v3.26.1
Note 13 - Business Combinations
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Business Combination [Text Block]

13.  BUSINESS COMBINATIONS

 

On December 31, 2025, Mercantile completed its acquisition of Eastern Michigan Financial Corporation and its wholly owned banking subsidiary, Eastern Michigan Bank, in accordance with the Agreement and Plan of Merger, as amended (the "Merger Agreement") by and between Mercantile, Eastern Michigan Financial Corporation, and Shamrock Merger Sub LLC, a wholly owned special purpose subsidiary of Mercantile (“Merger Sub”), entered into on July 22, 2025. Pursuant to the Merger Agreement, Eastern Michigan Financial Corporation merged with and into Merger Sub, with Merger Sub continuing as the surviving entity (the “Merger”). Immediately following the Merger, and also effective as of December 31, 2025, Merger Sub merged with and into Mercantile, with Mercantile continuing as the surviving entity. The newly acquired Eastern Michigan Bank will operate alongside Mercantile Bank until the first quarter of 2027, at which time Mercantile plans to consolidate Eastern Michigan Bank into Mercantile Bank.

 

 

 

Mercantile accounted for the Eastern Michigan Financial Corporation acquisition as a business combination using the acquisition method of accounting in accordance with ASC 805, Business Combinations ("ASC 805"). ASC 805 requires assets purchased and liabilities assumed to be recorded at their respective fair values as of the date of acquisition. Mercantile determined the fair value of loans, core deposit intangibles, mortgage servicing rights, time deposits, and real property with the assistance of third-party valuations and appraisals. During the first quarter of 2026, purchase accounting adjustments were made to decrease the core deposit intangible asset by $1.3 million, decrease deferred tax liabilities by $0.3 million and increase goodwill by $1.0 million. The purchase accounting adjustments were made to the provisional amounts due to the finalization of a third-party valuation report and effective January 1, 2026. The following table summarizes the final fair value of the total consideration transferred and the fair value of identifiable assets acquired and liabilities assumed as of the effective date of the transaction:

 

(Dollars in thousands, except per share data)

    
     

Consideration:

    

Cash

 $50,876 

Common stock (924,999 shares issued at $48.55 per share)

  44,909 

Total consideration

 $95,785 
     

Identifiable assets acquired

    

Cash and due from banks

 $62,361 

Interest-earning deposits

  42,084 

Securities available for sale

  198,399 

Loans, net

  201,320 

Premises and equipment

  7,482 

Core deposit intangible

  19,038 

Other assets

  16,875 

Total identifiable assets acquired

  547,559 
     

Identifiable liabilities assumed

    

Deposits

 $474,898 

Other liabilities

  1,093 

Total identifiable liabilities acquired

  475,991 
     

Net identifiable assets acquired

 $71,568 
     

Goodwill

 $24,217 

 

The following table presents supplemental pro-forma information as if the acquisition had occurred at the beginning of 2025. The unaudited pro forma information includes adjustments for interest income on loans acquired, amortization of intangibles arising from the transaction, depreciation expense on property acquired, interest expense on deposits acquired, and the related income tax effects. The pro forma financial information is not necessarily indicative of the results of operations that would have occurred had the transaction been effected on the assumed dates.

 

  

Three Months Ended June 30,

  

Six Months Ended June 30,

 

(Dollars in thousands, except per share data)

 

2026

  

2025

  

2026

  

2025

 
                 

Net interest income

 $57,143  $54,770  $112,928  $108,382 

Provision for credit losses

  (1,800)  1,349   (3,600)  3,318 

Noninterest income

  11,498   11,968   23,189   21,149 

Noninterest expense

  39,109   37,598   80,744   72,953 

Income before income taxes

  31,332   27,791   58,973   53,260 

Income tax expense

  5,222   3,925   9,745   8,918 
                 

Net income

 $26,110  $23,866  $49,228  $44,342 
                 

Earnings per share

 $1.51  $1.39  $2.85  $2.59