8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (date of earliest event reported): October 10, 2007

Mercantile Bank Corporation

(Exact name of registrant as specified in its charter)

Michigan
(State or other jurisdiction
of incorporation) 000-26719
(Commission File
Number) 38-3360865
(IRS Employer
Identification Number)

310 Leonard Street NW, Grand Rapids, Michigan
(Address of principal executive offices) 49504
(Zip Code)

Registrant’s telephone number, including area code 616-406-3000

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

     Earnings Release. On October 10, 2007, Mercantile Bank Corporation issued a press release announcing earnings and other financial results for the quarter ended September 30, 2007. A copy of the press release is furnished as Exhibit 99.1 to this report and incorporated here by reference.

     In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

Exhibit Number	Description
99.1	Press release of Mercantile Bank Corporation reporting financial results and earnings for the quarter ended September 30, 2007.

2

Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MERCANTILE BANK CORPORATION
By:	/s/ Charles E. Christmas
	Charles E. Christmas
	Senior Vice President, Chief Financial Officer and Treasurer

Date: October 10, 2007

3

Exhibit Index

Exhibit Number	Description
99.1	Press release of Mercantile Bank Corporation reporting financial results and earnings for the quarter ended September 30, 2007.

4

EX-99.1

Exhibit 99.1

FOR FURTHER INFORMATION:

AT MERCANTILE BANK CORPORATION:

Michael Price	Charles Christmas
Chairman & CEO	Chief Financial Officer
616-726-1600	616-726-1202
mprice@mercbank.com	cchristmas@mercbank.com

MERCANTILE BANK CORPORATION ANNOUNCES THIRD QUARTER
NET INCOME OF $2.4 MILLION

Grand Rapids, MI — October 10, 2007 — Mercantile Bank Corporation (Nasdaq: MBWM) reported earnings for the third quarter of 2007 of $2.4 million, or $0.28 per diluted share, a decrease of approximately 54 percent from the $5.2 million, or $0.61 per diluted share, reported for the third quarter of 2006. For the first nine months of 2007, Mercantile reported net income of $8.9 million, or $1.05 per diluted share, a decrease of approximately 42 percent from the $15.2 million, or $1.79 per diluted share, reported in the prior-year period. Third quarter results continue to reflect an elevated level of non-performing assets and a lower net interest margin relative to the year-ago quarter.

Chairman and CEO Michael Price commented, “We are taking aggressive steps to improve asset quality. We are identifying loans with signs of weakness and reclassifying them to non-performing status. At this point, 38 percent of our non-performing loans are contractually current, which reflects our proactive approach to credit oversight. The rate of increase in problem assets slowed during the third quarter, with non-performing assets only $1.9 million higher than in the second quarter of this year.”

Mr. Price continued, “During the third quarter, we announced plans to expand into Oakland County, where we will be opening our ninth banking office during the fourth quarter. This expansion represents another opportunity for Mercantile Bank to introduce its lending expertise into a new market: Oakland County, the fourth wealthiest county in the nation, and first in deposit market share among all Michigan counties. We are in the process of hiring an experienced team of local bankers to serve local businesses that support the 235 Fortune 500 companies with operations in this market.”

Operating Results

Total revenue, consisting of net interest income and non-interest income, was $15.6 million for the third quarter of 2007, a decrease of 8.0 percent from the $16.9 million reported for the prior-year third quarter. Net interest income for the current quarter was $14.1 million, a decrease of $1.5 million, or 9.6 percent, from the 2006 third quarter level; the 48 basis point decline in the net interest margin, from 3.34 percent to 2.86 percent, was partially offset by a 5.9 percent increase year-over-year in average earning assets. Mr. Price continued, “We experienced a slower rate of margin compression in the third quarter, as the rate of increase in funding costs continued to decline. The 50-basis point cut in the prime rate in September will have a negative impact near-term on our net interest margin. However, this impact will be mitigated as fixed rate deposits and borrowed funds reprice downward in future periods.” Non-interest income for the third quarter of 2007 was $1.51 million, an increase of $0.15 million, or 10.6 percent over the third quarter of 2006.

The provision for loan and lease losses was $2.8 million for the current quarter, up $1.5 million from the year-ago quarter, and $0.5 million above the previous quarter, primarily due to further downgrades in our loan portfolio.

Non-interest expense for the third quarter of 2007 was $9.6 million, an increase of $1.5 million, or 19.2 percent, over the prior-year third quarter. Salaries and benefits were $5.4 million, up $0.7 million, or 14.7 percent, from the year-ago quarter, primarily due to the addition of 18 FTE employees. Other non-interest expense for the third quarter of 2007 was $2.7 million, up $0.8 million, or 37.9 percent, from the $2.0 million reported for the year-ago quarter; nearly 50 percent of the third quarter increase in the other expense category is attributable to costs associated with the administration and resolution of problem assets, while an additional $0.2 million represents an increase in the FDIC insurance premium assessment. The efficiency ratio was 61.5 percent for the third quarter of 2007 compared with 47.5 percent for the third quarter of 2006, reflecting a lower net interest margin and a higher level of non-interest expense.

