UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from __________________ to ____________________________
 Commission file number 000-26719
 MERCANTILE BANK CORPORATION
  Michigan
    
    38-3360865(State or other jurisdiction of
incorporation or organization)310 Leonard Street NW, Grand Rapids, Michigan
    
    (I.R.S. Employer Identification
No.)49504(Address of principal executive offices)
    
    (Zip Code)
 (616) 406-3000(Registrants telephone number, including area code)
  Title of each class
    
    Name of each exchange on which registeredCommon Stock
    
    The Nasdaq Stock Market LLC
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  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
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   DOCUMENTS INCORPORATED BY REFERENCE




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PART I
 Item 1. Business.
 The Company
     Our Bank
  th
 2




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Our Mortgage Company
  Our Insurance Company
  Our Real Estate Company
  Our Trust
  3




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Effect of Government Monetary Policies
  Regulation and Supervision
     Employees
  4




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Lending Policy
     Lending Activity
 Commercial Loans.
  5




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Single-Family Residential Real Estate Loans.
  Consumer Loans.
   Loan and Lease Portfolio Quality
  6




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Allowance for Loan and Lease Losses
    7




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Investments
 Bank Holding Company Investments
  8




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Our Banks Investments
  Competition
  Selected Statistical Information
  Return on Equity and Assets
  Available Information
  9




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Item 1A. Risk Factors.
  Difficult market conditions have adversely affected our industry.
  Significant declines in the value of commercial real estate adversely impact us.
  Market volatility may adversely affect us.
  10




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Adverse changes in economic conditions or interest rates may negatively affect our earnings,
capital and liquidity.
  The soundness of other financial institutions could adversely affect us.
  11




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The effect of the U.S. Governments response to the financial crisis remains uncertain.
  The U.S. Governments legislative and regulatory response to the financial crisis and our
participation in its programs may have adverse effects on us.
  Our credit losses could increase and our allowance for loan and lease losses may not be adequate to
cover actual loan losses.
  12




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We rely heavily on our management and other key personnel, and the loss of any of them may
adversely affect our operations.
    Decline in the availability of out-of-area deposits could cause liquidity or interest rate margin
concerns, or limit our growth.
  Future sales of our common stock or other securities may dilute the value of our common stock.
  13




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Our future success is dependent on our ability to compete effectively in the highly competitive
banking industry.
  We are subject to significant government regulation, and any regulatory changes may adversely
affect us.
  We continually encounter technological change, and we may have fewer resources than our competitors
to continue to invest in technological improvements.
  14




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Our Articles of Incorporation and By-laws and the laws of Michigan contain provisions that may
discourage or prevent a takeover of our company and reduce any takeover premium.
   There is a limited trading market for our common stock.
    Our business is subject to operational risks.
  15




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Item 1B. Unresolved Staff Comments
  Item 2. Properties.
      16




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th
  Item 3.
    
    Legal Proceedings.
  Item 4.
    
    Reserved
 PART II
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
   High
    
    
    Low
    
    
    Dividend2009First Quarter
    
    $
    6.48
    
    
    $
    3.01
    
    
    $
    0.04Second Quarter
    
    
    6.00
    
    
    
    2.84
    
    
    
    0.01Third Quarter
    
    
    4.79
    
    
    
    3.02
    
    
    
    0.01Fourth Quarter
    
    
    4.33
    
    
    
    3.00
    
    
    
    0.012008First Quarter
    
    $
    16.19
    
    
    $
    10.19
    
    
    $
    0.15Second Quarter
    
    
    11.40
    
    
    
    7.10
    
    
    
    0.08Third Quarter
    
    
    10.09
    
    
    
    4.82
    
    
    
    0.04Fourth Quarter
    
    
    9.69
    
    
    
    4.00
    
    
    
    0.04
 17




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18




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Period EndingIndex
    
    12/31/04
    
    
    12/31/05
    
    
    12/31/06
    
    
    12/31/07
    
    
    12/31/08
    
    
    12/31/09Mercantile Bank Corporation
    
    
    100.00
    
    
    
    103.39
    
    
    
    107.70
    
    
    
    47.63
    
    
    
    13.59
    
    
    
    9.90NASDAQ Composite
    
    
    100.00
    
    
    
    101.37
    
    
    
    111.03
    
    
    
    121.92
    
    
    
    72.49
    
    
    
    104.31SNL Bank NASDAQ
    
    
    100.00
    
    
    
    96.95
    
    
    
    108.85
    
    
    
    85.45
    
    
    
    62.06
    
    
    
    50.34
 Item 6.
    
    Selected Financial Data.
  Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operation.
  Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  Item 8.
    
    Financial Statements and Supplementary Data.
  19




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Item 9.
    
    Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
  Item 9A.
    
    Controls and Procedures.
    Internal Control
 Integrated Framework Internal Control  Integrated
Framework
  Item 9B.
    
    Other Information.
  PART III
 Item 10.
    
    Directors, Executive Officers and Corporate Governance.
   20




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Item 11.
    
    Executive Compensation.
  Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
    Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    
    Weighted-average
    
    
    equity compensationbe issued upon exercise
    
    
    exercise price of
    
    
    plans (excludingof outstanding options,
    
    
    outstanding options,
    
    
    securities reflected inPlan Category
    
    warrants and rights
    
    
    warrants and rights
    
    
    column (a))(a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
(1)
    
    
    296,215
    
    
    $
    20.34
    
    
    
    410,000
    (2)Equity compensation
plans not approved
by security holders
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    
    296,215
    
    
    $
    20.34
    
    
    
    410,000
 
 (1)
    
    These plans are Mercantiles 1997 Employee Stock Option Plan, 2000 Employee Stock Option Plan,
2004 Employee Stock Option Plan, Independent Director Stock Option Plan and the Stock Incentive
Plan of 2006.(2)
    
    These securities are available under the Stock Incentive Plan of 2006. Incentive awards may
include, but are not limited to, stock options, restricted stock, stock appreciation rights and
stock awards. Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence.
  Item 14.
    
    Principal Accountant Fees and Services.
  21




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PART IV
 Item 15.
    
    Exhibits and Financial Statement Schedules
            EXHIBIT NO.
    
    EXHIBIT DESCRIPTION3.1
    
    Our Articles of Incorporation are incorporated by reference to
exhibit 3.1 of our Form 10-Q for the quarter ended June 30,
20093.2
    
    Our Amended and Restated Bylaws dated as of January 16, 2003
are incorporated by reference to exhibit 3.2 of our
Registration Statement on Form S-3 (Commission File No.
333-103376) that became effective on February 21, 200310.1
    
    Our 1997 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Registration Statement on
Form SB-2 (Commission File No. 333-33081) that became
effective on October 23, 1997 *10.2
    
    Our 2000 Employee Stock Option Plan is incorporated by
reference to exhibit 10.14 of our Form 10-K for the year ended
December 31, 2000 *10.3
    
    Our 2004 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form 10-Q for the quarter
ended September 30, 2004 *10.4
    
    
    Form of Stock Option Agreement for options under the 2004
Employee Stock Option Plan is incorporated by reference to
exhibit 10.2 of our Form 10-Q for the quarter ended September
30, 2004 *
 22




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EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.5
    
    Our Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.26 of our Form 10-K for the year ended
December 31, 2002 *10.6
    
    Form of Stock Option Agreement for options under the
Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form 8-K filed October 22,
2004 *10.7
    
    Mercantile Bank of Michigan Amended and Restated Deferred
Compensation Plan for Members of the Board of Directors dated
June 29, 2006 is incorporated by reference to exhibit 10.9 of
our Form 10-K for the year ended December 31, 200710.8
    
    First Amendment dated October 25, 2007 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June 29, 2006 is
incorporated by reference to exhibit 10.10 of our Form 10-K
for the year ended December 31, 200710.9
    
    Second Amendment dated October 23, 2008 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June 29, 2007 is
incorporated by reference to exhibit 10.9 of our Form 10-K for
the year ended December 31, 200810.10
    
    Agreement between Fiserv Solutions, Inc. and our bank dated
September 10, 1997, is incorporated by reference to exhibit
10.3 of our Registration Statement on Form SB-2 (Commission
File No. 333-33081) that became effective on October 23, 199710.11
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated May 12, 2000 extending the
agreement between Fiserv Solutions, Inc. and our bank dated
September 10, 1997, is incorporated by reference to exhibit
10.15 of our Form 10-K for the year ended December 31, 200010.12
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated November 21, 2002 extending
the agreement between Fiserv Solutions, Inc. and our bank
dated September 10, 1997, is incorporated by reference to
exhibit 10.5 of our Form 10-K for the year ended December 31,
200210.13
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated December 20, 2006 extending
the agreements between Fiserv Solutions, Inc. and our bank
dated September 10, 1997 and November 21, 2002 is incorporated
by reference to exhibit 10.14 of our Form 10-K for the year
ended December 31, 200710.14
    
    Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form 10-K
for the year ended December 31, 2001 *10.15
    
    Employment Agreement dated as of October 18, 2001, among the
company, our bank and Robert B. Kaminski, Jr., is incorporated
by reference to exhibit 10.23 of our Form 10-K for the year
ended December 31, 2001 *10.16
    
    Employment Agreement dated as of October 18, 2001, among the
company, our bank and Charles E. Christmas, is incorporated by
reference to exhibit 10.23 of our Form 10-K for the year ended
December 31, 2001 *
 23




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EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.17
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form 10-K
for the year ended December 31, 2002 *10.18
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.23 of our Form 10-K
for the year ended December 31, 2002 *10.19
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Charles E. Christmas, is
incorporated by reference to exhibit 10.24 of our Form 10-K
for the year ended December 31, 2002 *10.20
    
    Amendment to Employment Agreement dated as of October 28,
2004, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.21 of our Form 10-K
for the year ended December 31, 2004 *10.21
    
    Junior Subordinated Indenture between us and Wilmington Trust
Company dated September 16, 2004 providing for the issuance of
the Series A and Series B Floating Rate Junior Subordinated
Notes due 2034 is incorporated by reference to exhibit 10.1 of
our Form 8-K filed December 15, 200410.22
    
    Amended and Restated Trust Agreement dated September 16, 2004
for Mercantile Bank Capital Trust I is incorporated by
reference to exhibit 10.2 of our Form 8-K filed December 15,
200410.23
    
    Placement Agreement between us, Mercantile Bank Capital Trust
I, and SunTrust Capital Markets, Inc. dated September 16, 2004
is incorporated by reference to exhibit 10.3 of our Form 8-K
filed December 15, 200410.24
    
    Guarantee Agreement dated September 16, 2004 between
Mercantile as Guarantor and Wilmington Trust Company as
Guarantee Trustee is incorporated by reference to exhibit 10.4
of our Form 8-K filed December 15, 200410.25
    
    Form of Agreement Amending Stock Option Agreement, dated
November 17, 2005 issued under our 2004 Employee Stock Option
Plan, is incorporated by reference to exhibit 10.1 of our Form
8-K filed December 14, 2005 *10.26
    
    Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Michael H. Price is
incorporated by reference to exhibit 10.29 of our Form 10-K
for the year ended December 31, 2005 *10.27
    
    Third Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Robert B. Kaminski,
Jr. is incorporated by reference to exhibit 10.30 of our Form
10-K for the year ended December 31, 2005 *10.28
    
    Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Charles E. Christmas
is incorporated by reference to exhibit 10.31 of our Form 10-K
for the year ended December 31, 2005 *
 24




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EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.29
    
    Form of Mercantile Bank of Michigan Amended and Restated
Executive Deferred Compensation Agreement dated November 18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank is incorporated by reference to exhibit 10.34 of our Form
10-K for the year ended December 31, 2007 *10.30
    
    Form of First Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement dated November 18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank, dated October 25, 2007 is incorporated by reference to
exhibit 10.35 of our Form 10-K for the year ended December 31,
2007 *10.31
    
    Form of Second Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement date November 18,
2006, that has been entered into between our bank and each of
Michael H. Price, Robert B. Kaminski, Charles E. Christmas,
and certain other officers of our bank, dated October 23, 2008
is incorporated by reference to exhibit 10.34 of our Form 10-K
for the year ended December 31, 2008 *10.32
    
    Form of Mercantile Bank of Michigan Split Dollar Agreement
that has been entered into between our bank and each of Gerald
R. Johnson, Jr., Michael H. Price, Robert B. Kaminski, Jr.,
Charles E. Christmas, and certain other officers of our bank
is incorporated by reference to exhibit 10.33 of our Form 10-K
for the year ended December 31, 2005 *10.33
    
    Director Fee Summary *10.34
    
    Lease Agreement between our bank and The Conlin Company dated
July 12, 2005 for our Ann Arbor, Michigan office is
incorporated by reference to exhibit 10.36 of our Form 10-K
for the year ended December 31, 200510.35
    
    Stock Incentive Plan of 2006 is incorporated by reference to
Appendix A of our proxy statement for our April 27, 2006
annual meeting of shareholders that was filed with the
Securities and Exchange Commission *10.36
    
    Amendment and Restatement of Stock Incentive Plan of 2006
dated November 18, 2008 is incorporated by reference to
exhibit 10.39 of our Form 10-K for the year ended December 31,
2008 *10.37
    
    Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted in 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.1 of our Form 8-K filed November 22,
2006 *10.38
    
    Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted after
2006 under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.41 of our Form 10-K for the year ended
December 31, 2007 *
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EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.39
    
    Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
in 2006 under our Stock Incentive Plan of 2006 is incorporated
by reference to exhibit 10.2 of our Form 8-K filed November
22, 2006 *10.40
    
    Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
after 2006 under our Stock Incentive Plan of 2006 is
incorporated by reference to exhibit 10.43 of our Form 10-K
for the year ended December 31, 2007 *10.41
    
    Mercantile Bank Corporation Employee Stock Purchase Plan of
2002 is incorporated by reference to exhibit 10.47 of our Form
10-K for the year ended December 31, 200810.42
    
    First Amendment to Mercantile Bank Corporation Employee Stock
Purchase Plan of 2002 is incorporated by reference to exhibit
4(c) of our Registration Statement on Form S-8 (Commission
File No. 333-158280) that became effective on March 30, 200910.43
    
    Second Amendment to Mercantile Bank Corporation Employee Stock
Purchase Plan of 2002 is incorporated by reference to exhibit
4(d) of our Registration Statement on Form S-8 (Commission
File No. 333-158280) that became effective on March 30, 200910.44
    
    Lease Agreement between our bank and CD Partners LLC dated
October 2, 2007 for our Oakland County, Michigan office is
incorporated by reference to exhibit 10.47 of our Form 10-K
for the year ended December 31, 200710.45
    
    Letter Agreement, dated as of May 15, 2009, between Mercantile
Bank Corporation and the United States Department of the
Treasury, including the Securities Purchase Agreement 
Standard Terms and Schedules is incorporated by reference to
exhibit 10.1 of our Form 8-K filed May 15, 200910.46
    
