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<SEC-DOCUMENT>0000950124-04-003648.txt : 20040806
<SEC-HEADER>0000950124-04-003648.hdr.sgml : 20040806
<ACCEPTANCE-DATETIME>20040806155805
ACCESSION NUMBER:		0000950124-04-003648
CONFORMED SUBMISSION TYPE:	10-Q
PUBLIC DOCUMENT COUNT:		6
CONFORMED PERIOD OF REPORT:	20040630
FILED AS OF DATE:		20040806

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			MERCANTILE BANK CORP
		CENTRAL INDEX KEY:			0001042729
		STANDARD INDUSTRIAL CLASSIFICATION:	STATE COMMERCIAL BANKS [6022]
		IRS NUMBER:				383360865
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-Q
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	000-26719
		FILM NUMBER:		04958166

	BUSINESS ADDRESS:	
		STREET 1:		5650 BYRON CENTER AVENUE S. W.
		CITY:			WYOMING
		STATE:			MI
		ZIP:			49509
		BUSINESS PHONE:		616 406-3777

	MAIL ADDRESS:	
		STREET 1:		5650 BYRON CENTER AVENUE S. W.
		CITY:			WYOMING
		STATE:			MI
		ZIP:			49509
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>k86649e10vq.txt
<DESCRIPTION>QUARTERLY REPORT FOR PERIOD ENDED 06/30/04
<TEXT>
<PAGE>

                    U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-Q

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 30, 2004

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                      For the transition period from    to   .

                         Commission File No. 000-26719

                          MERCANTILE BANK CORPORATION
             (Exact name of registrant as specified in its charter)

            Michigan                                      38-3360865
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation or organization)

                 5650 BYRON CENTER AVENUE SW, WYOMING, MI 49509
              (Address of principal executive offices) (Zip Code)

                                 (616) 406-3777
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes [X]   No  [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

                                Yes [X]   No [ ]

At August 6, 2004, there were 7,175,930 shares of Common Stock outstanding.

                                       1
<PAGE>

                          MERCANTILE BANK CORPORATION

                                     INDEX

<TABLE>
<CAPTION>
                                                                                                    Page No.
                                                                                                    --------
<S>                                                                                                 <C>
PART I.   Financial Information

          Item 1.    Financial Statements

          Consolidated Balance Sheets -
             June 30, 2004 (Unaudited) and December 31, 2003.....................................       3

          Consolidated Statements of Income and Comprehensive Income -
             Three and Six Months Ended June 30, 2004 (Unaudited) and
             June 30, 2003 (Unaudited)...........................................................       4

          Consolidated Statements of Changes in Shareholders' Equity -
             Six Months Ended June 30, 2004 (Unaudited) and
             June 30, 2003 (Unaudited)...........................................................       5

          Consolidated Statements of Cash Flows -
             Three and Six Months Ended June 30, 2004 (Unaudited) and
             June 30, 2003 (Unaudited)...........................................................       6

          Notes to Consolidated Financial Statements (Unaudited).................................       7

          Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations.................................................      15

          Item 3.  Quantitative and Qualitative Disclosures About Market Risk....................      24

          Item 4.  Controls and Procedures.......................................................      26

PART II.  Other Information

          Item 1.  Legal Proceedings.............................................................      27

          Item 2.  Changes in Securities, Use of Proceeds and Issuer Purchases of
              Equity Securities..................................................................      27

          Item 3.  Defaults upon Senior Securities...............................................      27

          Item 4.  Submission of Matters to a Vote of Security Holders...........................      27

          Item 5.  Other Information.............................................................      28

          Item 6.  Exhibits and Reports on Form 8-K..............................................      28

          Signatures.............................................................................      30
</TABLE>

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                          MERCANTILE BANK CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                   June 30,          December 31,
                                                                                     2004                2003
                                                                                     ----                ----
                                                                                  (Unaudited)
<S>                                                                             <C>                <C>
ASSETS
     Cash and due from banks                                                    $    35,005,000    $     16,309,000
     Short-term investments                                                             967,000             255,000
                                                                                ---------------    ----------------
         Total cash and cash equivalents                                             35,972,000          16,564,000

     Securities available for sale                                                   69,751,000          71,421,000
     Securities held to maturity (fair value of $48,921,000
       at June 30, 2004 and $47,102,000 at December 31, 2003)                        48,466,000          45,112,000
     Federal Home Loan Bank stock                                                     6,644,000           4,977,000

     Total loans and leases                                                       1,185,363,000       1,035,963,000
     Allowance for loan and lease losses                                            (16,312,000)        (14,379,000)
                                                                                ----------------   -----------------
              Total loans and leases, net                                         1,169,051,000       1,021,584,000

     Premises and equipment, net                                                     18,468,000          15,305,000
     Bank owned life insurance policies                                              16,796,000          16,441,000
     Accrued interest receivable                                                      4,257,000           4,098,000
     Other assets                                                                     9,221,000           7,835,000
                                                                                ---------------    ----------------

         Total assets                                                           $ 1,378,626,000    $  1,203,337,000
                                                                                ===============    ================

LIABILITIES AND SHAREHOLDERS' EQUITY
     Deposits
         Noninterest-bearing                                                    $   114,441,000    $     76,579,000
         Interest-bearing                                                           931,628,000         826,313,000
                                                                                ---------------    ----------------
              Total deposits                                                      1,046,069,000         902,892,000

     Securities sold under agreements to repurchase                                  46,960,000          49,545,000
     Federal funds purchased                                                          7,000,000           6,000,000
     Federal Home Loan Bank advances                                                120,000,000          90,000,000
     Subordinated debentures                                                         16,495,000          16,495,000
     Other borrowed money                                                             1,414,000           1,114,000
     Accrued expenses and other liabilities                                           6,416,000           7,090,000
                                                                                ---------------    ----------------
              Total liabilities                                                   1,244,354,000       1,073,136,000

Shareholders' equity
     Preferred stock, no par value; 1,000,000 shares
        authorized, none issued                                                               0                   0
     Common stock, no par value: 9,000,000 shares authorized;
        7,175,896 shares outstanding at June 30, 2004 and
        6,805,914 shares outstanding at December 31, 2003                           130,902,000         118,560,000
     Retained earnings                                                                4,166,000          11,421,000
     Accumulated other comprehensive income (loss)                                     (796,000)            220,000
                                                                                ----------------   ----------------
         Total shareholders' equity                                                 134,272,000         130,201,000
                                                                                ---------------    ----------------

              Total liabilities and shareholders' equity                        $ 1,378,626,000    $  1,203,337,000
                                                                                ===============    ================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                          MERCANTILE BANK CORPORATION
                       CONSOLIDATED STATEMENTS OF INCOME
                            AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                              Three Months     Three Months      Six Months       Six Months
                                                  Ended            Ended            Ended            Ended
                                              June 30, 2004    June 30, 2003    June 30, 2004    June 30, 2003
                                              -------------    -------------    -------------    -------------
                                               (Unaudited)      (Unaudited)      (Unaudited)      (Unaudited)
<S>                                         <C>                <C>              <C>              <C>
Interest income
     Loans and leases, including fees       $    14,722,000    $  12,223,000    $  28,630,000    $  23,666,000
     Investment securities                        1,400,000        1,186,000        2,826,000        2,402,000
     Federal funds sold                               8,000           23,000           27,000           39,000
     Short-term investments                               0            1,000            1,000            1,000
                                            ---------------    -------------    -------------    -------------
         Total interest income                   16,130,000       13,433,000       31,484,000       26,108,000

Interest expense
     Deposits                                     4,929,000        5,165,000        9,679,000       10,401,000
     Short-term borrowings                          186,000          173,000          356,000          344,000
     Federal Home Loan Bank advances                597,000          183,000        1,126,000          257,000
     Long-term borrowings                           418,000          413,000          834,000          825,000
                                            ---------------    -------------    -------------    -------------
         Total interest expense                   6,130,000        5,934,000       11,995,000       11,827,000
                                            ---------------    -------------    -------------    -------------

NET INTEREST INCOME                              10,000,000        7,499,000       19,489,000       14,281,000

Provision for loan and lease losses               1,230,000          845,000        2,474,000        1,470,000
                                            ---------------    -------------    -------------    -------------

NET INTEREST INCOME AFTER PROVISION
   FOR LOAN AND LEASE LOSSES                      8,770,000        6,654,000       17,015,000       12,811,000

Noninterest income
     Services charges on accounts                   312,000          280,000          611,000          549,000
     Net gain on sales of securities                      0          212,000           78,000          212,000
     Net gain on sales of loans                      40,000                0           40,000                0
     Other income                                   649,000          755,000        1,311,000        1,475,000
                                            ---------------    -------------    -------------    -------------
         Total noninterest income                 1,001,000        1,247,000        2,040,000        2,236,000

Noninterest expense
     Salaries and benefits                        3,510,000        2,759,000        6,793,000        5,256,000
     Occupancy                                      383,000          345,000          769,000          679,000
     Furniture and equipment                        267,000          245,000          540,000          466,000
     Other expense                                1,240,000        1,012,000        2,453,000        1,989,000
                                            ---------------    -------------    -------------    -------------
         Total noninterest expenses               5,400,000        4,361,000       10,555,000        8,390,000
                                            ---------------    -------------    -------------    -------------

INCOME BEFORE FEDERAL INCOME
   TAX EXPENSE                                    4,371,000        3,540,000        8,500,000        6,657,000

Federal income tax expense                        1,225,000        1,000,000        2,381,000        1,884,000
                                            ---------------    -------------    -------------    -------------

NET INCOME                                  $     3,146,000    $   2,540,000    $   6,119,000    $   4,773,000
                                            ===============    =============    =============    =============

COMPREHENSIVE INCOME                        $     1,740,000    $   2,325,000    $   5,103,000    $   4,424,000
                                            ===============    =============    =============    =============

Basic earnings per share                    $          0.44    $        0.45    $        0.85    $        0.84
                                            ===============    =============    =============    =============
Diluted earnings per share                  $          0.43    $        0.44    $        0.84    $        0.82
                                            ===============    =============    =============    =============
Cash dividends per share                    $          0.09    $        0.08    $        0.18    $        0.16
                                            ===============    =============    =============    =============

Average basic shares outstanding                  7,172,633        5,692,176        7,165,744        5,687,686
                                            ===============    =============    =============    =============
Average diluted shares outstanding                7,322,474        5,823,186        7,310,298        5,817,740
                                            ===============    =============    =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                          MERCANTILE BANK CORPORATION
                           CONSOLIDATED STATEMENTS OF
                        CHANGES IN SHAREHOLDERS' EQUITY
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                 Accumulated
                                                                                    Other            Total
                                                   Common         Retained      Comprehensive    Shareholders'
                                                    Stock         Earnings          Income           Equity
                                                -------------   -------------   -------------    -------------
<S>                                             <C>             <C>             <C>              <C>
BALANCE, JANUARY 1, 2003                        $  75,530,000   $   3,250,000   $   1,054,000    $  79,834,000

Comprehensive income:
     Net income for the period from
       January 1, 2003 through
       June 30, 2003                                                4,773,000                        4,773,000

     Change in net unrealized gain
       (loss) on securities available for
       sale, net of reclassifications
       and tax effect                                                                (349,000)        (349,000)
                                                                                                 -------------
         Total comprehensive income                                                                  4,424,000

Common stock cash dividends, $0.16 per share                         (866,000)                        (866,000)

Cash dividend reinvestment plan, 567 shares            14,000                                           14,000

Employee stock purchase plan, 935 shares               24,000                                           24,000

Stock option exercises, 15,436 shares                  27,000                                           27,000
                                                -------------   -------------   -------------    -------------

BALANCE, JUNE 30, 2003                          $  75,595,000   $   7,157,000   $     705,000    $  83,457,000
                                                =============   =============   =============    =============

BALANCE, JANUARY 1, 2004                        $ 118,560,000   $  11,421,000   $     220,000    $ 130,201,000

Comprehensive income:
     Net income for the period from
       January 1, 2004 through
       June 30, 2004                                                6,119,000                        6,119,000

     Change in net unrealized gain
       (loss) on securities available for
       sale, net of reclassifications
       and tax effect                                                              (1,016,000)      (1,016,000)
                                                                                                 -------------
         Total comprehensive income                                                                  5,103,000

Payment of 5% stock dividend, 340,180 shares       12,112,000     (12,116,000)                          (4,000)

Common stock cash dividends, $0.18 per share                       (1,258,000)                      (1,258,000)

Cash dividend reinvestment plan, 1,909 shares          65,000                                           65,000
..
Employee stock purchase plan, 1,094 shares             38,000                                           38,000

Stock option exercises, 26,799 shares                 127,000                                          127,000
                                                -------------   -------------   -------------    -------------

BALANCE, JUNE 30, 2004                          $ 130,902,000   $   4,166,000   $    (796,000)   $ 134,272,000
                                                =============   =============   =============    =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                          MERCANTILE BANK CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                        Three Months      Three Months     Six Months       Six Months
                                                            Ended             Ended           Ended            Ended
                                                        June 30, 2004     June 30, 2003   June 30, 2004    June 30, 2003
                                                        -------------     -------------   -------------    -------------
                                                         (Unaudited)       (Unaudited)     (Unaudited)      (Unaudited)
<S>                                                     <C>               <C>             <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income                                         $   3,146,000     $   2,540,000   $   6,119,000    $   4,773,000
     Adjustments to reconcile net income
        to net cash from operating activities
         Depreciation and amortization                        436,000           516,000         848,000          967,000
         Provision for loan and lease losses                1,230,000           845,000       2,474,000        1,470,000
         Net gain on sales of loans                           (40,000)                0         (40,000)               0
         Net gain on sales of securities                            0          (212,000)        (78,000)        (212,000)
         Net change in:
              Accrued interest receivable                     567,000           399,000        (159,000)        (125,000)
              Bank owned life insurance policies             (178,000)         (197,000)       (355,000)        (405,000)
              Other assets                                 (1,429,000)       (1,217,000)       (998,000)        (701,000)
              Accrued expenses and other liabilities          359,000            35,000        (674,000)         121,000
                                                        -------------     -------------   -------------    -------------
                 Net cash used in operating activities      4,091,000         2,709,000       7,137,000        5,888,000

