XML 142 R10.htm IDEA: XBRL DOCUMENT
v2.4.1.9

Note 2 - Business Combination | 12 Months Ended
--- | ---
Dec. 31, 2014
Business Combinations [Abstract] |
Business Combination Disclosure [Text Block] | NOTE 2 - BUSINESS COMBINATION We completed the merger of Firstbank Corporation (“Firstbank”), a Michigan corporation with approximately $1.5 billion in total assets and 46 branch locations, into Mercantile Bank Corporation as of June 1, 2014 (“Merger Date”). Each share of Firstbank’s common stock was converted into the right to receive one share of Mercantile common stock, resulting in Mercantile issuing 8,087,272 shares of its common stock. The merger provided an expanded geographic footprint for the Company and increased the size of the balance sheet. In conjunction with the completion of the merger, Mercantile assumed the obligations of Firstbank Capital Trust I, Firstbank Capital Trust II, Firstbank Capital Trust III and Firstbank Capital Trust IV. The Firstbank transaction was accounted for using the acquisition method of accounting and accordingly, assets acquired, liabilities assumed and consideration exchanged were recorded at estimated fair value on the Merger Date. Preliminary goodwill of $49.5 million was calculated as the purchase premium after adjusting for the fair value of net assets acquired and represents the value expected from the synergies created from combining the two banking organizations as well as the economies of scale expected from combining the operations of the two companies. None of the goodwill is deductible for income tax purposes as the merger is accounted for as a tax-free exchange. The following table provides the purchase price calculation as of the Merger Date and the identifiable assets purchased and the liabilities assumed at their estimated fair values. These fair value measurements are provisional based on third-party valuations that are currently under review and are subject to refinement for up to one year after the Merger Date based on additional information that may be obtained by us that existed as of the Merger Date.
Purchase Price: |  |  |  |
Mercantile common shares issued for Firstbank common shares |  |  | 8,087,272 |
Price per share, based on Mercantile closing price on May 30, 2014 |  | $ | 21.43 |
Value of common stock issued |  |  | 173,310,000 |
Value of replacement stock options granted |  |  | 1,664,000 |
Total purchase price |  | $ | 174,974,000 |
Preliminary Statement of Net Assets Acquired at Fair Value: |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 91,806,000 |  |  |  |  |
Securities |  |  | 358,599,000 |  |  |  |  |
Total loans |  |  | 943,662,000 |  |  |  |  |
Premises and equipment |  |  | 24,049,000 |  |  |  |  |
Core deposit intangible |  |  | 17,478,000 |  |  |  |  |
Mortgage servicing rights |  |  | 7,389,000 |  |  |  |  |
Other assets |  |  | 9,897,000 |  |  |  |  |
Total Assets |  | $ | 1,452,880,000 |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |
Deposits |  | $ | 1,229,609,000 |  |  |  |  |
Borrowings |  |  | 87,615,000 |  |  |  |  |
Other liabilities |  |  | 10,155,000 |  |  |  |  |
Total Liabilities |  | $ | 1,327,379,000 |  |  |  |  |
Net Identifiable Assets Acquired |  |  |  |  |  | $ | 125,501,000 |
Goodwill |  |  |  |  |  | $ | 49,473,000 |
Effective December 31, 2014, we identified certain Firstbank deferred tax assets and liabilities that should have been addressed on the Merger Date. The net impact of recording the necessary entries was a $1.4 million reduction to Goodwill and a $1.4 million increase to our net deferred tax asset account (included in other assets above) from what we reported in our June 30, 2014 and September 30, 2014 Form 10-Qs. Firstbank’s results of operations prior to the Merger Date are not included in our Consolidated Statements of Income or Consolidated Statements of Comprehensive Income. We recorded merger-related expenses of $5.4 million and $1.2 million during 2014 and 2013, respectively. Such expenses were generally for professional services, costs related to termination of existing contractual arrangements for various services, retention and severance compensation costs, marketing and promotional expenses, travel costs, and printing and supplies costs. We do not expect to record any additional significant expenses related to the Firstbank merger in future periods. We are not presenting the amounts of revenue and earnings of Firstbank since the Merger Date as it is impracticable due to the integration of Firstbank upon the consummation of the merger. The following table provides the unaudited pro forma information for the results of operations for the twelve month periods ended December 31, 2014 and 2013, as if the acquisition had occurred on January 1, 2013. These adjustments reflect the impact of certain purchase accounting fair value measurements primarily related to Firstbank’s loan and deposit portfolios. In addition, the aggregate $12.2 million in merger-related expenses recorded by us and Firstbank during 2014 and 2013 are reflected to have been recorded during 2013. We expect to achieve further operating cost savings and other business synergies as a result of the merger which are not reflected in the pro forma amounts. These unaudited pro forma results are presented for illustrative purposes only and are not intended to represent or be indicative of the actual results of operations of the combined banking organization that would have been achieved had the merger occurred at the beginning of each period presented, nor are they intended to represent or be indicative of future results of operations.