    Side Letter Agreement, dated as of May 15, 2009, between
Mercantile Bank Corporation and the United States Department
of the Treasury regarding the American Recovery and
Reinvestment Act of 2009 is incorporated by reference to
exhibit 10.2 of our Form 8-K filed May 15, 200910.47
    
    Amendment to Employment Agreements, dated May 15, 2009, by and
among Mercantile Bank Corporation, Mercantile Bank of
Michigan, Michael H. Price, Robert B. Kaminski, Jr. and
Charles E. Christmas is incorporated by reference to exhibit
10.3 of our Form 8-K filed May 15, 2009 *10.48
    
    Form of Waiver executed by each of Michael H. Price, Robert B.
Kaminski, Jr. and Charles E. Christmas is incorporated by
reference to exhibit 10.4 of our Form 8-K filed May 15, 200910.49
    
    Amendment to Commercial Lease between our bank and Jerry
Helmer and Ruthann Helmer dated August 14, 2007 for our Ann
Arbor, Michigan office is incorporated by reference to exhibit
10.5 of our Form 10-Q for the quarter ended June 30, 2009
 26




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EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.50
    
    Termination of Lease Agreement between our bank and CD
Partners LLC dated May 21, 2009 for our Oakland County,
Michigan office is incorporated by reference to exhibit 10.6
of our Form 10-Q for the quarter ended June 30, 200910.51
    
    Termination of Lease Agreement between our bank and Jerry
Helmer and Ruthann Helmer dated July 22, 2009 for our Ann
Arbor, Michigan office is incorporated by reference to exhibit
10.7 of our Form 10-Q for the quarter ended June 30, 200910.52
    
    Warrant to Purchase Common Stock of Mercantile Bank
Corporation, dated May 15, 2009 is incorporated by reference
to exhibit 4.2 of our Form 8-K filed May 15, 200921
    
    Subsidiaries of the company is incorporated by reference to
exhibit 21 of our Form 10-K for the year ended December 31,
200823
    
    Consent of BDO Seidman, LLP31
    
    Rule 13a-14(a) Certifications32.1
    
    Section 1350 Chief Executive Officer Certification32.2
    
    Section 1350 Chief Financial Officer Certification99.1
    
    First fiscal year certification of our principal executive
officer and principal financial officer required because of
our participation in the Capital Purchase Program of the
Troubled Asset Relief Program
 
 *
    
    Management contract or compensatory plan(c)
    
    Financial Statements Not Included In Annual ReportNot applicable 27




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MERCANTILE BANK CORPORATION
 FINANCIAL INFORMATION
 F-1




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SELECTED FINANCIAL DATA
    
    
    F-3MANAGEMENTS DISCUSSION AND ANALYSIS
    
    
    F-4REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    
    F-32REPORT BY MERCANTILE BANK CORPORATIONS MANAGEMENT ON INTERNAL
CONTROL OVER FINANCIAL REPORTING
    
    
    F-34CONSOLIDATED FINANCIAL STATEMENTSCONSOLIDATED BALANCE SHEETS
    
    
    F-35CONSOLIDATED STATEMENTS OF OPERATIONS
    
    
    F-36CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
    
    
    F-37CONSOLIDATED STATEMENTS OF CASH FLOWS
    
    
    F-40NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    
    F-42
  F-2




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SELECTED FINANCIAL DATA
 2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(Dollars in thousands except per share data)Consolidated Results of Operations:Interest income
    
    $
    104,909
    
    
    $
    121,072
    
    
    $
    144,181
    
    
    $
    137,260
    
    
    $
    102,130Interest expense
    
    
    53,576
    
    
    
    74,863
    
    
    
    88,624
    
    
    
    75,673
    
    
    
    46,838Net interest income
    
    
    51,333
    
    
    
    46,209
    
    
    
    55,557
    
    
    
    61,587
    
    
    
    55,292Provision for loan and lease losses
    
    
    59,000
    
    
    
    21,200
    
    
    
    11,070
    
    
    
    5,775
    
    
    
    3,790Noninterest income
    
    
    7,558
    
    
    
    7,282
    
    
    
    5,870
    
    
    
    5,261
    
    
    
    5,661Noninterest expense
    
    
    46,488
    
    
    
    42,126
    
    
    
    38,356
    
    
    
    32,262
    
    
    
    31,117Income (loss) before income tax expense (benefit)
    
    
    (46,597
    )
    
    
    (9,835
    )
    
    
    12,001
    
    
    
    28,811
    
    
    
    26,046Income tax expense (benefit)
    
    
    5,490
    
    
    
    (4,876
    )
    
    
    3,035
    
    
    
    8,964
    
    
    
    8,145Net income (loss)
    
    
    (52,087
    )
    
    
    (4,959
    )
    
    
    8,966
    
    
    
    19,847
    
    
    
    17,901Preferred stock dividends and accretion
    
    
    802
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Net income (loss) attributable to common shares
    
    $
    (52,889
    )
    
    $
    (4,959
    )
    
    $
    8,966
    
    
    $
    19,847
    
    
    $
    17,901Consolidated Balance Sheet Data:Total assets
    
    $
    1,906,208
    
    
    $
    2,208,010
    
    
    $
    2,121,403
    
    
    $
    2,067,268
    
    
    $
    1,838,210Cash and cash equivalents
    
    
    21,735
    
    
    
    25,804
    
    
    
    29,430
    
    
    
    51,380
    
    
    
    36,753Securities
    
    
    257,384
    
    
    
    242,787
    
    
    
    211,736
    
    
    
    202,419
    
    
    
    181,614Loans and leases
    
    
    1,539,818
    
    
    
    1,856,915
    
    
    
    1,799,880
    
    
    
    1,745,478
    
    
    
    1,561,812Allowance for loan and lease losses
    
    
    47,878
    
    
    
    27,108
    
    
    
    25,814
    
    
    
    21,411
    
    
    
    20,527Bank owned life insurance
    
    
    45,024
    
    
    
    42,462
    
    
    
    39,118
    
    
    
    30,858
    
    
    
    28,071Deposits
    
    
    1,401,627
    
    
    
    1,599,575
    
    
    
    1,591,181
    
    
    
    1,646,903
    
    
    
    1,419,352Securities sold under agreements to repurchase
    
    
    99,755
    
    
    
    94,413
    
    
    
    97,465
    
    
    
    85,472
    
    
    
    72,201Federal Home Loan Bank advances
    
    
    205,000
    
    
    
    270,000
    
    
    
    180,000
    
    
    
    95,000
    
    
    
    130,000Subordinated debentures
    
    
    32,990
    
    
    
    32,990
    
    
    
    32,990
    
    
    
    32,990
    
    
    
    32,990Shareholders equity
    
    
    140,104
    
    
    
    174,372
    
    
    
    178,155
    
    
    
    171,915
    
    
    
    155,125Consolidated Financial Ratios:Return on average assets
    
    
    (2.51
    %)
    
    
    (0.23
    %)
    
    
    0.43
    %
    
    
    1.01
    %
    
    
    1.05
    %Return on average shareholders equity
    
    
    (29.91
    %)
    
    
    (2.87
    %)
    
    
    5.10
    %
    
    
    12.19
    %
    
    
    12.05
    %Average shareholders equity to average assets
    
    
    8.40
    %
    
    
    8.01
    %
    
    
    8.44
    %
    
    
    8.31
    %
    
    
    8.73
    %Nonperforming loans and leases to total loans and leases
    
    
    5.52
    %
    
    
    2.66
    %
    
    
    1.66
    %
    
    
    0.49
    %
    
    
    0.26
    %Allowance for loan and lease losses to total loans and leases
    
    
    3.11
    %
    
    
    1.46
    %
    
    
    1.43
    %
    
    
    1.23
    %
    
    
    1.31
    %Tier 1 leverage capital
    
    
    8.64
    %
    
    
    9.17
    %
    
    
    9.97
    %
    
    
    10.04
    %
    
    
    10.45
    %Tier 1 leverage risk-based capital
    
    
    9.92
    %
    
    
    9.68
    %
    
    
    10.14
    %
    
    
    10.37
    %
    
    
    10.82
    %Total risk-based capital
    
    
    11.18
    %
    
    
    10.93
    %
    
    
    11.39
    %
    
    
    11.45
    %
    
    
    12.00
    %Per Share Data:Net income (loss):Basic
    
    $
    (6.23
    )
    
    $
    (0.59
    )
    
    $
    1.06
    
    
    $
    2.36
    
    
    $
    2.14Diluted
    
    
    (6.23
    )
    
    
    (0.59
    )
    
    
    1.05
    
    
    
    2.33
    
    
    
    2.10Book value at end of period
    
    
    13.86
    
    
    
    20.29
    
    
    
    20.89
    
    
    
    21.43
    
    
    
    19.46Dividends declared
    
    
    0.07
    
    
    
    0.31
    
    
    
    0.55
    
    
    
    0.48
    
    
    
    0.39Dividend payout ratio
    
    NA
    
    NA
    
    
    52.16
    %
    
    
    20.34
    %
    
    
    17.79
    %
 F-3




---



##### 



MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 FORWARD-LOOKING STATEMENTS
   CRITICAL ACCOUNTING POLICIES AND ESTIMATES
  Allowance For Loan and Lease Losses
 F-4




---



##### 



Income Tax Accounting
  INTRODUCTION
  F-5




---



##### 



FINANCIAL OVERVIEW
  F-6




---



##### 



FINANCIAL CONDITION
  Earning Assets
   F-7




---



##### 



12/31/09
    
    
    9/30/09
    
    
    6/30/09
    
    
    3/31/09
    
    
    12/31/08Residential-Related:Vacant Land
    
    $
    19,465,000
    
    
    $
    20,630,000
    
    
    $
    21,400,000
    
    
    $
    22,244,000
    
    
    $
    21,374,000Land Development
    
    
    34,027,000
    
    
    
    33,862,000
    
    
    
    42,053,000
    
    
    
    50,402,000
    
    
    
    54,055,000Construction
    
    
    7,199,000
    
    
    
    9,446,000
    
    
    
    11,157,000
    
    
    
    14,646,000
    
    
    
    16,839,00060,691,000
    
    
    
    63,938,000
    
    
    
    74,610,000
    
    
    
    87,292,000
    
    
    
    92,268,000Comml Non-Owner Occupied:Vacant Land
    
    
    25,549,000
    
    
    
    25,564,000
    
    
    
    29,005,000
    
    
    
    28,775,000
    
    
    
    29,269,000Land Development
    
    
    19,402,000
    
    
    
    22,412,000
    
    
    
    23,469,000
    
    
    
    24,636,000
    
    
    
    24,629,000Construction
    
    
    65,697,000
    
    
    
    79,339,000
    
    
    
    94,225,000
    
    
    
    93,322,000
    
    
    
    102,464,000Commercial Buildings
    
    
    537,891,000
    
    
    
    528,727,000
    
    
    
    545,501,000
    
    
    
    556,280,000
    
    
    
    558,360,000648,539,000
    
    
    
    656,042,000
    
    
    
    692,200,000
    
    
    
    703,013,000
    
    
    
    714,722,000Comml Owner Occupied:Construction
    
    
    1,404,000
    
    
    
    5,456,000
    
    
    
    7,407,000
    
    
    
    9,290,000
    
    
    
    9,344,000Commercial Buildings
    
    
    324,451,000
    
    
    
    349,335,000
    
    
    
    359,610,000
    
    
    
    365,250,000
    
    
    
    370,099,000325,855,000
    
    
    
    354,791,000
    
    
    
    367,017,000
    
    
    
    374,540,000
    
    
    
    379,443,000Total
    
    $
    1,035,085,000
    
    
    $
    1,074,771,000
    
    
    $
    1,133,827,000
    
    
    $
    1,164,845,000
    
    
    $
    1,186,433,000
  F-8




---



##### 



Less Than
    
    
    One Through
    
    
    More ThanOne Year
    
    
    Five Years
    
    
    Five Years
    
    
    TotalConstruction and land development
    
    $
    135,144,000
    
    
    $
    40,014,000
    
    
    $
    920,000
    
    
    $
    176,078,000Real estate  residential properties
    
    
    63,086,000
    
    
    
    48,387,000
    
    
    
    13,332,000
    
    
    
    124,805,000Real estate  multi-family properties
    
    
    18,001,000
    
    
    
    29,435,000
    
    
    
    243,000
    
    
    
    47,679,000Real estate  commercial properties
    
    
    355,983,000
    
    
    
    433,593,000
    
    
    
    24,482,000
    
    
    
    814,058,000Commercial and industrial
    
    
    245,596,000
    
    
    
    107,480,000
    
    
    
    17,070,000
    
    
    
    370,146,000Leases
    
    
    59,000
    
    
    
    996,000
    
    
    
    0
    
    
    
    1,055,000Consumer
    
    
    3,062,000
    
    
    
    2,752,000
    
    
    
    183,000
    
    
    
    5,997,000Total
    
    $
    820,931,000
    
    
    $
    662,657,000
    
    
    $
    56,230,000
    
    
    $
    1,539,818,000Fixed rate loans and leases
    
    $
    439,405,000
    
    
    $
    662,657,000
    
    
    $
    42,750,000
    
    
    $
    1,144,812,000Floating rate loans and leases
    
    
    381,526,000
    
    
    
    0
    
    
    
    13,480,000
    
    
    
    395,006,000Total
    
    $
    820,931,000
    
    
    $
    662,657,000
    
    
    $
    56,230,000
    
    
    $
    1,539,818,000
   F-9




---



##### 



F-10




---



##### 



12/31/09
    
    
    9/30/09
    
    
    6/30/09
    
    
    3/31/09
    
    
    12/31/08Residential Real Estate:Land Development
    
    $
    19,722,000
    
    
    $
    13,645,000
    
    
    $
    10,422,000
    
    
    $
    12,646,000
    
    
    $
    14,273,000Construction
    
    
    12,103,000
    
    
    
    13,021,000
    
    
    
    12,882,000
    
    
    
    13,538,000
    
    
    
    11,040,000Owner Occupied / Rental
    
    
    7,493,000
    
    
    
    6,830,000
    
    
    
    4,910,000
    
    
    
    4,877,000
    
    
    
    4,160,00039,318,000
    
    
    
    33,496,000
    
    
    
    28,214,000
    
    
    
    31,061,000
    
    
    
    29,473,000Commercial Real Estate:Land Development
    
    
    2,971,000
    
    
    
    4,621,000
    
    
    
    2,292,000
    
    
    
    2,383,000
    
    
    
    2,234,000Construction
    
    
    1,268,000
    
    
    
    228,000
    
    
    
    0
    
    
    
    0
    
    
    
    0Owner Occupied
    
    
    19,918,000
    
    
    
    21,429,000
    
    
    
    17,378,000
    
    
    
    8,753,000
    
    
    
