Mercantile Bank Corp. Reports Robust Q3 2025 Performance

Growth in net interest income and certain noninterest income categories and continued strength in asset quality metrics and capital measures highlight the quarter.

GRAND RAPIDS, Mich., Oct. 21, 2025 — Mercantile Bank Corporation (NASDAQ:
MBWM) (“Mercantile”) today reported impressive financial results for the
third quarter of 2025. Net income reached $23.8 million, translating to
$1.46 per diluted share, a notable increase compared to the $19.6 million,
or $1.22 per diluted share, reported in the same quarter last year. The
bank’s year-to-date performance is equally compelling, with net income
totaling $65.9 million, or $4.06 per diluted share, compared to $60.0
million, or $3.72 per diluted share, for the first nine months of 2024.

“We are very pleased to report another quarter of robust financial
performance, especially when taking into consideration the lengthy and
ongoing period of uncertain macro-economic conditions,” said Ray Reitsma,
President and Chief Executive Officer of Mercantile. “Our strong operating
results reflected net interest income expansion, a stable and healthy net
interest margin, solid growth in certain core noninterest income
categories, a notable decline in federal income tax expense, strong local
deposit growth, and continuing strength in asset quality metrics and capital
measures. The growth in local deposits provided for a reduction in our
loan-to-deposit ratio, the lowering of which remains an important strategic
goal.”

Third quarter highlights include:

• Return on average assets of 1.50 percent and return on average equity of
  14.72 percent
• Tangible book value per common share of $37.41 as of September 30, 2025,
  up $4.27, or approximately 13 percent, since year-end 2024
• Net interest income expansion of nearly 8 percent
• Noteworthy increases in treasury management and payroll services fees of
  approximately 11 percent and 16 percent, respectively
• Significant decrease in effective tax rate from approximately 20 percent
  in the third quarter of 2024 to approximately 13 percent in the third
  quarter of 2025 due to the acquisition of transferable energy tax credits
  and net benefits from investments in tax credit structures
• Solid commercial loan pipeline
• Ongoing low levels of nonperforming assets, past due loans, and loan
  charge-offs
• Notable reduction in loan-to-deposit ratio from 102 percent as of
  September 30, 2024, to 96 percent as of September 30, 2025, largely
  reflecting robust local deposit growth
• Strong tangible and regulatory capital positions
• Announced planned partnership with Eastern Michigan Financial Corporation

Operating Results

Mercantile’s strong performance was driven by both net interest income and
non-interest income growth. Net revenue reached $62.4 million, a 7.6%
increase from $58.0 million in the third quarter of 2024. This was
attributed to a combination of strategic balance sheet management and
growing customer adoption of fee-based services. A closer look reveals that
net interest income climbed to $52.0 million, up 7.7% year-over-year,
fueled by earning asset growth that effectively countered a slight dip in
the net interest margin. Noninterest income also saw a healthy increase,
totaling $10.4 million compared to $9.7 million in the prior year, primarily
due to higher treasury management and payroll service fees, as well as income
from bank-owned life insurance claims.

The net interest margin stood at 3.50 percent, a marginal decrease from 3.52
percent in the third quarter of 2024. This slight compression reflects the
ongoing challenges in the yield environment, but Mercantile appears to have
navigated these headwinds effectively through active balance sheet
management and strategic moves into higher-yielding assets.

Provisions for credit losses amounted to $0.2 million, a decrease from the
$1.1 million recorded in the third quarter of 2024. This decrease reflects
the company’s continued strong asset quality.

On the expense side, noninterest expense totaled $34.8 million, up from
$32.3 million in the prior-year third quarter, mostly stemming from higher
salary and benefit costs. Notably, the effective tax rate decreased
significantly to 13.4 percent, attributable to the claiming of transferable
energy tax credits and net benefits from their tax credit investments.

“Our net interest margin has remained strong and relatively steady over the
past five quarters, with ongoing growth in earning assets providing for net
interest income expansion,” Reitsma stated. “We are pleased with the higher
levels of treasury management and payroll services fees, mainly reflecting
customers’ increased use of products and services and effective marketing
efforts, and noteworthy decrease in federal income tax expense, primarily
resulting from the acquisition of transferable energy tax credits and net
benefits from investments in tax credit structures. Growing our balance
sheet in a cost-effective manner while continuing to deliver outstanding
service and offer market-leading products and services to our customers
remain important objectives.”

Balance Sheet

As of September 30, 2025, total assets were $6.31 billion, showing an
increase of $256 million from December 31, 2024. The loan portfolio has
seen modest growth, with commercial loans leading the way, although some
larger relationships were paid off during the period. This suggests Mercantile
is being strategic with its commercial lending, focusing on quality over
sheer volume.

Total deposits equaled $4.81 billion as of September 30, 2025, compared to
$4.70 billion as of December 31, 2024. Wholesale funds were $525 million and
$537 million at September 30, 2025, and December 31, 2024, respectively, with
both amounts representing approximately 10 percent of total funds at the end of
each period. Noninterest-bearing checking accounts represented approximately
25 percent of total deposits as of September 30, 2025.

“While being overshadowed by the elevated levels of line paydowns and full
payoffs, commercial loan originations remained strong during the third
quarter of 2025,” Mr. Reitsma noted. “Based on our current pipeline and
ongoing discussions with existing and prospective borrowers, we believe
plentiful opportunities to originate commercial loans will exist in future
periods. We are pleased with the growth in local deposits and associated
decline in our loan-to-deposit ratio during the third quarter of 2025 and
will continue our efforts to fund loan originations and investment purchases
through local deposit generation.”

Asset Quality

The Bank’s non-performing assets totaled $9.8 million, or 0.2 percent of
total assets, as of September 30, 2025, compared to $5.7 million, or less
than 0.1 percent of total assets, as of December 31, 2024, and $9.9 million,
or 0.2 percent of total assets, as of September 30, 2024. The increase in
nonperforming assets during the first nine months of 2025 mainly reflected
the weakening of the previously mentioned nonperforming commercial
construction loan, which accounted for approximately 56 percent of total
nonperforming assets as of September 30, 2025

Mr. Reitsma remarked, “As reflected by continuing low levels of nonperforming assets, past due loans, and loan charge-offs, the quality of our asset base remained robust during the third quarter of 2025. We remain committed to underwriting loans across all portfolio segments in a disciplined manner, including adherence to internal policy guidelines, and detecting any weakening credit relationships and developing systemic or sector-specific credit issues as soon as possible to minimize the impact of such on our overall financial health. Our borrowers have continued to perform well during the prolonged period of uncertain macro-economic conditions.”

Capital Position

Shareholders’ equity totaled $658 million as of September 30, 2025, up $73.1 million from December 31, 2024. Mercantile Bank maintained “well-capitalized” positions at the end of the third quarter of 2025 and year-end 2024, with total risk-based capital ratios of 14.3 percent and 13.9 percent, respectively.

Overall, Mercantile’s Q3 2025 results highlight a stable and well-managed
financial institution capitalizing on its core strengths: growing its loan
portfolio, expanding core fee-based income, and strategically improving its tax
position. The bank seems well-positioned to navigate ongoing economic
uncertainty and continue delivering value to shareholders. The planned
partnership with Eastern Michigan Financial Corporation is likely to further
strengthen its market position in the State of Michigan.

Mercantile Bank Corporation
Third Quarter 2025 Results
MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME
(Unaudited)