CASH FLOWS FROM INVESTING ACTIVITIES
     Loan and leases originations and payments, net       (74,426,000)      (53,615,000)   (149,901,000)     (94,657,000)
     Purchases of:
         Securities available for sale                     (9,970,000)      (16,380,000)    (12,964,000)     (25,129,000)
         Securities held to maturity                       (2,910,000)       (1,958,000)     (4,336,000)      (4,639,000)
         Federal Home Loan Bank stock                        (860,000)       (1,464,000)     (1,667,000)      (1,464,000)
     Proceeds from:
         Maturities, calls and repayments of
            available for sale securities                   3,016,000         8,253,000      11,340,000       14,827,000
         Maturities, calls and repayments of
            held to maturity securities                       965,000           534,000         965,000          534,000
         Sales of available for sale securities                     0         8,336,000       1,748,000        8,336,000
     Purchases of premises and equipment, net              (2,195,000)       (1,997,000)     (3,774,000)      (2,548,000)
     Purchases of bank owned life insurance policies                0                 0               0         (300,000)
                                                        -------------     -------------   -------------    -------------
              Net cash used in investing activities       (86,380,000)      (58,291,000)   (158,589,000)    (105,040,000)

CASH FLOWS FROM FINANCING ACTIVITIES
     Net increase in deposits                              50,735,000        42,490,000     143,177,000       89,474,000
     Net increase (decrease) in securities sold under
       agreements to repurchase                             5,347,000        (5,548,000)     (2,585,000)     (10,645,000)
     Advances from Federal Home Loan Bank                  20,000,000        30,000,000      30,000,000       30,000,000
     Net increase (decrease) in other borrowed money        7,053,000        (1,917,000)      1,300,000          346,000
     Stock option exercises                                    39,000             7,000         127,000           27,000
     Employee stock purchase plan                              22,000            14,000          38,000           24,000
     Cash dividend reinvestment plan                           46,000            14,000          65,000           14,000
     Payment of cash dividends                               (646,000)         (433,000)     (1,258,000)        (866,000)
     Cash paid in lieu of fractional shares on
       stock dividend                                               0                 0          (4,000)               0
                                                        -------------     -------------   -------------    -------------
         Net cash from financing activities                82,596,000        64,627,000     170,860,000      108,374,000
                                                        -------------     -------------   -------------    -------------

Net change in cash and cash equivalents                       307,000         9,045,000      19,408,000        9,222,000
Cash and cash equivalents at beginning of period           35,665,000        28,294,000      16,564,000       28,117,000
                                                        -------------     -------------   -------------    -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD              $  35,972,000     $  37,339,000   $  35,972,000    $  37,339,000
                                                        =============     =============   =============    =============
Cash paid during the period for:
     Interest                                           $   6,232,000     $   6,294,000   $  12,183,000    $  11,724,000
     Federal income tax                                     2,550,000         2,350,000       2,925,000        2,575,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6
<PAGE>

                          MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1.    SIGNIFICANT ACCOUNTING POLICIES

      Basis of Presentation: The unaudited financial statements for the three
      and six months ended June 30, 2004 include the consolidated results of
      operations of Mercantile Bank Corporation and its consolidated
      subsidiaries. These subsidiaries include Mercantile Bank of West Michigan
      ("our bank"), our bank's four subsidiaries, Mercantile Bank Mortgage
      Company, LLC ("our mortgage company"), Mercantile BIDCO, Inc. ("our
      BIDCO"), Mercantile Bank Real Estate Co., LLC ("our real estate company"),
      and Mercantile Insurance Center, Inc. ("our insurance center"). These
      consolidated financial statements have been prepared in accordance with
      the instructions for Form 10-Q and Item 303(b) of Regulation S-K and do
      not include all disclosures required by accounting principles generally
      accepted in the United States of America for a complete presentation of
      our financial condition and results of operations. In the opinion of
      management, the information reflects all adjustments (consisting only of
      normal recurring adjustments) which are necessary in order to make the
      financial statements not misleading and for a fair presentation of the
      results of operations for such periods. The results for the periods ended
      June 30, 2004 should not be considered as indicative of results for a full
      year. For further information, refer to the consolidated financial
      statements and footnotes included in our annual report on Form 10-K for
      the year ended December 31, 2003.

      MBWM Capital Trust I ("the trust"), a business trust formed by Mercantile
      Bank Corporation, sold 1.6 million trust preferred securities at $10.00
      per trust preferred security in a September 1999 offering. Mercantile Bank
      Corporation issued subordinated debentures to the trust in exchange for
      the proceeds of the offering. The debentures and related debt issuance
      costs represent the sole assets of the trust. Prior to 2004, the trust was
      consolidated in our financial statements, with the trust preferred
      securities issued by the trust reported in liabilities as "Trust preferred
      securities" and the subordinated debentures eliminated in the
      consolidation. Under new accounting guidance, FASB Interpretation No. 46,
      as revised in December 2003, the trust is no longer consolidated.
      Accordingly, Mercantile Bank Corporation does not report the securities
      issued by the trust as liabilities, and instead reports as liabilities the
      subordinated debentures issued by Mercantile Bank Corporation and held by
      the trust, as these are no longer eliminated in consolidation. Amounts
      previously reported as "Trust preferred securities" in liabilities has
      been recaptioned "Subordinated debentures" and continue to be presented in
      liabilities on the balance sheet. The effect of no longer consolidating
      the trust does not significantly change the amounts reported as Mercantile
      Bank Corporation's assets, liabilities, equity or interest expense.

      Stock Dividend: All per share amounts and average shares outstanding have
      been adjusted for all periods presented to reflect the 5% stock dividend
      distributed on May 3, 2004. The Statement of Changes in Shareholders'
      Equity reflects a transfer from retained earnings to common stock for the
      value of the shares distributed.

      Allowance for Loan and Lease Losses: The allowance for loan and lease
      losses is a valuation allowance for probable incurred credit losses,
      increased by the provision for loan and lease losses and recoveries, and
      decreased by charge-offs. Management estimates the allowance balance
      required based on past loan loss experience, the nature and volume of the
      portfolio, information about specific borrower situations and estimated
      collateral values, and economic conditions. Allocations of the allowance
      may be made for specific loans and leases, but the entire allowance is
      available for any loan or lease that, in management's judgment, should be
      charged-off. Loan and lease losses are charged against the allowance when
      management believes the uncollectibility of a loan or lease balance is
      confirmed.

                                       7
<PAGE>

                          MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

1.    SIGNIFICANT ACCOUNTING POLICIES (Continued)

      A loan or lease is impaired when full payment under the loan or lease
      terms is not expected. Impairment is evaluated in aggregate for
      smaller-balance loans of similar nature such as residential mortgage,
      consumer and credit card loans, and on an individual loan basis for other
      loans. If a loan or lease is impaired, a portion of the allowance is
      allocated so that the loan or lease is reported, net, at the present value
      of estimated future cash flows using the loan's or lease's existing rate
      or at the fair value of collateral if repayment is expected solely from
      the collateral. Loans and leases are evaluated for impairment when
      payments are delayed, typically 90 days or more, or when the internal
      grading system indicates a doubtful classification.

      Stock Compensation: Employee compensation expense under stock option plans
      is reported using the intrinsic value method. No stock-based compensation
      cost is reflected in net income, as all options granted had an exercise
      price equal to or greater than the market price of the underlying common
      stock at date of grant. The following table illustrates the effect on net
      income and earnings per share if expense was measured using the fair value
      recognition provisions of FASB Statement No. 123, Accounting for
      Stock-Based Compensation.

<TABLE>
<CAPTION>
                                                   Quarter ended                    Six months ended
                                          June 30, 2004     June 30, 2003    June 30, 2004     June 30, 2003
                                          -------------     -------------    -------------     -------------
<S>                                       <C>              <C>               <C>              <C>
Net income as reported                    $   3,146,000     $   2,540,000    $   6,119,000     $   4,773,000
Deduct: Stock-based compensation
   expense determined under fair
   value based method                            63,000            81,000          126,000           163,000
                                          -------------     -------------    -------------     -------------
Pro forma net income                          3,083,000         2,459,000        5,993,000         4,610,000
                                          =============     =============    =============     =============

Basic earnings per share as reported      $        0.44     $        0.45    $        0.85     $        0.84
Pro forma basic earnings per share                 0.43              0.43             0.84              0.81

Diluted earnings per share
   as reported                            $        0.43     $        0.44    $        0.84     $        0.82
Pro forma diluted earnings per share               0.42              0.42             0.82              0.79
</TABLE>

      The pro forma effects are computed using option pricing models, using the
      following weighted-average assumptions as of grant date.

<TABLE>
<CAPTION>
                                                   Quarter ended                    Six months ended
                                          June 30, 2004     June 30, 2003    June 30, 2004     June 30, 2003
                                          -------------     -------------    -------------     -------------
<S>                                       <C>               <C>              <C>               <C>
Risk-free interest rate                           3.25%             3.25%            3.25%             3.25%
Expected option life                            7 Years           7 Years          7 Years           7 Years
Expected stock price volatility                     22%               20%              22%               20%
Dividend yield                                    1.00%             1.30%            1.00%             1.30%
</TABLE>

                                       8
<PAGE>

                          MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

2.    LOANS AND LEASES

      Our total loans and leases at June 30, 2004 were $1,185.4 million compared
      to $1,036.0 million at December 31, 2003, an increase of $149.4 million,
      or 14.4%. The components of our outstanding balances at June 30, 2004 and
      December 31, 2003, and the percentage changes in loans and leases from the
      end of 2003 to the end of the second quarter 2004 are as follows:

<TABLE>
<CAPTION>
                                                                                             Percent
                                          June 30, 2004             December 31, 2003       Increase/
                                    Balance            %            Balance          %      (Decrease)
                                    -------            -            -------          -      ----------
<S>                             <C>                  <C>        <C>                <C>      <C>
Real Estate:
    Construction and land
      development               $   119,086,000       10.0%     $   117,649,000     11.4%       1.2%
    Secured by 1-4 family
      properties                    107,603,000        9.1           92,339,000      8.9       16.5
    Secured by multi-family
      properties                     34,312,000        2.9           28,950,000      2.8       18.5
    Secured by nonresidential
      properties                    575,757,000       48.6          485,080,000     46.8       18.7
Commercial                          341,067,000       28.8          304,800,000     29.4       11.9
Leases                                2,381,000        0.2            2,309,000      0.2        3.1
Consumer                              5,157,000        0.4            4,836,000      0.5        6.6
                                ---------------      -----      ---------------    -----       ----

    Total loans and leases      $ 1,185,363,000      100.0%     $ 1,035,963,000    100.0%      14.4%
                                ===============      =====      ===============    =====       ====
</TABLE>

3.    ALLOWANCE FOR LOAN AND LEASE LOSSES

      The following is a summary of the change in our allowance for loan and
      lease losses account for the three and six months ended June 30:

<TABLE>
<CAPTION>
                                      Three months ended                    Six months ended
                                  June 30,          June 30,            June 30,          June 30,
                                    2004              2003               2004              2003
                                    ----              ----               ----              ----
<S>                             <C>              <C>                 <C>              <C>
Balance at beginning of
  period                        $  15,337,000    $  11,406,000       $  14,379,000    $   10,890,000
     Charge-offs                     (264,000)        (297,000)           (562,000)         (429,000)
     Recoveries                         9,000          204,000              21,000           227,000
     Provision for loan and
       lease losses                 1,230,000          845,000           2,474,000         1,470,000
                                -------------    -------------       -------------    --------------

Balance at June 30              $  16,312,000    $  12,158,000       $  16,312,000    $   12,158,000
                                =============    =============       =============    ==============
</TABLE>

                                       9
<PAGE>

                          MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)

4.    PREMISES AND EQUIPMENT - NET

      Premises and equipment are comprised of the following:

<TABLE>
<CAPTION>
                                                    June 30,          December 31,
                                                      2004                2003
                                                      ----                ----
<S>                                              <C>                 <C>
Land and improvements                            $   5,753,000       $   5,745,000
Buildings and leasehold improvements                11,730,000           8,183,000
Furniture and equipment                              5,154,000           4,935,000
                                                 -------------       -------------
                                                    22,637,000          18,863,000
Less accumulated depreciation                        4,169,000           3,558,000
                                                 -------------       -------------

Premises and equipment, net                      $  18,468,000       $  15,305,000
                                                 =============       =============
</TABLE>

      Depreciation expense amounted to $307,000 during the second quarter of
      2004, compared to $285,000 in the second quarter of 2003. Depreciation
      expense amounted to $610,000 during the first six months of 2004, compared
      to $551,000 during the first six months of 2003.

