Mercantile Bank (MBWM) 8-K Mercantile Bank Corp. Reports 2006 Eps of $2.45, Up 11.4 Percent Fourth Quarter Eps Is $0.57

Exhibit 99.1

FOR FURTHER INFORMATION:

AT MERCANTILE BANK CORPORATION:
Gerald R. Johnson, Jr.	Charles Christmas
Chairman & CEO	Chief Financial Officer
616-726-1200	616-726-1202

MERCANTILE BANK CORP. REPORTS 2006 EPS OF $2.45, UP 11.4 PERCENT
FOURTH QUARTER EPS IS $0.57

GRAND RAPIDS, Mich., January 10, 2007 — Mercantile Bank Corporation (NASDAQ: MBWM) reported net income for fiscal year 2006 of $19.8 million, an increase of 10.9 percent from the $17.9 million reported for 2005. Diluted earnings per share were $2.45, an increase of 11.4 percent from the $2.20 reported for the prior year. Earnings benefited from solid loan growth, most notably from within the Company’s newer markets, and effective expense control. Net interest margin pressure and a higher loan loss provision partially offset earnings growth.

For the fourth quarter of 2006, Mercantile reported net income of $4.6 million, an increase of 1.2 percent from the $4.5 million reported for the fourth quarter of 2005. Diluted earnings per share were $0.57 compared with $0.56 reported for the year-ago quarter, an increase of 1.8 percent.

Gerald R. Johnson, Jr., Chairman and CEO of Mercantile Bank Corp., commented, “We reported a healthy earnings increase for the year, despite formidable challenges faced not only by us, but by the entire banking industry. We continue to generate strong organic loan growth, spearheaded by the success of our recent expansion initiatives into Holland, Ann Arbor, and Lansing, which together contributed over fifty percent of 2006 loan growth. Local deposit growth was also exceptionally strong, contributing nearly eighty percent of deposit growth this past year.

“However, competitive pricing and underwriting pressures in our markets restrained our lending activities throughout the year; the aggressive pricing terms offered by

competitors negatively impacted the volume of loans we booked, lowered our yields, and accelerated the level of paydowns as well. Despite these pressures, we have remained committed to our traditionally high standards of underwriting and believe the long term benefits of this conservative posture far outweigh the short term costs to our bottom line.”

Total revenue, comprised of net interest income and non-interest income, was $66.8 million for 2006, an increase of 9.7 percent over the $61.0 million reported for the prior fiscal year. Net interest income increased 11.4 percent year over year to $61.6 million, reflecting average earning asset growth of 15.3 percent, partially offset by a 13 basis point decline in net interest margin to 3.37 percent. Mr. Johnson continued, “Our net interest margin has been subjected to a three-fold challenge this past year; in addition to the uncertainty associated with the direction of interest rates, margin compression has been exacerbated by the flat to inverted yield curve and competitive loan and deposit pricing pressures. Although we have more funding flexibility than many banks, there is little that we can do until the yield curve reverts to a more normal relationship.” Non-interest income for the year was $5.3 million compared with $5.7 million for 2005; approximately $0.7 million of 2005 fee income represented a one-time gain on the fourth quarter 2005 sale of state tax credits derived from the construction of the Company’s new headquarters building.

Mr. Johnson noted that Mercantile has continued to leverage its investment in infrastructure, supporting additional loan growth while maintaining operating expense at a stable level throughout the year. For 2006, the efficiency ratio averaged 48.3 percent compared to 51.1 percent in 2005, and was below 50.0 percent for each of the four quarters of 2006. Non interest expense was $32.3 million for 2006, a modest increase of 3.7 percent over the fiscal year 2005; this compares with year-over-year asset growth of 12.5 percent. Salaries and benefits, the largest component of non interest expense, was $19.0 million, an increase of 1.9 percent over the prior year.

Asset quality has remained relatively stable throughout the year. Mr. Johnson commented that a return to Mercantile’s historically high levels of asset quality remains a top corporate priority; to that end, Mercantile has been strengthening its credit administration function throughout 2006, adding seasoned professionals and closely monitoring performance of the loan portfolio in light of changing economic conditions. Net loan charge-offs for 2006 were $4.9 million, equivalent to 0.29 percent of average loans; this compares with $1.1 million or 0.08 percent of average loans for the prior year. Non-performing assets were $9.6 million, or 0.46 percent of total assets at December 31, 2006, compared with $9.4 million, or 0.47 percent of assets at September 30, 2006, and $4.0 million, or 0.22 percent, of assets at December 31, 2005. Loan and lease loss reserves were $21.4 million, or 1.23 percent of total loans and leases at December 31, 2006.