    6,495,000Non-Owner Occupied
    
    
    38,417,000
    
    
    
    36,473,000
    
    
    
    28,110,000
    
    
    
    28,364,000
    
    
    
    14,055,00062,574,000
    
    
    
    62,751,000
    
    
    
    47,780,000
    
    
    
    39,500,000
    
    
    
    22,784,000Non-Real Estate:Commercial Assets
    
    
    9,758,000
    
    
    
    14,510,000
    
    
    
    10,629,000
    
    
    
    13,155,000
    
    
    
    5,134,000Consumer Assets
    
    
    8,000
    
    
    
    8,000
    
    
    
    8,000
    
    
    
    31,000
    
    
    
    30,0009,766,000
    
    
    
    14,518,000
    
    
    
    10,637,000
    
    
    
    13,186,000
    
    
    
    5,164,000Total
    
    $
    111,658,000
    
    
    $
    110,765,000
    
    
    $
    86,631,000
    
    
    $
    83,747,000
    
    
    $
    57,421,000
  4th Qtr
    
    
    3rd Qtr
    
    
    2nd Qtr
    
    
    1st Qtr
    
    
    Whole Year2009
    
    
    2009
    
    
    2009
    
    
    2009
    
    
    2009Residential Real Estate:Land Development
    
    $
    2,204,000
    
    
    $
    467,000
    
    
    $
    1,060,000
    
    
    $
    624,000
    
    
    $
    4,355,000Construction
    
    
    733,000
    
    
    
    3,208,000
    
    
    
    1,023,000
    
    
    
    86,000
    
    
    
    5,050,000Owner Occupied / Rental
    
    
    946,000
    
    
    
    530,000
    
    
    
    729,000
    
    
    
    1,442,000
    
    
    
    3,647,0003,883,000
    
    
    
    4,205,000
    
    
    
    2,812,000
    
    
    
    2,152,000
    
    
    
    13,052,000Commercial Real Estate:Land Development
    
    
    45,000
    
    
    
    0
    
    
    
    74,000
    
    
    
    0
    
    
    
    119,000Construction
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Owner Occupied
    
    
    1,140,000
    
    
    
    1,254,000
    
    
    
    593,000
    
    
    
    75,000
    
    
    
    3,062,000Non-Owner Occupied
    
    
    3,009,000
    
    
    
    3,265,000
    
    
    
    2,347,000
    
    
    
    786,000
    
    
    
    9,407,0004,194,000
    
    
    
    4,519,000
    
    
    
    3,014,000
    
    
    
    861,000
    
    
    
    12,588,000Non-Real Estate:Commercial Assets
    
    
    2,788,000
    
    
    
    2,232,000
    
    
    
    4,918,000
    
    
    
    2,475,000
    
    
    
    12,413,000Consumer Assets
    
    
    (1,000
    )
    
    
    7,000
    
    
    
    35,000
    
    
    
    136,000
    
    
    
    177,0002,787,000
    
    
    
    2,239,000
    
    
    
    4,953,000
    
    
    
    2,611,000
    
    
    
    12,590,000Total
    
    $
    10,864,000
    
    
    $
    10,963,000
    
    
    $
    10,779,000
    
    
    $
    5,624,000
    
    
    $
    38,230,000
 F-11




---



##### 



12/31/09
    
    
    12/31/08
    
    
    12/31/07
    
    
    12/31/06
    
    
    12/31/05Past due 90 days or more and
accruing interest
    
    $
    243,000
    
    
    $
    1,358,000
    
    
    $
    977,000
    
    
    $
    819,000
    
    
    $
    394,000Nonaccrual
    
    
    81,818,000
    
    
    
    47,945,000
    
    
    
    28,832,000
    
    
    
    7,752,000
    
    
    
    3,601,000Troubled debt restructurings
    
    
    2,989,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Total
    
    $
    85,050,000
    
    
    $
    49,303,000
    
    
    $
    29,809,000
    
    
    $
    8,571,000
    
    
    $
    3,995,000
  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Loans and leases outstanding at year-end
    
    $
    1,539,818,000
    
    
    $
    1,856,915,000
    
    
    $
    1,799,880,000
    
    
    $
    1,745,478,000
    
    
    $
    1,561,812,000Daily average balance of loans and leases
outstanding during the year
    
    $
    1,704,335,000
    
    
    $
    1,829,686,000
    
    
    $
    1,765,465,000
    
    
    $
    1,660,284,000
    
    
    $
    1,432,609,000Balance of allowance at beginning of year
    
    $
    27,108,000
    
    
    $
    25,814,000
    
    
    $
    21,411,000
    
    
    $
    20,527,000
    
    
    $
    17,819,000Loans and leases charged-off:Commercial, financial and agricultural
    
    
    (25,858,000
    )
    
    
    (12,566,000
    )
    
    
    (4,232,000
    )
    
    
    (5,208,000
    )
    
    
    (718,000
    )Construction and land development
    
    
    (9,606,000
    )
    
    
    (4,835,000
    )
    
    
    (1,353,000
    )
    
    
    0
    
    
    
    (521,000
    )Leases
    
    
    (120,000
    )
    
    
    (174,000
    )
    
    
    (18,000
    )
    
    
    0
    
    
    
    0Residential real estate
    
    
    (3,797,000
    )
    
    
    (2,900,000
    )
    
    
    (1,618,000
    )
    
    
    (50,000
    )
    
    
    (131,000
    )Instalment loans to individuals
    
    
    (240,000
    )
    
    
    (119,000
    )
    
    
    (53,000
    )
    
    
    (131,000
    )
    
    
    (22,000
    )Total charge-offs
    
    
    (39,621,000
    )
    
    
    (20,594,000
    )
    
    
    (7,274,000
    )
    
    
    (5,389,000
    )
    
    
    (1,392,000
    )Recoveries of previously charged-off
loans and leases:Commercial, financial and agricultural
    
    
    1,141,000
    
    
    
    597,000
    
    
    
    586,000
    
    
    
    487,000
    
    
    
    298,000Construction and land development
    
    
    81,000
    
    
    
    8,000
    
    
    
    11,000
    
    
    
    0
    
    
    
    2,000Leases
    
    
    4,000
    
    
    
    6,000
    
    
    
    0
    
    
    
    0
    
    
    
    0Residential real estate
    
    
    150,000
    
    
    
    51,000
    
    
    
    3,000
    
    
    
    2,000
    
    
    
    6,000Instalment loans to individuals
    
    
    15,000
    
    
    
    26,000
    
    
    
    7,000
    
    
    
    9,000
    
    
    
    4,000Total recoveries
    
    
    1,391,000
    
    
    
    688,000
    
    
    
    607,000
    
    
    
    498,000
    
    
    
    310,000Net loan and lease charge-offs
    
    
    (38,230,000
    )
    
    
    (19,906,000
    )
    
    
    (6,667,000
    )
    
    
    (4,891,000
    )
    
    
    (1,082,000
    )Provision for loan and lease losses
    
    
    59,000,000
    
    
    
    21,200,000
    
    
    
    11,070,000
    
    
    
    5,775,000
    
    
    
    3,790,000Balance of allowance at year-end
    
    $
    47,878,000
    
    
    $
    27,108,000
    
    
    $
    25,814,000
    
    
    $
    21,411,000
    
    
    $
    20,527,000Ratio of net loan and lease charge-offs
during the year to average loans and leases
outstanding during the year
    
    
    (2.24
    %)
    
    
    (1.09
    %)
    
    
    (0.38
    %)
    
    
    (0.29
    %)
    
    
    (0.08
    %)Ratio of allowance to loans and leases
outstanding at year-end
    
    
    3.11
    %
    
    
    1.46
    %
    
    
    1.43
    %
    
    
    1.23
    %
    
    
    1.31
    %
 F-12




---



##### 



F-13




---



##### 



12/31/2009
    
    
    12/31/2008
    
    
    12/31/2007
    
    
    12/31/2006
    
    
    12/31/2005Loan
    
    
    
    
    
    
    Loan
    
    
    
    
    
    
    Loan
    
    
    
    
    
    
    Loan
    
    
    
    
    
    
    LoanAmount
    
    
    Portfolio
    
    
    Amount
    
    
    Portfolio
    
    
    Amount
    
    
    Portfolio
    
    
    Amount
    
    
    Portfolio
    
    
    Amount
    
    
    PortfolioCommercial, financial and agricultural
    
    $
    37,590
    
    
    
    80.0
    %
    
    $
    20,170
    
    
    
    77.9
    %
    
    $
    18,947
    
    
    
    77.4
    %
    
    $
    15,706
    
    
    
    74.7
    %
    
    $
    16,507
    
    
    
    76.9
    %Construction and land development
    
    
    6,566
    
    
    
    11.4
    
    
    
    5,137
    
    
    
    14.1
    
    
    
    4,907
    
    
    
    14.7
    
    
    
    3,975
    
    
    
    17.1
    
    
    
    2,868
    
    
    
    14.5Leases
    
    
    49
    
    
    
    0.1
    
    
    
    41
    
    
    
    0.1
    
    
    
    29
    
    
    
    0.1
    
    
    
    15
    
    
    
    0.1
    
    
    
    30
    
    
    
    0.1Residential real estate
    
    
    3,517
    
    
    
    8.1
    
    
    
    1,656
    
    
    
    7.6
    
    
    
    1,829
    
    
    
    7.5
    
    
    
    1,591
    
    
    
    7.6
    
    
    
    1,020
    
    
    
    8.2Instalment loans to individuals
    
    
    156
    
    
    
    0.4
    
    
    
    104
    
    
    
    0.3
    
    
    
    102
    
    
    
    0.3
    
    
    
    124
    
    
    
    0.5
    
    
    
    102
    
    
    
    0.3Unallocated
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0
    
    
    
    0
    
    
    
    0.0Total
    
    $
    47,878
    
    
    
    100.0
    %
    
    $
    27,108
    
    
    
    100.0
    %
    
    $
    25,814
    
    
    
    100.0
    %
    
    $
    21,411
    
    
    
    100.0
    %
    
    $
    20,527
    
    
    
    100.0
    %
    F-14




---



##### 



12/31/09
    
    
    12/31/08
    
    
    12/31/07Carrying
    
    
    
    
    
    
    Carrying
    
    
    
    
    
    
    CarryingValue
    
    
    Percent
    
    
    Value
    
    
    Percent
    
    
    Value
    
    
    PercentU.S. Government agency
debt obligations
    
    $
    95,544,000
    
    
    
    39.6
    %
    
    $
    62,382,000
    
    
    
    27.5
    %
    
    $
    80,945,000
    
    
    
    40.1
    %Mortgage-backed
securities
    
    
    64,982,000
    
    
    
    26.9
    
    
    
    77,026,000
    
    
    
    33.9
    
    
    
    54,619,000
    
    
    
    27.0Municipal general
obligations
    
    
    49,892,000
    
    
    
    20.6
    
    
    
    54,066,000
    
    
    
    23.8
    
    
    
    57,668,000
    
    
    
    28.5Municipal revenue bonds
    
    
    9,319,000
    
    
    
    3.9
    
    
    
    10,371,000
    
    
    
    4.6
    
    
    
    7,662,000
    
    
    
    3.8Michigan Strategic
Fund bonds
    
    
    20,550,000
    
    
    
    8.5
    
    
    
    22,105,000
    
    
    
    9.7
    
    
    
    0
    
    
    
    0.0Mutual funds
    
    
    1,416,000
    
    
    
    0.5
    
    
    
    1,156,000
    
    
    
    0.5
    
    
    
    1,109,000
    
    
    
    0.6Totals
    
    $
    241,703,000
    
    
    
    100.0
    %
    
    $
    227,106,000
    
    
    
    100.0
    %
    
    $
    202,003,000
    
    
    
    100.0
    %
   F-15




---



##### 



(1)
 Carrying
    
    
    AverageValue
    
    
    YieldU.S. Treasury securities and obligations of U.S.Government agencies and corporations:One year or less
    
    $
    3,068,000
    
    
    
    4.76
    %Over one through five years
    
    
    3,292,000
    
    
    
    4.96Over five through ten years
    
    
    13,962,000
    
    
    
    4.52Over ten years
    
    
    75,222,000
    
    
    
    5.0095,544,000
    
    
    
    4.92Obligations of states and political subdivisions:One year or less
    
    
    4,156,000
    
    
    
    7.32Over one through five years
    
    
    8,016,000
    
    
    
    6.31Over five through ten years
    
    
    13,526,000
    
    
    
    6.39Over ten years
    
    
    33,513,000
    
    
    
    6.3559,211,000
    
    
    
    6.42Mortgage-backed securities
    
    
    64,982,000
    
    
    
    5.15Michigan Strategic Fund bonds
    
    
    20,550,000
    
    
    
    3.06Mutual funds
    
    
    1,416,000
    
    
    
    3.06Totals
    
    $
    241,703,000
    
    
    
    5.16
    %
 
 (1)
    
    Yields on tax-exempt securities are computed on a fully
taxable-equivalent basis.  Non-Earning Assets
   F-16




---



##### 



Source of Funds
       F-17




---



##### 



RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 and 2008
 Summary
    2009
    
    2008Return on average assets
    
    
    (2.51
    )%
    
    
    (0.23
    )%Return on average shareholders equity
    
    
    (29.91
    )
    
    
    (2.87
    )Average shareholders equity to average assets
    
    
    8.40
    
    
    
    8.01
 Net Interest Income
   F-18




---



##### 



F-19




---



##### 



Years ended December 31,2009
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateTaxable securities
    
    $
    154,273
    
    
    $
    7,498
    
    
    
    4.86
    %
    
    $
    147,668
    
    
    $
    7,888
    
    
    
    5.34
    %
    
    $
    141,289
    
    
    $
    7,243
    
    
    
    5.13
    %Tax-exempt
securities
    
    
    83,816
    
    
    
    4,623
    
    
    
    5.52
    
    
    
    69,857
    
    
    
    4,180
    
    
    
    5.98
    
    
    
    64,122
    
    
    
    4,013
    
    
    
    6.26Total securities
    
    
    238,089
    
    
    
    12,121
    
    
    
    5.09
    
    
    
    217,525
    
    
    
    12,068
    
    
    
    5.55
    
    
    
    205,411
    
    
    
    11,256
    
    
    
    5.48Loans and leases
    
    
    1,704,335
    
    
    
    93,903
    
    
    
    5.51
    
    
    
    1,829,686
    
    
    
    110,013
    
    
    
    6.01
    
    
    
    1,765,465
    
    
    
    133,685
    
    
    
    7.57Short-term
investments
    
    
    6,730
    
    
    
    21
    
    
    
    0.31
    
    
    
    392
    
    
    
    7
    
    
    
    1.79
    
    
    
    510
    
    
    
    20
    
    
    
    3.92Federal funds sold
    
    
    53,825
    
    
    
    136
    
    
    
