and growth in interest-bearing liabilities.

The increase in noninterest income mainly reflected higher levels of treasury management fees, interest rate swap income, and mortgage banking income.

The negative provision for credit losses recorded during the first quarter of 2026 primarily reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations.

Excluding the previously mentioned one-time core and digital banking system conversion and acquisition costs, the increase in noninterest expense during the first three months of 2026 mainly reflected higher levels of salary and benefit and data processing costs and allocations to the reserve for unfunded loan commitments.

Interest income during the first quarter of 2026 was $85.4 million, an increase of $5.1 million, or 6.3%, from the $80.3 million earned during the first quarter of 2025.

We recorded net income of $25.9 million, or $1.50 per basic and diluted share, for the second quarter of 2026, compared with net income of $22.6 million, or $1.39 per basic and diluted share, for the second quarter of 2025.

We recorded net income of $48.6 million, or $2.82 per basic and diluted share, for the first six months of 2026, compared with net income of $42.2 million, or $2.60 per basic and diluted share, for the first six months of 2025.

Excluding after-tax one-time costs associated with the year-end 2025 acquisition of Eastern Michigan Financial Corporation and the previously announced core and digital banking system conversion (a non-GAAP measurement), net income improved to $26.4 million, or $1.53 per diluted share, for the second quarter of 2026, and $51.7 million, or $2.99 per diluted share, for the first six months of 2026.

Using these non-GAAP measures, earnings per diluted share increased $0.14, or 10.1%, in the second quarter of 2026, and $0.39, or 15.0%, in the first six months of 2026, compared to the respective 2025 periods.

The increases in net income during the 2026 periods compared to the respective 2025 periods primarily reflected growth in net interest income and lower provisions for credit losses, which more than offset increased levels of noninterest expense.

Higher levels of noninterest income, mainly reflecting growth in treasury management fees, bank owned life insurance income, and payroll services fees, also contributed to the increases in net income in the 2026 periods.

Net interest income increased as earning asset expansion and decreases in the costs of funds outweighed lower yields on earning assets and growth in interest-bearing liabilities.

The negative provision expense recorded during the second quarter of 2026 primarily reflected the elimination of a $2.7 million specific allocation associated with the resolution of a nonperforming commercial construction loan, while the negative provision expense recorded during the first six months of 2026 mainly reflected a decline in specific allocations and changes in loan mix.

Excluding the previously mentioned one-time core and digital banking system conversion and acquisition costs, the increases in noninterest expense during the 2026 periods primarily reflected higher salary and benefit costs, cost inflation, and increased costs of a larger balance sheet and branch network.

Interest income during the second quarter of 2026 was $86.7 million, an increase of $4.7 million, or 5.8%, from the $82.0 million earned during the second quarter of 2025.

The increase resulted from growth in average earning assets, which more than offset a lower yield on average earning assets.

Average earning assets equaled $6.42 billion during the first three months of 2026, up $719 million, or 12.6%, from the level of $5.70 billion during the respective 2025 period;

average loans were up $199 million, average securities increased $357 million, and average other interest-earning assets grew $163 million.

The yield on average earning assets was 5.42% during the first three months of 2026, a decrease from 5.73% during the first three months of 2025.

The lower yield mainly stemmed from a reduced yield on loans and a change in earning asset mix, which more than offset an improved yield on securities resulting from the reinvestment of relatively low-yielding bonds and portfolio expansion activities, along with the positive impact resulting from the addition of Eastern Michigan Bank’s securities portfolio.

The yield on loans was 6.04% during the first quarter of 2026, down from 6.28% during the first quarter of 2025, primarily due to reduced interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) lowering the targeted federal funds rate.

Average earning assets equaled $6.43 billion during the second quarter of 2026, up $699 million, or 12.2%, from the level of $5.73 billion during the prior-year second quarter; average securities increased $325 million, average loans were up $196 million, and average other interest-earning assets grew $178 million.

