MERCANTILE BANK CORP

Regulatory Filings • Jun 29, 2009

11-K 1 k48043e11vk.htm FORM 11-K 11-K PAGEBREAK

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UNITED STATES 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, 2008*

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) 406-3000

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Mercantile Bank of Michigan 401(k) Plan

Financial Statements and Supplemental Schedule Years Ended December 31, 2008 and 2007

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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, 2008 and 2007	4
Statements of Changes in Net Assets Available for Benefits for the
Years Ended December 31, 2008 and 2007	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, 2008	13
Signature	15
Consent
of Independent Registered Public Accounting Firm
EX-23.1

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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 the Mercantile Bank of Michigan 401(k) Plan (Plan) as of December 31, 2008 and 2007, and the related statements of changes in net assets available for benefits for the years 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 audits 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. The Plan is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included 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 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, 2008 and 2007, and the changes in net assets available for benefits for the years 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 basic financial statements taken as a whole. The accompanying supplemental Schedule of Assets (Held at End of Year) as of December 31, 2008 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 stated in all material respects in relation to the basic financial statements taken as a whole.

/s/ BDO SEIDMAN, LLP

Grand Rapids, Michigan June 24, 2009

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Mercantile Bank of Michigan 401(k) Plan

Statements of Net Assets Available for Benefits

December 31,	2008	2007
Assets
Investments, at fair value (Note 3 and 4):
Mutual funds	$ 5,805,794	$ 9,352,295
Common stock — securities of employer (Note 5)	1,417,163	2,895,369
Common/collective trust (Note 2)	506,029	481,868
Money market fund	737	892
Participant loans	142,872	154,091
Total investments	7,872,595	12,884,515
Cash	80,572	19,902
Net Assets Available for Benefits, at Fair Value	7,953,167	12,904,417
Adjustment from fair value to contract value for fully
benefit-responsive investment contract (Note 2)	27,645	3,778
Net Assets Available for Benefits	$ 7,980,812	$ 12,908,195

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,	2008		2007
Additions
Investment income (loss):
Net depreciation in fair value of
investments (Note 3)	$ (6,488,719	)	$ (3,660,702	)
Interest	10,206		11,254
Dividends — cash	346,745		839,125
Total investment loss	(6,131,768	)	(2,810,323	)
Contributions:
Employer	810,053		747,421
Employee	1,330,448		1,249,677
Rollover	307,097		233,051
Total contributions	2,447,598		2,230,149
Total Additions	(3,684,170	)	(580,174	)
Deductions
Benefits paid to participants	1,212,423		985,148
Deemed distributions	26,939		—
Administrative expense	3,851		3,320
Total Deductions	1,243,213		988,468
Net decrease	(4,927,383	)	(1,568,642	)
Net Assets Available for Benefits, beginning of year	12,908,195		14,476,837
Net Assets Available for Benefits, end of year	$ 7,980,812		$ 12,908,195

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 roll over account balances from other qualified defined benefit or
defined contribution plans into their account. Effective January 1, 2008, participants may
elect to make Roth deferral contributions. |
| 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 2008 and 2007, 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. |
| Effective March 27, 2009, the Bank suspended the employer matching contributions. |
| 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. Interest rates in effect as of December 31, 2008 ranged from 4.0% 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’s account as a lump-sum amount.
A participant may receive the portion of his or her account invested in Mercantile Bank
Corporation common stock 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. |
| New Accounting Pronouncements |
| In September 2006, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS No.
157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value,
and expands disclosures about fair value measurements. SFAS No. 157 applies to reporting
periods beginning after November 15, 2007. As of January 1, 2008, the Plan has adopted SFAS
No. 157. See Note 4, Fair Value Measurements. There was no material impact to the
financial statements of the Plan upon adoption of SFAS No. 157. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| 2. |
| --- |
| 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. |
| Risks 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, 2008 and 2007, approximately 18% and 22%, 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 are stated at fair value. The fair value of mutual funds and
Mercantile Bank Corporation common stock are based on quoted market prices on the last day
of the Plan year. The Plan invests in investment contracts through a common collective
trust (CCT). Investment contracts held by a defined contribution plan are required to be
reported at fair value, with an adjustment to contract value in the amount participants
would receive if they were to initiate permitted transactions under the terms |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| | of the Plan. The fair value of the Plan’s interest in the CCT is based on audited
information reported by the issuer at year-end. The contract value of the CCT represents
contributions plus earnings, less participant withdrawals and administrative expenses.
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. |
| | Reclassifications |
| | Certain reclassifications of prior year amounts have been made to conform to the current
year presentation. |
| 3. | Investments |
| | Investments that represent 5% or more of the fair value of the Plan’s net assets available
for benefits are as follows: |

December 31,	2008	2007
Mutual funds
American Funds Growth Fund of America	$ 991,658	$ 1,738,142
Mutual Beacon Fund	594,864	1,388,269
American Funds Europacific Growth Fund	757,171	1,286,040
American Funds Cap World Growth & Income	558,390	1,061,085
Federated Kaufman Fund	547,097	868,914
Royce Value Fund	506,702	689,493
American Funds Investment Company of America	484,151	678,763
PIMCO Total Return	578,795	*
Union Bond & Trust Co. Stable Value Fund**	533,674	*
Common stock
Mercantile Bank Corporation	1,417,163	2,895,369

*	Below 5% of net assets available for benefits.
**	The Union Bond & Trust Company Stable Value Fund is listed above at contract value.