    0.25
    
    
    
    11,353
    
    
    
    204
    
    
    
    1.80
    
    
    
    8,239
    
    
    
    420
    
    
    
    5.10Total earning
assets
    
    
    2,002,979
    
    
    
    106,181
    
    
    
    5.30
    
    
    
    2,058,956
    
    
    
    122,292
    
    
    
    5.94
    
    
    
    1,979,625
    
    
    
    145,381
    
    
    
    7.34Allowance for loan
and lease losses
    
    
    (34,155
    )
    
    
    
    
    
    
    
    
    
    
    (30,184
    )
    
    
    
    
    
    
    
    
    
    
    (23,157
    )Cash and due
from banks
    
    
    16,341
    
    
    
    
    
    
    
    
    
    
    
    21,004
    
    
    
    
    
    
    
    
    
    
    
    33,099Other non-earning
assets
    
    
    120,508
    
    
    
    
    
    
    
    
    
    
    
    107,546
    
    
    
    
    
    
    
    
    
    
    
    94,279Total assets
    
    $
    2,105,673
    
    
    
    
    
    
    
    
    
    
    $
    2,157,322
    
    
    
    
    
    
    
    
    
    
    $
    2,083,846Interest-bearing
demand deposits
    
    $
    60,155
    
    
    $
    867
    
    
    
    1.44
    %
    
    $
    42,734
    
    
    $
    492
    
    
    
    1.15
    %
    
    $
    37,143
    
    
    $
    1,047
    
    
    
    2.82
    %Savings deposits
    
    
    48,182
    
    
    
    521
    
    
    
    1.08
    
    
    
    65,091
    
    
    
    922
    
    
    
    1.42
    
    
    
    86,009
    
    
    
    2,977
    
    
    
    3.46Money market
accounts
    
    
    25,759
    
    
    
    361
    
    
    
    1.40
    
    
    
    13,948
    
    
    
    192
    
    
    
    1.38
    
    
    
    11,706
    
    
    
    359
    
    
    
    3.07Time deposits
    
    
    1,279,188
    
    
    
    39,520
    
    
    
    3.09
    
    
    
    1,332,071
    
    
    
    58,206
    
    
    
    4.37
    
    
    
    1,385,260
    
    
    
    71,838
    
    
    
    5.19Total interest-
bearing deposits
    
    
    1,413,284
    
    
    
    41,269
    
    
    
    2.92
    
    
    
    1,453,844
    
    
    
    59,812
    
    
    
    4.11
    
    
    
    1,520,118
    
    
    
    76,221
    
    
    
    5.01Short-term
borrowings
    
    
    98,513
    
    
    
    1,845
    
    
    
    1.87
    
    
    
    97,313
    
    
    
    2,021
    
    
    
    2.08
    
    
    
    93,307
    
    
    
    3,493
    
    
    
    3.74Federal Home Loan
Bank advances
    
    
    239,699
    
    
    
    8,808
    
    
    
    3.67
    
    
    
    258,939
    
    
    
    10,554
    
    
    
    4.08
    
    
    
    118,904
    
    
    
    6,100
    
    
    
    5.13Other borrowings
    
    
    50,278
    
    
    
    1,654
    
    
    
    3.29
    
    
    
    46,579
    
    
    
    2,476
    
    
    
    5.32
    
    
    
    36,610
    
    
    
    2,810
    
    
    
    7.68Total interest-
bearing liabilities
    
    
    1,801,774
    
    
    
    53,576
    
    
    
    2.97
    
    
    
    1,856,675
    
    
    
    74,863
    
    
    
    4.03
    
    
    
    1,768,939
    
    
    
    88,624
    
    
    
    5.01Demand deposits
    
    
    112,821
    
    
    
    
    
    
    
    
    
    
    
    108,584
    
    
    
    
    
    
    
    
    
    
    
    115,172Other liabilities
    
    
    14,258
    
    
    
    
    
    
    
    
    
    
    
    19,286
    
    
    
    
    
    
    
    
    
    
    
    23,838Total liabilities
    
    
    1,928,853
    
    
    
    
    
    
    
    
    
    
    
    1,984,545
    
    
    
    
    
    
    
    
    
    
    
    1,907,949Average equity
    
    
    176,820
    
    
    
    
    
    
    
    
    
    
    
    172,777
    
    
    
    
    
    
    
    
    
    
    
    175,897Total liabilities
and equity
    
    $
    2,105,673
    
    
    
    
    
    
    
    
    
    
    $
    2,157,322
    
    
    
    
    
    
    
    
    
    
    $
    2,083,846Net interest
income
    
    
    
    
    
    $
    52,605
    
    
    
    
    
    
    
    
    
    
    $
    47,429
    
    
    
    
    
    
    
    
    
    
    $
    56,757Rate spread
    
    
    
    
    
    
    
    
    
    
    2.33
    %
    
    
    
    
    
    
    
    
    
    
    1.91
    %
    
    
    
    
    
    
    
    
    
    
    2.33
    %Net interest
margin
    
    
    
    
    
    
    
    
    
    
    2.63
    %
    
    
    
    
    
    
    
    
    
    
    2.30
    %
    
    
    
    
    
    
    
    
    
    
    2.87
    %
 F-20




---



##### 



Years ended December 31,2009 over 2008
    
    
    2008 over 2007Total
    
    
    Volume
    
    
    Rate
    
    
    Total
    
    
    Volume
    
    
    RateIncrease (decrease) in interest income
Taxable securities
    
    $
    (390,000
    )
    
    $
    342,000
    
    
    $
    (732,000
    )
    
    $
    645,000
    
    
    $
    334,000
    
    
    $
    311,000Tax exempt securities
    
    
    443,000
    
    
    
    788,000
    
    
    
    (345,000
    )
    
    
    167,000
    
    
    
    348,000
    
    
    
    (181,000
    )Loans
    
    
    (16,110,000
    )
    
    
    (7,253,000
    )
    
    
    (8,857,000
    )
    
    
    (23,672,000
    )
    
    
    4,713,000
    
    
    
    (28,385,000
    )Short-term investments
    
    
    14,000
    
    
    
    24,000
    
    
    
    (10,000
    )
    
    
    (13,000
    )
    
    
    (4,000
    )
    
    
    (9,000
    )Federal funds sold
    
    
    (68,000
    )
    
    
    230,000
    
    
    
    (298,000
    )
    
    
    (216,000
    )
    
    
    121,000
    
    
    
    (337,000
    )Net change in tax-equivalent
interest income
    
    
    (16,111,000
    )
    
    
    (5,869,000
    )
    
    
    (10,242,000
    )
    
    
    (23,089,000
    )
    
    
    5,512,000
    
    
    
    (28,601,000
    )Increase (decrease) in interest expense
Interest-bearing demand deposits
    
    
    375,000
    
    
    
    232,000
    
    
    
    143,000
    
    
    
    (555,000
    )
    
    
    139,000
    
    
    
    (694,000
    )Savings deposits
    
    
    (401,000
    )
    
    
    (210,000
    )
    
    
    (191,000
    )
    
    
    (2,055,000
    )
    
    
    (599,000
    )
    
    
    (1,456,000
    )Money market accounts
    
    
    169,000
    
    
    
    165,000
    
    
    
    4,000
    
    
    
    (167,000
    )
    
    
    59,000
    
    
    
    (226,000
    )Time deposits
    
    
    (18,686,000
    )
    
    
    (2,230,000
    )
    
    
    (16,456,000
    )
    
    
    (13,632,000
    )
    
    
    (2,673,000
    )
    
    
    (10,959,000
    )Short-term borrowings
    
    
    (176,000
    )
    
    
    25,000
    
    
    
    (201,000
    )
    
    
    (1,472,000
    )
    
    
    144,000
    
    
    
    (1,616,000
    )Federal Home Loan Bank
advances
    
    
    (1,746,000
    )
    
    
    (751,000
    )
    
    
    (995,000
    )
    
    
    4,454,000
    
    
    
    5,927,000
    
    
    
    (1,473,000
    )Other borrowings
    
    
    (822,000
    )
    
    
    184,000
    
    
    
    (1,006,000
    )
    
    
    (334,000
    )
    
    
    655,000
    
    
    
    (989,000
    )Net change in interest
expense
    
    
    (21,287,000
    )
    
    
    (2,585,000
    )
    
    
    (18,702,000
    )
    
    
    (13,761,000
    )
    
    
    3,651,000
    
    
    
    (17,412,000
    )Net change in tax-equivalent
net interest income
    
    $
    5,176,000
    
    
    $
    (3,284,000
    )
    
    $
    8,460,000
    
    
    $
    (9,328,000
    )
    
    $
    1,861,000
    
    
    $
    (11,189,000
    )
    F-21




---



##### 



F-22




---



##### 



Provision for Loan and Lease Losses
  Noninterest Income
  Noninterest Expense
   Federal Income Tax Expense
   F-23




---



##### 



RESULTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2008 AND 2007
 Summary
   2008
    
    
    2007Return on average assets
    
    
    (0.23
    )%
    
    
    0.43
    %Return on average shareholders equity
    
    
    (2.87
    )
    
    
    5.10Dividend payout ratio
    
    NA
    
    
    52.16Average shareholders equity to average assets
    
    
    8.01
    
    
    
    8.44
 Net Interest Income
    F-24




---



##### 



F-25




---



##### 



Provision for Loan and Lease Losses
  Noninterest Income
  Noninterest Expense
  Federal Income Tax Expense
  F-26




---



##### 



CAPITAL RESOURCES
    LIQUIDITY
   F-27




---



##### 



One Year
    
    
    One to
    
    
    Three to
    
    
    Overor Less
    
    
    Three Years
    
    
    Five Years
    
    
    Five Years
    
    
    TotalDeposits without a stated maturity
    
    $
    278,110,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
    
    
    $
    278,110,000Certificates of deposit
    
    
    850,801,000
    
    
    
    254,345,000
    
    
    
    18,371,000
    
    
    
    0
    
    
    
    1,123,517,000Short-term borrowings
    
    
    102,355,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    102,355,000Federal Home Loan Bankadvances
    
    
    65,000,000
    
    
    
    125,000,000
    
    
    
    15,000,000
    
    
    
    0
    
    
    
    205,000,000Subordinated debentures
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    32,990,000
    
    
    
    32,990,000Other borrowed money
    
    
    5,000,000
    
    
    
    10,000,000
    
    
    
    0
    
    
    
    1,890,000
    
    
    
    16,890,000
 F-28




---



##### 



12/31/09
    
    
    12/31/08
    
    
    12/31/07Commercial unused lines of credit
    
    $
    205,018,000
    
    
    $
    323,785,000
    
    
    $
    377,493,000Unused lines of credit secured by 1-4 familyresidential properties
    
    
    24,916,000
    
    
    
    30,658,000
    
    
    
    33,083,000Credit card unused lines of credit
    
    
    8,565,000
    
    
    
    9,413,000
    
    
    
    9,035,000Other consumer unused lines of credit
    
    
    4,526,000
    
    
    
    4,881,000
    
    
    
    6,910,000Commitments to make loans
    
    
    7,701,000
    
    
    
    10,959,000
    
    
    
    66,196,000Standby letters of credit
    
    
    36,512,000
    
    
    
    51,439,000
    
    
    
    81,292,000Total
    
    $
    287,238,000
    
    
    $
    431,135,000
    
    
    $
    574,009,000
  MARKET RISK ANALYSIS
   F-29




---



##### 



Within
    
    
    Three to
    
    
    One to
    
    
    AfterThree
    
    
    Twelve
    
    
    Five
    
    
    FiveMonths
    
    
    Months
    
    
    Years
    
    
    Years
    
    
    TotalAssets:Commercial loans (1)
    
    $
    481,173,000
    
    
    $
    273,551,000
    
    
    $
    610,522,000
    
    
    $
    42,715,000
    
    
    $
    1,407,961,000Leases
    
    
    5,000
    
    
    
    54,000
    
    
    
    996,000
    
    
    
    0
    
    
    
    1,055,000Residential real estate loans
    
    
    48,504,000
    
    
    
    14,582,000
    
    
    
    48,387,000
    
    
    
    13,332,000
    
    
    
    124,805,000Consumer loans
    
    
    2,583,000
    
    
    
    479,000
    
    
    
    2,752,000
    
    
    
    183,000
    
    
    
    5,997,000Securities (2)
    
    
    38,657,000
    
    
    
    6,214,000
    
    
    
    52,786,000
    
    
    
    159,727,000
    
    
    
    257,384,000Federal funds sold
    
    
    1,368,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,368,000Short-term investments
    
    
    1,471,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    1,471,000Allowance for loan and
lease losses
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    (47,878,000
    )Other assets
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    154,045,000Total assets
    
    
    573,761,000
    
    
    
    294,880,000
    
    
    
    715,443,000
    
    
    
    215,957,000
    
    
    $
    1,906,208,000Liabilities:Interest-bearing checking
    
    
    86,320,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    86,320,000Savings deposits
    
    
    38,625,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    38,625,000Money market accounts
    
    
    32,008,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    32,008,000Time deposits under $100,000
    
    
    70,980,000
    
    
    
    65,278,000
    
    
    
    31,697,000
    
    
    
    0
    
    
    
    167,955,000Time deposits $100,000 & over
    
    
    314,358,000
    
    
    
    400,185,000
    
    
    
    241,019,000
    
    
    
    0
    
    
    
    955,562,000Short-term borrowings
    
    
    102,355,000
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    102,355,000Federal Home Loan Bank advances
    
    
    15,000,000
    
    
    
    50,000,000
    
    
    
    140,000,000
    
    
    
    0
    
    
    
    205,000,000Other borrowed money
    
    
    34,880,000
    
    
    
    5,000,000
    
    
    
    10,000,000
    
    
    
    0
    
    
    
    49,880,000Noninterest-bearing checking
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    121,157,000Other liabilities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    7,242,000Total liabilities
    
    
    694,526,000
    
    
    
    520,463,000
    
    
    
    422,716,000
    
    
    
    0
    
    
    
    1,766,104,000Shareholders equity
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    140,104,000Total liabilities & shareholders
equity
    
    
    694,526,000
    
    
    
    520,463,000
    
    
    
    422,716,000
    
    
    
    0
    
    
    $
    1,906,208,000Net asset (liability) GAP
    
    $
    (120,765,000
    )
    
    $
    (225,583,000
    )
    
    $
    292,727,000
    
    
    $
    215,957,000Cumulative GAP
    
    $
    (120,765,000
    )
    
    $
    (346,348,000
    )
    
    $
    (53,621,000
    )
    
    $
    162,336,000Percent of cumulative GAP to
total assets
    
    
    (6.3
    %)
    
    
    (18.2
    %)
    
    
    (2.8
    %)
    
    
    8.5
    %
 
 (1)
    
    Floating rate loans that are currently at interest rate floors are treated as fixed rate
loans and are reflected using maturity date and not repricing frequency.(2)
    