The yield on average earning assets was 5.42% during the current-year second quarter, a decline from 5.75% during the respective 2025 period.

The decreased yield largely stemmed from a lower yield on loans and a change in earning asset mix, which more than offset an improved yield on securities resulting from the reinvestment of relatively low-yielding bonds and portfolio expansion activities, along with the positive impact resulting from the addition of Eastern Michigan Bank’s securities portfolio.

The yield on loans was 6.01% during the second quarter of 2026, down from 6.29% during the second quarter of 2025, mainly due to reduced interest rates on variable-rate commercial loans resulting from the Federal Open Market Committee (“FOMC”) lowering the targeted federal funds rate.

The FOMC decreased the targeted federal funds rate by 25 basis points in each of September, October, and December of 2025, during which time average variable-rate commercial loans represented approximately 77% of average total commercial loans.

Denoting the success of a strategic initiative to lower the loan-to-deposit ratio and increase on-balance sheet liquidity and reflecting the impact of Eastern Michigan Bank’s liquid balance sheet, higher-yielding loans represented a decreased percentage of earning assets and lower-yielding securities accounted for an increased percentage of earning assets in the first quarter of 2026 compared to the first quarter of 2025.

The yield on securities equaled 3.27% during the first quarter of 2026, up from 2.73% during the prior-year first quarter.

The yield on other interest-earning assets, largely consisting of funds on deposit with the Federal Reserve Bank of Chicago, declined from 4.80% during the first three months of 2025 to 4.00% during the respective 2026 period, reflecting the decreased interest rate environment.

Interest expense during the first quarter of 2026 was $29.5 million, a decrease of $2.3 million, or 7.1%, from the $31.8 million expensed during the first quarter of 2025.

The lower level of interest expense resulted from a decrease in the weighted average cost of average interest-bearing liabilities, which more than offset growth in these funds.

The average weighted cost of interest-bearing liabilities declined from 3.08% during the first quarter of 2025 to 2.54% during the first quarter of 2026 mainly due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment.

An increase in low-cost deposit products as a percentage of total funding sources, primarily stemming from the onboarding of Eastern Michigan Bank’s deposit base, also contributed to the reduced weighted average cost of average interest-bearing liabilities.

During the first three months of 2026, average interest-bearing liabilities totaled $4.71 billion, up $529 million, or 12.6%, from $4.18 billion during the respective 2025 period.

Net interest income during the first quarter of 2026 was $55.9 million, an increase of $7.4 million, or 15.1%, from the $48.5 million earned during the first quarter of 2025.

The increase reflected growth in earning assets, along with a higher net interest margin.

The net interest margin was 3.55% in the current-year first quarter, up from 3.47% in the first quarter of 2025 due to a decreased cost of funds, which more than offset a lower yield on average earning assets.

The cost of funds equaled 1.87% in the first quarter of 2026, down from 2.26% in the prior-year first quarter mainly due to lower costs of money market accounts and time deposits, largely reflecting the decreased interest rate environment, and a higher level of low-cost deposit products primarily stemming from the addition of Eastern Michigan Bank’s deposit base.

The following table sets forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflects the average yield on assets and average cost of liabilities for the first quarters of 2026 and 2025.

Reflecting a strategic initiative to lower the loan-to-deposit ratio and the impact of Eastern Michigan Bank’s liquid balance sheet, relatively higher-yielding loans represented a decreased percentage of earning assets and relatively lower-yielding securities accounted for an increased percentage of earning assets in the second quarter of 2026 compared to the second quarter of 2025.

The yield on securities equaled 3.36% during the second quarter of 2026, up from 2.82% during the prior-year second quarter.

The yield on other interest-earning assets, primarily consisting of funds on deposit with the Federal Reserve Bank of Chicago, declined from 4.91% during the second quarter of 2025 to 4.04% during the respective 2026 period, reflecting the decreased interest rate environment.

Interest income during the first six months of 2026 was $172 million, an increase of $9.8 million, or 6.1%, from the $162 million earned during the first six months of 2025.

