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Note 12 - Regulatory Matters | 9 Months Ended
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Sep. 30, 2016
Notes to Financial Statements |
Regulatory Capital Requirements under Banking Regulations [Text Block] | 12. 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 an institution is not well capitalized, regulatory approval is required to accept brokered deposits. Subject to limited exceptions, no institution may make a capital distribution if, after making the distribution, it would be undercapitalized. If an institution is undercapitalized, it is subject to close monitoring by its principal federal regulator, its asset growth and expansion are restricted, and plans for capital restoration are required. In addition, further specific types of restrictions may be imposed on the institution at the discretion of the federal regulator. At September 30, 2016 and December 31, 2015, our bank was in the well capitalized category under the regulatory framework for prompt corrective action. There are no conditions or events since September 30, 2016 that we believe have changed our bank’s categorization. Our actual capital levels (dollars in thousands) and the minimum levels required to be categorized as adequately and well capitalized were:
|  | Actual |  |  | Minimum Required for Capital Adequacy Purposes |  |  | Minimum Required to be Well Capitalized Under Prompt Corrective Action Regulations |
|  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
September 30, 2016 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 354,580 |  |  |  | 13.1 | % |  | $ | 217,441 |  |  |  | 8.0 | % |  | $ | NA |  |  |  | NA |
Bank |  |  | 355,706 |  |  |  | 13.1 |  |  |  | 217,213 |  |  |  | 8.0 |  |  |  | 271,516 |  |  |  | 10.0 | %
Tier 1 capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 337,054 |  |  |  | 12.4 |  |  |  | 163,081 |  |  |  | 6.0 |  |  |  | NA |  |  |  | NA |
Bank |  |  | 338,180 |  |  |  | 12.5 |  |  |  | 162,910 |  |  |  | 6.0 |  |  |  | 217,213 |  |  |  | 8.0 |
Common equity tier 1 (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 294,463 |  |  |  | 10.8 |  |  |  | 122,311 |  |  |  | 4.5 |  |  |  | NA |  |  |  | NA |
Bank |  |  | 338,180 |  |  |  | 12.5 |  |  |  | 122,182 |  |  |  | 4.5 |  |  |  | 176,485 |  |  |  | 6.5 |
Tier 1 capital (to average assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 337,054 |  |  |  | 11.3 |  |  |  | 119,485 |  |  |  | 4.0 |  |  |  | NA |  |  |  | NA |
Bank |  |  | 338,180 |  |  |  | 11.3 |  |  |  | 119,440 |  |  |  | 4.0 |  |  |  | 149,300 |  |  |  | 5.0 |
|  | Actual |  |  | Minimum Required for Capital Adequacy Purposes |  |  | Minimum Required to be Well Capitalized Under Prompt Corrective Action Regulations |
|  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |  |  | Amount |  |  | Ratio |
December 31, 2015 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Total capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  | $ | 345,539 |  |  |  | 13.5 | % |  | $ | 205,602 |  |  |  | 8.0 | % |  | NA |  |  | NA |
Bank |  |  | 347,433 |  |  |  | 13.5 |  |  |  | 205,624 |  |  |  | 8.0 |  |  |  | 257,030 |  |  |  | 10.0 | %
Tier 1 capital (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 329,858 |  |  |  | 12.8 |  |  |  | 154,201 |  |  |  | 6.0 |  |  | NA |  |  | NA |
Bank |  |  | 331,752 |  |  |  | 12.9 |  |  |  | 154,218 |  |  |  | 6.0 |  |  |  | 205,624 |  |  |  | 8.0 |
Common equity tier 1 (to risk weighted assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 280,171 |  |  |  | 10.9 |  |  |  | 115,804 |  |  |  | 4.5 |  |  | NA |  |  | NA |
Bank |  |  | 331,752 |  |  |  | 12.9 |  |  |  | 115,664 |  |  |  | 4.5 |  |  |  | 167,070 |  |  |  | 6.5 |
Tier 1 capital (to average assets) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated |  |  | 329,858 |  |  |  | 11.6 |  |  |  | 114,138 |  |  |  | 4.0 |  |  | NA |  |  | NA |
Bank |  |  | 331,752 |  |  |  | 11.6 |  |  |  | 114,280 |  |  |  | 4.0 |  |  |  | 142,850 |  |  |  | 5.0 |
Our consolidated capital levels as of September 30, 2016 and December 31, 2015 include $42.6 million and $53.1 million, respectively, of trust preferred securities subject to certain limitations. Under applicable Federal Reserve guidelines, the trust preferred securities constitute a restricted core capital element. The guidelines provide that the aggregate amount of restricted core elements that may be included in our Tier 1 capital must not exceed 25% of the sum of all core capital elements, including restricted core capital elements, net of goodwill less any associated deferred tax liability. Our ability to include the trust preferred securities in Tier 1 capital in accordance with the guidelines is not affected by the provision of the Dodd-Frank Act generally restricting such treatment, because (i) the trust preferred securities were issued before May 19, 2010, and (ii) our total consolidated assets as of December 31, 2009 were less than $15.0 billion. As of September 30, 2016 and December 31, 2015, all $42.6 million and $53.1 million, respectively, of the trust preferred securities were included in our consolidated Tier 1 capital. Our regulatory capital calculations and the minimum requirements to be categorized as well capitalized and adequately capitalized under the prompt corrective action regulations were impacted by BASEL III, which became effective January 1, 2015 and are included in the tables above. The net impact on our regulatory capital ratios and our overall capital position was not material. On January 26, 2016, we closed on a repurchase of trust preferred securities that were auctioned as part of a pooled collateralized debt obligation (“Fund”). The Fund owned $11.0 million of the $32.0 million in trust preferred securities that had been issued by Mercantile Bank Capital Trust I, a wholly-owned