MERCANTILE BANK CORP
For the period ended Jun 30, 2026. Filed Jul 31, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Jul 31, 2026
MBWM$60.57+0.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-01.
0001437749-26-014320
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-07-31.
0001437749-26-025168
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 78 previous paragraphs and 82 current paragraphs.
26 unchanged; 48 reworded; 7 added; 4 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 5 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (7)
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
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%.
Current report
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.
Current report
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.
Removed paragraphs (4)
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Reworded paragraphs (48)
Previous wording
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; our ability to maintain adequate levels of allowance for credit losses; adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and non-traditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches, and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the Covid-19 pandemic or similar public health threats, and measures implemented to combat them; and other risk factors, including those described in our annual report on Form 10-K for the year ended December 31, 2025. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.
Current wording
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; adverse changes in interest rates and interest rate relationships; increasing rates of inflation and slower growth rates or recession; significant declines in the value of commercial real estate; market volatility; demand for products and services; climate impacts; labor markets; the degree of competition by traditional and non-traditional financial services companies; changes in banking regulation or actions by bank regulators; changes in tax laws and other laws and regulations applicable to us; changes in prices, levies, and assessments; the impact of technological advances; potential cyber-attacks, information security breaches, and other criminal activities; litigation liabilities; governmental and regulatory policy changes; the outcomes of existing or future contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; damage to our reputation resulting from adverse publicity, regulatory actions, litigation, operational failures, and the failure to meet client expectations and other facts; changes in the national and local economies; unstable political and economic environments; disease outbreaks, such as the Covid-19 pandemic or similar public health threats, and measures implemented to combat them; and other risk factors, including those described in our annual report on Form 10-K for the year ended December 31, 2025. These are representative of the Future Factors that could cause a difference between an ultimate actual outcome and a forward-looking statement.
Previous wording
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). 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. 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. Management believes it is useful for the reader to review these non-GAAP adjusted measures alongside the GAAP measures. Our definition of these adjusted financial measures may differ from similarly named measures used by others. 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.
Current wording
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 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. Management believes it is useful for the reader to review these non-GAAP adjusted measures alongside the GAAP measures. Our definition of these adjusted financial measures may differ from similarly named measures used by others. 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.
Previous wording
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. This discussion should be read in conjunction with the interim consolidated financial statements and footnotes included in this report. Unless the text clearly suggests otherwise, references in this report to “us,” “we,” “our” or “the Company” include Mercantile Bank Corporation and its consolidated subsidiaries referred to above.
Current wording
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. Unless the text clearly suggests otherwise, references in this report to “us,” “we,” “our” or “the Company” include Mercantile Bank Corporation and its consolidated subsidiaries referred to above.
Previous wording
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. 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.
Current wording
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 six months of 2026 represented the initial period of financial performance that included Eastern Michigan Bank’s operating results.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
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. 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.
Current wording
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 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.
Previous wording
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.
Current wording
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.
Previous wording
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. 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.
Current wording
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 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.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
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. 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.
Current wording
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 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.
Previous wording
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.
Current wording
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. 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 during the first quarter of 2026.
Previous wording
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.
Current wording
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.
Previous wording
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 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. Our typical level of such payoffs and line paydowns average around $50 million per quarter.
Current wording
Our loan portfolio has historically been primarily comprised of commercial loans. 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. 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.
Previous wording
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.
Current wording
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.
Previous wording
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. Our current pipeline reports indicate continued strong commercial loan funding opportunities in future periods, including $289 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. Our commercial bankers also report additional opportunities they are currently discussing with existing borrowers and potential new customers. We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits, we have established within our commercial loan portfolio. Usage of existing commercial lines of credit averaged about 40% during the first three months of 2026, compared to approximately 44% during all of 2025.
Current wording
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. Our commercial bankers also report additional opportunities they are currently discussing with existing borrowers and potential new customers. We remain committed to prudent underwriting standards that provide for an appropriate yield and risk relationship, as well as concentration limits we have established within our commercial loan portfolio. Usage of existing commercial lines of credit averaged approximately 41% during the first six months of 2026, compared to approximately 44% during all of 2025.
Previous wording
Residential mortgage loans totaled $768 million, or 15.9% of total loans, as of March 31, 2026. 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 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.
Current wording
Residential mortgage loans totaled $751 million, or 15.3% of total loans, as of June 30, 2026. 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.
Previous wording
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. 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.
Current wording
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.
Previous wording
Our credit policies establish guidelines to manage credit risk and asset quality. These guidelines include loan review and early identification of problem loans to provide effective loan portfolio administration. The credit policies and procedures are 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. 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. Senior management and the Board of Directors review this list regularly. Market value estimates of collateral on nonperforming loans, as well as on foreclosed and repossessed assets, are reviewed periodically. We also have a process in place to monitor whether value estimates at each quarter end are reflective of current market conditions. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust outside and internal valuations based on identifiable trends within our markets, such as recent sales of similar properties or assets, listing prices and offers received. In addition, we may discount certain appraised and internal value estimates to address distressed market conditions.
