Mercantile Bank Corp (NASDAQ:MBWM) has announced the adoption of a new Nonqualified Deferred Compensation Plan #2, set to be effective from January 1, 2025.
The Board of Directors of Mercantile Bank, a wholly owned subsidiary of Mercantile Bank Corporation, approved the plan on November 21, 2024, with the aim of replacing the existing Deferred Compensation Plan that was restated on January 1, 2015.
The new plan will initially be available to the Board of Directors and Executive Vice Presidents of Mercantile and the Bank. Other eligible employees will be able to participate starting January 1, 2026. The plan allows eligible employees to defer up to 80% of their base salary and 100% of their performance-based bonus.
Board members may defer up to 100% of their director fees. However, neither Mercantile nor the Bank will contribute to Deferred Compensation Plan #2.
The Compensation Committee of Mercantile will administer the plan, with participants' accounts being credited with earnings as if invested in selected investment funds. Participants are fully vested in their accounts at all times, with distributions made upon separation from service, death, or disability.
The plan also allows for in-service distributions and distributions in the event of an unforeseeable emergency but does not consider a change in control as a distributable event.
Concurrently, the Bank's Board of Directors approved a Second Amendment to the existing Deferred Compensation Plan, detailing the transition to the new plan. This amendment confirms the ineligibility of certain employees for the old plan from specified dates and ensures that their accounts will continue to be credited with interest and paid out according to the existing plan's terms.
Additionally, a rabbi trust agreement was adopted to hold amounts credited to the new Deferred Compensation Plan #2. The trust, which is irrevocable and subject to the claims of the Bank's general creditors, will be managed by Delaware Charter Guarantee & Trust Company, doing business as Principal Trust Company.
This news is based on a press release statement and reflects the company's ongoing efforts to manage and structure executive compensation.
In other recent news, Mercantile Bank Corporation reported a net income of $19.6 million, showing a decrease from the previous year's earnings. However, the bank experienced robust local deposit growth, leading to an improved loan-to-deposit ratio of 102%, down from 110% at the end of 2023. The bank also saw a 49% surge in mortgage banking income and a 27% rise in total non-interest income.
Keefe, Bruyette & Woods maintained their Outperform rating on Mercantile Bank, despite a minor decrease in margin and an increase in expenses. The firm's analysis highlighted a significant deposit growth of 30% and a solid 10% increase in loan growth on an annualized basis.
The firm has adjusted its earnings estimates for 2025 and 2026 downwards by $0.05 per share for each year, taking into account a modest increase in expected expenses balanced by a more favorable net interest income outlook.
Recent developments include a commercial loan growth of $233 million in the first three quarters. The bank anticipates a loan growth between 4% to 6% and projects a net interest margin of 3.35% to 3.45% in the upcoming period.
Despite a slight deterioration in the automotive risk profile and increased noninterest expenses, Mercantile Bank maintains strong asset quality, with the total risk-based capital ratio standing at $13.9 million, significantly above regulatory requirements.
InvestingPro Insights
Mercantile Bank Corp's (NASDAQ:MBWM) decision to implement a new Nonqualified Deferred Compensation Plan aligns with its strong financial performance and commitment to employee retention. According to InvestingPro data, the company boasts a market capitalization of $831.31 million and has demonstrated impressive profitability with a P/E ratio of 10.45, significantly lower than many in the banking sector.
InvestingPro Tips highlight that Mercantile Bank has maintained dividend payments for 13 consecutive years and has raised its dividend for 5 consecutive years. This consistent dividend policy, coupled with the new deferred compensation plan, underscores the company's focus on rewarding both shareholders and key employees.
The company's stock is currently trading near its 52-week high, with a strong return of 18.18% over the last month and a remarkable 49.53% over the past year. These performance metrics suggest that investors are optimistic about Mercantile Bank's strategic decisions, including the implementation of the new compensation plan.
For readers interested in a deeper analysis, InvestingPro offers 8 additional tips that could provide further insights into Mercantile Bank's financial health and future prospects.
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