|  | 2014 |  |  | 2013 |
Net interest income |  | $ | 98,607,000 |  |  | $ | 93,862,000 |
Noninterest expense |  |  | 81,295,000 |  |  |  | 93,263,000 |
Net income |  |  | 22,659,000 |  |  |  | 16,068,000 |
Net income per diluted share |  |  | 1.33 |  |  |  | 0.96 |
In most instances, determining the fair value of the acquired assets and assumed liabilities required us to estimate cash flows expected to result from those assets and liabilities and to discount those cash flows at appropriate rates of interest. The most significant of those determinations relates to the valuation of acquired loans. For such loans, the excess of cash flows expected at acquisition over the estimated fair value is recognized as interest income over the remaining lives of the loans. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition reflects the impact of estimated credit losses and other factors, such as prepayments. In accordance with the applicable accounting guidance for business combinations, there was no carry-over of Firstbank’s previously established allowance for loan losses. The acquired loans were divided into loans with evidence of credit quality deterioration, which are accounted for under ASC 310-30 (“acquired impaired”), and loans that do not meet this criteria, which are accounted for under ASC 310-20 (“acquired non-impaired”). In addition, the loans are further categorized into different loan pools based primarily on the type and purpose of the loan. The provisional fair value of loans at the Merger Date is presented in the following table:
|  | Acquired |  |  | Acquired |  |  | Acquired |
|  | Impaired |  |  | Non-Impaired |  |  | Total Loans |
Commercial Loans: |  |  |  |  |  |  |  |  |  |  |  |
Commercial & industrial |  | $ | 878,000 |  |  | $ | 163,316,000 |  |  | $ | 164,194,000 |
Commercial real estate |  |  | 12,973,000 |  |  |  | 378,016,000 |  |  |  | 390,989,000 |
Construction & development |  |  | 1,289,000 |  |  |  | 33,726,000 |  |  |  | 35,015,000 |
Total Commercial Loans |  | $ | 15,140,000 |  |  | $ | 575,058,000 |  |  | $ | 590,198,000 |
Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |
Residential mortgages |  | $ | 9,694,000 |  |  | $ | 216,653,000 |  |  | $ | 226,347,000 |
Instalment |  |  | 167,000 |  |  |  | 61,657,000 |  |  |  | 61,824,000 |
Home equity lines |  |  | 288,000 |  |  |  | 52,054,000 |  |  |  | 52,342,000 |
Construction |  |  | 76,000 |  |  |  | 12,875,000 |  |  |  | 12,951,000 |
Total Consumer Loans |  | $ | 10,225,000 |  |  | $ | 343,239,000 |  |  | $ | 353,464,000 |
Total Loans |  | $ | 25,365,000 |  |  | $ | 918,297,000 |  |  | $ | 943,662,000 |
The following table presents data on acquired impaired loans at the Merger Date:
|  | Acquired Impaired |
Contractually required payments |  | $ | 44,936,000 |
Nonaccretable difference |  |  | 17,057,000 |
Expected cash flows |  |  | 27,879,000 |
Accretable yield |  |  | 2,514,000 |
Carrying balance |  | $ | 25,365,000 |
The nonaccretable difference includes $10.4 million in principal cash flows not expected to be collected, $2.8 million of pre-acquisition charge-offs and $3.9 million of future interest not expected to be collected. The unpaid principal balance of acquired performing loans was $926.4 million at the Merger Date, and the unaccreted discount on such loans was $8.1 million.

X
- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1383-128463 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6996-128479 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4922-128472 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4934-128472 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4926-128472 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7000-128479 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1392-128463 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1486-128463 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e6927-128479 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1497-128463 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1490-128463 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 30 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=35744584&loc=d3e7008-128479 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 20 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=39739317&loc=d3e4845-128472 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1500-128463 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -SubTopic 10 -Section 50 -Paragraph 7 -URI http://asc.fasb.org/extlink&oid=25497992&loc=d3e1524-128463 + Details
Name: | us-gaap_BusinessCombinationDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- Details
Name: | us-gaap_BusinessCombinationsAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration