Mercantile Bank Corp. Files 10-Q for Q1 2024

TL;DR

<b>Mercantile Bank Corp. reported $16.12 billion in assets and $16.13 billion in debt for Q1 2024.</b>

AI Summary

MERCANTILE BANK CORP (MBWM) filed a Quarterly Report (10-Q) with the SEC on May 3, 2024. Total assets were $16,122,503,000 as of March 31, 2024. Total debt was $16,125,662,000 as of March 31, 2024. Revenue from Service Charges on Deposit and Sweep Accounts Member was $203,000 for Q1 2024. Revenue from Credit and Debit Card Member was $500,000 for Q1 2024. Net income was $16,122,503 for the period ending March 31, 2024.

Why It Matters

For investors and stakeholders tracking MERCANTILE BANK CORP, this filing contains several important signals. The filing provides a detailed look at Mercantile Bank Corp.'s financial position and performance for the first quarter of 2024, including asset and liability breakdowns. Key revenue streams such as service charges and credit/debit card fees are disclosed, offering insight into the bank's operational income generation.

Risk Assessment

Risk Level: medium — MERCANTILE BANK CORP shows moderate risk based on this filing. The company's debt ($16.125 billion) is nearly equal to its total assets ($16.122 billion), indicating a high leverage ratio which could pose financial risk.

Analyst Insight

Investors should monitor Mercantile Bank Corp.'s debt-to-asset ratio and net interest margin in future filings to assess financial stability.

Financial Highlights

total Assets

16,122,503,000

total Debt

16,125,662,000

net Income

16,122,503

eps

0.35

Revenue Breakdown

Key Numbers

• 16,122,503,000 — Total Assets (As of March 31, 2024)
• 16,125,662,000 — Total Debt (As of March 31, 2024)
• 203,000 — Service Charges on Deposit and Sweep Accounts Revenue (Q1 2024)
• 500,000 — Credit and Debit Card Revenue (Q1 2024)
• 16,122,503 — Net Income (For the period ending March 31, 2024)

Key Players & Entities

• MERCANTILE BANK CORP (company) — Filer name
• MBWM (company) — Ticker symbol
• 2024-05-03 (date) — Filing date
• 2024-03-31 (date) — Period end date
• 616 406-3000 (phone) — Business phone number

FAQ

Risk Factors

• High Leverage Ratio [high — financial]: The company's total debt of $16,125,662,000 is nearly equal to its total assets of $16,122,503,000 as of March 31, 2024, indicating a high degree of financial leverage.

Key Dates

• 2024-05-03: 10-Q Filing — Report of financial performance for Q1 2024.
• 2024-04-11: Earnings Release Date — Indicates when preliminary Q1 2024 results were likely announced.

Filing Documents

• mbwm20240331_10q.htm (10-Q) — 3381KB
• ex_639699.htm (EX-31) — 18KB
• ex_639700.htm (EX-32.1) — 5KB
• ex_639701.htm (EX-32.2) — 5KB
• 0001437749-24-014488.txt (&nbsp;) — 16232KB
• mbwm-20240331.xsd (EX-101.SCH) — 79KB
• mbwm-20240331_cal.xml (EX-101.CAL) — 65KB
• mbwm-20240331_def.xml (EX-101.DEF) — 568KB
• mbwm-20240331_lab.xml (EX-101.LAB) — 475KB
• mbwm-20240331_pre.xml (EX-101.PRE) — 610KB
• mbwm20240331_10q_htm.xml (XML) — 4548KB

Financial Statements

Item 1. Financial Statements Consolidated Balance Sheets (Unaudited) – March 31, 2024 and December 31, 2023 1 Consolidated Statements of Income (Unaudited) - Three Months Ended March 31, 2024 and March 31, 2023 2 Consolidated Statements of Comprehensive Income (Unaudited) - Three Months Ended March 31, 2024 and March 31, 2023 3 Consolidated Statements of Changes in Shareholders' Equity (Unaudited) – Three Months Ended March 31, 2024 and March 31, 2023 4 Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended March 31, 2024 and March 31, 2023 6

Notes to Consolidated Financial Statements (Unaudited)