The increase resulted from a higher level of average earning assets, which more than offset a reduced yield on average earning assets.

Average earning assets equaled $6.42 billion during the first six months of 2026, up $709 million, or 12.4%, from the level of $5.72 billion during the respective 2025 period; average securities grew $341 million, average loans increased $198 million, and average other interest-earning assets were up $170 million.

The yield on average earning assets was 5.42% during the first six months of 2026, a decline from 5.75% during the first six months of 2025.

The lower yield primarily resulted from a reduced yield on loans and a change in earning asset mix, which more than offset a higher yield on securities resulting from the reinvestment of relatively low-yielding bonds and portfolio expansion activities, along with the positive impact stemming from the addition of Eastern Michigan Bank’s securities portfolio.

The yield on loans was 6.02% during the first six months of 2026, down from 6.29% during the first six months of 2025, mainly due to lower interest rates on variable-rate commercial loans resulting from the FOMC decreasing the targeted federal funds rate.

The FOMC reduced the targeted federal funds rate by 25 basis points in each of September, October, and December of 2025, during which time average variable-rate commercial loans represented approximately 77% of average total commercial loans.

Exhibiting a strategic plan to lower the loan-to-deposit ratio and the impact of Eastern Michigan Bank’s liquid balance sheet, relatively higher-yielding loans represented a decreased percentage of earning assets and relatively lower-yielding securities accounted for an increased percentage of earning assets in the first six months of 2026 compared to the respective 2025 period.

The yield on securities equaled 3.31% during the first six months of 2026, up from 2.78% during the first six months of 2025.

The yield on other interest-earning assets, largely consisting of funds on deposit with the Federal Reserve Bank of Chicago, declined from 4.85% during the first six months of 2025 to 4.02% during the first six months of 2026, reflecting the decreased interest rate environment.

Interest expense during the second quarter of 2026 was $29.4 million, a decrease of $3.1 million, or 9.4%, from the $32.5 million expensed during the second quarter of 2025.

The lower level of interest expense resulted from a decline in the weighted average cost of average interest-bearing liabilities, which more than offset growth in the average balance of these funds.

The weighted average cost of average interest-bearing liabilities declined from 3.09% during the second quarter of 2025 to 2.53% during the second quarter of 2026 mainly due to lower rates paid on money market accounts and time deposits, reflecting the decreased interest rate environment.

An increase in low-cost deposit products as a percentage of total funding sources, primarily stemming from the addition of Eastern Michigan Bank’s deposit base, and a reduction in brokered deposits also contributed to the reduced cost of funds.

The latter reflects a strategy to refine the deposit base whereby the reliance on the brokered deposit market and other higher-priced deposit-only relationships is reduced.

Average interest-bearing liabilities totaled $4.66 billion during the second quarter of 2026, compared to $4.21 billion during the prior-year second quarter, representing an increase of $450 million, or 10.7%.

MERCANTILE BANK CORPORATION

Interest expense during the first six months of 2026 was $59.0 million, a decrease of $5.3 million, or 8.3%, from the $64.3 million expensed during the first six months of 2025.

The decreased interest expense reflected a reduction in the weighted average cost of average interest-bearing liabilities, which more than offset growth in the average balance of these funds.

The weighted average cost of average interest-bearing liabilities decreased from 3.09% during the first six months of 2025 to 2.54% during the first six months of 2026 mainly due to reduced rates paid on money market accounts and time deposits, reflecting the lower interest rate environment.

An increase in low-cost deposit products as a percentage of total funding sources, largely stemming from the onboarding of Eastern Michigan Bank’s deposit base, and a decrease in brokered deposits also contributed to the reduced cost of funds.

The latter reflects the previously mentioned strategy to reduce reliance on the brokered deposit market and other higher-priced deposit-only relationships.

Average interest-bearing liabilities totaled $4.69 billion during the first six months of 2026, compared to $4.20 billion during the respective 2025 period, representing an increase of $490 million, or 11.7%.