Total assets grew $229.1 million, or 12.5 percent, over the past twelve months, reaching $2.07 billion at December 31, 2006. Earning asset growth was $204.2 million, or 11.7 percent, during this period, with loans up $183.7 million, or 11.8 percent. The composition of the loan portfolio remains basically unchanged from the prior year; commercial loans account for over 90% of outstandings. “As a highly regarded business

bank in our local markets,” Johnson added, “we continue to see a substantial volume of well-structured transactions in the small-to-mid-sized commercial sector, where our pipeline remains strong, pricing pressures notwithstanding.” Growth in earning assets was primarily funded by a $227.6 million, or 16.0 percent, increase in deposits; local deposits contributed the majority of deposit growth, up $176.6 million, or 38.7 percent from last year. Local deposits now comprise 38.4 percent of total deposits at December 31, 2006 compared to 32.2 percent at December 31, 2005.

Shareholders’ equity at December 31, 2006 was $171.9 million, a twelve-month increase of $16.8 million, or 10.8 percent. Total shares outstanding at year-end were 8,022,221. Mercantile remains well-capitalized, with a total risk-based capital ratio of 11.5 percent at year-end. Mr. Johnson concluded, “We completed 2006 positioned to capitalize on growth opportunities in our markets. Nonetheless, we maintain a cautious lending posture in this current environment.”

About Mercantile Bank Corporation

Mercantile Bank Corporation is the bank holding company for Mercantile Bank of Michigan. Headquartered in Grand Rapids, the Bank provides a wide variety of commercial banking services through its five full-service banking offices in greater Grand Rapids, and its full-service banking offices in Holland, Lansing, and Ann Arbor, Michigan. Mercantile Bank Corporation’s common stock is listed on the NASDAQ Global Market under the symbol “MBWM.”

Forward Looking Statements

This news release contains comments or information that constitute forward-looking statements (within the meaning of the Private Securities Litigation Reform Act of 1995) that are based on current expectations that involve a number of risks and uncertainties. Actual results may differ materially from the results expressed in forward-looking statements. Factors that might cause such a difference include 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; changes in the national and local economy; and other factors, including risk factors, disclosed from time to time in filings made by Mercantile with the Securities and Exchange Commission. Mercantile undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

# # # #

Mercantile Bank Corporation
Fourth Quarter 2006 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED BALANCE SHEETS

	DECEMBER 31,			DECEMBER 31,			DECEMBER 31,
	2006			2005			2004
	(Unaudited)			(Audited)			(Audited)
ASSETS
Cash and due from banks	$	51,098,000		$	36,208,000		$	20,662,000
Short-term investments		282,000			545,000			149,000
Total cash and cash equivalents		51,380,000			36,753,000			20,811,000
Securities available for sale		130,967,000			112,961,000			93,826,000
Securities held to maturity		63,943,000			60,766,000			52,341,000
Federal Home Loan Bank stock		7,509,000			7,887,000			6,798,000
Total loans and leases		1,745,478,000			1,561,812,000			1,317,124,000
Allowance for loan and lease losses		(21,411,000	)		(20,527,000	)		(17,819,000	)
Total Loans and leases, net		1,724,067,000			1,541,285,000			1,299,305,000
Premises and equipment, net		33,539,000			30,206,000			24,572,000
Bank owned life insurance policies		30,858,000			28,071,000			23,750,000
Accrued interest receivable		10,287,000			8,274,000			5,644,000
Other assets		14,718,000			12,007,000			9,072,000
Total assets	$	2,067,268,000		$	1,838,210,000		$	1,536,119,000
LIABILITIES AND STOCKHOLDERS’ EQUITY
Deposits:
Noninterest-bearing	$	133,197,000		$	120,828,000		$	101,742,000
Interest-bearing		1,513,706,000			1,298,524,000			1,057,439,000
Total deposits		1,646,903,000			1,419,352,000			1,159,181,000
Securities sold under agreement to repurchase		85,472,000			72,201,000			56,317,000
Federal funds purchased		9,800,000			9,600,000			15,000,000
Federal Home Loan Bank advances		95,000,000			130,000,000			120,000,000
Subordinated debentures		32,990,000			32,990,000			32,990,000
Other borrowed money		3,316,000			2,347,000			1,609,000
Accrued expenses and other liabilities		21,872,000			16,595,000			9,405,000
Total liabilities		1,895,353,000			1,683,085,000			1,394,502,000
SHAREHOLDERS’ EQUITY
Common stock		161,223,000			148,533,000			131,010,000
Retained earnings		11,794,000			8,000,000			10,475,000
Accumulated other comprehensive income (loss)		(1,102,000	)		(1,408,000	)		132,000
Total shareholders’ equity		171,915,000			155,125,000			141,617,000
Total liabilities and shareholders’ equity	$	2,067,268,000		$	1,838,210,000		$	1,536,119,000