5.    DEPOSITS

      Our total deposits at June 30, 2004 were $1,046.1 million compared to
      $902.9 million at December 31, 2003, an increase of $143.2 million, or
      15.9%. The components of our outstanding balances at June 30, 2004 and
      December 31, 2003, and percentage change in deposits from the end of 2003
      to the end of the second quarter 2004 are as follows:

<TABLE>
<CAPTION>
                                                                               Percent
                                     June 30, 2004       December 31, 2003    Increase/
                                 Balance         %        Balance        %    (Decrease)
                                 -------         -        -------        -    ---------
<S>                          <C>               <C>     <C>             <C>    <C>
Noninterest-bearing demand   $   114,441,000    10.9%  $  76,579,000     8.5%    49.4%
Interest-bearing checking         30,411,000     2.9      34,241,000     3.8    (12.7)
Money market                       8,254,000     0.8       8,290,000     0.9     (0.4)
Savings                          129,233,000    12.4     101,710,000    11.3     27.1
Time, under $100,000               7,436,000     0.7       8,163,000     0.9     (8.9)
Time, $100,000 and over           83,439,000     8.0      82,288,000     9.1      1.4
                             ---------------   -----   -------------   -----    -----
                                 373,214,000    35.7     311,271,000    34.5     19.9
Out-of-area time,
   under $100,000                102,060,000     9.8      98,079,000    10.9      4.1
Out-of-area time,
   $100,000 and over             570,795,000    54.5     493,542,000    54.6     15.7
                             ---------------   -----   -------------   -----    -----
                                 672,855,000    64.3     591,621,000    65.5     13.7
                             ---------------   -----   -------------   -----    -----

    Total deposits           $ 1,046,069,000   100.0%  $ 902,892,000   100.0%    15.9%
                             ===============   =====   =============   =====    =====
</TABLE>

                                       10
<PAGE>

                           MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

6.    SHORT-TERM BORROWINGS

      Information relating to our securities sold under agreements to repurchase
      follows:

<TABLE>
<CAPTION>
                                                      June 30,             December 31,
                                                        2004                  2003
                                                        ----                  ----
<S>                                                  <C>                   <C>
Outstanding balance at end of period                 $46,960,000           $49,545,000
Average interest rate at end of period                      1.38%                 1.38%

Average balance during the period                    $46,373,000           $45,865,000
Average interest rate during the period                     1.39%                 1.45%

Maximum month end balance during the period          $50,138,000           $55,270,000
</TABLE>

      Securities sold under agreements to repurchase ("repurchase agreements")
      generally have original maturities of less than one year. Repurchase
      agreements are treated as financings and the obligations to repurchase
      securities sold are reflected as liabilities. Securities involved with the
      agreements are recorded as assets of our bank and are primarily held in
      safekeeping by correspondent banks. Repurchase agreements are offered
      principally to certain large deposit customers as deposit equivalent
      investments.

7.    FEDERAL HOME LOAN BANK ADVANCES

      Our outstanding balances at June 30, 2004 and December 31, 2003 were as
      follows.

<TABLE>
<CAPTION>
                                                                 June 30,           December 31,
                                                                  2004                 2003
                                                                  ----                 ----
<S>                                                           <C>                   <C>
Maturities July 2004 through September 2006,
   fixed rates from 1.46% to 3.21%, averaging 2.14%           $110,000,000                     0

Maturities in May 2006, floating rates tied to Libor
   indices, averaging 1.33% as of June 30, 2004                 10,000,000                     0

Maturities January 2004 through September 2006,
   fixed rates from 1.54% to 3.21%, averaging 2.07%                      0          $ 90,000,000
                                                              ------------          ------------

          Total Federal Home Loan Bank advances               $120,000,000          $ 90,000,000
                                                              ============          ============
</TABLE>

      Each advance is payable at its maturity date, and is subject to a
      prepayment fee if paid prior to the maturity date. The advances are
      collateralized by residential mortgage loans, first mortgage liens on
      multi-family residential property loans, first mortgage liens on
      commercial real estate property loans, and substantially all other assets
      of our bank, under a blanket lien arrangement. Our borrowing line of
      credit as of June 30, 2004 totaled $182.5 million, with availability
      approximating $54.0 million.

                                       11
<PAGE>

                           MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

7.    FEDERAL HOME LOAN BANK ADVANCES (Continued)

      Maturities of FHLB advances currently outstanding during the next five
      years are:

<TABLE>
<C>                                  <C>
2004                                 $    30,000,000
2005                                      55,000,000
2006                                      35,000,000
2007                                               0
2008                                               0
</TABLE>

8.    COMMITMENTS AND OFF-BALANCE-SHEET RISK

      Our bank is a party to financial instruments with off-balance-sheet risk
      in the normal course of business to meet the financing needs of our
      customers. These financial instruments include commitments to extend
      credit and standby letters of credit. Loan commitments to extend credit
      are agreements to lend to a customer as long as there is no violation of
      any condition established in the contract. Standby letters of credit are
      conditional commitments issued by our bank to guarantee the performance of
      a customer to a third party. Commitments generally have fixed expiration
      dates or other termination clauses and may require payment of a fee. Since
      many of the commitments are expected to expire without being drawn upon,
      the total commitment amounts do not necessarily represent future cash
      requirements.

      These instruments involve, to varying degrees, elements of credit risk in
      excess of the amount recognized, if any, in the balance sheet. Our bank's
      maximum exposure to loan loss in the event of nonperformance by the other
      party to the financial instrument for commitments to extend credit and
      standby letters of credit is represented by the contractual notional
      amount of those instruments. Our bank uses the same credit policies in
      making commitments and conditional obligations as it does for on-balance
      sheet instruments. Collateral, such as accounts receivable, securities,
      inventory, property and equipment, is generally obtained based on
      management's credit assessment of the borrower.

      A summary of the contractual amounts of our financial instruments with
      off-balance-sheet risk at June 30, 2004 and December 31, 2003 follows:

<TABLE>
<CAPTION>
                                                        June 30,            December 31,
                                                         2004                   2003
                                                         ----                   ----
<S>                                                   <C>                   <C>
Commercial unused lines of credit                     $194,927,000          $176,943,000
Unused lines of credit secured by 1-4 family
  residential properties                                23,385,000            19,020,000
Credit card unused lines of credit                      11,234,000             8,990,000
Other consumer unused lines of credit                    6,964,000             5,569,000
Commitments to make loans                               47,322,000            73,570,000
Standby letters of credit                               57,138,000            57,918,000
                                                      ------------          ------------

       Total loan and leases commitments              $340,970,000          $342,010,000
                                                      ============          ============
</TABLE>

                                       12
<PAGE>

                           MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

9.    REGULATORY MATTERS

      We are subject to regulatory capital requirements administered by federal
      banking agencies. Capital adequacy guidelines and prompt corrective action
      regulations involve quantitative measures of assets, liabilities, and
      certain off-balance-sheet items calculated under regulatory accounting
      practices. Capital amounts and classifications are also subject to
      qualitative judgments by regulators about components, risk weightings, and
      other factors, and the regulators can lower classifications in certain
      cases. Failure to meet various capital requirements can initiate
      regulatory action that could have a direct material effect on our
      financial statements.

      The prompt corrective action regulations provide five classifications,
      including well capitalized, adequately capitalized, undercapitalized,
      significantly undercapitalized, and critically undercapitalized, although
      these terms are not used to represent overall financial condition. If not
      well capitalized, regulatory approval is required to accept brokered
      deposits. If undercapitalized, capital distributions are limited, as is
      asset growth and expansion, and plans for capital restoration are
      required.

      Our actual capital levels and minimum required levels were (dollars in
      thousands):

<TABLE>
<CAPTION>
                                                                                                    Minimum Required
                                                                                                       to be Well
                                                                      Minimum Required              Capitalized Under
                                                                        for Capital                 Prompt Corrective
                                          Actual                     Adequacy Purposes             Action Regulations
                                   -------------------              --------------------          --------------------
                                   Amount        Ratio              Amount         Ratio          Amount         Ratio
                                   ------        -----              ------         -----          ------         -----
<S>                              <C>             <C>              <C>              <C>            <C>            <C>
June 30, 2004
  Total capital (to risk
    weighted assets)
      Consolidated               $167,380          12.7%          $105,165           8.0%         $131,456          10.0%
      Bank                        163,709          12.5            104,922           8.0           131,153          10.0
  Tier 1 capital (to risk
    weighted assets)
      Consolidated                151,068          11.5             52,582           4.0            78,874           6.0
      Bank                        147,397          11.2             52,461           4.0            78,692           6.0
  Tier 1 capital (to
    average assets)
      Consolidated                151,068          11.4             53,221           4.0            66,526           5.0
      Bank                        147,397          11.1             53,121           4.0            66,401           5.0
</TABLE>

                                       13
<PAGE>

                           MERCANTILE BANK CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

9.    REGULATORY MATTERS (Continued)

<TABLE>
<CAPTION>
                                                                                                     Minimum Required
                                                                                                        to be Well
                                                                      Minimum Required              Capitalized Under
                                                                         for Capital                Prompt Corrective
                                          Actual                      Adequacy Purposes             Action Regulations
                                   -------------------              --------------------           --------------------
                                   Amount        Ratio              Amount         Ratio           Amount         Ratio
                                   ------        -----              ------         -----           ------         -----
<S>                               <C>             <C>             <C>              <C>            <C>             <C>
December 31, 2003
  Total capital (to risk
    weighted assets)
      Consolidated                $160,360        13.8%           $ 92,711         8.0%           $115,888        10.0%
      Bank                         156,950        13.6              92,556         8.0             115,695        10.0
  Tier 1 capital (to risk
    weighted assets)
      Consolidated                 145,981        12.6              46,356         4.0              69,533         6.0
      Bank                         142,571        12.3              46,278         4.0              69,417         6.0
  Tier 1 capital (to
    average assets)
      Consolidated                 145,981        12.5              46,756         4.0              58,444         5.0
      Bank                         142,571        12.2              46,703         4.0              58,378         5.0
</TABLE>

      Our capital levels as of June 30, 2004 include the $16.0 million in trust
      preferred securities issued by the trust subject to certain limitations.
      Federal Reserve guidelines limit the amount of trust preferred securities
      which can be included in our Tier 1 capital to 25% of total Tier 1
      capital. As of June 30, 2004, the entire $16.0 million of the trust
      preferred securities were included as Tier 1 capital.

      Our and our bank's ability to pay cash and stock dividends is subject to
      limitations under various laws and regulations and to prudent and sound
      banking practices. We declared a 5% stock dividend on April 7, 2004, that
      was distributed on May 3, 2004 to record holders as of April 16, 2004. All
      earnings per share and dividend per share information have been adjusted
      for the 5% stock dividend. We have also paid two cash dividends on our
      common stock during 2004. On January 6, 2004, we declared a $0.09 per
      share cash dividend on our common stock, which was paid on March 10, 2004
      to record holders as of February 10, 2004. On April 7, 2004, we declared a
      $0.09 per share cash dividend on our common stock, which was paid on June
      10, 2004 to record holders as of May 10, 2004. On July 7, 2004, we
      declared a $0.09 per share cash dividend on our common stock, which is
      payable on September 10, 2004 to record holders as of August 10, 2004.

10.   BENEFIT PLANS

      We sponsor an employee stock purchase plan which allows employees to defer
      after-tax payroll dollars and purchase our common stock on a quarterly
      basis. We have registered 26,250 shares of common stock to be issued and
      purchased under the plan; however, the plan allows for shares to be
      purchased directly from us or on the open market. During the six months
      ended June 30, 2004, we issued 1,094 shares under the plan.

                                       14
<PAGE>

                           MERCANTILE BANK CORPORATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements that are based on management's
beliefs, assumptions, current expectations, estimates and projections about the
financial services industry, the economy, and about our company. Words such as
"anticipates", "believes", "estimates", "expects", "forecasts", "intends", "is
likely", "plans", "projects", variations of such words and similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve certain risks, uncertainties
and assumptions ("Future Factors") that are difficult to predict with regard to
timing, extent, likelihood and degree of occurrence. Therefore, actual results
and outcomes may materially differ from what may be expressed or forecasted in
such forward-looking statements. We undertake no obligation to update, amend, or
clarify forward looking-statements, whether as a result of new information,
future events (whether anticipated or unanticipated), or otherwise.

Future Factors include, among others, 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; and changes in the national and local economy. These are representative
of the Future Factors that could cause a difference between an ultimate actual
outcome and a forward-looking statement.

INTRODUCTION

The following discussion compares the financial condition of Mercantile Bank
Corporation and its consolidated subsidiaries, Mercantile Bank of West Michigan
("our bank"), our bank's four subsidiaries Mercantile Bank Mortgage Company
("our mortgage company"), Mercantile BIDCO, Inc. ("our BIDCO"), Mercantile Bank
Real Estate Co., LLC ("our real estate company") and Mercantile Insurance
Center, Inc. ("our insurance center"), at June 30, 2004 to December 31, 2003 and
the results of operations for the three and six months ended June 30, 2004 and
June 30, 2003. This discussion should be read in conjunction with the interim
consolidated financial statements and footnotes included in this report. Unless
the text clearly suggests otherwise, references in this report to "us," "we,"
"our," or "the company" include Mercantile Bank Corporation and its consolidated
subsidiaries referred to above.

