Mercantile Bank Corp expands board, updates executive agreements

Mercantile Bank (NASDAQ:MBWM) Corporation (NASDAQ:MBWM), headquartered in Grand Rapids, Michigan, announced on Thursday significant updates to its corporate governance and executive compensation arrangements, as disclosed in a recent SEC Form 8-K filing.

The $725 million market cap bank, currently trading at $44.87, has recently experienced a notable 9% decline over the past week, according to InvestingPro data. Analysis suggests the stock may be undervalued at current levels.

The company's Board of Directors has expanded from eight to thirteen members, with five new directors appointed who are currently serving on the board of Mercantile's wholly-owned subsidiary, Mercantile Bank. These appointments, effective January 1, 2025, include Thomas D. Dickinson, Joseph D. Jones, Richard D. MacDonald, Sara A. Schmidt, and Shoran R. Williams, all of whom have been determined to meet the independence criteria under NASDAQ listing standards. Mr. Dickinson has also been identified as an "audit committee financial expert" in accordance with SEC regulations.

In addition to the board changes, Mercantile and the Bank have entered into amended and restated executive employment agreements with several officers. Changes to these agreements, which also take effect on January 1, 2025, include adjustments to the timing of base salary increases, disability benefits, severance payments, and death benefits.

Notably, the agreements outline enhanced severance terms, including extended benefits periods and increased severance payment percentages in the event of termination without cause or resignation for a good reason.

The company also announced the designation of Mark S. Augustyn and Tara M. Randall as "Officers" of Mercantile for purposes of Section 16 of the Securities Exchange Act of 1934, and "Executive Officers" for disclosure in annual reports and proxy statements. These designations are effective as of January 1, 2025.

Mercantile Bank Corp, which operates within the state commercial banks sector, has ensured that the new appointees and officers have no direct or indirect material interest in any transaction that would require reporting under SEC regulations.

In other recent news, Mercantile Bank Corporation reported a net income of $19.6 million, down from the previous year. Despite this, the bank experienced significant growth in local deposits, leading to an improved loan-to-deposit ratio of 102%, down from 110%. The bank also saw a surge in mortgage banking income by 49% and a rise in total non-interest income by 27%.

Mercantile Bank has adopted a new Nonqualified Deferred Compensation Plan #2, set to be effective from January 2025. The plan, approved by the Board of Directors, will replace the existing Deferred Compensation Plan. It allows eligible employees to defer up to 80% of their base salary and 100% of their performance-based bonus.

Keefe, Bruyette & Woods maintained their Outperform rating on Mercantile Bank, despite a minor decrease in margin and an increase in expenses. The firm adjusted its earnings estimates for 2025 and 2026 downwards by $0.05 per share for each year, considering a modest increase in expected expenses balanced by a more favorable net interest income outlook.

Recent developments include a commercial loan growth of $233 million in the first three quarters. The bank anticipates a loan growth between 4% to 6% and projects a net interest margin of 3.35% to 3.45% in the upcoming period. Despite some challenges, Mercantile Bank maintains strong asset quality, with the total risk-based capital ratio standing at $13.9 million, significantly above regulatory requirements.

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