Mercantile Bank Corporation
Fourth Quarter 2006 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED REPORTS OF INCOME

	THREE MONTHS ENDED		THREE MONTHS ENDED		TWELVE MONTHS ENDED		TWELVE MONTHS ENDED
	December 31, 2006		December 31, 2005		December 31, 2006		December 31, 2005
	(Unaudited)		(Unaudited)		(Unaudited)		(Audited)
INTEREST INCOME
Loans and leases, including fees	$	34,178,000	$	27,074,000	$	127,470,000	$	93,666,000
Investment securities		2,425,000		2,148,000		9,296,000		8,184,000
Federal funds sold		135,000		90,000		482,000		266,000
Short-term investments		2,000		3,000		12,000		14,000
Total interest income		36,740,000		29,315,000		137,260,000		102,130,000
INTEREST EXPENSE
Deposits		18,644,000		11,998,000		64,755,000		38,884,000
Short-term borrowings		839,000		607,000		2,867,000		1,795,000
Federal Home Loan Bank advances		1,257,000		1,189,000		5,393,000		4,200,000
Long-term borrowings		705,000		564,000		2,658,000		1,959,000
Total interest expense		21,445,000		14,358,000		75,673,000		46,838,000
Net interest income		15,295,000		14,957,000		61,587,000		55,292,000
Provision for loan and lease losses		1,700,000		1,270,000		5,775,000		3,790,000
Net interest income after provision for loan and lease losses		13,595,000		13,687,000		55,812,000		51,502,000
NON INTEREST INCOME
Service charges on accounts		380,000		343,000		1,386,000		1,391,000
Net gain on sales of commercial loans		0		0		29,000		84,000
Other income		1,001,000		1,560,000		3,846,000		4,186,000
Total non interest income		1,381,000		1,903,000		5,261,000		5,661,000
NON INTEREST EXPENSE
Salaries and benefits		4,804,000		5,088,000		18,983,000		18,635,000
Occupancy		732,000		752,000		3,136,000		2,641,000
Furniture and equipment		500,000		558,000		2,050,000		1,667,000
Other expense		2,161,000		2,404,000		8,093,000		8,174,000
Total non interest expense		8,197,000		8,802,000		32,262,000		31,117,000
Income before federal income tax expense		6,779,000		6,788,000		28,811,000		26,046,000
Federal income tax expense		2,174,000		2,239,000		8,964,000		8,145,000
Net income	$	4,605,000	$	4,549,000	$	19,847,000	$	17,901,000
Basic earnings per share	$	0.57	$	0.57	$	2.48	$	2.25
Diluted earnings per share	$	0.57	$	0.56	$	2.45	$	2.20
Average shares outstanding *		8,020,303		7,968,632		8,003,013		7,959,338
Average diluted shares outstanding *		8,117,442		8,102,195		8,112,355		8,137,164

* - Adjusted for 5% stock dividend paid on May 16, 2006

Mercantile Bank Corporation
Fourth Quarter 2006 Results

MERCANTILE BANK CORPORATION
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)