    Mortgage-backed securities are categorized by expected maturities based upon prepayment
trends as of December 31, 2009. F-30




---



##### 



Dollar Change
    
    
    Percent ChangeIn Net
    
    
    In NetInterest Rate Scenario
    
    Interest Income
    
    
    Interest IncomeInterest rates down 300 basis points
    
    $
    265,000
    
    
    0.5%Interest rates down 200 basis points
    
    
    925,000
    
    
    1.8Interest rates down 100 basis points
    
    
    1,570,000
    
    
    3.1No change in interest rates
    
    
    2,250,000
    
    
    4.4Interest rates up 100 basis points
    
    
    570,000
    
    
    1.1Interest rates up 200 basis points
    
    
    805,000
    
    
    1.6Interest rates up 300 basis points
    
    
    2,610,000
    
    
    5.1
   F-31




---



##### 



Internal Control  Integrated Framework
 /s/ BDO Seidman, LLPBDO Seidman, LLP 
 F-32




---



##### 



Internal
Control  Integrated Framework
      /s/ BDO Seidman, LLPBDO Seidman, LLP 
 F-33




---



##### 



Internal Control
 Integrated Framework
   /s/ Michael H. PriceMichael H. PriceChairman of the Board, President and Chief Executive Officer /s/ Charles E. ChristmasCharles E. ChristmasSenior Vice President  Chief Financial Officer and Treasurer F-34




---



##### 



2009
    
    
    2008ASSETSCash and due from banks
    
    $
    18,896,000
    
    
    $
    16,754,000Short-term investments
    
    
    1,471,000
    
    
    
    100,000Federal funds sold
    
    
    1,368,000
    
    
    
    8,950,000Total cash and cash equivalents
    
    
    21,735,000
    
    
    
    25,804,000Securities available for sale
    
    
    182,492,000
    
    
    
    162,669,000Securities held to maturity (fair value of $60,271,000 at
December 31, 2009 and $65,381,000 at December 31, 2008)
    
    
    59,211,000
    
    
    
    64,437,000Federal Home Loan Bank stock
    
    
    15,681,000
    
    
    
    15,681,000Loans and leases
    
    
    1,539,818,000
    
    
    
    1,856,915,000Allowance for loan and lease losses
    
    
    (47,878,000
    )
    
    
    (27,108,000
    )Loans and leases, net
    
    
    1,491,940,000
    
    
    
    1,829,807,000Premises and equipment, net
    
    
    29,684,000
    
    
    
    32,334,000Bank owned life insurance
    
    
    45,024,000
    
    
    
    42,462,000Accrued interest receivable
    
    
    7,088,000
    
    
    
    8,513,000Other real estate owned and repossessed assets
    
    
    26,608,000
    
    
    
    8,118,000Other assets
    
    
    26,745,000
    
    
    
    18,185,000Total assets
    
    $
    1,906,208,000
    
    
    $
    2,208,010,000LIABILITIES AND SHAREHOLDERS EQUITYDepositsNoninterest-bearing
    
    $
    121,157,000
    
    
    $
    110,712,000Interest-bearing
    
    
    1,280,470,000
    
    
    
    1,488,863,000Total
    
    
    1,401,627,000
    
    
    
    1,599,575,000Securities sold under agreements to repurchase
    
    
    99,755,000
    
    
    
    94,413,000Federal funds purchased
    
    
    2,600,000
    
    
    
    0Federal Home Loan Bank advances
    
    
    205,000,000
    
    
    
    270,000,000Subordinated debentures
    
    
    32,990,000
    
    
    
    32,990,000Other borrowed money
    
    
    16,890,000
    
    
    
    19,528,000Accrued interest and other liabilities
    
    
    7,242,000
    
    
    
    17,132,000Total liabilities
    
    
    1,766,104,000
    
    
    
    2,033,638,000Shareholders equityPreferred stock, no par value; 1,000,000 shares authorized;
21,000 shares outstanding at December 31, 2009
    
    
    19,839,000
    
    
    
    0Common stock, no par value; 20,000,000 shares
authorized; 8,592,514 shares outstanding at December 31, 2009
and 8,593,304 shares outstanding at December 31, 2008
    
    
    172,438,000
    
    
    
    172,353,000Common stock warrant
    
    
    1,138,000
    
    
    
    0Retained earnings (deficit)
    
    
    (54,170,000
    )
    
    
    (1,281,000
    )Accumulated other comprehensive income
    
    
    859,000
    
    
    
    3,300,000Total shareholders equity
    
    
    140,104,000
    
    
    
    174,372,000Total liabilities and shareholders equity
    
    $
    1,906,208,000
    
    
    $
    2,208,010,000
  F-35




---



##### 



2009
    
    
    2008
    
    
    2007Interest incomeLoans and leases, including fees
    
    $
    93,903,000
    
    
    $
    110,013,000
    
    
    $
    133,685,000Securities, taxable
    
    
    7,498,000
    
    
    
    7,888,000
    
    
    
    7,243,000Securities, tax-exempt
    
    
    3,351,000
    
    
    
    2,960,000
    
    
    
    2,813,000Federal funds sold
    
    
    136,000
    
    
    
    204,000
    
    
    
    420,000Short-term investments
    
    
    21,000
    
    
    
    7,000
    
    
    
    20,000Total interest income
    
    
    104,909,000
    
    
    
    121,072,000
    
    
    
    144,181,000Interest expenseDeposits
    
    
    41,269,000
    
    
    
    59,812,000
    
    
    
    76,221,000Short-term borrowings
    
    
    1,845,000
    
    
    
    2,021,000
    
    
    
    3,493,000Federal Home Loan Bank advances
    
    
    8,808,000
    
    
    
    10,554,000
    
    
    
    6,100,000Other borrowings
    
    
    1,654,000
    
    
    
    2,476,000
    
    
    
    2,810,000Total interest expense
    
    
    53,576,000
    
    
    
    74,863,000
    
    
    
    88,624,000Net interest income
    
    
    51,333,000
    
    
    
    46,209,000
    
    
    
    55,557,000Provision for loan and lease losses
    
    
    59,000,000
    
    
    
    21,200,000
    
    
    
    11,070,000Net interest income (deficiency) after provision
for loan and lease losses
    
    
    (7,667,000
    )
    
    
    25,009,000
    
    
    
    44,487,000Noninterest incomeService charges on accounts
    
    
    2,023,000
    
    
    
    1,994,000
    
    
    
    1,610,000Earnings on bank owned life insurance
    
    
    1,444,000
    
    
    
    1,727,000
    
    
    
    1,252,000Mortgage banking activities
    
    
    1,202,000
    
    
    
    662,000
    
    
    
    464,000Credit and debit card fees
    
    
    670,000
    
    
    
    745,000
    
    
    
    668,000Letter of credit fees
    
    
    541,000
    
    
    
    687,000
    
    
    
    613,000Rental income from other real estate owned
    
    
    438,000
    
    
    
    27,000
    
    
    
    0Other income
    
    
    1,240,000
    
    
    
    1,440,000
    
    
    
    1,263,000Total noninterest income
    
    
    7,558,000
    
    
    
    7,282,000
    
    
    
    5,870,000Noninterest expenseSalaries and benefits
    
    
    20,331,000
    
    
    
    22,493,000
    
    
    
    22,876,000Occupancy
    
    
    3,377,000
    
    
    
    3,826,000
    
    
    
    3,300,000Furniture and equipment rent, depreciation and maintenance
    
    
    1,871,000
    
    
    
    1,980,000
    
    
    
    2,063,000Nonperforming asset costs
    
    
    7,294,000
    
    
    
    3,266,000
    
    
    
    1,099,000FDIC insurance
    
    
    4,852,000
    
    
    
    1,890,000
    
    
    
    654,000Data processing
    
    
    2,526,000
    
    
    
    2,394,000
    
    
    
    2,017,000Branch consolidation costs
    
    
    1,308,000
    
    
    
    0
    
    
    
    0Advertising
    
    
    650,000
    
    
    
    559,000
    
    
    
    585,000Other expense
    
    
    4,279,000
    
    
    
    5,718,000
    
    
    
    5,762,000Total noninterest expenses
    
    
    46,488,000
    
    
    
    42,126,000
    
    
    
    38,356,000Income (loss) before federal income tax expense (benefit)
    
    
    (46,597,000
    )
    
    
    (9,835,000
    )
    
    
    12,001,000Federal income tax expense (benefit)
    
    
    5,490,000
    
    
    
    (4,876,000
    )
    
    
    3,035,000Net income (loss)
    
    
    (52,087,000
    )
    
    
    (4,959,000
    )
    
    
    8,966,000Preferred stock dividends and accretion
    
    
    802,000
    
    
    
    0
    
    
    
    0Net income (loss) attributable to common shares
    
    $
    (52,889,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000Earnings (loss) per share:Basic
    
    $
    (6.23
    )
    
    $
    (0.59
    )
    
    $
    1.06Diluted
    
    $
    (6.23
    )
    
    $
    (0.59
    )
    
    $
    1.06
  F-36




---



##### 



AccumulatedCommon
    
    
    Retained
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Earnings
    
    
    Comprehensive
    
    
    ShareholdersStock
    
    
    Stock
    
    
    Warrant
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    Equity($ in thousands)Balances, January 1, 2007
    
    $
    0
    
    
    $
    161,223
    
    
    $
    0
    
    
    $
    11,794
    
    
    $
    (1,102
    )
    
    $
    171,915Payment of 5% stock dividend
    
    
    
    
    
    
    11,131
    
    
    
    
    
    
    
    (11,135
    )
    
    
    
    
    
    
    (4
    )Employee stock purchase plan
(3,966 shares)
    
    
    
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91Dividend reinvestment plan
(3,137 shares)
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76Stock option exercises
(52,117 shares)
    
    
    
    
    
    
    643
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    643Stock tendered for stock option exercises
(18,291 shares)
    
    
    
    
    
    
    (587
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (587
    )Stock-based compensation expense
    
    
    
    
    
    
    361
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    361Cash dividends
($0.55 per common share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,677
    )
    
    
    
    
    
    
    (4,677
    )Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,966
    
    
    
    
    
    
    
    8,966Change in net unrealized gain (loss)
on securities available for sale,
net of reclassifications and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,371
    
    
    
    1,371Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,337Balances, December 31, 2007
    
    $
    0
    
    
    $
    172,938
    
    
    $
    0
    
    
    $
    4,948
    
    
    $
    269
    
    
    $
    178,155
  F-37




---



##### 



AccumulatedCommon
    
    
    Retained
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders($ in thousands)
    
    Stock
    
    
    Stock
    
    
    Warrant
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    EquityBalances, January 1, 2008
    
    $
    0
    
    
    $
    172,938
    
    
    $
    0
    
    
    $
    4,948
    
    
    $
    269
    
    
    $
    178,155Employee stock purchase plan
(10,904 shares)
    
    
    
    
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76Dividend reinvestment plan
(4,340 shares)
    
    
    
    
    
    
    40
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40Stock option exercises
(2,000 shares)
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Stock tendered for stock option exercises
(1,123 shares)
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16
    )Stock-based compensation expense
    
    
    
    
    
    
    654
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    654Cash dividends
($0.31 per common share)
    
    
    
    
    
    
    (1,355
    )
    
    
    
    
    
    
    (1,270
    )
    
    
    
    
    
    
    (2,625
    )Comprehensive income (loss):Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,959
    )
    
    
    
    
    
    
    (4,959
    )Change in net unrealized gain (loss)
on securities available for sale,
net of reclassifications and tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,795
    
    
    
    1,795Change in net fair value of interest rate
swaps, net of reclassifications and
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,236
    
    
    
    1,236Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,928
    )Balances, December 31, 2008
    
    $
    0
    
    
    $
    172,353
    
    
    $
    0
    
    
    $
    (1,281
    )
    
    $
    3,300
    
    
    $
    174,372
  F-38




---



##### 



AccumulatedCommon
    
    
    Retained
    
    
    Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Stock
    
    
    Earnings
    
    
    Comprehensive
    
    
    Shareholders($ in thousands)
    
    Stock
    
    
    Stock
    
    
    Warrant
    
    
    (Deficit)
    
    
    Income (Loss)
    
    
    EquityBalances, January 1, 2009
    
    $
    0
    
    
    $
    172,353
    
    
    $
    0
    
    
    $
    (1,281
    )
    
    $
    3,300
    
    
    $
    174,372Preferred stock issued, net
    
    
    19,696
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,696Accretion of preferred stock
    
    
    143
    
    
    
    
    
    
    
    
    
    
    
    (143
    )
    
    
    
    
    
    
    0Common stock warrant issued
    
    
    
    
    
    
    
    
    
    
    1,138
    
    
    
    
    
    
    
    
    
    
    
    1,138Employee stock purchase plan
(14,694 shares)
    
    
    
    
    
    
    57
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    57Dividend reinvestment plan
(2,875 shares)
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Stock-based compensation expense
    
    
    
    
    
    
    611
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    611Cash dividends
($0.07 per common share)
    
    
    
    
    
    
    (594
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (594
    )Preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (659
    )
    
    
    
    
    
    
    (659
    )Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (52,087
    )
    
    
    
    
    
    
    (52,087
    )Change in net unrealized gain (loss)
on securities available for sale,
net of reclassifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,269
    )
    
    
    (1,269
    )Reclassification of unrealized gain
on interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,172
    )
    
    
    (1,172
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (54,528
    )Balances, December 31, 2009
    
    $
    19,839
    
    
    $
    172,438
    
    
    $
    1,138
    
    
    $
    (54,170
    )
    
    $
    859
    
    
    $
    140,104
  F-39




---



##### 



2009
    
    
    2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    (52,087,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000Adjustments to reconcile net income (loss)
to net cash from (for) operating activities:Depreciation and amortization
    
    
    2,577,000
    
    
    
    2,773,000
    
    
    
    3,067,000Provision for loan and lease losses
    
    
    59,000,000
    
    
    
    21,200,000
    
    
    
    11,070,000Deferred income tax expense (benefit)
    
    
    9,973,000
    
    
    
    (1,558,000
    )
    
    
    (2,103,000
    )Stock-based compensation expense
    
    
    611,000
    
    
    
    654,000
    
    
    
    361,000Proceeds from sales of mortgage loans held for sale
    
    
    80,782,000
    
    
    
    44,095,000
    
    
    
    32,911,000Origination of mortgage loans held for sale
    
    
    (82,251,000
    )
    
    
    (42,810,000
    )
    
    
    (33,408,000
    )Net gain on sales of mortgage loans held for sale
    
    
    (905,000
    )
    
    
    (506,000
    )
    
    
    (432,000
    )Net (gain) loss on sale and write-down of premises and equipment
    
    
    227,000
    
    
    
    (11,000
    )
    
    
    13,000Net loss on sale and valuation write-downs of foreclosed assets
    
    
    3,551,000
    
    
    