Current wording
Our credit policies establish guidelines to manage credit risk and asset quality. These guidelines include loan review and early identification of problem loans to provide effective loan portfolio administration. The credit policies and procedures are meant to minimize the risk and uncertainties inherent in lending. In following these policies and procedures, we must rely on estimates, appraisals and evaluations of loans and the possibility that changes in these 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. Senior management and the Board of Directors review this list regularly. Market value estimates of collateral on nonperforming loans, as well as on foreclosed and repossessed assets, are reviewed periodically. We also have a process in place to monitor whether value estimates at each quarter-end are reflective of current market conditions. Our credit policies establish criteria for obtaining appraisals and determining internal value estimates. We may also adjust 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.
Previous wording
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 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 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. We continue our collection efforts on charged-off loans and expect to record recoveries in future periods; however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries.
Current wording
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. 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; however, given the nature of these efforts, it is not practical to forecast the dollar amount and timing of the recoveries.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
Securities available for sale increased $23.2 million during the first three months of 2026, totaling $1.13 billion as of March 31, 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. 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. Treasury and U.S. Government agency bonds (64%), municipal bonds (25%), U.S. Government agency guaranteed mortgage-backed securities (7%) and domestic bonds (4%). 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 net unrealized loss equaled $30.4 million as of December 31, 2025. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. We maintain the securities portfolio at levels to provide adequate pledging and secondary liquidity for our daily operations. In addition, the securities portfolio serves a primary interest rate risk management function. We expect any upcoming purchases to generally consist of U.S. Government agency bonds and municipal bonds, with the securities portfolio maintained at the current level of approximately 16% of total assets.
Current wording
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 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 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 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 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. After we considered whether the securities were issued by the federal government or its agencies and whether downgrades by bond rating agencies had occurred, we determined that the unrealized losses were due to changing interest rate environments. We maintain the securities portfolio at levels to provide adequate pledging and secondary liquidity for our daily operations. In addition, the securities portfolio serves a primary interest rate risk management function. We expect any upcoming purchases to generally consist of U.S. Government agency bonds and municipal bonds, with the securities portfolio maintained at the current level of approximately 16% of total assets.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
Total deposits increased $135 million during the first three months of 2026, totaling $5.42 billion as of March 31, 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. 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. The deposit balance increases reflect new deposit account relationships and additional funds from existing deposit customers, largely from business and public units.
Current wording
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.
Previous wording
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. 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.
Current wording
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.
Previous wording
Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 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. 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.
Current wording
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 $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.
Previous wording
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. 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.
Current wording
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 our bank, under a blanket lien arrangement. Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $847 million, as of June 30, 2026.
Previous wording
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. 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 $1.2 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.
Current wording
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. 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.
Previous wording
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. 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. Asset and liability management is the process of managing our balance sheet to achieve a mix of earning assets and liabilities that maximize profitability, while providing adequate liquidity.
Current wording
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 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. Asset and liability management is the process of managing our balance sheet to achieve a mix of earning assets and liabilities that maximize profitability, while providing adequate liquidity.
Previous wording
To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources. 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.
Current wording
To assist in providing needed funds and managing interest rate risk, we periodically obtain monies from wholesale funding sources. 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.
Previous wording
Sweep accounts decreased $12.8 million during the first quarter of 2026, totaling $220 million as of March 31, 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. 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.
Current wording
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 $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 our repurchase agreements are accounted for as secured borrowings.
Previous wording
Information regarding our repurchase agreements as of March 31, 2026, and during the first three months of 2026 is as follows:
Current wording
Information regarding our repurchase agreements as of June 30, 2026, and during the first six months of 2026 is as follows:
Previous wording
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. 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.
Current wording
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 our bank, under a blanket lien arrangement. Our borrowing line of credit totaled $1.16 billion, with remaining availability based on collateral equaling $847 million, as of June 30, 2026.
Previous wording
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. 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.
Current wording
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. 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 $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.
Previous wording
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. Of the total unfunded loan commitments, $2.18 billion were commitments available as lines of credit to be drawn at any time as customers’ cash needs vary, and $289 million were for loan commitments generally expected to close and become funded within the next 12 to 18 months. We regularly monitor fluctuations in loan balances and commitment levels and include such data in our overall liquidity management.
Current wording
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 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. We regularly monitor fluctuations in loan balances and commitment levels and include such data in our overall liquidity management.
Previous wording
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. 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 $1.2 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.
Current wording
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. 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.
Previous wording
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.”
Current wording
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 13.5% 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.”
Showing the first 40 of 48 pairs. Open the source sections for the rest.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
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.