Net interest income during the second quarter of 2026 was $57.3 million, an increase of $7.8 million, or 15.7%, from the $49.5 million earned during the respective 2025 period.

The increase reflected growth in earning assets and an improved net interest margin.

The net interest margin was 3.59% in the current-year second quarter, up from 3.48% in the second quarter of 2025 due to a decline in the cost of funds, which more than offset a decreased yield on average earning assets.

The cost of funds equaled 1.83% in the second quarter of 2026, down from 2.27% in the prior-year second quarter primarily due to lower costs of money market accounts and time deposits, reflecting the decreasing interest rate environment, and an increase in low-cost deposits as a percentage of total funding sources.

The lower yield on average earning assets mainly resulted from a decreased yield on commercial loans, largely reflecting the impact of the previously mentioned FOMC rate cuts, and a change in earning asset mix resulting from the aforementioned strategic initiative to lower the loan-to-deposit ratio.

Net interest income during the first six months of 2026 was $113 million, an increase of $15.1 million, or 15.4%, from the $98.0 million earned during the first six months of 2025.

The increase reflected earning asset expansion and a higher net interest margin.

The net interest margin was 3.57% in the first six months of 2026, up from 3.48% in the respective 2025 period due to a decreased cost of funds, which more than offset a lower yield on average earning assets.

The cost of funds equaled 1.85% in the first six months of 2026, down from 2.27% in the first six months of 2025 primarily due to decreased costs of money market accounts and time deposits, reflecting the lower interest rate environment, and an increase in low-cost deposits as a percentage of total funding sources.

The reduced yield on average earning assets mainly stemmed from a decreased yield on commercial loans, primarily reflecting the impact of the previously mentioned FOMC rate cuts, and a change in earning asset mix resulting from the aforementioned strategic plan to lower the loan-to-deposit ratio.

The following tables set forth certain information relating to our consolidated average interest-earning assets and interest-bearing liabilities and reflect the average yield on assets and average cost of liabilities for the second quarters and first six months of 2026 and 2025.

Such yields and costs are derived by dividing income or expense by the average daily balance of assets or liabilities, respectively, for the period presented.

Tax-exempt securities interest income and yield for the first three months of 2026 and 2025 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%.

Securities interest income was increased by $300,000 and $255,000 in the first quarters of 2026 and 2025, respectively, for this non-GAAP, but industry standard, adjustment.

These adjustments equated to increases in our net interest margin of approximately two basis points for the first quarters of 2026 and 2025.

Tax-exempt securities interest income and yield for the second quarters and first six months of 2026 and 2025 have been computed on a tax equivalent basis using a marginal tax rate of 21.0%.

Securities interest income was increased by $300,000 and $255,000 in the second quarters of 2026 and 2025, respectively, and $600,000 and $510,000 in the first six months of 2026 and 2025, respectively, for this non-GAAP, but industry standard, adjustment.

These adjustments equated to increases in our net interest margin of approximately two basis points for each of the 2026 and 2025 periods.

MERCANTILE BANK CORPORATION

Quarters ended March 31,

Quarters ended June 30,

(dollars in thousands)

18 unchanged sentences

MERCANTILE BANK CORPORATION

We recorded a negative provision for credit losses of $1.8 million during the first quarter of 2026, compared to a positive provision for credit losses of $2.1 million during the first quarter of 2025.

The negative provision expense recorded during the current-year first quarter mainly reflected improvements to the economic forecast, changes in loan mix, decreases to the residential mortgage loan portfolio, and a decline in specific allocations, which reduced the calculated allowance for credit losses by $0.6 million, $0.4 million, $0.2 million, and $0.2 million, respectively.

Noninterest income totaled $11.7 million during the first quarter of 2026, up $3.0 million, or 34.3%, from $8.7 million during the prior-year first quarter.

The increase mainly reflected higher levels of treasury management fees, interest rate swap income, mortgage banking income, bank owned life insurance income, and payroll services fees.