    1,768,000
    
    
    
    157,000Recognition of unrealized gain on interest rate swaps
    
    
    (1,803,000
    )
    
    
    (974,000
    )
    
    
    0Earnings on bank owned life insurance
    
    
    (1,444,000
    )
    
    
    (1,727,000
    )
    
    
    (1,252,000
    )Net change in:Accrued interest receivable
    
    
    1,425,000
    
    
    
    1,444,000
    
    
    
    330,000Other assets
    
    
    (18,407,000
    )
    
    
    913,000
    
    
    
    (2,243,000
    )Accrued interest and other liabilities
    
    
    (10,024,000
    )
    
    
    (6,667,000
    )
    
    
    1,927,000Net cash from (for) operating activities
    
    
    (8,775,000
    )
    
    
    13,635,000
    
    
    
    19,364,000Cash flows from investing activitiesPurchases of:Securities available for sale
    
    
    (73,059,000
    )
    
    
    (96,292,000
    )
    
    
    (15,406,000
    )Securities held to maturity
    
    
    (1,025,000
    )
    
    
    (978,000
    )
    
    
    (4,658,000
    )Federal Home Loan Bank stock
    
    
    0
    
    
    
    (5,948,000
    )
    
    
    (2,224,000
    )Proceeds from:Maturities, calls and repayments of
securities available for sale
    
    
    52,343,000
    
    
    
    73,571,000
    
    
    
    11,969,000Maturities, calls and repayments of
securities held to maturity
    
    
    6,270,000
    
    
    
    1,840,000
    
    
    
    3,221,000Loan and lease originations and payments, net
    
    
    240,291,000
    
    
    
    (86,489,000
    )
    
    
    (66,681,000
    )Proceeds from sales of commercial loans
    
    
    11,633,000
    
    
    
    0
    
    
    
    0Purchases of premises and equipment, net
    
    
    (44,000
    )
    
    
    (673,000
    )
    
    
    (3,513,000
    )Proceeds from sales of foreclosed assets
    
    
    7,276,000
    
    
    
    4,777,000
    
    
    
    1,476,000Purchases of bank owned life insurance
    
    
    (1,118,000
    )
    
    
    (1,617,000
    )
    
    
    (7,008,000
    )Net cash from (for) investing activities
    
    
    242,567,000
    
    
    
    (111,809,000
    )
    
    
    (82,824,000
    )Cash flows from financing activitiesNet increase (decrease) in time deposits
    
    
    (240,269,000
    )
    
    
    42,774,000
    
    
    
    (50,972,000
    )Net increase (decrease) in all other deposits
    
    
    42,321,000
    
    
    
    (34,380,000
    )
    
    
    (4,750,000
    )Net increase (decrease) in securities sold under
agreements to repurchase
    
    
    5,342,000
    
    
    
    (3,052,000
    )
    
    
    11,993,000Net increase (decrease) in federal funds purchased
    
    
    2,600,000
    
    
    
    (13,800,000
    )
    
    
    4,000,000Proceeds from Federal Home Loan Bank advances
    
    
    5,000,000
    
    
    
    266,500,000
    
    
    
    175,000,000Maturities of Federal Home Loan Bank advances
    
    
    (70,000,000
    )
    
    
    (176,500,000
    )
    
    
    (90,000,000
    )Increase in structured repurchase agreements
    
    
    0
    
    
    
    15,000,000
    
    
    
    0Increase (decrease) in other borrowed money
    
    
    (2,638,000
    )
    
    
    515,000
    
    
    
    697,000Cash paid in lieu of fractional shares on stock dividend
    
    
    0
    
    
    
    0
    
    
    
    (4,000
    )Proceeds from issuance of preferred stock and common
stock warrant, net
    
    
    20,834,000
    
    
    
    0
    
    
    
    0Employee stock purchase plan
    
    
    57,000
    
    
    
    76,000
    
    
    
    91,000Dividend reinvestment plan
    
    
    11,000
    
    
    
    40,000
    
    
    
    76,000Stock option exercises, net
    
    
    0
    
    
    
    0
    
    
    
    56,000Payment of cash dividends on preferred stock
    
    
    (525,000
    )
    
    
    0
    
    
    
    0Payment of cash dividends to common shareholders
    
    
    (594,000
    )
    
    
    (2,625,000
    )
    
    
    (4,677,000
    )Net cash from (for) financing activities
    
    
    (237,861,000
    )
    
    
    94,548,000
    
    
    
    41,510,000
  F-40




---



##### 



2009
    
    
    2008
    
    
    2007Net change in cash and cash equivalents
    
    
    (4,069,000
    )
    
    
    (3,626,000
    )
    
    
    (21,950,000
    )Cash and cash equivalents at beginning of period
    
    
    25,804,000
    
    
    
    29,430,000
    
    
    
    51,380,000Cash and cash equivalents at end of period
    
    $
    21,735,000
    
    
    $
    25,804,000
    
    
    $
    29,430,000Supplemental disclosures of cash flow informationCash paid during the year for:Interest
    
    $
    62,663,000
    
    
    $
    80,748,000
    
    
    $
    87,707,000Federal income taxes
    
    
    0
    
    
    
    0
    
    
    
    5,730,000Noncash financing and investing activities:Transfers from loans and leases to foreclosed assets
    
    
    29,317,000
    
    
    
    9,062,000
    
    
    
    6,898,000Preferred stock cash dividend accrued
    
    
    134,000
    
    
    
    0
    
    
    
    0
  F-41




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Principles of Consolidation
  Nature of Operations
    Use of Estimates
  F-42




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Cash Flow Reporting
 Securities
   Loans and Leases
   Loans Held for Sale
  F-43




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Troubled Debt Restructurings
 Allowance for Loan and Lease Losses
  Transfers of Financial Assets
 Premises and Equipment
  F-44




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Long-lived Assets
 Foreclosed Assets:
 Bank Owned Life Insurance:
 Repurchase Agreements
 Financial Instruments and Loan Commitments
 Stock-Based Compensation:
 Income Taxes
 Fair Values of Financial Instruments
 Earnings Per Share
  F-45




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Stock Dividend
 Comprehensive Income (Loss)
 Derivatives
   Contingencies:
 Reclassifications
 Operating Segment
  F-46




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Adoption of New Accounting Standards Topic 105  Generally
Accepted Accounting Principles  FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles , The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB
Statement No. 162).
 Business Combinations Business Combinations)
 Fair Value Measurements
and Disclosures Fair Value Measurements)
 Derivatives and Hedging Disclosures About Derivative Instruments and Hedging Activities  an
Amendment of FASB Statement No. 133)
  F-47




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  
    
    FSP No. FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly, codified in ASC 820, Fair Value Measurements and Disclosures. This guidance
provides additional direction for estimating fair value when the volume and level of
activity for the asset or liability have significantly decreased as well as guidance on
identifying circumstances that indicate a transaction is not orderly. Our adoption of this
new standard during the quarter ended June 30, 2009 had no impact on our results of
operations or financial position, although additional disclosures were required.
    
    FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments, codified in ASC 320, Investments  Debt and Equity Securities. This
guidance, which applies to debt securities, is intended to provide greater clarity to
investors about the credit and noncredit components of an OTTI event and to more
effectively communicate when an OTTI event has occurred. It defines the credit component
of an OTTI charge as the difference between the present value of the cash flows expected to
be collected and the amortized cost basis of the debt security. When an entity does not
intend to sell the security and it is more likely than not that the entity will not have to
sell the security before recovery of its cost basis, it will recognize the credit component
of an OTTI charge in earnings and the remaining portion in other comprehensive income. In
addition, it requires additional disclosures about investment securities on an interim
basis. Our adoption of this guidance during the quarter ended June 30, 2009 had no impact
on our results of operations or financial position, although additional disclosures were
required.
    
    FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, codified in ASC 825, Financial Instruments. This guidance requires
disclosures about fair value of financial instruments for interim reporting periods of
publicly traded companies in addition to annual reporting periods. It also requires
disclosure of the method(s) and significant assumptions used to estimate the fair value of
financial instruments and changes in method(s) and significant assumptions, if any, during
the period. Our adoption of this guidance during the quarter ended June 30, 2009 had no
impact on our results of operations or financial position, although additional disclosures
were required.
 Earnings Per Share Determining Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities)
 , Subsequent Events Subsequent Event
  F-48




---



##### 



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Accounting for Transfers of Financial Assets Accounting for Transfers of Financial Assets, an amendment of FASB
Statement No. 140
 Improving Disclosures about Fair Value Measurements
 NOTE 2  SECURITIES
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairCost
    
    
    Gains
    
    
    Losses
    
    
    Value2009U.S. Government agency
debt obligations
    
    $
    96,438,000
    
    
    $
    490,000
    
    
    $
    (1,384,000
    )
    
    $
    95,544,000Mortgage-backed securities
    
    
    62,171,000
    
    
    
    2,811,000
    
    
    
    0
    
    
    
    64,982,000Michigan Strategic Fund bonds
    
    
    20,550,000
    
    
    
    0
    
    
    
    0
    
    
    
    20,550,000Mutual funds
    
    
    1,425,000
    
    
    
    0
    
    
    
    (9,000
    )
    
    
    1,416,000$
    180,584,000
    
    
    $
    3,301,000
    
    
    $
    (1,393,000
    )
    
    $
    182,492,0002008U.S. Government agency
debt obligations
    
    $
    61,511,000
    
    
    $
    1,264,000
    
    
    $
    (393,000
    )
    
    $
    62,382,000Mortgage-backed securities
    
    
    74,702,000
    
    
    
    2,324,000
    
    
    
    0
    
    
    
    77,026,000Michigan Strategic Fund bonds
    
    
    22,105,000
    
    
    
    0
    
    
    
    0
    
    
    
    22,105,000Mutual fund
    
    
    1,175,000
    
    
    
    0
    
    
    
    (19,000
    )
    
    
    1,156,000$
    159,493,000
    
    
    $
    3,588,000
    
    
    $
    (412,000
    )
    
    $
    162,669,000
  F-49




---



##### 



NOTE 2  SECURITIES
  Gross
    
    
    GrossCarrying
    
    
    Unrealized
    
    
    Unrealized
    
    
    FairAmount
    
    
    Gains
    
    
    Losses
    
    
    Value2009Municipal general obligation bonds
    
    $
    49,892,000
    
    
    $
    1,000,000
    
    
    $
    (111,000
    )
    
    $
    50,781,000Municipal revenue bonds
    
    
    9,319,000
    
    
    
    190,000
    
    
    
    (19,000
    )
    
    
    9,490,000$
    59,211,000
    
    
    $
    1,190,000
    
    
    $
    (130,000
    )
    
    $
    60,271,0002008Municipal general obligation bonds
    
    $
    54,066,000
    
    
    $
    1,034,000
    
    
    $
    (342,000
    )
    
    $
    54,758,000Municipal revenue bonds
    
    
    10,371,000
    
    
    
    274,000
    
    
    
    (22,000
    )
    
    
    10,623,000$
    64,437,000
    
    
    $
    1,308,000
    
    
    $
    (364,000
    )
    
    $
    65,381,000
  Less than 12 Months
    
    
    12 Months or More
    
    
    TotalFair
    
    
    Unrealized
    
    
    Fair
    
    
    Unrealized
    
    
    Fair
    
    
    UnrealizedDescription of Securities
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss
    
    
    Value
    
    
    Loss2009U.S. Government agency
debt obligations
    
    $
    50,190,000
    
    
    $
    (1,322,000
    )
    
    $
    7,927,000
    
    
    $
    (62,000
    )
    
    $
    58,117,000
    
    
    $
    (1,384,000
    )Mortgage-backed securities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Michigan Strategic Fund bonds
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Mutual funds
    
    
    0
    
    
    
    0
    
    
    
    1,211,000
    
    
    
    (9,000
    )
    
    
    1,211,000
    
    
    
    (9,000
    )Municipal general
obligation bonds
    
    
    738,000
    
    
    
    (5,000
    )
    
    
    8,638,000
    
    
    
    (106,000
    )
    
    
    9,376,000
    
    
    
    (111,000
    )Municipal revenue bonds
    
    
    228,000
    
    
    
    (12,000
    )
    
    
    1,073,000
    
    
    
    (7,000
    )
    
    
    1,301,000
    
    
    
    (19,000
    )$
    51,156,000
    
    
    $
    (1,339,000
    )
    
    $
    18,849,000
    
    
    $
    (184,000
    )
    
    $
    70,005,000
    
    
    $
    (1,523,000
    )2008U.S. Government agency
debt obligations
    
    $
    20,588,000
    
    
    $
    (387,000
    )
    
    $
    1,994,000
    
    
    $
    (6,000
    )
    
    $
    22,582,000
    
    
    $
    (393,000
    )Mortgage-backed securities
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Michigan Strategic Fund bonds
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Mutual fund
    
    
    0
    
    
    
    0
    
    
    
    1,156,000
    
    
    
    (19,000
    )
    
    
    1,156,000
    
    
    
    (19,000
    )Municipal general
obligation bonds
    
    
    3,547,000
    
    
    
    (76,000
    )
    
    
    10,580,000
    
    
    
    (266,000
    )
    
    
    14,127,000
    
    
    
    (342,000
    )Municipal revenue bonds
    
    
    307,000
    
    
    
    (1,000
    )
    
    
    1,066,000
    
    
    
    (21,000
    )
    
    
    1,373,000
    
    
    
    (22,000
    )$
    24,442,000
    
    
    $
    (464,000
    )
    
    $
    14,796,000
    
    
    $
    (312,000
    )
    
    $
    39,238,000
    
    
    $
    (776,000
    )
  F-50




---



##### 



NOTE 2  SECURITIES
     Held-to-Maturity
    
    
    
    
    
    
    Available-for-SaleWeighted
    
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    Carrying
    
    
    Fair
    
    
    Average
    
    
    Amortized
    
    
    FairYield
    
    
    Amount
    
    
    Value
    
    
    Yield
    
    
    Cost
    
    
    ValueDue in one year or less
    
    
    7.32
    %
    
    $
    4,156,000
    
    
    $
    4,232,000
    
    
    
    4.76
    %
    
    $
    2,998,000
    
    
    $
    3,068,000Due from one to five years
    
    
    6.31
    
    
    
    8,016,000
    
    
    
    8,377,000
    
    
    
    4.96
    
    
    
    2,983,000
    
    
    
    3,292,000Due from five to ten years
    
    
    6.39
    
    
    
    13,526,000
    
    
    
    13,850,000
    
    
    
    4.52
    
    
    
    13,985,000
    
    
    
    13,962,000Due after ten years
    
    
    6.35
    
    
    
    33,513,000
    
    
    
    33,812,000
    
    
    
    5.00
    
    
    
    76,472,000
    
    
    
    75,222,000Mortgage-backed securities
    
    NA
    


    
    0
    
    
    
