MERCANTILE BANK CORP

Regulatory Filings • Jun 27, 2007

11-K 1 k16273e11vk.htm ANNUAL REPORT ON FORM 11-K e11vk PAGEBREAK

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2006

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the transition period from to

Commission File No. 000-26719

MERCANTILE BANK OF MICHIGAN 401(K) PLAN

MERCANTILE BANK CORPORATION 310 LEONARD STREET, NW GRAND RAPIDS, MICHIGAN 49504 (616) 406-3777

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Mercantile Bank of Michigan 401(k) Plan

Contents

Report of Independent Registered Public Accounting Firm	3
BDO Seidman, LLP
Report of Independent Registered Public Accounting Firm	4
Crowe Chizek and Company LLC
Financial Statements
Statements of Net Assets Available for Benefits as of December 31, 2006 and 2005	5
Statements of Changes in Net Assets Available for Benefits for the Years Ended December 31, 2006 and 2005	6
Notes to Financial Statements	7-12
Supplemental Schedule
Schedule H, Line 4i — Schedule of Assets (Held at End of Year) as of December 31, 2006	13

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Report of Independent Registered Public Accounting Firm

Plan Administrator of Mercantile Bank of Michigan 401(k) Plan Grand Rapids, Michigan

We have audited the accompanying statement of net assets available for benefits of Mercantile Bank of Michigan 401(k) Plan (the Plan) as of December 31, 2006, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2006, and the changes in net assets available for benefits for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

Our audit was performed for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental schedule of assets (held at end of year) as of December 31, 2006, is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements, and, in our opinion, is fairly presented in all material respects in relation to the basic financial statements taken as a whole.

/s/ BDO Seidman, LLP BDO Seidman, LLP
Grand Rapids, Michigan
June 25, 2007

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Plan Administrator of Mercantile Bank of Michigan 401(k) Plan Grand Rapids, Michigan

We have audited the accompanying statement of net assets available for benefits of Mercantile Bank of Michigan 401(k) Plan (“the Plan”) as of December 31, 2005, and the related statement of changes in net assets available for benefits for the year then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2005, and the changes in net assets available for benefits for the year then ended in conformity with U.S. generally accepted accounting principles.

/s/ Crowe Chizek and Company, LLC Crowe Chizek and Company LLC
South Bend, Indiana
May 18, 2006

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Mercantile Bank of Michigan 401(k) Plan

Statements of Net Assets Available for Benefits

December 31,	2006	2005
Assets
Investments, at fair value (Note 3)
Mutual funds	$ 7,064,340	$ 4,377,083
Common stock — securities of employer (Note 4)	6,932,653	7,005,537
Common/collective trust (Note 2)	312,831	190,159
Money market fund	427	1,010
Participant loans	160,454	76,883
	14,470,705	11,650,672
Cash and cash equivalents	101	26,836
Total Assets	14,470,806	11,677,508
Liabilities
Due to custodian for securities purchased	—	26,565
Net Assets Available for Benefits at Fair Value	14,470,806	11,650,943
Adjustment from fair value to contract value for fully
benefit-responsive investment contract (Note 2)	6,031	3,665
Net Assets Available for Benefits	$ 14,476,837	$ 11,654,608

See accompanying notes to financial statements.

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Mercantile Bank of Michigan 401(k) Plan

Statements of Changes in Net Assets Available for Benefits

Year ended December 31,
Additions
Investment income:
Net appreciation in fair value of
investments (Note 3)	$ 1,017,732	$ 384,464
Interest	6,824	4,062
Dividends — cash	92,850	70,724
Total investment income	1,117,406	459,250
Contributions:
Employer	673,526	553,924
Employee	1,156,353	942,507
Rollover	227,685	712,795
Total contributions	2,057,564	2,209,226
Total Additions	3,174,970	2,668,476
Deductions
Benefits paid to participants	349,994	157,480
Administrative expense	2,747	589
Total Deductions	352,741	158,069
Net increase	2,822,229	2,510,407
Net Assets Available for Benefits, beginning of year	11,654,608	9,144,201
Net Assets Available for Benefits, end of year	$ 14,476,837	$ 11,654,608

