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

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 CORPORATION
310 LEONARD STREET, NW
GRAND RAPIDS, MICHIGAN 49504
(616) 406-3777

 

 

Mercantile Bank of Michigan
401(k) Plan

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

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

2

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

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.

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.

Mercantile Bank of Michigan
401(k) Plan

Notes to Financial Statements

1.		Plan Description
		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.

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.

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.

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.

Mercantile Bank of Michigan
401(k) Plan

Notes to Financial Statements

3.		Investments
		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

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

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.

Mercantile Bank of Michigan
401(k) Plan

Notes to Financial Statements

7.		Changes in Trustee/Plan Amendments
		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.

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

Exhibit to Report on Form 11-K:

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

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.

Exhibit Index

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