	Quarterly															Year-To-Date
	2006			2006			2006			2006			2005
(dollars in thousands except per share data)	4th Qtr			3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			2006			2005
EARNINGS
Net interest income	$	15,295			15,547			15,646			15,099			14,957			61,587			55,292
Provision for loan and lease losses	$	1,700			1,350			1,500			1,225			1,270			5,775			3,790
NonInterest income	$	1,381			1,362			1,275			1,243			1,903			5,261			5,661
NonInterest expense	$	8,197			8,028			8,031			8,006			8,802			32,262			31,117
Net income	$	4,605			5,202			5,111			4,929			4,549			19,847			17,901
Basic earnings per share	$	0.57			0.65			0.64			0.62			0.57			2.48			2.25
Diluted earnings per share	$	0.57			0.64			0.63			0.61			0.56			2.45			2.20
Average shares outstanding *		8,020,303			8,016,016			8,000,998			7,974,180			7,968,632			8,003,013			7,959,338
Average diluted shares outstanding *		8,117,442			8,118,206			8,119,820			8,102,052			8,102,195			8,112,355			8,137,164
PERFORMANCE RATIOS
Return on average assets		0.89	%		1.04	%		1.06	%		1.07	%		1.00	%		1.01	%		1.05	%
Return on average common equity		10.78	%		12.54	%		12.81	%		12.74	%		11.76	%		12.19	%		12.05	%
Net interest margin(fully tax-equivalent)		3.19	%		3.34	%		3.47	%		3.51	%		3.54	%		3.37	%		3.50	%
Efficiency ratio		49.15	%		47.48	%		47.46	%		48.99	%		52.21	%		48.26	%		51.05	%
Full-time equivalent employees		291			284			277			275			273			291			273
CAPITAL
Period-ending equity to assets		8.32	%		8.27	%		8.21	%		8.37	%		8.44	%		8.32	%		8.44	%
Tier 1 leverage capital ratio		10.04	%		10.14	%		10.15	%		10.29	%		10.45	%		10.04	%		10.45	%
Tier 1 risk-based capital ratio		10.37	%		10.47	%		10.52	%		10.74	%		10.82	%		10.37	%		10.82	%
Total risk-based capital ratio		11.45	%		11.61	%		11.66	%		11.91	%		12.00	%		11.45	%		12.00	%
Book value per share	$	21.43			20.89			20.17			19.86			19.46			21.43			19.46
Cash dividend per share	$	0.13			0.13			0.13			0.12			0.11			0.51			0.43
ASSET QUALITY
Gross loan charge-offs	$	2,276			1,250			1,083			780			350			5,389			1,392
Net loan charge-offs	$	2,227			920			988			756			315			4,891			1,083
Net loan charge-offs to average loans		0.51	%		0.22	%		0.24	%		0.19	%		0.08	%		0.29	%		0.08	%
Allowance for loan and lease losses	$	21,411			21,938			21,507			20,995			20,527			21,411			20,527
Allowance for losses to total loans		1.23	%		1.28	%		1.29	%		1.30	%		1.31	%		1.23	%		1.31	%
Nonperforming loans	$	8,571			9,017			8,530			8,791			3,995			8,571			3,995
Other real estate and repossessed assets	$	986			421			150			0			0			986			0
Nonperforming assets to total assets		0.46	%		0.47	%		0.44	%		0.46	%		0.22	%		0.46	%		0.22	%
END OF PERIOD BALANCES
Loans and leases	$	1,745,478			1,710,268			1,670,471			1,612,351			1,561,812			1,745,478			1,561,812
Total earning assets(before allowance)	$	1,948,179			1,922,051			1,859,411			1,800,909			1,743,971			1,948,179			1,743,971
Total assets	$	2,067,268			2,026,834			1,969,429			1,896,974			1,838,210			2,067,268			1,838,210
Deposits	$	1,646,903			1,614,703			1,547,912			1,482,219			1,419,352			1,646,903			1,419,352
Shareholders’ equity	$	171,915			167,548			161,660			158,910			155,125			171,915			155,125
AVERAGE BALANCES
Loans and leases	$	1,729,899			1,684,700			1,643,022			1,581,617			1,519,616			1,660,284			1,432,609
Total earning assets(before allowance)	$	1,938,499			1,881,873			1,841,666			1,778,694			1,709,612			1,860,680			1,613,448
Total assets	$	2,042,037			1,984,199			1,939,413			1,871,945			1,804,067			1,959,933			1,701,997
Deposits	$	1,628,233			1,569,614			1,521,037			1,459,266			1,394,023			1,545,069			1,308,091
Shareholders’ equity	$	169,452			164,560			160,039			156,901			153,522			162,781			148,589

* - Adjusted for 5% stock dividend paid on May 16, 2006