MERCANTILE BANK CORP

Regulatory Filings • Jun 30, 2008

11-K 1 k27875e11vk.htm 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, 2007

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

Financial Statements and Supplemental Schedule Years Ended December 31, 2007 and 2006

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Mercantile Bank of Michigan 401(k) Plan

Contents

Report of Independent Registered Public Accounting Firm	3
Financial Statements
Statements of Net Assets Available for Benefits
as of December 31, 2007 and 2006	4
Statements of Changes in Net Assets Available for Benefits
for the Years Ended December 31, 2007 and 2006	5
Notes to Financial Statements	6-12
Supplemental Schedule
Schedule H, Line 4i — Schedule of Assets (Held at End of Year)
as of December 31, 2007	13
Signature	15
Consent
of Independent Registered Public Accounting Firm	17

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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 statements of net assets available for benefits of Mercantile Bank of Michigan 401(k) Plan (the Plan) as of December 31, 2007 and 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 audits.

We conducted our audit in accordance with the auditing 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal controls 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 controls 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 audits provide 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, 2007 and 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 audits were 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, 2007, 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 audits 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 26, 2008

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Mercantile Bank of Michigan 401(k) Plan

Statements of Net Assets Available for Benefits

December 31,	2007	2006
Assets
Investments, at fair value (Note 3)
Mutual funds	$ 9,352,295	$ 7,064,340
Common stock — securities of employer
(Note 4)	2,895,369	6,932,653
Common/collective trust (Note 2)	481,868	312,831
Money market fund	892	427
Participant loans	154,091	160,454
	12,884,515	14,470,705
Cash and cash equivalents	19,902	101
Net Assets Available for Benefits at Fair Value	12,904,417	14,470,806
Adjustment from fair value to contract value for fully
benefit-responsive investment contract (Note 2)	3,778	6,031
Net Assets Available for Benefits	$ 12,908,195	$ 14,476,837

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,	2007		2006
Additions
Investment income:
Net
appreciation (depreciation) in fair value of
investments (Note 3)	$ (2,923,638	)	$ 1,017,732
Interest	11,254		6,824
Dividends — cash	102,061		92,850
Total investment income (loss)	(2,810,323	)	1,117,406
Contributions:
Employer	747,421		673,526
Employee	1,249,677		1,156,353
Rollover	233,051		227,685
Total contributions	2,230,149		2,057,564
Total Additions	(580,174	)	3,174,970
Deductions
Benefits paid to participants	985,148		349,994
Administrative expense	3,320		2,747
Total Deductions	988,468		352,741
Net increase (decrease)	(1,568,642	)	2,822,229
Net Assets Available for Benefits, beginning of year	14,476,837		11,654,608
Net Assets Available for Benefits, end of year	$ 12,908,195		$ 14,476,837

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 (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 2007 and 2006, 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.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| 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. |
| 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, 2007 and 2006, approximately 22% and 48%, 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, and, in fact, the per share market price of the Plan’s investment in the common
stock has decreased significantly as of June 2008 compared to the December 31, 2007 and
December 31, 2006 prices. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| 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). 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 fair value of the CCT is based on the contract value on the last
business day of the plan year. Contract value approximates fair 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. |
| Payment of Benefits |
| Benefits are recorded when paid. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

3.
Investments that represent 5% or more of the Plan’s net assets available for benefits are as
follows:

December 31,	2007	2006
Mutual funds
Growth Fund of America	$ 1,738,142	$ 1,350,038
Mutual Beacon Fund	1,388,269	1,413,966
Europacific Growth Fund	1,286,040	988,205
Capital World Growth and Income	1,061,085	790,012
Federated Kaufman Fund	868,914	*
Royce Value Fund	689,493	*
Investment Company of America	678,763	*
Common stock
Mercantile Bank Corporation	2,895,369	6,932,653

• Below 5% of net assets available for benefits in prior year

During 2007 and 2006, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in fair value as follows:

December 31,	2007		2006
Mutual funds	$ 854,082		$ 833,492
Common/collective trust	13,960		7,940
Common stock	(3,791,680	)	176,300
	$ (2,923,638	)	$ 1,017,732

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

4.	Related Party Transactions
	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 186,798 and 183,890 shares of Mercantile Bank Corporation common stock held by the Plan
as of December 31, 2007 and 2006, respectively, represent approximately 2.2% and 2.3% of the
Corporation’s outstanding shares as of December 31, 2007 and 2006, respectively.
	Cash dividends of $102,061 and $92,850 were paid to the Plan by Mercantile Bank Corporation
during 2007 and 2006, respectively. A 5% stock dividend was declared and paid by Mercantile
Bank Corporation during 2007 and 2006. As a result of this stock dividend, Mercantile Bank
Corporation issued 8,711 and 8,661 additional shares of Mercantile Bank Corporation common
stock to the Plan in 2007 and 2006, respectively.
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.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| 7. |
| --- |
| Gerald R. Johnson, Jr. resigned as Trustee of the Mercantile Bank of Michigan 401(k)
Plan on June 20, 2007. Lonna L. Wiersma became the Successor Trustee of the Plan effective
June 21, 2007. |

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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, 2007

		(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	23,893 shares	*	*	$ 1,061,085
	Eaton Vance Emerging	20,768 shares	*	*	624,909
	Europacific Growth Fund	25,690 shares	*	*	1,286,040
	Federated Kaufman Fund	139,472 shares	*	*	868,914
	Franklin Income Fund	124,776 shares	*	*	323,169
	Growth Fund of America	51,854 shares	*	*	1,738,142
	Investment Company of America	20,644 shares	*	*	678,763
	Mutual Beacon Fund	88,821 shares	*	*	1,388,269
	PIMCO High Yield	7,532 shares	*	*	71,852
	PIMCO Total Return Fund	42,927 shares	*	*	458,891
	Royce Value Fund	64,802 shares	*	*	689,493
	VanGuard Index	1,204 shares	*	*	162,768
	Total mutual funds				$ 9,352,295
	Common stock
*	Mercantile Bank Corporation	186,798 shares	*	*	2,895,369
	Common/collective trust
	Gartmore Stable Value Fund	23,229 shares	*	*	485,646
	Money market fund
*	Schwab Value Advantage Fund	892 shares	*	*	892
*	Participant loans	(4.25% to 8.25%)			154,091
	Cash				19,902
	Total Assets				$ 12,908,195

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

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Exhibit to Report on Form 11-K:

Exhibit No.	Exhibit Description
23.1	Consent of Independent Registered Public Accounting Firm

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plan) has 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 26, 2008	/s/ Lonna L. Wiersma, Trustee
	Lonna L. Wiersma, Trustee

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Exhibit Index

Exhibit No.	Exhibit Description
23.1	Consent of Independent Registered Public Accounting Firm

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