business trust subsidiary. The $11.0 million in trust preferred securities was retired upon the repurchase, resulting in a commensurate reduction in the related Floating Rate Junior Subordinate Note, leaving $21.0 million outstanding. Our accepted bid equated to 73% of the $11.0 million par value, with the 27% discount resulting in a pre-tax gain of approximately $3.0 million (after-tax gain of approximately $1.8 million, or $0.11 per diluted share). On a pro forma basis as of December 31, 2015, the repurchase resulted in a nine basis point increase in our tangible equity to tangible assets ratio and an $0.11 increase in our tangible book value per share, but an approximately 35 basis point decline in our regulatory tier 1 capital and total risk-based capital ratios. The repurchase was funded via a cash dividend from our bank, resulting in a similar decline of approximately 35 basis points in the regulatory capital ratios. Subsequent to the repurchase, the regulatory capital ratios of both Mercantile and our bank remained well above the minimum thresholds to be categorized as well capitalized. 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. On January 14, 2016, our Board of Directors declared a cash dividend on our common stock in the amount of $0.16 per share that was paid on March 23, 2016 to shareholders of record as of March 11, 2016. On April 14, 2016, our Board of Directors declared a cash dividend on our common stock in the amount of $0.16 per share that was paid on June 23, 2016 to shareholders of record as of June 10, 2016. On July 14, 2016, our Board of Directors declared a cash dividend on our common stock in the amount of $0.17 per share that was paid on September 21, 2016 to shareholders of record as of September 9, 2016. On October 13, 2016, our Board of Directors declared a cash dividend on our common stock in the amount of $0.17 per share that will be paid on December 21, 2016 to shareholders of record as of December 9, 2016. Also on October 13, 2016, our Board of Directors declared a special cash dividend on our common stock in the amount of $0.50 per share that will be paid on December 21, 2016 to shareholders of record as of December 9, 2016. On a pro forma basis as of September 30, 2016, the payment of the $0.50 special cash dividend, that will be funded via a cash dividend from our bank, has a 25 to 30 basis point negative impact on our and our bank’s regulatory capital ratios reflected above. On January 30, 2015, we announced that our Board of Directors had authorized a new program to repurchase up to $20.0 million of our common stock from time to time in open market transactions at prevailing market prices or by other means in accordance with applicable regulations. On April 19, 2016, we announced that our Board of Directors had authorized a $15.0 million expansion of the existing common stock repurchase program. During the first nine months of 2016, we purchased approximately 168,000 shares of common stock at an average price of $22.23, totaling about $3.7 million. Since the program’s inception, we have purchased approximately 956,000 shares of common stock at an average price of $20.38, totaling about $19.5 million. All common stock repurchases to date have been funded from cash dividends paid to us from our bank, and we expect future common stock repurchases to be funded in the same manner.

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- Definition The entire disclosure for banks, savings institutions, and credit unions, for regulatory capital requirements imposed by the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of Thrift Supervision (OTS) or for any state imposed capital requirements, as applicable. The disclosure may include (1) a description of regulatory capital requirements (a) for capital adequacy purposes and (b) established by the prompt corrective action provisions of Section 38 of the Federal Depository Insurance Act; (2) the actual or possible material effects of noncompliance with such requirements; (3) whether the entity is in compliance with the regulatory capital requirements including (a) required and actual ratios and amounts of Tier 1 leverage, Tier 1 risk-based, and total risk-based capital, tangible capital (for savings institutions), and Tier 3 capital for market risk (for certain banks and bank holding companies), (b) factors that may significantly affect capital adequacy; (4) the prompt corrective action category in which the entity was classified as of its most recent notification; (5) whether management believes any conditions or events since notification have changed the entity's category. Also may include additional information that might be disclosed in situations where substantial doubt about the entity's ability to continue as a going concern for a reasonable period of time. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1G -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958577-112826 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1C -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958572-112826 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1E -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958574-112826 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1H -URI http://asc.fasb.org/extlink&oid=35709795&loc=d3e65071-112826 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958569-112826 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958570-112826 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1F -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958575-112826 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958568-112826 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 505 -Section 50 -Paragraph 1D -URI http://asc.fasb.org/extlink&oid=35709795&loc=SL5958573-112826 + Details
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