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

During 2008 and 2007, 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, — Mutual funds	2008 — $ (3,600,252	)	2007 — $ 117,018
Common/collective trust	17,809		13,960
Common stock	(2,906,276	)	(3,791,680	)
Net depreciation in fair
value of investments	$ (6,488,719	)	$ (3,660,702	)

| 4. |
| --- |
| As of January 1, 2008, the Plan adopted SFAS No. 157. SFAS No. 157 establishes a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for
identical assets or liabilities (Level 1 measurement) and the lowest priority to
unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy
under SFAS No. 157 are described below: |
| Basis of Fair Value Measurement |
| Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or liabilities; |
| Level 2 — Quoted prices in markets that are not considered to be active or financial
instruments for which all significant inputs are observable, either directly or indirectly; |
| Level 3 — Prices or valuations that require inputs that are both significant to the fair
value measurement and unobservable. |
| A financial instrument’s level within the fair value hierarchy is based on the lowest level
of any input that is significant to the fair value measurement. |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

The following table sets forth, by level within the fair value hierarchy, the Plan investment assets at fair value, as of December 31, 2008.

	Investments at Fair Value
	As of December 31, 2008
	Level 1	Level 2	Level 3	Total
Mutual funds	$ 5,805,794	$ —	$ —	$ 5,805,794
Common stock	1,417,163	—	—	1,417,163
Common/collective trust	—	506,029	—	506,029
Money market fund	737	—	—	737
Participant loans	—	142,872	—	142,872
Total Investments at Fair Value	$ 7,223,694	$ 648,901	$ —	$ 7,872,595

| 5. |
| --- |
| 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 329,573 and 186,798 shares of Mercantile Bank Corporation common stock held by the Plan
as of December 31, 2008 and 2007, respectively, represent approximately 3.84%
and 2.2% of the Corporation’s outstanding shares as of December 31, 2008 and 2007,
respectively. |
| Cash dividends of $76,801 and $102,061 were paid to the Plan by Mercantile Bank Corporation
during 2008 and 2007, respectively. A 5% stock dividend was declared and paid by Mercantile
Bank Corporation during 2007. As a result of this stock dividend, |

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Mercantile Bank of Michigan 401(k) Plan

Notes to Financial Statements

| | Mercantile Bank Corporation issued 8,711 additional shares of Mercantile Bank Corporation
common stock to the Plan in 2007. |
| --- | --- |
| 6. | 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. |
| 7. | 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). The Plan was amended and restated effective January 1,
2008 and the Bank has applied for a new 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. |
| 8. | Change in Trustee |
| | 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, 2008

		(c)
		Description of Investment,
	(b)	Including Maturity Date, Rate
	Identity of Issuer, Borrower, Lessor	of Interest, Collateral, Par or	(d)		(e)
(a)	or Similar Party	Maturity Value	Cost		Current Value
	Mutual funds
	American Funds Cap World Growth & Income	21,119 shares	*	*	$ 558,390
	Eaton Vance Emerging Markets Fund	18,963 shares	*	*	215,613
	American Funds Europacific Growth Fund	27,474 shares	*	*	757,171
	Federated Kaufman Fund	151,971 shares	*	*	547,097
	Franklin Income Fund	180,836 shares	*	*	301,995
	American Funds Growth Fund of America	49,092 shares	*	*	991,659
	American Funds Investment Co. of America	23,143 shares	*	*	484,151
	Mutual Beacon Fund	66,170 shares	*	*	594,864
	PIMCO High Yield Fund	14,005 shares	*	*	93,691
	PIMCO Total Return Fund	57,080 shares	*	*	578,795
	Royce Value Fund	72,386 shares	*	*	506,702
	VanGuard 500 Index Fund	2,114 shares	*	*	175,666
	Total mutual funds				5,805,794
	Common stock
*	Mercantile Bank Corporation	329,573 shares	*	*	1,417,163
	Common/collective trust
	Union Bond & Trust Stable Value Fund	24,646 shares	*	*	533,674
	Money market fund
*	Schwab Value Advantage Fund	737 shares	*	*	737
*	Participant loans	(4.0 % to 8.25%)	—		142,872
	Cash				80,572
	Total Assets				$ 7,980,812

*	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.

/s/ Lonna L. Wiersma
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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