Asset Quality

Commenting on asset quality, Mr. Price added, “The slowdown in home sales that began in the Midwest has since become a national problem, affecting not only the banking sector but all levels of the credit markets. Approximately two-thirds of our loan portfolio consists of commercial real estate loans, including commercial and residential construction and development loans. The decline in real estate prices and slowdown in sales has stretched the cash flow of our local developers and eroded the value of our underlying collateral. Over 80 percent of our $23.1 million of non-performing loans are real estate-related, and the majority is associated with residential real estate development. We have only five non-performing credits larger than $1 million; these five loans total $13.0 million, and comprise 56.2 percent of the non-performing loan portfolio. We believe we have an effective workout process in place; however, the timeline for disposition of real estate is lengthy.”

Non-performing assets were $25.9 million, or 1.23 percent of total assets at September 30, 2007, compared with $24.0 million, or 1.14 percent of total assets at June 30, 2007, and $9.4 million, or 0.47 percent of total assets at September 30, 2006. Mercantile is making progress with the disposition of its non-performing assets; $5.3 million were paid down or sold during the third quarter. However, two loans totaling $6.8 million were downgraded to non-accrual status in the same quarter. Of the $25.9 million in non-performing assets, $2.8 million consist of foreclosed properties and repossessed assets, a decline of $0.5 million from the second quarter. ”

Net loan charge-offs (“NCOs”) for the third quarter of 2007 were $0.7 million, equivalent to an annualized 0.17 percent of average loans, lower than the previous quarter’s NCOs of $1.2 million or an annualized 0.28 percent of average loans, and lower than the year-ago quarter’s NCOs of $0.9 million or an annualized 0.22 percent of average loans. Loan and lease loss reserves were $24.9 million, or 1.38 percent of total loans and leases at September 30, 2007, up from 1.28 percent of total loans reported for both the year-ago third quarter and the second quarter of 2007.

Balance Sheet

Total assets were $2.11 billion at September 30, 2007, an increase of $79.6 million, or 3.9 percent, from September 30, 2006. Year-to-date, loan growth was $51.5 million, with the third quarter contributing $20.9 million compared with $3.4 million and $27.2 million for the first and second quarters, respectively. The majority of growth since year-end 2006 was in commercial real estate (“CRE”) loans, which increased by $53.8 million, or 6.4 percent, to $893.0 million; CRE loans now account for 49.7 percent of total loans outstanding. Commercial and Industrial loans (“C&I”) are the second largest component of Mercantile’s portfolio, with 26.5 percent of loans outstanding; C&I loans grew $5.4 million, or 1.1 percent, reaching $476.7 million at September 30, 2007.

Shareholders’ equity at September 30, 2007 was $177.7 million, a twelve-month increase of $10.2 million, or 6.1 percent. Total shares outstanding at quarter-end were 8,480,425. Mercantile’s total risk-based capital ratio was 11.4 percent at September 30, 2007. Mr. Price concluded, “The deterioration in asset quality over the past few quarters will take time to resolve, since real estate shows no quick sign of recovery in our markets. Nonetheless, we are confident that our strengthened credit underwriting and loan review departments have the expertise, the manpower, and the motivation to improve asset quality.”

About Mercantile Bank Corporation

Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Headquartered in Grand Rapids, the Bank provides a wide variety of commercial banking services through its five full-service banking offices in greater Grand Rapids, and its full-service banking offices in Holland, Lansing, and Ann Arbor, Michigan. The Company recently announced its expansion into the Oakland County market. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Select Market under the symbol “MBWM.”

Forward-Looking Statements

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include changes in interest rates and interest rate relationships; demand for products and services; the degree of competition by traditional and non-traditional competitors; changes in banking regulation; changes in tax laws; changes in prices, levies, and assessments; the impact of technological advances; governmental and regulatory policy changes; the outcomes of contingencies; trends in customer behavior as well as their ability to repay loans; changes in local real estate values; changes in the national and local economy; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

# # # #

Mercantile Bank Corporation
Third Quarter 2007 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS

	SEPTEMBER 30,			DECEMBER 31,			SEPTEMBER 30,
	2007			2006			2006
	(Unaudited)			(Audited)			(Unaudited)
ASSETS
Cash and due from banks	$	28,764,000		$	51,098,000		$	39,100,000
Short-term investments		534,000			282,000			176,000
Federal funds sold		0			0			16,000,000
Total cash and cash equivalents		29,298,000			51,380,000			55,276,000
Securities available for sale		135,243,000			130,967,000			125,746,000
Securities held to maturity		64,863,000			63,943,000			62,097,000
Federal Home Loan Bank stock		7,534,000			7,509,000			7,764,000
Total loans and leases		1,796,962,000			1,745,478,000			1,710,268,000
Allowance for loan and lease losses		(24,857,000	)		(21,411,000	)		(21,938,000	)
Total Loans and leases, net		1,772,105,000			1,724,067,000			1,688,330,000
Premises and equipment, net		34,492,000			33,539,000			32,309,000
Bank owned life insurance policies		32,962,000			30,858,000			30,150,000
Accrued interest receivable		11,143,000			10,287,000			10,438,000
Other assets		18,787,000			14,718,000			14,724,000
Total assets	$	2,106,427,000		$	2,067,268,000		$	2,026,834,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	121,336,000		$	133,197,000		$	115,269,000
Interest-bearing		1,519,648,000			1,513,706,000			1,499,434,000
Total deposits		1,640,984,000			1,646,903,000			1,614,703,000
Securities sold under agreements to repurchase		88,683,000			85,472,000			74,111,000
Federal funds purchased		3,300,000			9,800,000			0
Federal Home Loan Bank advances		135,000,000			95,000,000			115,000,000
Subordinated debentures		32,990,000			32,990,000			32,990,000
Other borrowed money		3,839,000			3,316,000			3,147,000
Accrued expenses and other liabilities		23,907,000			21,872,000			19,335,000
Total liabilities		1,928,703,000			1,895,353,000			1,859,286,000
SHAREHOLDERS’ EQUITY
Common stock		176,610,000			161,223,000			161,045,000
Retained earnings		2,220,000			11,794,000			8,230,000
Accumulated other comprehensive income (loss)		(1,106,000	)		(1,102,000	)		(1,727,000	)
Total shareholders’ equity		177,724,000			171,915,000			167,548,000
Total liabilities and shareholders’ equity	$	2,106,427,000		$	2,067,268,000		$	2,026,834,000

Mercantile Bank Corporation
Third Quarter 2007 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME

	THREE MONTHS ENDED		THREE MONTHS ENDED		NINE MONTHS ENDED		NINE MONTHS ENDED
	September 30, 2007		September 30, 2006		September 30, 2007		September 30, 2006
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
INTEREST INCOME
Loans and leases, including fees	$	34,077,000	$	33,261,000	$	101,012,000	$	93,292,000
Investment securities		2,530,000		2,335,000		7,521,000		6,871,000
Federal funds sold		168,000		76,000		343,000		347,000
Short-term investments		5,000		3,000		13,000		10,000
Total interest income		36,780,000		35,675,000		108,889,000		100,520,000
INTEREST EXPENSE
Deposits		19,357,000		17,268,000		57,361,000		46,111,000
Short-term borrowings		900,000		707,000		2,598,000		2,028,000
Federal Home Loan Bank advances		1,759,000		1,452,000		4,343,000		4,136,000
Long-term borrowings		713,000		701,000		2,104,000		1,953,000
Total interest expense		22,729,000		20,128,000		66,406,000		54,228,000
Net interest income		14,051,000		15,547,000		42,483,000		46,292,000
Provision for loan and lease losses		2,800,000		1,350,000		6,170,000		4,075,000
Net interest income after provision for loan and lease losses		11,251,000		14,197,000		36,313,000		42,217,000
NONINTEREST INCOME
Service charges on accounts		402,000		361,000		1,184,000		1,006,000
Net gain on sales of commercial loans		0		0		0		29,000
Other income		1,105,000		1,001,000		3,152,000		2,845,000
Total noninterest income		1,507,000		1,362,000		4,336,000		3,880,000
NONINTEREST EXPENSE
Salaries and benefits		5,425,000		4,731,000		17,330,000		14,179,000
Occupancy		881,000		802,000		2,462,000		2,404,000
Furniture and equipment		530,000		513,000		1,524,000		1,550,000
Other expense		2,734,000		1,982,000		7,032,000		5,932,000
Total noninterest expense		9,570,000		8,028,000		28,348,000		24,065,000
Income before federal income tax expense		3,188,000		7,531,000		12,301,000		22,032,000
Federal income tax expense		821,000		2,329,000		3,430,000		6,790,000
Net income	$	2,367,000	$	5,202,000	$	8,871,000	$	15,242,000
Basic earnings per share	$	0.28	$	0.62	$	1.05	$	1.82
Diluted earnings per share	$	0.28	$	0.61	$	1.05	$	1.79
Average shares outstanding *		8,458,601		8,416,816		8,450,524		8,397,046
Average diluted shares outstanding *		8,491,612		8,524,116		8,488,226		8,523,594

* - Adjusted for 5% stock dividend paid on May 4, 2007

Mercantile Bank Corporation
Third Quarter 2007 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)