The increases in treasury management and payroll services fees primarily resulted from new commercial client acquisitions and effective marketing endeavors leading to customers’ amplified use of products and services, as well as a modified fee schedule.

The growth in interest rate swap income mainly reflected a higher volume of new swap transactions, while the increase in mortgage banking income largely resulted from higher production and an increased percentage of loans originated with the intent to sell.

Noninterest income during the first three months of 2026 included $0.4 million in interest from the Internal Revenue Service on federal income tax payments made during 2024 that were subsequently refunded due to offsetting purchased energy tax credits.

Noninterest expense totaled $42.1 million during the first quarter of 2026, compared to $31.1 million during the first quarter of 2025.

The increase in noninterest expense mainly resulted from higher salary and benefit costs, largely reflecting annual merit pay increases, market adjustments, a larger bonus accrual, increased health insurance costs, higher payroll taxes, larger residential mortgage lender commissions and incentives, lower residential mortgage loan deferred salary costs, and increased stock-based compensation costs.

The remaining increase in noninterest expense during the first three months of 2026 primarily reflected cost inflation and the increased cost of a larger balance sheet and branch network.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million during the first quarter of 2026, including salary and benefit costs of $1.7 million, core deposit intangible asset amortization of $0.9 million, and data processing costs of $0.4 million.

During the first quarter of 2026, we recorded income before federal income tax of $27.3 million and federal income tax expense of $4.6 million.

During the first quarter of 2025, we recorded income before federal income tax of $24.0 million and federal income tax expense of $4.5 million.

The $0.1 million increase in federal income tax expense primarily resulted from a higher level of income before federal income tax.

The acquisition of transferable energy tax credits and the net benefits from low-income housing and historic tax credit investments provided for aggregate tax benefits of $0.8 million and $0.3 million during the first three months of 2026 and 2025, respectively.

The recording of the tax benefits positively impacted our effective tax rate, which equaled 16.9% during the first quarter of 2026, down from 18.8% during the prior-year first quarter.

Six months ended June 30,

(dollars in thousands)

Investment securities

Other interest-earning assets

Total interest - earning assets

Allowance for credit losses

LIABILITIES AND SHAREHOLDERS’ EQUITY

Interest-bearing deposits

Short-term borrowings

Federal Home Loan Bank advances

Other borrowings

Total interest-bearing liabilities

Noninterest-bearing deposits

Other liabilities

Shareholders’ equity

Total liabilities and shareholders’ equity

Net interest income

Net interest rate spread

Net interest spread on average assets

Net interest margin on earning assets

MERCANTILE BANK CORPORATION

We recorded negative provisions for credit losses of $1.8 million and $3.6 million during the second quarter and first six months of 2026, respectively, and positive provisions for credit losses of $1.6 million and $3.7 million during the respective 2025 periods.

The negative provision expense recorded during the current-year second quarter mainly reflected the elimination of a $2.7 million specific allocation associated with the resolution of a nonperforming commercial construction loan, which was partially offset by changes in the economic forecast, allocations necessitated by net loan growth, and an increase in qualitative factor allocations.

The negative provision expense recorded during the first six months of 2026 primarily reflected a decline in specific allocations and changes in loan mix, which more than offset allocations necessitated by changes in qualitative factors and net loan growth.

The positive provision expense recorded during the second quarter of 2025 mainly reflected an individual allocation of $2.5 million associated with a commercial construction loan relationship that was placed on nonaccrual during the quarter and allocations of $0.7 million necessitated by net loan growth, which more than offset an aggregate reduction of $1.0 million in individual allocations related to nonperforming loan relationships resulting from full payoffs and partial paydowns.

The positive provision expense recorded during the first six months of 2025 primarily reflected a net increase in individual allocations driven by the aforementioned commercial construction loan that was placed on nonaccrual during the second quarter, allocations necessitated by net loan growth, and the net impact of changes to the economic forecast.

Noninterest income totaled $11.5 million during the second quarter of 2026, up slightly from the level recorded during the prior-year second quarter.