CRITICAL ACCOUNTING POLICIES

Generally accepted accounting principles are complex and require management to
apply significant judgment to various accounting, reporting and disclosure
matters. Management must use assumptions and estimates to apply these principles
where actual measurements are not possible or practical. The Management's
Discussion and Analysis of Financial Condition and Results of Operations should
be read in conjunction with our unaudited financial statements included in this
report. For a complete discussion of our significant accounting policies, see
footnotes to our Consolidated Financial Statements included on pages F-27
through F-31 in our Form 10-K for the fiscal year ended December 31, 2003
(Commission file number 000-26719). Below is a discussion of our Allowance for
Loan and Lease Losses policy. This policy is critical because it is highly
dependent upon subjective or complex judgments, assumptions and estimates.
Changes in such estimates may have a significant impact on the financial
statements, and actual results may differ from those estimates. Management has
reviewed the application of this policy with the Audit Committee of the
Company's Board of Directors.

                                       15
<PAGE>

                           MERCANTILE BANK CORPORATION

Allowance for Loan and Lease Losses: The allowance for loan and lease losses is
a valuation allowance for probable incurred credit losses, increased by the
provision for loan and lease losses and recoveries, and decreased by
charge-offs. Management estimates the allowance balance required based on past
loan loss experience, the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, and economic
conditions. Allocations of the allowance may be made for specific loans and
leases, but the entire allowance is available for any loan or lease that, in
management's judgment, should be charged-off. Loan and lease losses are charged
against the allowance when management believes the uncollectibility of a loan or
lease balance is confirmed.

A loan or lease is impaired when full payment under the loan or lease terms is
not expected. Impairment is evaluated in aggregate for smaller-balance loans of
similar nature such as residential mortgage, consumer and credit card loans, and
on an individual loan basis for other loans. If a loan or lease is impaired, a
portion of the allowance is allocated so that the loan or lease is reported,
net, at the present value of estimated future cash flows using the loan's or
lease's existing rate or at the fair value of collateral if repayment is
expected solely from the collateral. Loans and leases are evaluated for
impairment when payments are delayed, typically 90 days or more, or when the
internal grading system indicates a doubtful classification.

FINANCIAL CONDITION

During the first six months of 2004, our assets increased from $1,203.3 million
on December 31, 2003, to $1,378.6 million on June 30, 2004. This represents a
total increase in assets of $175.3 million, or 14.6%. The asset growth was
comprised primarily of a $147.5 million increase in net loans, an increase of
$19.4 million in cash and cash equivalents and a $3.4 million increase in
securities. The increase in assets was primarily funded by a $143.2 million
growth in deposits and an increase of $30.0 million in Federal Home Loan Bank
advances.

Commercial loans and leases increased by $133.8 million during the first six
months of 2004, and at June 30, 2004 totaled $1,072.6 million, or 90.5% of the
total loan and lease portfolio. The continued significant concentration of the
loan and lease portfolio in commercial loans and leases and the rapid growth of
this portion of our lending business is consistent with our stated strategy of
focusing a substantial amount of efforts on "wholesale" banking. Corporate and
business lending continues to be an area of expertise of our senior management
team, and our 15 commercial lenders have over 220 years of combined commercial
lending experience, ten of whom have 15 years or more experience. Of each of the
loan categories that we originate, commercial loans and leases are most
efficiently originated and managed; thus limiting overhead costs by
necessitating the attention of fewer full-time employees. Our commercial lending
business generates the greatest amount of local deposits, and is our primary
source of demand deposits.

Residential mortgage loans and consumer loans increased by $15.3 million and
$0.3 million, respectively, during the first six months of 2004. As of June 30,
2004, residential mortgage and consumer loans totaled a combined $112.8 million,
or 9.5% of the total loan and lease portfolio. Although we plan to increase our
non-commercial loan portfolios in future periods, given our wholesale banking
strategy, we expect the commercial sector of our lending efforts and resultant
assets to remain the dominant loan portfolio category.

                                       16
<PAGE>

                           MERCANTILE BANK CORPORATION

Management believes the quality of our loan and lease portfolio remains strong.
Net loan and lease charge-offs during the first six months of 2004 totaled
$541,000, or 0.10% of average total loans and leases on an annualized basis.
During the first six months of 2003, net loan and lease charge-offs totaled
$202,000, or 0.05% of average total loans and leases on an annualized basis.
Past due and nonaccrual loans and leases at June 30, 2004 totaled $3.7 million,
or 0.31% of period-ending total loans and leases. At December 31, 2003, past due
and nonaccrual loans and leases totaled $1.8 million, or 0.17% of period-ending
total loans and leases. The $1.9 million increase during the first six months of
2004, as well as a vast majority of the $541,000 net loan and lease charge-off
figure noted above, is primarily attributable to two commercial loan
relationships. We believe we have instilled a strong credit culture within our
lending departments as it pertains to the underwriting and administration
processes, which in part is reflected in our loan and lease net charge-off and
delinquency ratios. Over 98% of the loan portfolio consists of loans extended
directly to companies and individuals doing business and residing within our
market area. The remaining portion is comprised of commercial loans participated
with certain commercial banks outside the immediate area, which we underwrite
using the same loan underwriting criteria as though our bank was the originating
bank.

Securities increased $3.4 million during the first six months of 2004. Purchases
during the first six months of 2004 totaled $19.0 million. Proceeds from the
sales of securities totaled $1.7 million, while proceeds from the maturities,
calls and repayments of securities totaled $12.3 million. At June 30, 2004, the
net unrealized loss on available for sale securities equaled $1.0 million,
compared to a net unrealized gain of $0.3 million at December 31, 2003. Our
securities portfolio consists of U.S. Government Agency bonds, mortgage-backed
securities issued or guaranteed by U.S. Governments Agencies, investment-grade
tax-exempt municipal securities and Federal Home Loan Bank of Indianapolis
("FHLBI") stock.

Cash and cash equivalents increased $19.4 million during the first six months of
2004, totaling $36.0 million on June 30, 2004. Cash and due from bank balances
were up $18.7 million, with short-term investments up $0.7 million. Our
commercial lending and wholesale funding focus results in relatively large
day-to-day fluctuations of our cash and cash equivalent balances. The average
cash and cash equivalents during the first six months of 2004 equaled $34.0
million, well above the relatively low balance of $16.6 million on December 31,
2003.

Premises and equipment at June 30, 2004 equaled $18.5 million, an increase of
$3.2 million since December 31, 2003, and an increase of $6.0 million since
March 31, 2003. The vast majority of the increase relates to our construction of
two new banking facilities. On April 30, 2003, our bank purchased an existing
building situated on 2.75 acres of land located about two miles north of the
center of downtown Grand Rapids, Michigan for $1.3 million. The building was
demolished, and we are now in the construction phase of building a new
four-story facility on this property. This facility will serve as the new
location for our current downtown leased facility, which includes our commercial
lending function, and will house the administration and loan operations
functions currently housed at other of our locations. Expected completion date
is mid-2005. On September 29, 2003, our bank purchased ten acres of land located
in Holland, Michigan for $0.9 million. We are now in the construction phase of
building a new two-story facility on this property. This facility will serve as
the new location for our current full-service branch and lending office which
currently operates out of a leased facility. Expected completion date is
late-2004.

                                       17
<PAGE>

                           MERCANTILE BANK CORPORATION

Deposits increased $143.2 million during the first six months of 2004, totaling
$1,046.1 million at June 30, 2004. Local deposits increased $61.9 million, or
19.9% and out-of-area deposits increased $81.3 million. As a percent of total
deposits, local deposits increased from 34.5% on December 31, 2003, to 35.7% on
June 30, 2004. Noninterest-bearing demand deposits, comprising 10.9% of total
deposits, increased $37.8 million during the first six months of 2004. Savings
deposits (12.4% of total deposits) increased $27.5 million, interest-bearing
checking deposits (2.9% of total deposits) decreased $3.8 million and money
market deposit accounts (0.8% of total deposits) was relatively unchanged during
the first six months of 2004. Local certificates of deposit, comprising 8.7% of
total deposits, increased by $0.4 million during the first six months of 2004.

Out-of-area deposits increased $81.3 million during the first six months of
2004, totaling $672.9 million as of June 30, 2004. Out-of-area deposits consist
primarily of certificates of deposit obtained from depositors located outside
our market area and placed by deposit brokers for a fee, but also include
certificates of deposit obtained from the deposit owners directly. Out-of-area
deposits are utilized to support our asset growth, and are generally a lower
cost source of funds when compared to the deposit interest rates that would have
to be offered in the local market to generate a sufficient level of funds.
During the first six months of 2004 rates paid on new out-of-area certificates
of deposit were generally about the same as rates paid on new certificates of
deposit issued to local customers. Overhead costs associated with the
out-of-area deposits are considerably less than the overhead costs that would be
incurred to administer a similar level of local deposits. Although local
deposits have and are expected to increase as new business, governmental and
consumer deposit relationships are established, our relatively high reliance on
out-of-area deposits will likely continue.

Securities sold under agreements to repurchase ("repurchase agreements")
decreased by $2.6 million during the first six months of 2004, totaling $47.0
million as of June 30, 2004. As part of our sweep account program, collected
funds from certain business noninterest-bearing checking accounts are invested
into over-night interest-bearing repurchase agreements. Although not considered
a deposit account and therefore not afforded federal deposit insurance, the
repurchase agreements have characteristics very similar to that of our business
checking deposit accounts.

FHLBI advances increased by $30.0 million during the first six months of 2004,
totaling $120.0 million as of June 30, 2004. The advances are collateralized by
residential mortgage loans, first mortgage liens on multi-family residential
property loans and first mortgage liens on commercial real estate property
loans, and substantially all other assets of our bank, under a blanket lien
arrangement. Our borrowing line of credit as of June 30, 2004 totaled $182.5
million, with availability of approximately $54.0 million. FHLBI advances, along
with out-of-area deposits, are the primary components of our wholesale funding
program.

LIQUIDITY

Liquidity is measured by our ability to raise funds through deposits, borrowed
funds, capital or cash flow from the repayment of loans and securities. These
funds are used to meet deposit withdrawals, maintain reserve requirements, fund
loans and support our operations. Liquidity is primarily achieved through the
growth of deposits (both local and out-of-area) and advances from the FHLBI, as
well as liquid assets such as securities available for sale, matured securities,
and federal funds sold. Asset and liability management is the process of
managing our balance sheet to achieve a mix of earning assets and liabilities
that maximizes profitability, while providing adequate liquidity.

                                       18
<PAGE>

                           MERCANTILE BANK CORPORATION

Our liquidity strategy is to fund loan growth with deposits and repurchase
agreements and to maintain an adequate level of short- and medium-term
investments to meet typical daily loan and deposit activity. Although deposit
and repurchase agreement growth from depositors located in our market area have
generally consistently increased, this growth has not been sufficient to meet
our substantial loan growth and provide monies for additional investing
activities. To assist in providing the additional needed funds, we have
regularly obtained monies from wholesale funding sources. Wholesale funds,
comprised primarily of certificates of deposit from customers outside of our
market area and advances from the FHLBI, totaled $792.9 million, or 64.1% of
combined deposits and borrowed funds as of June 30, 2004. As of December 31,
2003, wholesale funds totaled $681.6 million, or 63.9% of combined deposits and
borrowed funds. Reliance on wholesale funds is expected to continue due to our
anticipated future asset growth.

As a member of the FHLBI, our bank has access to the FHLBI's borrowing programs.
At June 30, 2004, advances from the FHLBI totaled $120.0 million, up from the
$90.0 million outstanding at December 31, 2003. Based on available collateral at
June 30, 2004, our bank could borrow an additional $54.0 million.

Our bank has the ability to borrow money on a daily basis through correspondent
banks via established unsecured federal funds purchased lines, totaling $50.0
million as of June 30, 2004. The average balance of federal funds purchased
during the first six months of 2004 equaled $6.0 million, compared to a $5.7
million average federal funds sold position during the same time period.

In addition to typical loan funding and deposit flow, we must maintain liquidity
to meet the demands of certain unfunded loan commitments and standby letters of
credit. As of June 30, 2004, our bank had a total of $283.8 million in unfunded
loan commitments and $57.1 million in unfunded standby letters of credit. Of the
total unfunded loan commitments, $236.5 million were commitments available as
lines of credit to be drawn at any time as customers' cash needs vary, and $47.3
million were for loan commitments expected to close and become funded within the
next three to six months. We monitor fluctuations in loan balances and
commitment levels, and include such data in managing our overall liquidity.

CAPITAL RESOURCES

Shareholders' equity is a noninterest-bearing source of funds that provides
support for asset growth. Shareholders' equity increased by $4.1 million during
the first six months of 2004, from $130.2 million on December 31, 2003, to
$134.3 million at June 30, 2004. The increase is primarily attributable to net
income of $6.1 million recorded during the first six months of 2004.
Shareholders' equity was negatively impacted during the first six months of 2004
by the payment of cash dividends totaling $1.3 million and a $1.0 million
mark-to-market adjustment for available for sale securities as defined in SFAS
No. 115. Shareholders' equity also increased $0.2 million from the issuance of
29,802 new shares of common stock resulting from our dividend reinvestment plan,
employee stock purchase plan and stock option exercises.

We are subject to regulatory capital requirements primarily administered by
federal bank regulatory agencies. Failure to meet the various capital
requirements can initiate regulatory action that could have a direct material
effect on the financial statements. The capital ratios of the company and our
bank as of June 30, 2004 and December 31, 2003 are disclosed under Note 9 of the
Notes to Consolidated Financial Statements.