	Quarterly
	2007			2007			2007			2006			2006			Year-To-Date
(dollars in thousands except per share data)	3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr			2007			2006
EARNINGS
Net interest income	$	14,051			13,948			14,484			15,295			15,547			42,483			46,292
Provision for loan and lease losses	$	2,800			2,350			1,020			1,700			1,350			6,170			4,075
Noninterest income	$	1,507			1,421			1,408			1,381			1,362			4,336			3,880
Noninterest expense	$	9,570			10,039			8,739			8,197			8,028			28,348			24,065
Net income	$	2,367			2,221			4,283			4,605			5,202			8,871			15,242
Basic earnings per share	$	0.28			0.26			0.51			0.55			0.62			1.05			1.82
Diluted earnings per share	$	0.28			0.26			0.50			0.54			0.61			1.05			1.79
Average shares outstanding *		8,458,601			8,455,891			8,436,933			8,421,318			8,416,816			8,450,524			8,397,046
Average diluted shares outstanding *		8,491,612			8,503,138			8,518,791			8,523,314			8,524,116			8,488,226			8,523,594
PERFORMANCE RATIOS
Return on average assets		0.45	%		0.43	%		0.84	%		0.89	%		1.04	%		0.57	%		1.05	%
Return on average common equity		5.32	%		5.08	%		10.04	%		10.78	%		12.54	%		6.78	%		12.69	%
Net interest margin (fully tax-equivalent)		2.86	%		2.91	%		3.07	%		3.19	%		3.34	%		2.94	%		3.44	%
Efficiency ratio		61.51	%		65.32	%		54.99	%		49.15	%		47.48	%		60.55	%		47.97	%
Full-time equivalent employees		302			305			295			291			284			302			284
CAPITAL
Period-ending equity to assets		8.44	%		8.30	%		8.40	%		8.32	%		8.27	%		8.44	%		8.27	%
Tier 1 leverage capital ratio		10.06	%		10.10	%		10.12	%		10.04	%		10.14	%		10.06	%		10.14	%
Tier 1 risk-based capital ratio		10.19	%		10.26	%		10.44	%		10.37	%		10.47	%		10.19	%		10.47	%
Total risk-based capital ratio		11.40	%		11.37	%		11.52	%		11.45	%		11.61	%		11.40	%		11.61	%
Book value per share	$	21.00			20.64			20.70			20.36			19.90			21.00			20.89
Cash dividend per share	$	0.14			0.14			0.13			0.12			0.12			0.41			0.36
ASSET QUALITY
Gross loan charge-offs	$	795			1,358			1,134			2,276			1,250			3,287			3,113
Net loan charge-offs	$	743			1,204			777			2,227			920			2,724			2,664
Net loan charge-offs to average loans		0.17	%		0.28	%		0.18	%		0.51	%		0.22	%		0.21	%		0.22	%
Allowance for loan and lease losses	$	24,857			22,800			21,654			21,411			21,938			24,857			21,938
Allowance for losses to total loans		1.38	%		1.28	%		1.24	%		1.23	%		1.28	%		1.38	%		1.28	%
Nonperforming loans	$	23,070			20,595			10,018			8,571			9,017			23,070			9,017
Other real estate and repossessed assets	$	2,820			3,369			2,540			986			421			2,820			421
Nonperforming assets to total assets		1.23	%		1.14	%		0.60	%		0.46	%		0.47	%		1.23	%		0.47	%
END OF PERIOD BALANCES
Loans and leases	$	1,796,962			1,776,026			1,748,838			1,745,478			1,710,268			1,796,962			1,710,268
Total earning assets (before allowance)	$	2,005,136			1,980,722			1,967,733			1,948,179			1,922,051			2,005,136			1,922,051
Total assets	$	2,106,427			2,103,520			2,089,577			2,067,268			2,026,834			2,106,427			2,026,834
Deposits	$	1,640,984			1,639,010			1,686,157			1,646,903			1,614,703			1,640,984			1,614,703
Shareholders’ equity	$	177,724			174,531			175,477			171,915			167,548			177,724			167,548
AVERAGE BALANCES
Loans and leases	$	1,773,151			1,755,033			1,741,531			1,729,899			1,684,700			1,756,688			1,636,824
Total earning assets (before allowance)	$	1,992,075			1,965,345			1,953,416			1,938,499			1,881,873			1,970,420			1,834,455
Total assets	$	2,096,597			2,075,217			2,058,718			2,042,037			1,984,199			2,076,983			1,932,264
Deposits	$	1,632,153			1,643,522			1,647,000			1,628,233			1,569,614			1,640,838			1,517,043
Shareholders’ equity	$	176,482			175,434			173,028			169,452			164,560			174,993			160,533

* - Adjusted for 5% stock dividend paid on May 4, 2007