See accompanying notes to financial statements.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| 1. |
| --- |
| The following description of Mercantile Bank of Michigan 401(k) Plan (Plan) provides
only general information. Participants should refer to the Plan Agreement or Summary Plan
Description for a more complete description of the Plan’s provisions. |
| General |
| The Plan was established by the plan sponsor, Mercantile Bank of Michigan (the Bank),
effective January 1, 1998. The Plan is a defined contribution plan covering eligible
employees who have completed one hour of service. Eligible employees can enter the Plan on
the first day of the fiscal quarter following date of hire. The Plan is subject to the
Employee Retirement Income Security Act of 1974 (ERISA). |
| Contributions |
| Elective deferrals by participants under the 401(k) provisions are based on a percentage of
their compensation, subject to certain limitations as defined by the Plan Agreement.
Participants may also rollover account balances from other qualified defined benefit or
defined contribution plans into their account. |
| The Bank may contribute additional amounts at the discretion of the Bank’s Board of
Directors in the form of a matching contribution which is a percentage of the participant’s
elective contribution for the year. In 2006 and 2005, the Bank made matching contributions
equal to 100% of the first 5% of compensation deferred by each participant, subject to
certain limitations as specified in the Plan Agreement. |
| Participant Accounts |
| Each participant’s account is credited with the participant’s contributions, allocations of
the Bank’s matching contribution and Plan earnings. Allocations are based on participant
earnings or account balances, as defined. The benefit to which a participant is entitled is
the benefit that can be provided from the participant’s vested account. Participants may
direct the investment of their account balances into various investment options offered by
the Plan. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

	Vesting
	Participants are immediately vested in their elective deferrals and employer contributions
and earnings thereon.
	Participant Loans
	Participants may borrow from their accounts a minimum of $1,000 up to a maximum equal to the
lesser of $50,000 or 50% of their account balance. The loans are secured by the balance in
the participant’s account and bear interest at rates that are commensurate with local
borrowing rates. Current interest rates range from 4.25% to 8.25%. Principal and interest
is paid ratably through payroll deductions over a period not to exceed five years, unless
the loans were used to purchase a primary residence in which case the loan terms shall not
exceed ten years.
	Payment of Benefits
	Upon separation of service, death, disability, or retirement, a participant or his or her
beneficiary will receive a distribution of the participant account as a lump-sum amount. A
participant may receive the portion of his or her account invested in Mercantile Bank
Corporation in either common shares or cash. Additionally, under certain circumstances of
financial hardship, participants are allowed to withdraw funds from the Plan.
	Administrative Expenses
	Substantially all administrative expenses are paid by the Plan sponsor.
2.	Significant Accounting Policies
	Basis of Accounting
	The accompanying financial statements are prepared under the accrual method of accounting.
	Use of Estimates
	The preparation of financial statements in conformity with generally accepted accounting
principles in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of net assets and changes therein. Actual
results could differ from those estimates.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| Risk and Uncertainties |
| --- |
| The Plan invests in various investment securities. Investment securities are exposed to
various risks such as interest rate, market and credit risks. Due to the level of risk
associated with certain investment securities, it is at least reasonably possible that
changes in the values of investment securities will occur in the near term and that such
changes could materially affect participants’ account balances and the amounts reported in
the financial statements. |
| Concentration of Credit Risk |
| At December 31, 2006 and 2005, approximately 48% and 60%, respectively, of the Plan’s assets
were invested in Mercantile Bank Corporation common stock. A significant decline in the
market value of the common stock would significantly affect the net assets available for
benefits. |
| Investment Valuation and Income Recognition |
| The Plan’s investments in mutual funds and Mercantile Bank Corporation common stock are
stated at fair value based on quoted market prices of shares held by the Plan. The
investment in the common/collective trust (Gartmore Stable Value Fund) is stated according
to the Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment
Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and
Welfare and Pension Plans (FSP), which became effective and was adopted by the Plan for the
year ended December 31, 2006, and was applied retroactively to December 31, 2005, as required. The FSP states that contract value
is the relevant measurement attribute for that portion of the net assets available for
benefits of a defined-contribution plan attributable to fully benefit-responsive investment
contracts because contract value is the amount participants would receive if they were to
initiate permitted transactions under the terms of the plan. As required by the FSP, the
Statement of Net Assets Available for Benefits presents the fair value of the investment
contracts as well as the adjustment of the fully benefit-responsive investment contracts
from fair value to contract value. The Statement of Changes in Net Assets Available for
Benefits is prepared on a contract value basis. Participant loans are stated at cost,
which approximates fair value. Purchases and sales of investments are recorded on a
trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded
on the ex-dividend date. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

	Payment of Benefits
	Benefits are recorded when paid.
	Reclassifications
	Certain reclassifications of prior year amounts have been made to conform to the current
year presentation.
3.	Investments
	Investments that represent five percent or more of the Plan’s net assets available for
benefits are as follows:

December 31,
Mutual funds
Mutual Beacon Fund	$ 1,413,966	$ 1,106,334
Growth Fund of America	1,350,038	*
Europacific Growth Fund	988,205	*
Capital World G&I	790,012	*
Common stock
Mercantile Bank Corporation	6,932,653	7,005,537

• Below 5% of net assets available for benefits.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

During 2006 and 2005, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated in fair value as follows:

December 31, — Mutual funds	$ 833,492	$ 313,363
Common/collective trust	7,940	1,329
Common stock	176,300	69,772
	$ 1,017,732	$ 384,464

| 4. |
| --- |
| Parties-in-interest are defined under Department of Labor (DOL) regulations as any
fiduciary of the Plan, any party rendering service to the Plan, the employer and certain
other parties. Professional fees for the administration and audit of the Plan are paid by
the Bank. |
| Certain Plan investments are managed by Charles Schwab Trust Company. Schwab is the
custodian as defined by the Plan; therefore, these transactions qualify as party-in-interest
transactions. |
| The 183,890 and 181,962 shares of Mercantile Bank Corporation common stock held by the Plan
as of December 31, 2006 and 2005, respectively, represent approximately 2.3% and 2.4% of the
Corporation’s outstanding shares as of December 31, 2006 and 2005, respectively. |
| Cash dividends of $92,850 and $70,724 were paid to the Plan by Mercantile Bank Corporation
during 2006 and 2005, respectively. A 5% stock dividend was declared and paid by Mercantile
Bank Corporation during 2006 and 2005. As a result of this stock dividend, Mercantile Bank
Corporation issued 8,661 and 8,133 additional shares of Mercantile Bank Corporation common
stock to the Plan in 2006 and 2005, respectively. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

5.	Plan Termination
	Although it has not expressed any intent to do so, the Bank has the right under the
Plan to discontinue its contributions at any time and to terminate the Plan, subject to the
provisions of ERISA.
6.	Tax Status
	The Internal Revenue Service has determined and informed the Bank by a letter dated
June 1, 2001, that the Plan and related trust are designed in accordance with applicable
sections of the Internal Revenue Code (IRC). Although the Plan has been amended since
receiving the determination letter, the Plan Administrator believes that the Plan is
designed and is being operated in compliance with the applicable requirements of the IRC.
The related trust, therefore, is not subject to tax under present tax law.
7.	Change in Trustee/Plan Amendments
	On August 1, 2005, the Plan’s assets were transferred to Charles Schwab Trust Company
(custodian). The Plan was also amended to implement daily valuation of participant accounts
which will be administered by a third party administrator.
	Also, effective August 1, 2005, the name of the Plan was changed to Mercantile Bank of
Michigan 401(k) Plan. The Plan was formerly known as Mercantile Bank of West Michigan
401(k) Plan.
	Effective January 1, 2006, the Plan was amended to incorporate various regulatory provisions
recently required. Effective October 1, 2006, the Plan was amended to allow
participants to receive in-service distributions of funds the participant rolled into the
Plan from another qualified plan.

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Mercantile Bank of Michigan 401(k) Plan

Schedule H, Line 4i — Schedule of Assets (Held at End of Year)

EIN: 38-3360868 Plan Number: 001

December 31, 2006
		(c)
		Description of Investment,
	(b)	Including Maturity Date, Rate				(e)
	Identity of Issuer, Borrower, Lessor	of Interest, Collateral, Par or	(d)			Current
(a)	or Similar Party	Maturity Value	Cost			Value
	Mutual funds
	Capital World Growth & Income	18,917.912	shares	*	*	$ 790,012
	Eaton Vance Emerging	7,850.334	shares	*	*	224,049
	Europacific Growth Fund	21,529.520	shares	*	*	988,205
	Federated Kaufman Fund	103,221.807	shares	*	*	584,235
	Franklin Income Fund	83,111.975	shares	*	*	221,078
	Growth Fund of America	41,603.649	shares	*	*	1,350,038
	Investment Co of America	16,916.361	shares	*	*	565,852
	Mutual Beacon Fund	85,127.373	shares	*	*	1,413,966
	PIMCO High Yield	2,177.832	shares	*	*	21,539
	PIMCO Total Return Fund	34,115.439	shares	*	*	354,118
	Royce Value Fund	49,841.658	shares	*	*	551,248
	Total mutual funds					7,064,340
	Common stock
*	Mercantile Bank Corporation	183,890	shares	*	*	6,932,653
	Common/collective trust
	Gartmore Stable Value Fund	15,829.184	shares	*	*	318,862
	Money market fund
*	Schwab Value Advantage Fund	427.05	shares	*	*	427
*	Participant loans	(4.25% to 8.25%)				160,454
	Cash					101
	Total Assets					$ 14,476,837

*	A party-in-interest as defined by ERISA.
**	The cost of participant-directed investments is not required to be disclosed.

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Exhibits to Report on Form 11-K:

Exhibit No.	Exhibit Description
23.1	Consent of Independent Registered
Public Accounting Firm — BDO Seidman, LLP
23.2	Consent of Independent Registered Public Accounting Firm — Crowe Chizek and Company LLC

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustees (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed on its behalf by the undersigned hereunto duly authorized.

	MERCANTILE BANK OF MICHIGAN 401(K) PLAN
Date: June 25, 2007	/s/ Lonna Wiersma, Trustee
	Lonna Wiersma, Trustee

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Exhibit Index

Exhibit No.	Exhibit Description
23.1	Consent of Independent Registered
Public Accounting Firm — BDO Seidman, LLP
23.2	Consent of Independent Registered Public Accounting Firm — Crowe Chizek and Company LLC

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