                                       19
<PAGE>

                           MERCANTILE BANK CORPORATION

Our and our bank's ability to pay cash and stock dividends is subject to
limitations under various laws and regulations and to prudent and sound banking
practices. We declared a 5% stock dividend on April 7, 2004, that was
distributed on May 3, 2004 to record holders as of April 16, 2004. We paid a
$0.09 per share cash dividend on our common stock on March 10, 2004 and June 10,
2004. On July 7, 2004, we declared a $0.09 per share cash dividend payable on
September 10, 2004, to record holders as of August 10, 2004.

RESULTS OF OPERATIONS

Net income for the second quarter of 2004 was $3.1 million ($0.44 per basic
share and $0.43 per diluted share), which represents a 23.9% increase over net
income of $2.5 million ($0.45 per basic share and $0.44 per diluted share)
recorded during the second quarter of 2003. Net income for the first six months
of 2004 was $6.1 million ($0.85 per basic share and $0.84 per diluted share),
which represents a 28.2% increase over net income of $4.8 million ($0.84 per
basic share and $0.82 per diluted share) recorded during the first six months of
2003. Per share amounts reflect the dilutive impact of the common stock sale
completed during the latter part of 2003, with average shares outstanding up
25.7% in the second quarter of 2004 and year-to-date 2004 when compared to the
same time periods in 2003. The improvement in net income during both time
periods is primarily due to an increase in net interest income and greater
operating efficiency.

Interest income during the second quarter of 2004 was $16.1 million, an increase
of 20.1% over the $13.4 million earned during the second quarter of 2003.
Interest income during the first six months of 2004 was $31.5 million, an
increase of 20.6% over the $26.1 million earned during the first six months of
2003. The growth in interest income during both time periods is primarily
attributable to an increase in earning assets, which more than offset the
negative impact of a declining interest rate environment. During the second
quarter of 2004 earning assets averaged $1,269.3 million, $315.4 million higher
than average earning assets of $953.9 million during the second quarter of 2003.
Average loans were up $302.4 million and securities increased $17.2 million.
During the first six months of 2004, earning assets averaged $1,233.1 million,
$309.7 million higher than average earning assets of $923.4 million during the
same time period in 2003. Average loans were up $291.7 million and securities
increased $18.4 million. Negatively impacting the growth in interest income was
the decline in yield on earning assets. During the second quarter of 2004 and
2003, earning assets had a weighted average yield (tax equivalent-adjusted
basis) of 5.17% and 5.73%, respectively. During the first six months of 2004 and
2003 earning assets had a weighted average yield of 5.21% and 5.86%,
respectively. The decrease in weighted average yields during both time periods
is primarily due to the decline in market interest rates.

Interest expense during the second quarter of 2004 was $6.1 million, an increase
of 3.3% over the $5.9 million expensed during the second quarter of 2003.
Interest expense during the first six months of 2004 was $12.0 million, an
increase of 1.4% over the $11.8 million expensed during the first six months of
2003. The relatively small increase in interest expense is primarily
attributable to the decline in the cost of funds, which offset a vast majority
of the impact of increased funding liabilities necessitated by the growth in
assets. During the second quarter of 2004, interest-bearing liabilities averaged
$1,104.1 million, $248.8 million higher than average interest-bearing
liabilities of $855.3 million during the second quarter of 2003.
Interest-bearing deposits were up $166.4 million and FHLBI advances increased
$72.5 million. During the first six months of 2004, interest-bearing liabilities
averaged $1,073.7 million, $247.2 million higher than average interest-bearing
liabilities of $826.5 million during the same time period in 2003.
Interest-bearing deposits were up $161.3 million and FHLBI advances increased
$78.5 million. During the second quarter of 2004 and 2003, interest-bearing
liabilities had a weighted average rate of 2.23% and 2.78%, respectively. During
the first six months of 2004 and 2003, interest-bearing liabilities had a
weighted average rate of 2.25% and 2.88%, respectively. The decrease in the
weighted average cost of interest-bearing liabilities during both time periods
is primarily due to the decline in market interest rates.

                                       20
<PAGE>

                           MERCANTILE BANK CORPORATION

Net interest income during the second quarter of 2004 was $10.0 million, an
increase of 33.4% over the $7.5 million earned during the second quarter of
2003. Net interest income during the first six months of 2004 was $19.5 million,
an increase of 36.5% over the $14.3 million earned during the same time period
in 2003. The increase in net interest income is primarily due to the growth in
earning assets, combined with a steady to slightly improving net interest
margin. The net interest margin during the second quarter of 2004 was 3.24%,
unchanged from the level during the second quarter of 2003. During the first six
months of 2004 the net interest margin was 3.25%, compared to 3.21% during the
same time period in 2003.

The following table sets forth certain information relating to our consolidated
average interest earning assets and interest-bearing liabilities and reflects
the average yield on assets and average cost of liabilities for the second
quarter of 2004 and 2003. Such yields and costs are derived by dividing income
or expense by the average daily balance of assets or liabilities, respectively,
for the period presented. Tax-exempt securities interest income and yield have
been computed on a tax equivalent basis using a marginal tax rate of 35%.
Securities interest income was increased by $234,000 and $193,000 in the second
quarter of 2004 and 2003, respectively, for this adjustment.

<TABLE>
<CAPTION>

                                                                     Quarters ended June 30,
                                                                     -----------------------
                                                     2 0 0 4                                           2 0 0 3
                                                     -------                                           -------
                                    Average                           Average          Average                            Average
                                    Balance          Interest           Rate           Balance          Interest            Rate
                                 -------------     -------------     -----------    --------------    -------------       ------
                                                                    (dollars in thousands)
<S>                              <C>               <C>               <C>            <C>               <C>                 <C>
ASSETS
   Loans and leases              $   1,144,758     $      14,722         5.16%      $     842,370     $      12,223         5.82%
   Securities                          120,632             1,634         5.42             103,480             1,379         5.36
   Federal funds sold                    3,282                 8         0.94               7,796                23         1.20
   Short term investments                  627                 0         0.30                 205                 1         0.75
                                 -------------     -------------                    -------------     -------------
      Total interest-earning
        assets                       1,269,299            16,364         5.17             953,851            13,626         5.73
   Allowance for loan losses           (15,787)                                           (11,845)
   Other assets                         76,995                                             60,708
                                 -------------                                      -------------
      Total assets               $   1,330,507                                      $   1,002,714
                                 =============                                      =============

LIABILITIES AND
  SHAREHOLDERS' EQUITY
   Interest-bearing deposits     $     918,006     $       4,929         2.15%      $     751,592     $       5,165         2.76%
   Short-term borrowings                55,142               186         1.35              45,774               173         1.52
   FHLB advances                       113,077               597         2.08              40,604               183         1.78
   Long-term borrowings                 17,878               418         9.35              17,365               413         9.51
                                 -------------     -------------                    -------------     -------------
      Total interest-bearing
        liabilities                  1,104,103             6,130         2.23             855,335             5,934         2.78

   Noninterest-bearing
     deposits                           86,645                                             58,394
   Other liabilities                     6,548                                              6,579
   Shareholders' equity                133,211                                             82,406
                                 -------------                                      -------------
      Total liabilities and
        shareholders' equity     $   1,330,507                                      $   1,002,714
                                 =============     -------------                    =============     -------------
   Net interest income                             $      10,234                                      $       7,692
                                                   =============                                      =============
   Net interest rate spread                                              2.94%                                              2.95%
                                                                     ========                                             ======
   Net interest rate spread
     on average assets                                                   3.08%                                              3.08%
                                                                     ========                                             ======
   Net interest margin on
     earning assets                                                      3.24%                                              3.24%
                                                                     ========                                             ======
</TABLE>

                                       21
<PAGE>

                           MERCANTILE BANK CORPORATION

Provisions to the allowance for loan and lease losses during the second quarter
of 2004 were $1.2 million, compared to the $0.8 million that was expensed during
the second quarter of 2003. Provisions to the allowance for loan and lease
losses during the first six months of 2004 were $2.5 million, compared to the
$1.5 million that was expensed during the same time period in 2003. The increase
during both time periods primarily reflects the higher volume of loan and lease
growth and net loan and lease charge-offs. Loan and lease growth during the
second quarter of 2004 was $74.2 million, compared to loan and lease growth of
$53.5 million during the second quarter of 2003. Loan and lease growth during
the first six months of 2004 was $149.4 million, compared to loan and lease
growth of $94.4 million during the same time period in 2003. Net loan and lease
charge-offs of $255,000 were recorded during the second quarter of 2004,
compared to net loan and lease charge-offs of $93,000 during the second quarter
of 2003. During the first six months of 2004 net loan and lease charge-offs
totaled $541,000, compared to net loan and lease charge-offs of $202,000 during
the same time period in 2003. The allowance for loan and lease losses as a
percentage of total loans outstanding as of June 30, 2004 was 1.38%, compared to
1.40% at June 30, 2003.

In each accounting period, the allowance for loan and lease losses is adjusted
to the amount believed necessary to maintain the allowance for loan and lease
losses at adequate levels. Through the loan review and credit departments, we
attempt to allocate specific portions of the allowance for loan and lease losses
based on specifically identifiable problem loans and leases. The evaluation of
the allowance for loan and lease losses is further based on, although not
limited to, consideration of the internally prepared Allowance Analysis,
composition of the loan and lease portfolio, third party analysis of the loan
administration processes and loan portfolio and general economic conditions. In
addition, the rapid growth of the loan and lease portfolio is taken into
account.

The Allowance Analysis, used since the inception of our bank and completed
monthly, applies reserve allocation factors to outstanding loan and lease
balances to calculate an overall allowance dollar amount. For commercial loans
and leases, which continue to comprise a vast majority of our loan and lease
portfolio, reserve allocation factors are based upon the loan ratings as
determined by our comprehensive loan rating paradigm that is administered by our
loan review function. For retail loans, reserve allocation factors are based
upon the type of credit. The reserve allocation factors are based on the
experience of senior management making similar loans in the same community over
the past 15 years. The Allowance Analysis is reviewed regularly by senior
management and the Board of Directors and is adjusted periodically based upon
identifiable trends and experience.

                                       22
<PAGE>

                           MERCANTILE BANK CORPORATION

Noninterest income during the second quarter of 2004 was $1.0 million, compared
to the $1.2 million earned during the second quarter of 2003. Noninterest income
during the first six months of 2004 was $2.0 million, compared to the $2.2
million earned during the same time period in 2003. The declines during both
time periods primarily results from a lower level of income from mortgage
banking activities and a decline in gains on the sales of securities, which was
only partially offset by increased fee income on other products and services.
Primarily reflecting the opening of new accounts and adjustments in our deposit
fee structure, service charge income on deposits and repurchase agreements
increased $32,000 during the second quarter of 2004 when compared to the second
quarter of 2003, and were up $62,000 during the first six months of 2004 when
compared to the same time period in 2003. Primarily reflecting an accounting
change in recognizing fee income and an increase in the dollar volume of
commercial letters of credit outstanding, commercial letter of credit fees
increased $70,000 during the second quarter of 2004 when compared to the second
quarter of 2003, and were up $137,000 during the first six months of 2004 when
compared to the same time period in 2003. Primarily reflecting an increased
interest rate environment and resulting decrease in residential mortgage loan
refinancings, residential mortgage loan fees decreased $208,000 during the
second quarter of 2004 when compared to the second quarter of 2003, and
decreased $353,000 during the first six months of 2004 when compared to the same
time period in 2003. There were no securities gains during the second quarter of
2004 compared to securities gains of $212,000 recorded during the second quarter
of 2003, and totaled $78,000 during the first six months of 2004 compared to
$212,000 during the same time period in 2003.

Noninterest expense during the second quarter of 2004 was $5.4 million, compared
to the $4.4 million expensed during the second quarter of 2003. Noninterest
expense during the first six months of 2004 was $10.6 million, compared to the
$8.4 million expensed during the same time period in 2003. Employee salary and
benefit expenses were $0.8 million higher during the second quarter of 2004 than
the level expensed during the second quarter of 2003, and were $1.5 million
higher during the first six months of 2004 than the level expensed during the
first six months of 2003. The increases during both time periods primarily
resulted from the hiring of additional staff and merit annual pay increases. The
level of full-time equivalent employees increased from 147 at June 30, 2003 to
183 as of June 30, 2004. Other overhead costs, including occupancy and fixed
asset costs, increased $288,000 in the second quarter of 2004 over the level
expensed in the second quarter of 2003, and increased $628,000 during the first
six months of 2004 over the level expensed during the first six months of 2003,
primarily reflecting the additional expenses required to administer our
significantly increased asset base and staff.

Monitoring and controlling noninterest costs, while at the same time providing
high quality service to customers, is a key component to our business strategy.
While the dollar volume of noninterest costs has increased, the rate of growth
has been lower than the rate of increase in net interest income and noninterest
income. Noninterest expenses increased by $1.0 million during the second quarter
of 2004 over the amount expensed during the second quarter of 2003, and
increased by $2.2 million during the first six months of 2004 over the amount
expensed during the first six months of 2003. However, net revenues (net
interest income plus noninterest income) increased at a substantially higher
level of $2.3 million and $5.0 million during the same time periods,
respectively.

Federal income tax expense was $1.2 million and $2.4 million during the second
quarter and first six months of 2004, respectively. Federal income tax expense
was $1.0 million and $1.9 million during the second quarter and first six months
of 2003, respectively. The increases during both time periods primarily results
from the increase in net income before federal income tax.