    0
    
    
    
    5.15
    
    
    
    62,171,000
    
    
    
    64,982,000Michigan Strategic Fund bonds
    
    NA
    


    
    0
    
    
    
    0
    
    
    
    3.06
    
    
    
    20,550,000
    
    
    
    20,550,000Mutual funds
    
    NA
    


    
    0
    
    
    
    0
    
    
    
    3.06
    
    
    
    1,425,000
    
    
    
    1,416,0006.42
    %
    
    $
    59,211,000
    
    
    $
    60,271,000
    
    
    
    4.78
    %
    
    $
    180,584,000
    
    
    $
    182,492,000
   F-51




---



##### 



NOTE 2  SECURITIES
   NOTE 3  LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES
  PercentDecember 31, 2009
    
    
    
    
    
    
    December 31, 2008
    
    
    
    
    
    
    IncreaseBalance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    (Decrease)Real Estate:Construction and land development
    
    $
    176,078,000
    
    
    
    11.4
    %
    
    $
    263,392,000
    
    
    
    14.1
    %
    
    
    (33.1
    )%Secured by 1  4 family properties
    
    
    124,805,000
    
    
    
    8.1
    
    
    
    140,776,000
    
    
    
    7.6
    
    
    
    (11.3
    )Secured by multi-family properties
    
    
    47,679,000
    
    
    
    3.1
    
    
    
    47,365,000
    
    
    
    2.6
    
    
    
    0.6Secured by nonresidential properties
    
    
    814,058,000
    
    
    
    52.9
    
    
    
    881,350,000
    
    
    
    47.5
    
    
    
    (7.6
    )Commercial
    
    
    370,146,000
    
    
    
    24.0
    
    
    
    516,201,000
    
    
    
    27.8
    
    
    
    (28.3
    )Leases
    
    
    1,055,000
    
    
    
    0.1
    
    
    
    1,985,000
    
    
    
    0.1
    
    
    
    (46.9
    )Consumer
    
    
    5,997,000
    
    
    
    0.4
    
    
    
    5,846,000
    
    
    
    0.3
    
    
    
    2.6$
    1,539,818,000
    
    
    
    100.0
    %
    
    $
    1,856,915,000
    
    
    
    100.0
    %
    
    
    (17.1
    )%
  2009
    
    
    2008
    
    
    2007Beginning balance
    
    $
    27,108,000
    
    
    $
    25,814,000
    
    
    $
    21,411,000Provision for loan and lease losses
    
    
    59,000,000
    
    
    
    21,200,000
    
    
    
    11,070,000Charge-offs
    
    
    (39,621,000
    )
    
    
    (20,594,000
    )
    
    
    (7,274,000
    )Recoveries
    
    
    1,391,000
    
    
    
    688,000
    
    
    
    607,000Ending balance
    
    $
    47,878,000
    
    
    $
    27,108,000
    
    
    $
    25,814,000
  F-52




---



##### 



NOTE 3  LOANS AND LEASES AND ALLOWANCE FOR LOAN AND LEASE LOSSES
 2009
    
    
    2008Impaired loans and leases were as follows:Year-end loans with no allocated allowance for loan and lease losses
    
    $
    25,500,000
    
    
    $
    22,557,000Year-end loans with allocated allowance for loan and lease losses
    
    
    39,855,000
    
    
    
    22,222,000$
    65,355,000
    
    
    $
    44,779,000Amount of the allowance for loan and lease losses allocated
    
    $
    9,832,000
    
    
    $
    3,980,000
  2009
    
    
    2008Nonperforming loans and leases were as follows:Loans and leases past due 90 days or more still accruing interest
    
    $
    243,000
    
    
    $
    1,358,000Nonaccrual loans and leases
    
    
    81,818,000
    
    
    
    47,945,000Troubled debt restructurings
    
    
    2,989,000
    
    
    
    0$
    85,050,000
    
    
    $
    49,303,000
  2009
    
    2008Percentage of
    
    
    
    
    
    Percentage ofBalance
    
    Loan Portfolio
    
    Balance
    
    Loan PortfolioCommercial real estate loans to
lessors of non-residential
buildings
    
    $
    467,017,000
    
    
    
    30.3
    %
    
    $
    489,580,000
    
    
    
    26.4
    %
  F-53




---



##### 



NOTE 4  PREMISES AND EQUIPMENT, NET
  2009
    
    
    2008Land and improvements
    
    $
    8,531,000
    
    
    $
    8,538,000Buildings and leasehold improvements
    
    
    24,515,000
    
    
    
    24,888,000Furniture and equipment
    
    
    12,532,000
    
    
    
    12,484,00045,578,000
    
    
    
    45,910,000Less: accumulated depreciation
    
    
    15,894,000
    
    
    
    13,576,000$
    29,684,000
    
    
    $
    32,334,000
  NOTE 5  DEPOSITS
  PercentDecember 31, 2009
    
    
    December 31, 2008
    
    
    IncreaseBalance
    
    
    %
    
    
    Balance
    
    
    %
    
    
    (Decrease)Noninterest-bearing
demand
    
    $
    121,157,000
    
    
    
    8.6
    %
    
    $
    110,712,000
    
    
    
    6.9
    %
    
    
    9.4
    %Interest-bearing
checking
    
    
    86,320,000
    
    
    
    6.2
    
    
    
    50,248,000
    
    
    
    3.1
    
    
    
    71.8Money market
    
    
    32,008,000
    
    
    
    2.3
    
    
    
    24,886,000
    
    
    
    1.6
    
    
    
    28.6Savings
    
    
    38,625,000
    
    
    
    2.8
    
    
    
    49,943,000
    
    
    
    3.1
    
    
    
    (22.7
    )Time, under $100,000
    
    
    105,195,000
    
    
    
    7.5
    
    
    
    49,991,000
    
    
    
    3.1
    
    
    
    110.4Time, $100,000 and
over
    
    
    293,455,000
    
    
    
    20.9
    
    
    
    184,573,000
    
    
    
    11.6
    
    
    
    59.0676,760,000
    
    
    
    48.3
    
    
    
    470,353,000
    
    
    
    29.4
    
    
    
    43.9Out-of-area time,
under $100,000
    
    
    62,760,000
    
    
    
    4.5
    
    
    
    128,948,000
    
    
    
    8.1
    
    
    
    (51.3
    )Out-of-area time,
$100,000 and over
    
    
    662,107,000
    
    
    
    47.2
    
    
    
    1,000,274,000
    
    
    
    62.5
    
    
    
    (33.8
    )724,867,000
    
    
    
    51.7
    
    
    
    1,129,222,000
    
    
    
    70.6
    
    
    
    (35.8
    )$
    1,401,627,000
    
    
    
    100.0
    %
    
    $
    1,599,575,000
    
    
    
    100.0
    %
    
    
    (12.4
    )%
   F-54




---



##### 



NOTE 5  DEPOSITS
  2009
    
    
    2008In one year or less
    
    $
    850,801,000
    
    
    $
    1,179,405,000In one to two years
    
    
    186,135,000
    
    
    
    140,299,000In two to three years
    
    
    68,210,000
    
    
    
    27,116,000In three to four years
    
    
    11,565,000
    
    
    
    10,232,000In four to five years
    
    
    6,806,000
    
    
    
    6,734,000$
    1,123,517,000
    
    
    $
    1,363,786,000
  2009
    
    
    2008Up to three months
    
    $
    314,358,000
    
    
    $
    377,341,000Three months to six months
    
    
    164,870,000
    
    
    
    281,568,000Six months to twelve months
    
    
    235,315,000
    
    
    
    378,899,000Over twelve months
    
    
    241,019,000
    
    
    
    147,039,000$
    955,562,000
    
    
    $
    1,184,847,000
 NOTE 6  SHORT-TERM BORROWINGS
  2009
    
    2008Outstanding balance at year-end
    
    $
    99,755,000
    
    
    $
    94,413,000Weighted average interest rate at year-end
    
    
    1.41
    %
    
    
    1.96
    %Average daily balance during the year
    
    
    98,409,000
    
    
    
    93,149,000Weighted average interest rate during the year
    
    
    1.87
    %
    
    
    2.04
    %Maximum month-end balance during the year
    
    
    111,692,000
    
    
    
    105,986,000
   F-55




---



##### 



NOTE 7  FEDERAL HOME LOAN BANK ADVANCES
    2010
    
    $
    65,000,0002011
    
    
    85,000,0002012
    
    
    40,000,0002013
    
    
    10,000,0002014
    
    
    5,000,000
 NOTE 8  FEDERAL INCOME TAXES
  2009
    
    
    2008
    
    
    2007Current expense (benefit)
    
    $
    (4,483,000
    )
    
    $
    (3,318,000
    )
    
    $
    5,138,000Deferred benefit
    
    
    (13,276,000
    )
    
    
    (1,558,000
    )
    
    
    (2,103,000
    )Deferred expense  establishment of valuation allowance
    
    
    23,249,000
    
    
    
    0
    
    
    
    0Tax expense (benefit)
    
    $
    5,490,000
    
    
    $
    (4,876,000
    )
    
    $
    3,035,000
  2009
    
    
    2008
    
    
    2007Tax at statutory rates
    
    $
    (16,309,000
    )
    
    $
    (3,442,000
    )
    
    $
    4,200,000Increase (decrease) fromTax-exempt interest
    
    
    (866,000
    )
    
    
    (818,000
    )
    
    
    (794,000
    )Bank owned life insurance
    
    
    (505,000
    )
    
    
    (605,000
    )
    
    
    (438,000
    )Establishment of valuation allowance
    
    
    23,249,000
    
    
    
    0
    
    
    
    0Other
    
    
    (79,000
    )
    
    
    (11,000
    )
    
    
    67,000Tax expense (benefit)
    
    $
    5,490,000
    
    
    $
    (4,876,000
    )
    
    $
    3,035,000
  F-56




---



##### 



NOTE 8  FEDERAL INCOME TAXES
  2009
    
    
    2008Deferred income tax assetsAllowance for loan and lease losses
    
    $
    16,757,000
    
    
    $
    9,488,000Deferred loan fees
    
    
    160,000
    
    
    
    263,000Deferred compensation
    
    
    661,000
    
    
    
    1,584,000Nonaccrual loan interest income
    
    
    480,000
    
    
    
    440,000Fair value write-downs on foreclosed properties
    
    
    1,436,000
    
    
    
    303,000Net operating loss carryforward
    
    
    4,941,000
    
    
    
    0Tax credit carryforwards
    
    
    668,000
    
    
    
    0Other
    
    
    726,000
    
    
    
    727,00025,829,000
    
    
    
    12,805,000Deferred income tax liabilitiesDepreciation
    
    
    770,000
    
    
    
    907,000Unrealized gain on securities
    
    
    648,000
    
    
    
    1,112,000Interest rate swaps
    
    
    33,000
    
    
    
    666,000Other
    
    
    634,000
    
    
    
    674,0002,085,000
    
    
    
    3,359,000Net deferred tax asset before valuation allowance
    
    
    23,744,000
    
    
    
    9,446,000Valuation allowance
    
    
    (23,744,000
    )
    
    
    0Total net deferred tax asset
    
    $
    0
    
    
    $
    9,446,000
     F-57




---



##### 



NOTE 9  STOCK-BASED COMPENSATION
     2009
    
    
    2008
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageShares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair Value
    
    
    Shares
    
    
    Fair ValueNonvested at
beginning of year
    
    
    113,010
    
    
    $
    14.85
    
    
    
    63,024
    
    
    $
    23.69
    
    
    
    21,159
    
    
    $
    37.94Granted
    
    
    0
    
    
    NA
    
    
    56,710
    
    
    
    6.21
    
    
    
    44,450
    
    
    
    17.74Vested
    
    
    (3,290
    )
    
    
    20.39
    
    
    
    (128
    )
    
    
    30.37
    
    
    
    0
    
    
    NAForfeited
    
    
    (18,487
    )
    
    
    13.20
    
    
    
    (6,596
    )
    
    
    24.72
    
    
    
    (2,585
    )
    
    
    37.94Nonvested at
end of year
    
    
    91,233
    
    
    $
    14.98
    
    
    
    113,010
    
    
    $
    14.85
    
    
    
    63,024
    
    
    $
    23.69
  F-58




---



##### 



NOTE 9  STOCK-BASED COMPENSATION
  2009
    
    
    2008
    
    
    2007Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at
beginning of year
    
    
    325,434
    
    
    $
    20.49
    
    
    
    271,755
    
    
    $
    24.34
    
    
    
    288,962
    
    
    $
    24.07Granted
    
    
    0
    
    
    NA
    
    
    67,460
    
    
    
    6.21
    
    
    
    54,099
    
    
    
    17.74Exercised
    
    
    0
    
    
    NA
    
    
    (2,000
    )
    
    
    8.22
    
    
    
    (52,117
    )
    
    
    12.33Forfeited or expired
    
    
    (29,219
    )
    
    
    22.05
    
    
    
    (11,781
    )
    
    
    29.48
    
    
    
    (19,189
    )
    
    
    34.38Outstanding at
end of year
    
    
    296,215
    
    
    $
    20.34
    
    
    
    325,434
    
    
    $
    20.49
    
    
    
    271,755
    
    
    $
    24.34Options exercisable
at year-end
    
    
    230,895
    
    
    $
    24.04
    
    
    
    198,694
    
    
    $
    25.23
    
    
    
    181,544
    
    
    $
    23.68
   2009
    
    2008
    
    2007Risk-free interest rate
    
    NA
    
    
    2.00
    %
    
    
    3.40
    %Expected option life
    
    NA
    
    5 Years
    
    5 YearsExpected stock price volatility
    
    NA
    
    
    44
    %
    
    
    26
    %Dividend yield
    
    NA
    
    
    1
    %
    
    
    1
    %
  F-59




---



##### 



NOTE 9  STOCK-BASED COMPENSATION
  Outstanding
    
    ExercisableWeighted Average
    
    Weighted
    
    
    
    
    
    WeightedRange of
    
    
    
    
    
    Remaining
    
    Average
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    Contractual
    
    Exercise
    
    
    
    
    
    ExercisePrices
    
    Number
    
    Life
    
    Price
    
    Number
    
    Price$4.00   - $8.00
    
    
    59,360
    
    
    5.9 Years
    
    $
    6.21
    
    
    
    0
    
    
    $NA$8.01    - $12.00
    
    
    21,157
    
    
    0.7 Years
    
    
    8.44
    
    
    
    21,157
    
    
    
    8.44$12.01 - $16.00
    
    
    27,736
    
    
    1.8 Years
    
    
    12.89
    
    
    
    27,736
    
    
    
    12.89$16.01 - $20.00
    
    
    69,513
    
    
    4.1 Years
    
    
    17.16
    
    
    
    63,553
    
    
    