Notes to Consolidated Financial Statements (Unaudited) 8

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 43

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 58

Controls and Procedures

Item 4. Controls and Procedures 60 PART II. Other Information

Legal Proceedings

Item 1. Legal Proceedings 61

Risk Factors

Item 1A. Risk Factors 61

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 61

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 61

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 61

Other Information

Item 5. Other Information 61

Exhibits

Item 6. Exhibits 62

Signatures

Signatures 63 Table of Contents MERCANTILE BANK CORPORATION

--- FINANCIAL INFORMATION

PART I --- FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, (Dollars in thousands) 2024 2023 ASSETS Cash and due from banks $ 52,606 $ 70,408 Interest-earning deposits 184,625 60,125 Total cash and cash equivalents 237,231 130,533 Securities available for sale 609,153 617,092 Federal Home Loan Bank stock 21,513 21,513 Mortgage loans held for sale 14,393 18,607 Loans 4,322,006 4,303,758 Allowance for credit losses ( 51,638 ) ( 49,914 ) Loans, net 4,270,368 4,253,844 Premises and equipment, net 50,835 50,928 Bank owned life insurance 85,528 85,668 Goodwill 49,473 49,473 Other assets 127,459 125,566 Total assets $ 5,465,953 $ 5,353,224 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Noninterest-bearing $ 1,134,995 $ 1,247,640 Interest-bearing 2,872,815 2,653,278 Total deposits 4,007,810 3,900,918 Securities sold under agreements to repurchase 228,618 229,734 Federal Home Loan Bank advances 447,083 467,910 Subordinated debentures 49,815 49,644 Subordinated notes 89,057 88,971 Accrued interest and other liabilities 106,926 93,902 Total liabilities 4,929,309 4,831,079 Commitments and contingent liabilities (Note 8) Shareholders' equity Preferred stock, no par value; 1,000,000 shares authorized; none issued 0 0 Common stock, no par value; 40,000,000 shares authorized; 16,122,503 shares issued and outstanding at March 31, 2024 and 16,125,662 shares issued and outstanding at December 31, 2023 296,065 295,106 Retained earnings 293,554 277,526 Accumulated other comprehensive gain (loss) ( 52,975 ) ( 50,487 ) Total shareholders' equity 536,644 522,145 Total liabilities and shareholders' equity $ 5,465,953 $ 5,353,224 See accompanying notes to consolidated financial statements. 1 Table of Contents MERCANTILE BANK CORPORATION CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Three Months Ended Ended (Dollars in thousands exc

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation : The unaudited financial statements for the three months ended March 31, 2024 include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries. These subsidiaries include Mercantile Community Partners, LLC ("MCP") and Mercantile Bank ("our bank") and its subsidiaries, including Mercantile Insurance Center, Inc. These consolidated financial statements have been prepared in accordance with the instructions for Form 10 -Q and Item 303 (b) of Regulation S-K and do not include all disclosures required by accounting principles generally accepted in the United States of America ("GAAP") for a complete presentation of our financial condition and results of operations. 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, 2024 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, 2023 . We have five separate business trusts that were formed to issue trust preferred securities. Subordinated debentures were issued to the trusts in return for the proceeds raised from the issuance of the trust preferred securities. The trusts are not consolidated, but instead we report the subordinated debentures issued to the trusts as a liability. Earnings Per Share : Basic earnings per share is based on the weighted average number of common shares and participating securities outstanding during the period. Diluted earnings per share include the dilutive effect of additional potential common shares iss

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Debt Securities : Debt securities classified as held to maturity are carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities available for sale consist of bonds which might be sold prior to maturity due to a number of factors, including changes in interest rates, prepayment risks, yield, availability of alternative investments or liquidity needs. Debt securities classified as available for sale are reported at their fair value. For available for sale debt securities in an unrealized loss position, we first assess whether we intend to sell, or if it is more likely than not that we will be required to sell the security before recovery of the amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the debt security's amortized cost basis is written down to fair value through income with the establishment of an allowance. For debt securities available for sale that do not meet the aforementioned criteria, we evaluate whether any decline in fair value is due to credit loss factors. In making this assessment, we consider any changes to the rating of the security by a rating agency and adverse conditions specifically related to the issuer of the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance is recognized in other comprehensive income (loss). Changes in the allowance are recorded as pr

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Loans Held for Sale : Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings. As of March 31, 2024 and December 31, 2023 , we determined that the fair value of our mortgage loans held for sale totaled $ 14.6 million and $ 19.0 million, respectively. Mortgage loans held for sale are generally sold with servicing rights retained. Gains and losses on sales of mortgage loans are based on the difference between the selling price, which includes a gain or loss on the interest rate commitment coverage position, and the carrying value of the related loan sold, which is reduced by the cost allocated to the servicing right. Market rate risk on interest rate commitments with borrowers prior to loan closing is mitigated through forward commitments referred to as to-be-announced mortgage-backed securities. These mortgage banking activities are not designated as hedges and are carried at fair value. The net gain or loss on mortgage banking derivatives, which is generally nominal in dollar amount, is included in the gain on sale of loans and recorded as part of mortgage banking income. Allowance for Credit Losses ( "a llowance " ) : The allowance is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. The allowance is increased by a provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off. Loans are charged-off against the allowance when we believe the uncollectability of a loan balance is confirmed. The allowance is measured on a collective pool basis when similar risk characteristics exist and on an individual basis

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES (Continued) Our qualitative factors include: o Changes in lending policies and procedures o Changes in the nature and volume of the loan portfolio and in the terms of loans o Changes in the experience, ability and depth of lending management and other relevant staff o Changes in the volume and severity of past due loans, nonaccrual loans and adversely classified loans o Changes in the quality of the loan review program o Changes in the value of underlying collateral dependent loans o Existence and effect of any concentrations of credit and any changes in such o Effect of other factors such as competition and legal and regulatory requirements o Local or regional conditions that depart from the conditions and forecasts for the entire country The estimation of future credit losses should reflect consideration of all significant factors that affect the collectability of the loan portfolio at each evaluation date. While our methodology considers both the historical loss rates as well as the traditional qualitative factors, there may be instances or situations where additional qualitative factors need to be considered. Effective January 1, 2022, we established a historical loss information factor to address the relatively low level of loan losses during the look-back period. We recorded a provision for credit losses of $ 1.3 million during the first three months of 2024 . The provision for credit losses recorded during the current-year first quarter primarily reflected an individual allocation for a nonperforming commercial loan relationship, allocations necessitated by net loan growth, and a change in the historical loss information qualitative factor for commercial loans, which more than offset the impacts of an improved economic forecast and changes to the loan portfolio composition. Accrued interest receivable on loans totaling $ 17.4 million and $ 16.9 million as

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. 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. The allowance is calculated on an individual loan basis based on th

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