                                       23
<PAGE>

                           MERCANTILE BANK CORPORATION

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our primary market risk exposure is interest rate risk and, to a lesser extent,
liquidity risk. All of our transactions are denominated in U.S. dollars with no
specific foreign exchange exposure. We have only limited agricultural-related
loan assets and therefore have no significant exposure to changes in commodity
prices. Any impact that changes in foreign exchange rates and commodity prices
would have on interest rates are assumed to be insignificant. Interest rate risk
is the exposure of our financial condition to adverse movements in interest
rates. We derive our income primarily from the excess of interest collected on
our interest-earning assets over the interest paid on our interest-bearing
liabilities. The rates of interest we earn on our assets and owe on our
liabilities generally are established contractually for a period of time. Since
market interest rates change over time, we are exposed to lower profitability if
we cannot adapt to interest rate changes. Accepting interest rate risk can be an
important source of profitability and shareholder value; however, excessive
levels of interest rate risk could pose a significant threat to our earnings and
capital base. Accordingly, effective risk management that maintains interest
rate risk at prudent levels is essential to our safety and soundness.

Evaluating the exposure to changes in interest rates includes assessing both the
adequacy of the process used to control interest rate risk and the quantitative
level of exposure. Our interest rate risk management process seeks to ensure
that appropriate policies, procedures, management information systems and
internal controls are in place to maintain interest rate risk at prudent levels
with consistency and continuity. In evaluating the quantitative level of
interest rate risk we assess the existing and potential future effects of
changes in interest rates on our financial condition, including capital
adequacy, earnings, liquidity and asset quality.

We use two interest rate risk measurement techniques. The first, which is
commonly referred to as GAP analysis, measures the difference between the dollar
amounts of interest sensitive assets and liabilities that will be refinanced or
repriced during a given time period. A significant repricing gap could result in
a negative impact to our net interest margin during periods of changing market
interest rates. The following table depicts our GAP position as of June 30, 2004
(dollars in thousands):

                                       24
<PAGE>

                           MERCANTILE BANK CORPORATION

<TABLE>
<CAPTION>
                                                Within           Three to          One to            After
                                                 Three            Twelve            Five              Five
                                                Months            Months           Years              Years             Total
                                                ------            ------           -----              -----             -----
<S>                                         <C>               <C>               <C>               <C>               <C>
Assets:
   Commercial loans and leases (1)          $     501,036     $      32,322     $     488,306     $      50,939     $   1,072,603
   Residential real estate loans                   51,968             3,775            37,199            14,661           107,603
   Consumer loans                                   1,164               559             3,306               128             5,157
   Investment securities (2)                        6,817             1,271            19,507            97,266           124,861
   Short-term investments                             967                                                                     967
   Allowance for loan and leases losses                                                                 (16,312)          (16,312)
   Other assets                                                                                          83,747            83,747
                                            -------------     -------------     -------------     -------------     -------------
      Total assets                                561,952            37,927           548,318           230,429         1,378,626

Liabilities:
   Interest-bearing checking                       30,411                                                                  30,411
   Savings                                        129,233                                                                 129,233
   Money market accounts                            8,254                                                                   8,254
   Time deposits < $100,000                        38,750            40,286            30,460                             109,496
   Time deposits $100,000 and over                135,335           327,378           191,521                             654,234
   Short-term borrowings                           53,960                                                                  53,960
   FHLB advances                                   20,000            45,000            55,000                             120,000
   Long-term borrowings                             1,414                                                16,495            17,909
   Noninterest-bearing checking                                                                         114,441           114,441
   Other liabilities                                                                                      6,416             6,416
                                            -------------     -------------     -------------     -------------     -------------
      Total liabilities                           417,357           412,664           276,981           137,352         1,244,354
Shareholders' equity                                                                                    134,272           134,272
                                            -------------     -------------     -------------     -------------     -------------
Total sources of funds                            417,357           412,664           276,981           271,624         1,378,626
                                            -------------     -------------     -------------     -------------     -------------

Net asset (liability) GAP                   $     144,595     $    (374,737)    $     271,337     $     (41,195)
                                            =============     =============     =============     =============

Cumulative GAP                              $     144,595     $    (230,142)    $      41,195
                                            =============     =============     =============
Percent of cumulative GAP to
  total assets                                       10.5%            (16.7)%             3.0%
                                            =============     =============     =============
</TABLE>

(1)   Floating rate loans that are currently at interest rate floors are treated
      as fixed rate loans and are reflected using maturity date and not next
      repricing date.

(2)   Mortgage-backed securities are categorized by expected final maturities
      based upon prepayment trends as of June 30, 2004

The second interest rate risk measurement we use is commonly referred to as net
interest income simulation analysis. We believe that this methodology provides a
more accurate measurement of interest rate risk than the GAP analysis, and
therefore, serves as our primary interest rate risk measurement technique. The
simulation model assesses the direction and magnitude of variations in net
interest income resulting from potential changes in market interest rates. Key
assumptions in the model include prepayment speeds on various loan and
investment assets; cash flows and maturities of interest-sensitive assets and
liabilities; and changes in market conditions impacting loan and deposit volume
and pricing. These assumptions are inherently uncertain, subject to fluctuation
and revision in a dynamic environment; therefore, the model cannot precisely
estimate net interest income or exactly predict the impact of higher or lower
interest rates on net interest income. Actual results will differ from simulated
results due to timing, magnitude, and frequency of interest rate changes and
changes in market conditions and the company's strategies, among other factors.

                                       25
<PAGE>

                           MERCANTILE BANK CORPORATION

We conducted multiple simulations as of June 30, 2004, whereby it was assumed
that a simultaneous, instant and sustained change in market interest rates
occurred. The following table reflects the suggested impact on our net interest
income over the next twelve months, which is well within our policy parameters
established to manage and monitor interest rate risk.

<TABLE>
<CAPTION>
                                                          Dollar Change In                      Percent Change In
        Interest Rate Scenario                          Net Interest Income                   Net Interest Income
        ----------------------                          -------------------                   -------------------
<S>                                                     <C>                                   <C>
Interest rates down 200 basis points                    $     (2,621,000)                          (6.2)%

Interest rates down 100 basis points                          (1,513,000)                          (3.6)

No change in interest rates                                     (791,000)                          (1.9)

Interest rates up 100 basis points                               323,000                            0.8

Interest rates up 200 basis points                             1,445,000                            3.4
</TABLE>

The results detailed above have been influenced by the basis risk contained
within our earning assets and interest-bearing liabilities. Interest rates on
our floating rate loans, comprising approximately 67% of total assets as of June
30, 2004, are tied to the prime rate. Interest rates on our wholesale funds, and
to a lesser degree on our local interest-bearing deposits, closely mirror U.S.
Treasury and Libor interest rates. During the second quarter of 2004, U.S.
Treasury and Libor interest rates increased, reflecting the interest rate
market's expectations that the Federal Reserve was set to begin increasing short
term interest rates. For example, although as of June 30, 2004, the Federal
Reserve had not yet begun to increase the federal funds rate, the interest rate
on one year brokered CDs and FHLB bullet advances had increased by about 75
basis points during the second quarter of 2004. In conducting the net interest
income simulation we used brokered CD and FHLB bullet advance rates in effect as
of June 30, 2004. Therefore, it is likely that future net interest income would
be higher than what is detailed above.

In addition to changes in interest rates, the level of future net interest
income is also dependent on a number of other variables, including: the growth,
composition and absolute levels of loans, deposits, and other earning assets and
interest-bearing liabilities; economic and competitive conditions; potential
changes in lending, investing and deposit gathering strategies; client
preferences; and other factors.

ITEM 4. CONTROLS AND PROCEDURES

As of June 30, 2004, an evaluation was performed under the supervision of and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on that evaluation, our
management, including our Chief Executive Officer and Chief Financial Officer,
concluded that our disclosure controls and procedures were effective as of June
30, 2004.

                                       26
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be involved in various legal proceedings that are
incidental to our business. In our opinion, we are not a party to any current
legal proceedings that are material to our financial condition, either
individually or in the aggregate.

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
SECURITIES

On May 7, 2004, we issued 2,650 shares of our common stock to one of our
employees upon their exercise of employee stock options issued under our 1997
Employee Stock Option Plan. We received a weighted average exercise price of
$10.695 per share aggregating $28,341.75. The exercise price for these shares
was substantially paid by the employee delivering to us common stock of the
company that he already owned having an aggregate value of $28,310.98, with the
difference paid in cash. The shares issued under the 1997 Employee Stock Option
Plan were issued in reliance on an exemption from registration under the
Securities Act of 1933 based on Section 4(2) of that Act, and Regulation D
issued under that Act.

Issuer Purchases of Equity Securities

<TABLE>
<CAPTION>
                                                               (c) Total Number of
                                  (a) Total                    Shares Purchased as  (d) Maximum Number of
                                  Number of      (b) Average      Part of Publicly   Shares that May Yet Be
                                    Shares        Price Paid    Announced Plans or   Purchased Under the
  Period                          Purchased       Per Share           Programs        Plans or Programs
  ------                          ---------       ---------           --------        -----------------
<S>                               <C>            <C>           <C>                  <C>
April 1 - 30                           909       $    36.475          0                       0
May 1 - 31                             818            34.610          0                       0
June 1 - 30                              0             N/A            0                       0
                                     -----            ------          -                       -
Total                                1,727            35.592          0                       0
                                     -----            ------          -                       -
</TABLE>

The shares shown in column (a) above as having been purchased were acquired from
three of our employees when they used shares of common stock that they already
owned to pay part of the exercise price when exercising stock options issued
under our employee stock option plans.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

At our Annual Meeting held on April 22, 2004, our shareholders voted to elect
five directors, Edward J. Clark, C. John Gill, Gerald R. Johnson Jr., Calvin D.
Murdock and Donald Williams Sr., each for a three year term expiring at the
Annual Meeting of the shareholders of the company in 2007. The results of the
election were as follows:

<TABLE>
<CAPTION>
                                  Votes                  Votes            Votes              Broker
      Nominee                      For                  Against         Withheld            Non-Votes
      -------                      ---                  -------         --------            ---------
<S>                             <C>                     <C>            <C>                  <C>
Edward J. Clark                 6,044,123                  0             59,852                0
C. John Gill                    5,888,038                  0            215,937                0
Gerald R. Johnson, Jr.          5,992,592                  0            111,383                0
Calvin D. Murdock               6,039,726                  0             64,249                0
Donald Williams, Sr.            6,025,623                  0             78,352                0
</TABLE>

                                       27
<PAGE>

The terms of office of the following directors (who were not up for election)
continued after the Annual Meeting: Betty S. Burton, David M. Cassard, Peter A.
Cordes, Doyle A. Hayes, David M. Hecht, Susan K. Jones, Lawrence W. Larsen,
Michael H. Price and Dale J. Visser.

At our Annual Meeting held on April 22, 2004, our shareholders voted to amend
the Articles of Incorporation of the company to increase the authorized common
stock of the company from 9,000,000 shares to 20,000,000 shares. The results of
the vote were as follows:

<TABLE>
<CAPTION>

   Votes                       Votes                      Votes                      Broker
    For                       Against                   Abstained                  Non-Votes
    ---                       -------                   ---------                  ---------
<S>                           <C>                       <C>                        <C>
5,320,908                     762,550                     20,516                        0
</TABLE>

At our Annual Meeting held on April 22, 2004, our shareholders voted to approve
the 2004 Employee Stock Option Plan (the "Plan"). The plan provides for the
grant of options to acquire shares of our common stock, not to exceed 250,000
shares, to officers and other employees of the company and its subsidiaries. The
results of the vote were as follows:

<TABLE>
<CAPTION>
   Votes                       Votes                      Votes                      Broker
    For                       Against                   Abstained                  Non-Votes
    ---                       -------                   ---------                  ---------
<S>                           <C>                       <C>                        <C>
4,340,581                     277,320                    88,268                    1,397,896
</TABLE>

ITEM 5. OTHER INFORMATION.

Not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits:

<TABLE>
<CAPTION>
 Exhibit No.                           EXHIBIT DESCRIPTION
 -----------                           -------------------
<S>               <C>
    3.1           Articles of Incorporation

    3.2           Our Amended and Restated Bylaws dated as of January 16, 2003
                  are incorporated by reference to Exhibit 3.2 of our
                  Registration Statement on Form S-3 (Commission File No.
                  333-103376) that became effective on February 21, 2003

    11            Statement re Computation of Per Share Earnings

    31            Rule 13a-14(a) Certifications

    32.1          Section 1350 Chief Executive Officer Certification

    32.2          Section 1350 Chief Financial Officer Certification
</TABLE>

                                       28
<PAGE>

(b) Reports of Form 8-K

      During the second quarter of 2004, the Company furnished to the Securities
      and Exchange Commission the following report on Form 8-K:

            i)    Dated April 8, 2004, pertaining to the Company's press release
                  issued on April 8, 2004 reporting financial results and
                  earnings for its first quarter of 2004

                                       29
<PAGE>

                                   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, thereunto duly authorized, on August 6, 2004.

