MERCANTILE BANK CORP 8-K

What Happened

• Mercantile Bank Corporation announced the closing of its acquisition of Eastern Michigan Financial Corporation and its banking subsidiary, Eastern Michigan Bank, effective December 31, 2025. The transaction was completed under the previously announced Merger Agreement (Merger Sub merged into Mercantile, with Mercantile as the surviving entity). Mercantile plans to operate Eastern Michigan Bank separately until consolidating it into Mercantile Bank in the first quarter of 2027.
• To fund the purchase price and for working capital, Mercantile entered into a Credit Agreement with U.S. Bank National Association on December 24, 2025 for a $30.0 million term loan. Interest accrues at 1.70% plus the greater of (a) 0.0% and (b) the one‑month forward-looking term rate based on SOFR. Principal payments begin March 15, 2026, in $2.5 million installments, with a maturity date of December 24, 2028.
• Also effective December 31, 2025, Mercantile’s board expanded from 11 to 12 directors and appointed Steve Schweihofer (age 54) as a director; he will serve on the audit committee and is deemed independent under Nasdaq and SEC audit-committee standards.

Key Details

• $30.0 million term loan with U.S. Bank National Association (Credit Agreement dated Dec 24, 2025).
• Interest: 1.70% + max(0%, one‑month forward-looking SOFR term rate). Payments start Mar 15, 2026; principal installments of $2.5M; maturity Dec 24, 2028. Prepayments allowed anytime (min $100,000); prepaid amounts cannot be reborrowed.
• Financial covenants include: non-performing loans + OREO to tangible capital ≤ 12.00%; total risk‑based capital ratio ≥ 12.00%; maintain “well capitalized” status per 12 CFR §325.103(b)(1); and a four-quarter return on average assets ≥ 0.80% beginning with the quarter ending Dec 31, 2025.
• Board change: Steve Schweihofer appointed Dec 31, 2025; will stand for election at Mercantile’s May 2026 annual meeting and join the audit committee.
• The loan and related obligations are designated as “Designated Senior Indebtedness” under Mercantile’s Dec 15, 2021 Subordinated Indenture.

Why It Matters

• The acquisition expands Mercantile’s banking footprint and will add Eastern Michigan Bank’s assets and operations; the full operational consolidation is planned for Q1 2027.
• The $30M term loan provides financing for the acquisition and working capital but imposes financial covenants that could limit dividends, share buybacks, or other corporate actions if Mercantile falls out of compliance.
• The new independent director and audit‑committee addition strengthen board oversight during the integration and post‑merger period. Investors should watch forthcoming quarterly results and regulatory capital/asset-quality metrics to assess compliance with loan covenants and the financial impact of the acquisition.