Noninterest income totaled $23.2 million during the first six months of 2026, up $3.0 million, or 15.0%, from $20.2 million during the first six months of 2025.

The increases in noninterest income in the 2026 periods mainly reflected growth in treasury management fees, bank owned life insurance income, and payroll services fees.

The increases in treasury management and payroll services fees largely resulted from new commercial customer acquisitions and customers’ expanded use of products and services, as well as a modified fee schedule.

Reductions in mortgage banking income, primarily stemming from changes in the quarter-end fair values of commitments to originate salable residential mortgage loans, accelerated mortgage servicing rights amortization, and lower percentages of loans originated with the intent to sell, and interest rate swap income, mainly reflecting lower levels of new swap transactions, negatively impacted noninterest income in the 2026 periods.

Noninterest income during the first six months of 2026 included $0.4 million in interest from the Internal Revenue Service on federal income tax payments made during 2024 that were subsequently refunded due to offsetting purchased energy tax credits.

Eastern Michigan Bank generated $0.6 million and $1.1 million in noninterest income during the second quarter and first six months of 2026, respectively, primarily consisting of deposit service charges and bank owned life insurance income.

Noninterest expense totaled $39.4 million during the second quarter of 2026, compared to $33.4 million during the prior-year second quarter.

Noninterest expense totaled $81.5 million during the first six months of 2026, compared to $64.5 million during the first six months of 2025.

Excluding non-recurring costs aggregating $0.5 million and $3.5 million related to the core and digital banking system conversion and $0.1 million and $0.4 million associated with the acquisition of Eastern Michigan Financial Corporation during the second quarter and first six months of 2026, respectively, noninterest expense increased $5.4 million, or 16.1%, during the current-year second quarter and $13.1 million, or 20.4%, during the first six months of 2026 compared to the respective 2025 periods using these non-GAAP measurements.

The increases in noninterest expense mainly resulted from higher salary and benefit costs, largely reflecting annual merit pay increases and market adjustments and increased bonus accruals, residential mortgage lender commissions and incentives, health insurance costs, payroll taxes, stock-based compensation, and retirement costs.

The remaining rises in noninterest expense primarily reflected cost inflation and the increased costs of a larger balance sheet and branch network.

A $1.4 million decrease in allocations to the reserve for unfunded loan commitments, mainly reflecting a lower level of commercial loan commitments that have been accepted by customers, positively impacted noninterest expense during the second quarter of 2026.

Eastern Michigan Bank’s noninterest expense totaled $4.0 million and $8.0 million during the second quarter and first six months of 2026, respectively, including salary and benefit costs of $1.8 million and $3.5 million, core deposit intangible asset amortization of $0.9 million and $1.7 million, and data processing costs of $0.4 million and $0.8 million during the respective periods.

During the second quarter of 2026, we recorded income before federal income tax of $31.2 million and federal income tax expense of $5.3 million.

During the second quarter of 2025, we recorded income before federal income tax of $26.0 million and federal income tax expense of $3.4 million.

During the first six months of 2026, we recorded income before federal income tax of $58.5 million and federal income tax expense of $9.9 million.

During the first six months of 2025, we recorded income before federal income tax of $50.0 million and federal income tax expense of $7.8 million.

The increases in federal income tax expense during the 2026 periods primarily resulted from higher levels of income before federal income tax.

The acquisition of transferable energy tax credits and the net benefits from low-income housing and historic tax credit investments provided for aggregate tax benefits of $0.8 million and $1.8 million during the second quarters of 2026 and 2025, respectively, and $1.6 million and $2.0 million during the first six months of 2026 and 2025, respectively.

The recording of the tax benefits positively impacted our effective tax rate, which equaled 16.9% and 12.9% during the second quarters of 2026 and 2025, respectively, and 16.8% and 15.7% during the first six months of 2026 and 2025, respectively.

MERCANTILE BANK CORPORATION

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What changed 10-Q

Item 1. Financial Statements