                                         MERCANTILE  BANK CORPORATION

                                         By: /s/ Gerald R. Johnson, Jr.
                                             ----------------------------------
                                         Gerald R. Johnson, Jr.
                                         Chairman of the Board and Chief
                                         Executive Officer
                                         (Principal Executive Officer)

                                         By: /s/ Charles E. Christmas
                                             ----------------------------------
                                         Charles E. Christmas
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer
                                         (Principal Financial and Accounting
                                         Officer)

                                       30
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit No.                           EXHIBIT DESCRIPTION
- -----------                           -------------------
<S>              <C>
   3.1           Articles of Incorporation

   3.2           Our Amended and Restated Bylaws dated as of January 16, 2003
                 are incorporated by reference to Exhibit 3.2 of our
                 Registration Statement on Form S-3 (Commission File No.
                 333-103376) that became effective on February 21, 2003

   11            Statement re Computation of Per Share Earnings

   31            Rule 13a-14(a) Certifications

   32.1          Section 1350 Chief Executive Officer Certification

   32.2          Section 1350 Chief Financial Officer Certification
</TABLE>

                                       31

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.1
<SEQUENCE>2
<FILENAME>k86649exv3w1.txt
<DESCRIPTION>ARTICLES OF INCORPORATION
<TEXT>
<PAGE>

                                   EXHIBIT 3.1

MICHIGAN DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES - CORPORATION, SECURITIES
& LAND DEVELOPMENT BUREAU

Date Received ______________________ Effective Date _________________________

Corporate Identification Number

                            ARTICLES OF INCORPORATION

                                       OF

                           MERCANTILE BANK CORPORATION

      These Articles of Incorporation are signed by the incorporator for the
purpose of forming a profit corporation pursuant to the provisions of Act 284,
Public Acts of 1972, as amended, as follows:

                                   ARTICLE I.
                                      Name

      The name of the corporation is Mercantile Bank Corporation.

                                   ARTICLE II
                                Corporate Purpose

      The purpose or purposes for which the corporation is formed are to serve
as a bank holding company registered under the Bank Holding Company Act of 1956,
being 12 U.S.C. Sections 1841 to 1850 (as amended from time to time, and
including any successor statutes) and to engage in any activity within the
purposes for which corporations may be formed under the Business Corporation Act
of Michigan.

<PAGE>

ARTICLE III
                                  Capital Stock

      The total number of shares of all classes of stock which the corporation
shall have authority to issue is 10,000,000 shares which shall be divided into
two classes as follows;

      (1) 1,000,000 shares of Preferred Stock (Preferred Stock); and

      (2) 9,000,000 shares of Common Stock (Common Stock).

The designations and the powers, preferences and relative, participating
optional or other special rights, and the qualifications limitations or
restrictions of the above classes of stock shall be as follows:

A. PREFERRED STOCK

      1. Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine.

      2. The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, but not to exceed one
vote per share, or without voting powers and with such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restriction thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, and as are not stated and expressed in these
Articles of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:

            (a) The designation of such series and number of shares comprising
      such series, which number may (except where otherwise provided by the
      Board of Directors in creating such series) be increased or decreased (but
      not below the number of shares then outstanding) from time to time by
      action of the Board of Directors.

            (b) The dividend rate or rates on the shares of such series and the
      preference or relation which such dividends shall bear to the dividends
      payable on any other class of capital stock or on any other series of
      Preferred Stock, the terms and conditions upon which and the periods in
      respect of which dividends shall be payable, whether and upon what
      condition such dividends shall be cumulative and, if cumulative, the date
      or dates from which dividends shall accumulate.

            (c) Whether the shares of such series shall be redeemable, and, if
      redeemable, whether redeemable for cash, property or rights, including
      securities of any other corporations, at the option of either the holder
      or the corporation or upon the happening of a specified event, the
      limitations and restrictions with respect to such redemption, the time or
      times when, the price or prices or rate or rates at which, the adjustments
      with which and the manner in which such

                                       2
<PAGE>

      shares shall be redeemable, including the manner of selecting shares of
      such series for redemption if less than all shares are to be redeemed.

            (d) The rights to which the holders of shares of such series shall
      be entitled, and the preferences, if any, over any other series (or of any
      other series over such series), upon the voluntary or involuntary
      liquidation, dissolution, distribution or winding up of the corporation,
      which rights may vary depending on whether such liquidation, dissolution,
      distribution or winding up is voluntary or involuntary, and, if voluntary,
      may vary at different dates.

            (e) Whether the shares of such series shall be subject to the
      operation of a purchase, retirement or sinking fund, and, if so, whether
      and upon what conditions such purchase, retirement or sinking fund shall
      be cumulative or noncumulative, the extent to which and the manner in
      which such fund shall be applied to the purchase or redemption of the
      shares of such series for retirement or to other corporate purposes and
      the terms and provisions relative to the operation thereof.

            (f) Whether the shares of such series shall be convertible into, or
      exchangeable for, at the option of either the holder or the corporation or
      upon the happening of a specified event, shares of any other class or of
      any other series of any class of capital stock of the corporation, and, if
      so convertible or exchangeable, the times, prices, rates, adjustments, and
      other terms and conditions of such conversion or exchange.

            (g) The voting powers, full and/or limited, if any, of the shares of
      such series, and whether and under what conditions the shares of such
      series (alone or together with the shares of one or more other series
      having similar provisions) shall be entitled to vote separately as a
      single class, for the election of one or more directors, or additional
      directors of the corporation in case of dividend arrearages or other
      specified events, or upon other matters.

            (h) Whether the issuance of any additional shares of such series, or
      of any shares of any other series, shall be subject to restrictions as to
      issuance, or as to the powers, preferences or rights of any such other
      series.

            (i) Any other preferences, privileges and powers and relative,
      participating, option or other special rights, and qualifications,
      limitations or restrictions of such series, as the Board of Directors may
      deem advisable and as shall not be inconsistent with the provisions of
      these Articles of Incorporation.

      3. Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Section A, the holders of the Preferred
Stock shall have no voting power with respect to any matter whatsoever. In no
event shall the Preferred Stock be entitled to more than one vote in respect of
each share of stock.

      4. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon

                                       3
<PAGE>

compliance with any applicable provisions of the Business Corporation Act of the
State of Michigan, be given the status of authorized and unissued shares of
Preferred Stock and may be reissued by the Board of Directors as part of the
series of which they were originally a part or may be reclassified into and
reissued as part of a new series or as a part of any other series, all subject
to the protective conditions or restrictions of any outstanding series of
Preferred Stock.

B. COMMON STOCK

      1. Except as otherwise required by law or by any amendment to these
Articles of Incorporation, each holder of Common Stock shall have one vote for
each share of stock held by him of record on the books of the corporation on all
matters voted upon by the shareholders.

      2. Subject to the preferential dividend rights, if any, applicable to
shares of Preferred Stock and subject to applicable requirements, if any, with
respect to the setting aside of sums for purchase, retirement or sinking funds
for Preferred Stock, the holders of Common Stock shall be entitled to receive,
to the extent permitted by law, such dividends as may be declared from time to
time by the Board of Directors.

      3. In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to shareholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute in
kind to the holders of Common Stock such remaining assets of the corporation or
may sell, transfer or otherwise dispose of all or any part of such remaining
assets to any other corporation, trust or entity, or any combination thereof,
and may sell all or any part of the consideration so received and distribute any
balance thereof in kind to holders of Common Stock. The merger or consolidation
of the corporation into or with any other corporation, or the merger of any
other corporation into it, or any purchase or redemption of shares of stock of
the corporation of any class, shall not be deemed to be a dissolution,
liquidation of winding up of the corporation for the purposes of this paragraph.

      4. Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options, warrants or rights at the time outstanding to purchase
shares of Common Stock.

                                   ARTICLE IV
                               Board of Directors

      A. Number, Election and Term of Directors. The business and affairs of the
corporation shall be managed by or under the direction of a Board of Directors.
The number of directors of the

                                       4
<PAGE>

corporation shall be fixed from time to time by resolution adopted by the
affirmative vote of a majority of the entire Board of Directors of the
corporation, except that the minimum number of directors shall be fixed at no
less than 6 and the maximum number of directors shall be fixed at no more than
15. The directors shall be divided into three classes, designated Class I, Class
II and Class III. Each class shall consist, as nearly equal in number as
possible, of one-third of the total number of directors constituting the entire
Board of Directors. Initially, Class I directors shall be elected for a one-year
term, Class II directors for a two-years term and Class III directors for a
three-year term. At each succeeding annual meeting of shareholders, beginning in
1998, successors of the class of directors whose term expires at that annual
meeting shall be elected for a three-year term. If the number of directors is
changed, any increase or decrease shall be apportioned among the classes so as
to maintain the number of directors in each class as nearly equal as possible.

      B. Shareholder Nomination of Director Candidates. Nominations for election
to the Board of Directors of the corporation at a meeting of shareholders may be
made by the Board of Directors, on behalf of the Board of Directors by any
nominating committee appointed by the Board of Directors, or by any shareholder
of the corporation entitled to vote for the election of directors at the
meeting. Nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered to or mailed, postage
prepaid, and received by the Secretary of the corporation at least 60 days but
no more than 90 days prior to the anniversary date of the immediately preceding
Annual Meeting of Shareholders. The notice shall set forth (i) the name and
address of the shareholder who intends to make the nomination; (ii) the name,
age, business address and, if known, residence address of each nominee; (iii)
the principal occupation or employment of each nominee; (iv) the number of
shares of stock of the corporation which are beneficially owned by each nominee
and by the nominating shareholder; (v) any other information concerning the
nominee that must be disclosed by nominees in a proxy solicitation pursuant to
Regulation 14A of the Securities Exchange Act of 1934 (or any subsequent
provisions replacing such Regulation); and (vi) the executed consent of each
nominee to serve as a director of the corporation, if elected. The chairman of
the meeting of shareholders may, if the facts warrant, determine that a
nomination was not made in accordance with the foregoing procedures, and if the
chairman should so determine, the chairman shall so declare to the meeting and
the defective nomination shall be disregarded.

      C. Newly Created Directorships and Vacancies. Newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum, or by a sole
remaining director. Any director of any class chosen to fill a vacancy in such
class shall hold office for a term that shall coincide with the remaining term
of that class, but in no case will a decrease in the number of directors shorten
the term of any incumbent director. A director shall hold office until the next
annual meeting for the year in which his or her term expires and until such
director's successor shall have been elected and qualified.

      D. Removal. Any director may be removed from office only for cause and
only by the affirmative vote of the holders of at least a majority of the voting
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.

                                       5
<PAGE>

      E. Preferred Stock. Notwithstanding the foregoing paragraphs, whenever the
holders of any one or more classes or series of Preferred Stock issued by the
corporation shall have the right, voting separately by class or series, to elect
directors at an annual or special meeting of shareholders, the election, term of
office, filling of vacancies and other features of such directorships shall be
governed by the terms of the Articles of Incorporation applicable thereto. The
then authorized number of directors of the corporation shall be increased by the
number of additional directors to be elected, and such directors so elected
shall not be divided into classes pursuant to this Article unless expressly
provided by such terms.

      F. Amendment or Repeal. Notwithstanding anything contained in these
Articles of Incorporation or the By-laws of the corporation to the contrary, the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
the shares of the corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend,
repeal or adopt any provision inconsistent with the purpose and intent of this
Article.

                                    ARTICLE V
                              Directors' Liability

      A director of the corporation shall not be personally liable to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its shareholders, (ii) for acts or
omissions not in good faith or that involve intentional misconduct or a knowing
violation of law, (iii) a violation of Section 551(1) of the Michigan Business
Corporation Act, or (iv) for any transaction from which the director derived any
improper personal benefit. If the Michigan Business Corporation Act is amended
after the date of these Articles of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Michigan Business Corporation Act, as so
amended.

      Any repeal or modification of the foregoing paragraph by the shareholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or modification.

                                   ARTICLE VI
                                 Indemnification

      Directors and officers of the corporation shall be indemnified as of right
to the fullest extent now or hereafter permitted by law in connection with any
actual or threatened civil, criminal, administrative or investigative action,
suit or proceeding (whether brought by or in the name of the corporation, a
subsidiary, or otherwise) arising out of their service to the corporation or a
subsidiary, or to another organization at the request of the corporation or a
subsidiary. Persons who are not directors or officers of the corporation may be
similarly indemnified in respect of such service to the extent authorized at any
time by the Board of Directors of the corporation. The

                                       6
<PAGE>

corporation may purchase and maintain insurance to protect itself and any such
director, officer or other person against any liability asserted against him and
incurred by him in respect of such service whether or not the corporation would
have the power to indemnify him against such liability by law or under the
provisions of this paragraph. The provisions of this paragraph shall be
applicable to directors, officers and other persons who have ceased to render
such service, and shall inure to the benefit of the heirs, executors, and
administrators of the directors, officers and other persons referred to in this
paragraph.

                                   ARTICLE VII
                               Shareholder Action

      Except as otherwise required by law, any action required or permitted to
be taken on or after September 30, 1997 by any shareholders of the corporation
must be effected at a duly called annual or special meeting of such shareholders
and may not be effected by any consent in writing by such shareholders. Except
as may be otherwise required by law, special meetings of shareholders of the
corporation may be called only by the Board of Directors or the Chairman of the
Board. Notwithstanding anything contained in these Articles of Incorporation or
the By-laws of the corporation to the contrary, the affirmative vote of at least
66 2/3% of the voting power of all the shares of the corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to alter, amend or adopt any provision inconsistent with the
purpose and intent of this Article.

                                  ARTICLE VIII
                           Registered Office and Agent

      The address of the initial registered office of the corporation is: 500
Woodward Avenue, Suite 4000, Detroit, Michigan 48226. The name of the resident
agent is: Jerome M. Schwartz.

                                       7
<PAGE>

                                   ARTICLE IX
                                  Incorporator

      The name and address of the incorporator of the corporation is as follows:

                            Jerome M. Schwartz
                            Dickinson, Wright, Moon, Van Dusen & Freeman
                            500 Woodward Avenue, Suite 4000
                            Detroit, Michigan  48226

      I, the incorporator, sign my name this 15th day of July, 1997.

