Financial Analysis

"13. BUSINESS COMBINATIONS On December 31, 2025, Mercantile completed its acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, in accordance with the Agreement and Plan of Merger, as amended (the ""Merger Agreement"") by and between Mercantile, Eastern Michigan Financial Corporation, and Shamrock Merger Sub LLC, a wholly owned special purpose subsidiary of Mercantile (Merger Sub), entered into on July 22, 2025. Pursuant to the Merger Agreement, Eastern Michigan Financial Corporation merged with and into Merger Sub, with Merger Sub continuing as the surviving entity (the Merger). Immediately following the Merger, and also effective as of December 31, 2025, Merger Sub merged with and into Mercantile, with Mercantile continuing as the surviving entity. The newly acquired Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank. Mercantile accounted for the Eastern Michigan Financial Corporation acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations (""ASC 805"" ). ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values as of the date of acquisition. Mercantile determined the fair value of loans, core deposit intangibles, mortgage servicing rights, time deposits, and re …

BusinessCombinationDisclosureTextBlock · excerpt; the full note is in the filing

7. OTHER BORROWINGS FHLBI bullet advances totaled $280 million at June 30, 2026 , and were scheduled to mature at varying dates from September 2026 through April 2031 , with fixed rates of interest from 0.95% to 4.50% and averaging 3.41%. FHLBI bullet advances totaled $300 million at December 31, 2025 , and were scheduled to mature at varying dates from January 2026 through June 2030 , with fixed rates of interest from 0.90% to 4.50% and averaging 3.27%. Maturities of FHLBI bullet advances as of June 30, 2026 , were as follows: (Dollars in thousands) 2026 $ 30,000 2027 100,000 2028 90,000 2029 10,000 2030 20,000 Thereafter 30,000 FHLBI amortizing advances totaled $25.3 million as of June 30, 2026 , with an average rate of 2.52% and with final maturities in 2042 . FHLBI amortizing advances totaled $26.2 million as of December 31, 2025 , with an average rate of 2.52% and with final maturities in 2042 . FHLBI amortizing advances are obtained periodically to assist in managing interest rate risk associated with certain longer-term fixed rate commercial loans, with annual principal payments that closely align with the scheduled amortization of the underlying commercial loans. Scheduled principal payments on FHLBI amortizing advances as of June 30, 2026 , were as follows: (Dollars in thousands) 2026 $ 0 2027 938 2028 979 2029 1,021 2030 1,065 Thereafter 21,319 Each advance is payable at its maturity date and subject to a prepayment fee if paid prior to the maturity date. The advanc …

DebtDisclosureTextBlock · excerpt; the full note is in the filing

"8. STOCK-BASED COMPENSATION Stock-based compensation plans are used to provide directors and employees with an increased incentive to contribute to our long-term performance and growth, to align the interests of directors and employees with the interests of our shareholders through the opportunity for increased stock ownership and to attract and retain directors and employees. Stock-based compensation expense, reported as noninterest expense in the Consolidated Statements of Income, totaled $2.0 million and $1.7 million during the six months ended June 30, 2026, and 2025 , respectively. The Stock Incentive Plan of 2020 was approved by shareholders in May, 2020, and was effectively replaced with the Stock Incentive Plan of 2023 that was approved by shareholders in May, 2023. Under the Stock Incentive Plans of 2020 and 2023, incentive awards may include, but are not limited to, stock options, restricted stock, stock appreciation rights and stock awards. Price, vesting and expiration date parameters are determined by Mercantiles Compensation Committee on a grant-by-grant basis. No payments are required from employees for restricted stock awards. The restricted stock awards granted through the plan fully vest after three years and, in the case of performance-based restricted stock issued to executive officers issued under the plan, are subject to the attainment of pre-determined performance goals. A summary of restricted stock activity during the six months ended June 30, 2026 , …

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11. FAIR VALUES OF FINANCIAL INSTRUMENTS The carrying amounts, estimated fair values and level within the fair value hierarchy of financial instruments were as follows: Level in June 30, 2026 December 31, 2025 Fair Value Carrying Fair Carrying Fair (Dollars in thousands) Hierarchy Values Values Values Values Financial assets: Cash and cash equivalents Level 1 $ 340,931 $ 340,931 $ 473,324 $ 473,324 Securities available for sale (1) 1,125,529 1,125,529 1,102,230 1,102,230 FHLBI stock (2) 22,099 22,099 22,099 22,099 Loans, net Level 3 4,860,112 4,898,266 4,763,697 4,830,844 Mortgage loans held for sale Level 2 31,272 31,783 17,160 17,319 Accrued interest receivable Level 2 23,685 23,685 23,638 23,638 Interest rate swaps Level 2 16,923 16,923 23,212 23,212 Financial liabilities: Deposits Level 2 5,296,388 4,634,787 5,284,452 5,024,489 Securities sold under agreements to repurchase Level 2 217,470 217,470 232,291 232,291 FHLBI advances Level 2 305,322 297,864 326,221 321,069 Subordinated debentures Level 2 51,358 58,076 51,015 51,019 Subordinated notes Level 2 89,829 87,813 89,657 86,826 Term note Level 2 25,000 25,000 30,000 30,000 Accrued interest payable Level 2 7,208 7,208 9,921 9,921 Interest rate swaps Level 2 17,126 17,126 23,532 23,532 ( 1 ) See Note 12 for a description of the fair value hierarchy as well as a disclosure of levels for classes of financial assets and liabilities. ( 2 ) It is not practical to determine the fair value of FHLBI stock due to transferability r …

FairValueDisclosuresTextBlock · excerpt; the full note is in the filing

15. BUSINESS SEGMENT INFORMATION Pursuant to Financial Accounting Standards Codification 280, Segment Reporting, operating segments represent components of an enterprise for which separate financial information is available that is regularly evaluated by the chief operating decision makers in determining how to allocate resources and assessing performance. Prior to our acquisition of Eastern Michigan Financial Corporation on December 31, 2025, our chief operating decision makers, which include our Chief Executive Officer, Chief Financial Officer, and Chief Operating Officer, evaluated interest and noninterest income streams and credit losses from our various products and services, while expense activities, including interest expense and noninterest expense, were managed, and financial performance was evaluated, on a Company-wide basis. As a result, detailed profitability information for each interest and noninterest income stream was not used by our chief operating decision makers to allocate resources or in assessing performance. Rather, our chief operating decision makers used consolidated net income to assess performance by comparing it to and monitoring against budgeted and prior-year results. This information was used to manage resources to drive business and net income growth, including investment in key strategic priorities, as well as determine our ability to return capital to shareholders. Subsequent to our acquisition of Eastern Michigan Financial Corporation on Dec …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

"1. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation : The unaudited financial statements for the six months ended June 30, 2026 , include the consolidated results of operations of Mercantile Bank Corporation and its consolidated subsidiaries (unless text clearly suggests otherwise, collectively, ""we,"" ""us,"" ""our,"" ""the Company,"" and ""Mercantile""). These subsidiaries include Mercantile Bank and Eastern Michigan Bank (collectively ""our banks""), Mercantile Community Partners LLC (""MCP""), and Mercantile Insurance Center, Inc. (""our insurance company""), a subsidiary of Mercantile Bank. 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 June 30, 2026 , should not be considered as indicative of results for a full year. For further information, refer to the consolidated financial statements and footnotes included in our annual report on Form 10 -K for the year ende …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

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

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