                                         /s/ Jerome M. Schwartz
                                         -------------------------------------
                                         Incorporator, Jerome M. Schwartz

Fees remitted by and document to be returned to:
Jerome M. Schwartz
Dickinson, Wright, Moon, Van Dusen and Freeman
500 Woodward Avenue, Suite 4000
Detroit, Michigan  48226


                                       8
<PAGE>

                 MICHIGAN DEPARTMENT OF LABOR & ECONOMIC GROWTH
                          BUREAU OF COMMERCIAL SERVICES

Date Received              (FOR BUREAU USE ONLY)
JUL 07 2004

                  This document is effective on the date filed, unless a FILED
                  subsequent effective date within 90 days after received date
                  is stated in the document.

                                               FILED

                                            JUL 07 2004

                                   BUREAU OF COMMERCIAL SERVICES

                                          EFFECTIVE DATE:

Name
Jerome M. Schwartz

Address
Dickinson Wright PLLC, 500 Woodward Avenue, Suite 4000

City               State          Zip Code

Detroit           Michigan         48226



       Document will be returned to the name and address you enter above.
         If left blank document will be mailed to the registered office.

            CERTIFICATE OF AMENDMENT TO THE ARTICLES OF INCORPORATION

      Pursuant to the provisions of Act 284, Public Acts of 1972, (profit
      corporations), the undersigned corporation executes the following
      Certificate:

1.    The present name of the corporation is: Mercantile Bank Corporation

2.    The identification number assigned by the Bureau is: 478801

3.    Article III of the Articles of Incorporation is hereby amended to read as
      follows:

      Please see Exhibit A attached hereto which sets forth Article III of the
      Articles of Incorporation, as amended.

4.    The foregoing amendment to the Articles of Incorporation was duly adopted
      on the 22nd day of April, 2004 by the shareholders at a meeting where the
      necessary votes were cast in favor of the amendment.

Signed this 12th day of May, 2004

MERCANTILE BANK CORPORATION

By: /s/ Gerald R. Johnson, Jr.
    ---------------------------
Name: Gerald R. Johnson, Jr.

Title:    Chairman and Chief Executive Officer

Name of organization remitting fees:

Mercantile Bank Corporation


Preparer's name and business telephone number:

Jerome M. Schwartz
Dickinson Wright PLLC
(313) 223-3500

<PAGE>

                                    EXHIBIT A

                                   ARTICLE III
                                  Capital Stock

      The total number of shares of all classes of stock which the corporation
shall have authority to issue is 21,000,000 shares which shall be divided into
two classes as follows:

      (1) 1,000,000 shares of Preferred Stock (Preferred Stock); and

      (2) 20,000,000 shares of Common Stock (Common Stock).

The designations and the powers, preferences and relative, participating
optional or other special rights, and the qualifications limitations or
restrictions of the above classes of stock shall be as follows:

A. PREFERRED STOCK

      1. Shares of Preferred Stock may be issued in one or more series at such
time or times and for such consideration or considerations as the Board of
Directors may determine.

      2. The Board of Directors is expressly authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such voting powers, full or limited, but not to exceed one
vote per share, or without voting powers and with such designations, preferences
and relative, participating, optional or other special rights, and
qualifications, limitations or restriction thereof, as shall be stated and
expressed in the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors, and as are not stated and expressed in these
Articles of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) the following:

            (a) The designation of such series and number of shares comprising
      such series, which number may (except where otherwise provided by the
      Board of Directors in creating such series) be increased or decreased (but
      not below the number of shares then outstanding) from time to time by
      action of the Board of Directors.

            (b) The dividend rate or rates on the shares of such series and the
      preference or relation which such dividends shall bear to the dividends
      payable on any other class of capital stock or on any other series of
      Preferred Stock, the terms and conditions upon which and the periods in
      respect of which dividends shall be payable, whether and upon what
      condition such dividends shall be cumulative and, if cumulative, the date
      or dates from which dividends shall accumulate.

            (c) Whether the shares of such series shall be redeemable, and, if
      redeemable, whether redeemable for cash, property or rights, including
      securities of any other corporations, at the option of either the holder
      or the corporation or upon the happening of a specified event, the

                                       2
<PAGE>

      limitations and restrictions with respect to such redemption, the time or
      times when, the price or prices or rate or rates at which, the adjustments
      with which and the manner in which such shares shall be redeemable,
      including the manner of selecting shares of such series for redemption if
      less than all shares are to be redeemed.

            (d) The rights to which the holders of shares of such series shall
      be entitled, and the preferences, if any, over any other series (or of any
      other series over such series), upon the voluntary or involuntary
      liquidation, dissolution, distribution or winding up of the corporation,
      which rights may vary depending on whether such liquidation, dissolution,
      distribution or winding up is voluntary or involuntary, and, if voluntary,
      may vary at different dates.

            (e) Whether the shares of such series shall be subject to the
      operation of a purchase, retirement or sinking fund, and, if so, whether
      and upon what conditions such purchase, retirement or sinking fund shall
      be cumulative or noncumulative, the extent to which and the manner in
      which such fund shall be applied to the purchase or redemption of the
      shares of such series for retirement or to other corporate purposes and
      the terms and provisions relative to the operation thereof.

            (f) Whether the shares of such series shall be convertible into, or
      exchangeable for, at the option of either the holder or the corporation or
      upon the happening of a specified event, shares of any other class or of
      any other series of any class of capital stock of the corporation, and, if
      so convertible or exchangeable, the times, prices, rates, adjustments, and
      other terms and conditions of such conversion or exchange.

            (g) The voting powers, full and/or limited, if any, of the shares of
      such series, and whether and under what conditions the shares of such
      series (alone or together with the shares of one or more other series
      having similar provisions) shall be entitled to vote separately as a
      single class, for the election of one or more directors, or additional
      directors of the corporation in case of dividend arrearages or other
      specified events, or upon other matters.

            (h) Whether the issuance of any additional shares of such series, or
      of any shares of any other series, shall be subject to restrictions as to
      issuance, or as to the powers, preferences or rights of any such other
      series.

            (i) Any other preferences, privileges and powers and relative,
      participating, option or other special rights, and qualifications,
      limitations or restrictions of such series, as the Board of Directors may
      deem advisable and as shall not be inconsistent with the provisions of
      these Articles of Incorporation.

      3. Unless and except to the extent otherwise required by law or provided
in the resolution or resolutions of the Board of Directors creating any series
of Preferred Stock pursuant to this Section A, the holders of the Preferred
Stock shall have no voting power with respect to any matter whatsoever. In no
event shall the Preferred Stock be entitled to more than one vote in respect of
each share of stock.

                                       3
<PAGE>

      4. Shares of Preferred Stock redeemed, converted, exchanged, purchased,
retired or surrendered to the corporation, or which have been issued and
reacquired in any manner, may, upon compliance with any applicable provisions of
the Business Corporation Act of the State of Michigan, be given the status of
authorized and unissued shares of Preferred Stock and may be reissued by the
Board of Directors as part of the series of which they were originally a part or
may be reclassified into and reissued as part of a new series or as a part of
any other series, all subject to the protective conditions or restrictions of
any outstanding series of Preferred Stock.

B.  COMMON STOCK

    1. Except as otherwise required by law or by any amendment to these Articles
of Incorporation, each holder of Common Stock shall have one vote for each share
of stock held by him of record on the books of the corporation on all matters
voted upon by the shareholders.

    2. Subject to the preferential dividend rights, if any, applicable to shares
of Preferred Stock and subject to applicable requirements, if any, with respect
to the setting aside of sums for purchase, retirement or sinking funds for
Preferred Stock, the holders of Common Stock shall be entitled to receive, to
the extent permitted by law, such dividends as may be declared from time to time
by the Board of Directors.

    3. In the event of the voluntary or involuntary liquidation, dissolution,
distribution of assets or winding up of the corporation, after distribution in
full of the preferential amounts, if any, to be distributed to the holders of
shares of Preferred Stock, holders of Common Stock shall be entitled to receive
all of the remaining assets of the corporation of whatever kind available for
distribution to shareholders ratably in proportion to the number of shares of
Common Stock held by them respectively. The Board of Directors may distribute in
kind to the holders of Common Stock such remaining assets of the corporation or
may sell, transfer or otherwise dispose of all or any part of such remaining
assets to any other corporation, trust or entity, or any combination thereof,
and may sell all or any part of the consideration so received and distribute any
balance thereof in kind to holders of Common Stock. The merger or consolidation
of the corporation into or with any other corporation, or the merger of any
other corporation into it, or any purchase or redemption of shares of stock of
the corporation of any class, shall not be deemed to be a dissolution,
liquidation of winding up of the corporation for the purposes of this paragraph.

    4. Such numbers of shares of Common Stock as may from time to time be
required for such purpose shall be reserved for issuance (i) upon conversion of
any shares of Preferred Stock or any obligation of the corporation convertible
into shares of Common Stock which is at the time outstanding or issuable upon
exercise of any options or warrants at the time outstanding and (ii) upon
exercise of any options, warrants or rights at the time outstanding to purchase
shares of Common Stock.

                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11
<SEQUENCE>3
<FILENAME>k86649exv11.txt
<DESCRIPTION>STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TEXT>
<PAGE>
                                                                               .
                                                                               .
                                                                               .
                                   EXHIBIT 11

                 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS

RETURN ON EQUITY AND ASSETS

<TABLE>
<CAPTION>
                                                                                JANUARY 1, 2004
                                                                                     TO
                                                            ANNUALIZED           JUNE 30, 2004
                                                            ----------           -------------
<S>                                                         <C>                 <C>
Return on average total assets                               0.95%                       0.47%
Return on average equity                                     9.30%                       4.63%
Dividend payout ratio                                                                   20.56%
Average equity to average assets                                                        10.25%

STATEMENT OF COMPUTED PER SHARE EARNINGS

Net income                                                                        $ 6,119,000

Average basic shares outstanding                                                    7,165,744

Average diluted shares outstanding                                                  7,310,298

Basic earnings per share                                                          $      0.85

Diluted earnings per share                                                        $      0.84
</TABLE>

                                       32

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31
<SEQUENCE>4
<FILENAME>k86649exv31.txt
<DESCRIPTION>RULE 13A-14(A) CERTIFICATIONS
<TEXT>
<PAGE>
                                   EXHIBIT 31

                          RULE 13a-14(a) CERTIFICATIONS

I, Gerald R. Johnson, Jr., Chairman and Chief Executive Officer of Mercantile
Bank Corporation, certify that:

1. I have reviewed this report on Form 10-Q of Mercantile Bank Corporation (the
"registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: August 6, 2004                        /s/ Gerald R. Johnson, Jr.
                                            ------------------------------------
                                            Gerald R. Johnson, Jr.
                                            Chairman and Chief Executive Officer

                                       33
<PAGE>

I, Charles E. Christmas, Senior Vice President, Chief Financial Officer and
Treasurer of Mercantile Bank Corporation, certify that:

1. I have reviewed this report on Form 10-Q of Mercantile Bank Corporation (the
"registrant");

2. Based on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such
internal control over financial reporting to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and
procedures and presented in this report our conclusions about the effectiveness
of the disclosure controls and procedures, as of the end of the period covered
by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over
financial reporting that occurred during the registrant's most recent fiscal
quarter (the registrant's fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and

5. The registrant's other certifying officer(s) and I have disclosed, based on
our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of
directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal control over
financial reporting.

Date: August 6, 2004                     /s/ Charles E. Christmas
                                         ---------------------------------------
                                         Charles E. Christmas.
                                         Senior Vice President, Chief Financial
                                         Officer and Treasurer

                                       34

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>5
<FILENAME>k86649exv32w1.txt
<DESCRIPTION>SECTION 1350 CHIEF EXECUTIVE OFFICER CERTIFICATION
<TEXT>
<PAGE>
                                  EXHIBIT 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      This certification is provided pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the
quarterly report on Form 10-Q for the quarter ended June 30, 2004 (the "Form
10-Q") of Mercantile Bank Corporation (the "Issuer").

      I, Gerald R. Johnson, Jr., Chairman and Chief Executive Officer of the
Issuer, certify that:

(i)   the Form 10-Q fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and

(ii)  the information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of the
Issuer.

Dated: August 6, 2004

                                           /s/ Gerald R. Johnson, Jr.
                                           -------------------------------------
                                           Gerald R. Johnson, Jr.
                                           Chairman and Chief Executive Officer

                                       35

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>6
<FILENAME>k86649exv32w2.txt
<DESCRIPTION>SECTION 1350 CHIEF FINANCIAL OFFICER CERTIFICATION
<TEXT>
<PAGE>

                                  EXHIBIT 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      This certification is provided pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the
quarterly report on Form 10-Q for the quarter ended June 30, 2004 (the "Form
10-Q") of Mercantile Bank Corporation (the "Issuer").

      I, Charles E. Christmas, Senior Vice President, Chief Financial Officer
and Treasurer of the Issuer, certify that:

(i)   the Form 10-Q fully complies with the requirements of Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or
78o(d)); and

(ii)  the information contained in the Form 10-Q fairly presents, in all
material respects, the financial condition and results of operations of the
Issuer.

Dated: August 6, 2004

                                                 /s/ Charles E. Christmas
                                                 -------------------------------
                                                 Charles E. Christmas
                                                 Senior Vice President, Chief
                                                 Financial Officer and Treasurer

                                       36

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