    17.10$20.01 - $24.00
    
    
    6,996
    
    
    2.8 Years
    
    
    20.18
    
    
    
    6,996
    
    
    
    20.18$24.01 - $28.00
    
    
    22,211
    
    
    3.8 Years
    
    
    26.61
    
    
    
    22,211
    
    
    
    26.61$32.01 - $36.00
    
    
    64,995
    
    
    5.3 Years
    
    
    34.75
    
    
    
    64,995
    
    
    
    34.75$36.01 - $40.00
    
    
    17,311
    
    
    3.9 Years
    
    
    37.94
    
    
    
    17,311
    
    
    
    37.94$40.01 - $44.00
    
    
    6,936
    
    
    4.8 Years
    
    
    40.28
    
    
    
    6,936
    
    
    
    40.28Outstanding at year end
    
    
    296,215
    
    
    4.2 Years
    
    $
    20.34
    
    
    
    230,895
    
    
    $
    24.04
   2009
    
    2008
    
    2007Minimum exercise price
    
    $
    6.21
    
    
    $
    6.21
    
    
    $
    8.22Maximum exercise price
    
    
    40.28
    
    
    
    40.28
    
    
    
    40.28Average remaining option term
    
    4.2 Years
    
    5.3 Years
    
    5.9 Years
  2009
    
    2008
    
    2007Aggregate intrinsic value of stock options exercised
    
    NA
    
    $
    13,000
    
    
    $
    1,019,000Cash received from stock option exercises
    
    NA
    
    
    0
    
    
    
    56,000Tax benefit realized from stock option exercises
    
    NA
    
    
    0
    
    
    
    0Weighted average per share fair value of stock
options granted
    
    NA
    
    
    2.32
    
    
    
    4.60
    F-60




---



##### 



NOTE 10  RELATED PARTIES
  2009
    
    
    2008Beginning balance
    
    $
    14,090,000
    
    
    $
    14,719,000New loans
    
    
    519,000
    
    
    
    1,777,000Repayments
    
    
    (2,435,000
    )
    
    
    (2,406,000
    )Ending balance
    
    $
    12,174,000
    
    
    $
    14,090,000
  NOTE 11  COMMITMENTS AND OFF-BALANCE-SHEET RISK
     F-61




---



##### 



NOTE 11  COMMITMENTS AND OFF-BALANCE-SHEET RISK
  2009
    
    
    2008Commercial unused lines of credit
    
    $
    205,018,000
    
    
    $
    323,785,000Unused lines of credit secured by 1  4 family
residential properties
    
    
    24,916,000
    
    
    
    30,658,000Credit card unused lines of credit
    
    
    8,565,000
    
    
    
    9,413,000Other consumer unused lines of credit
    
    
    4,526,000
    
    
    
    4,881,000Commitments to make loans
    
    
    7,701,000
    
    
    
    10,959,000Standby letters of credit
    
    
    36,512,000
    
    
    
    51,439,000$
    287,238,000
    
    
    $
    431,135,000
    F-62




---



##### 



NOTE 11  COMMITMENTS AND OFF-BALANCE-SHEET RISK
  2009
    
    2008Contract
    
    Carrying
    
    Contract
    
    CarryingAmount
    
    Value
    
    Amount
    
    ValueStandby letters of credit
    
    $
    36,512,000
    
    
    $
    220,000
    
    
    $
    51,439,000
    
    
    $
    282,000
  NOTE 12  BENEFIT PLANS
      F-63




---



##### 



NOTE 13  HEDGING ACTIVITIES
      F-64




---



##### 



NOTE 14  FAIR VALUES OF FINANCIAL INSTRUMENTS
  2009
    
    2008Carrying
    
    Fair
    
    Carrying
    
    FairAmount
    
    Value
    
    Amount
    
    ValueFinancial assetsCash and cash equivalents
    
    $
    21,735,000
    
    
    $
    21,735,000
    
    
    $
    25,804,000
    
    
    $
    25,804,000Securities available for sale
    
    
    182,492,000
    
    
    
    182,492,000
    
    
    
    162,669,000
    
    
    
    162,669,000Securities held to maturity
    
    
    59,211,000
    
    
    
    60,271,000
    
    
    
    64,437,000
    
    
    
    65,381,000Federal Home Loan Bank stock
    
    
    15,681,000
    
    
    
    15,681,000
    
    
    
    15,681,000
    
    
    
    15,681,000Loans, net
    
    
    1,491,940,000
    
    
    
    1,501,860,000
    
    
    
    1,829,807,000
    
    
    
    1,872,141,000Bank owned life insurance
    
    
    45,024,000
    
    
    
    45,024,000
    
    
    
    42,462,000
    
    
    
    42,462,000Accrued interest receivable
    
    
    7,088,000
    
    
    
    7,088,000
    
    
    
    8,513,000
    
    
    
    8,513,000Financial liabilitiesDeposits
    
    
    1,401,627,000
    
    
    
    1,407,310,000
    
    
    
    1,599,575,000
    
    
    
    1,610,953,000Securities sold under
agreements to repurchase
    
    
    99,755,000
    
    
    
    99,755,000
    
    
    
    94,413,000
    
    
    
    94,413,000Federal funds purchased
    
    
    2,600,000
    
    
    
    2,600,000
    
    
    
    0
    
    
    
    0Federal Home Loan
Bank advances
    
    
    205,000,000
    
    
    
    208,435,000
    
    
    
    270,000,000
    
    
    
    274,847,000Subordinated debentures
    
    
    32,990,000
    
    
    
    32,971,000
    
    
    
    32,990,000
    
    
    
    31,100,000Accrued interest payable
    
    
    6,158,000
    
    
    
    6,158,000
    
    
    
    15,245,000
    
    
    
    15,245,000
    F-65




---



##### 



NOTE 15  FAIR VALUE MEASUREMENTS
       Securities available for sale.
 Securities held to maturity.
  F-66




---



##### 



NOTE 15  FAIR VALUE MEASUREMENTS
 Mortgage loans held for sale.
 Loans and leases.
 Foreclosed assets.
 Derivatives.
 Assets and Liabilities Measured at Fair Value on a Recurring Basi
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Securities available for sale
    
    $
    182,492,000
    
    
    $
    0
    
    
    $
    182,492,000
    
    
    $
    0Total
    
    $
    182,492,000
    
    
    $
    0
    
    
    $
    182,492,000
    
    
    $
    0
  F-67




---



##### 



NOTE 15  FAIR VALUE MEASUREMENTS
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Securities available for sale
    
    $
    162,669,000
    
    
    $
    0
    
    
    $
    162,669,000
    
    
    $
    0Total
    
    $
    162,669,000
    
    
    $
    0
    
    
    $
    162,669,000
    
    
    $
    0
 Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans (1)
    
    $
    41,456,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    41,456,000Foreclosed assets (1)
    
    
    26,608,000
    
    
    
    0
    
    
    
    0
    
    
    
    26,608,000Total
    
    $
    68,064,000
    
    
    $
    0
    
    
    $
    0
    
    
    $
    68,064,000
  QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsTotal
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Impaired loans (1)
    
    $
    33,410,000
    
    
    $
    0
    
    
    $
    33,410,000
    
    
    $
    0Total
    
    $
    33,410,000
    
    
    $
    0
    
    
    $
    33,410,000
    
    
    $
    0
 
 (1)
    
    Represents carrying value and related write-downs for which
adjustments are based on the estimated value of the property or other assets. The disclosure
relating to foreclosed assets was first required in 2009.  F-68




---



##### 



NOTE 15  FAIR VALUE MEASUREMENTS
  NOTE 16  EARNINGS (LOSS) PER SHARE
  2009
    
    
    2008
    
    
    2007BasicNet income (loss) attributable to common shares
    
    $
    (52,889,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000Weighted average common shares outstanding
    
    
    8,489,679
    
    
    
    8,470,721
    
    
    
    8,476,075Basic earnings (loss) per common share
    
    $
    (6.23
    )
    
    $
    (0.59
    )
    
    $
    1.06DilutedNet income (loss) attributable to common shares
    
    $
    (52,889,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000Weighted average common shares outstanding for
basic earnings (loss) per common share
    
    
    8,489,679
    
    
    
    8,470,721
    
    
    
    8,476,075Add: Dilutive effects of share-based awards
    
    
    0
    
    
    
    0
    
    
    
    44,765Average shares and dilutive potential
common shares
    
    
    8,489,679
    
    
    
    8,470,721
    
    
    
    8,520,840Diluted earnings (loss) per common share
    
    $
    (6.23
    )
    
    $
    (0.59
    )
    
    $
    1.05
    F-69




---



##### 



NOTE 17  SUBORDINATED DEBENTURES
   NOTE 18  REGULATORY MATTERS
    F-70




---



##### 



NOTE 18  REGULATORY MATTERS
  Minimum Requiredto be WellMinimum Required
    
    
    Capitalized Underfor Capital
    
    
    Prompt CorrectiveActual
    
    
    Adequacy Purposes
    
    
    Action RegulationsAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio2009Total capital (to risk
weighted assets)Consolidated
    
    $
    193,157
    
    
    
    11.2
    %
    
    $
    138,169
    
    
    
    8.0
    %
    
    $NA
    
    
    NABank
    
    
    191,146
    
    
    
    11.1
    
    
    
    138,051
    
    
    
    8.0
    
    
    
    172,563
    
    
    
    10.0
    %Tier 1 capital (to risk
weighted assets)Consolidated
    
    
    171,244
    
    
    
    9.9
    
    
    
    69,085
    
    
    
    4.0
    
    
    NA
    
    
    NABank
    
    
    169,251
    
    
    
    9.8
    
    
    
    69,026
    
    
    
    4.0
    
    
    
    103,538
    
    
    
    6.0Tier 1 capital (to average
assets)Consolidated
    
    
    171,244
    
    
    
    8.6
    
    
    
    79,325
    
    
    
    4.0
    
    
    NA
    
    
    NABank
    
    
    169,251
    
    
    
    8.6
    
    
    
    79,119
    
    
    
    4.0
    
    
    
    98,899
    
    
    
    5.02008Total capital (to risk
weighted assets)Consolidated
    
    $
    229,307
    
    
    
    10.9
    %
    
    $
    167,836
    
    
    
    8.0
    %
    
    $NA
    
    
    NABank
    
    
    226,034
    
    
    
    10.8
    
    
    
    167,480
    
    
    
    8.0
    
    
    
    209,350
    
    
    
    10.0
    %Tier 1 capital (to risk
weighted assets)Consolidated
    
    
    203,072
    
    
    
    9.7
    
    
    
    83,918
    
    
    
    4.0
    
    
    NA
    
    
    NABank
    
    
    199,853
    
    
    
    9.6
    
    
    
    83,740
    
    
    
    4.0
    
    
    
    125,610
    
    
    
    6.0Tier 1 capital (to average
assets)Consolidated
    
    
    203,072
    
    
    
    9.2
    
    
    
    88,577
    
    
    
    4.0
    
    
    NA
    
    
    NABank
    
    
    199,853
    
    
    
    9.0
    
    
    
    88,413
    
    
    
    4.0
    
    
    
    110,516
    
    
    
    5.0
    F-71




---



##### 



NOTE 19  U.S. TREASURY CAPITAL PURCHASE PROGRAM PARTICIPATION
      F-72




---



##### 



NOTE 20  OTHER COMPREHENSIVE INCOME
  2009
    
    
    2008
    
    
    2007Unrealized holding gains (losses) on
available-for-sale securities
    
    $
    (1,269,000
    )
    
    $
    2,761,000
    
    
    $
    2,110,000Change in net fair value of interest rate swaps
    
    
    0
    
    
    
    2,876,000
    
    
    
    0Reclassification adjustments for gains
later recognized in income
    
    
    (1,803,000
    )
    
    
    (974,000
    )
    
    
    0(3,072,000
    )
    
    
    4,663,000
    
    
    
    2,110,000Tax effect of unrealized holding gains
on available-for-sale securities and
unrealized gain on interest rate swaps
    
    
    0
    
    
    
    (1,973,000
    )
    
    
    (739,000
    )Tax effect of reclassification adjustments for
gains later recognized in income
    
    
    631,000
    
    
    
    341,000
    
    
    
    0Other comprehensive income
    
    $
    (2,441,000
    )
    
    $
    3,031,000
    
    
    $
    1,371,000
  NOTE 21  QUARTERLY FINANCIAL DATA (UNAUDITED)
 Net Income (Loss)Attributable toInterest
    
    Net Interest
    
    Common
    
    Earnings (Loss) per ShareIncome
    
    Income
    
    Shares
    
    Basic
    
    Diluted2009First quarter
    
    $
    28,021,000
    
    
    $
    11,805,000
    
    
    $
    (4,489,000
    )
    
    $
    (0.53
    )
    
    $
    (0.53
    )Second quarter
    
    
    26,866,000
    
    
    
    12,450,000
    
    
    
    (6,388,000
    )
    
    
    (0.75
    )
    
    
    (0.75
    )Third quarter
    
    
    25,893,000
    
    
    
    13,567,000
    
    
    
    (5,606,000
    )
    
    
    (0.66
    )
    
    
    (0.66
    )Fourth quarter
    
    
    24,129,000
    
    
    
    13,511,000
    
    
    
    (36,406,000
    )
    
    
    (4.28
    )
    
    
    (4.28
    )2008First quarter
    
    $
    31,955,000
    
    
    $
    11,383,000
    
    
    $
    (3,738,000
    )
    
    $
    (0.44
    )
    
    $
    (0.44
    )Second quarter
    
    
    29,139,000
    
    
    
    10,592,000
    
    
    
    (2,612,000
    )
    
    
    (0.31
    )
    
    
    (0.31
    )Third quarter
    
    
    29,843,000
    
    
    
    11,728,000
    
    
    
    1,079,000
    
    
    
    0.13
    
    
    
    0.13Fourth quarter
    
    
    30,134,000
    
    
    
    12,505,000
    
    
    
    313,000
    
    
    
    0.04
    
    
    
    0.042007First quarter
    
    $
    36,025,000
    
    
    $
    14,484,000
    
    
    $
    4,283,000
    
    
    $
    0.51
    
    
    $
    0.51Second quarter
    
    
    36,084,000
    
    
    
    13,948,000
    
    
    
    2,221,000
    
    
    
    0.26
    
    
    
    0.26Third quarter
    
    
    36,779,000
    
    
    
    14,051,000
    
    
    
    2,367,000
    
    
    
    0.28
    
    
    
    0.27Fourth quarter
    
    
    35,293,000
    
    
    
    13,074,000
    
    
    
    95,000
    
    
    
    0.01
    
    
    
    0.01
  F-73




---



##### 



NOTE 21  QUARTERLY FINANCIAL DATA (UNAUDITED)
  NOTE 22  MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL STATEMENTS
   2009
    
    
    2008ASSETSCash and cash equivalents
    
    $
    1,928,000
    
    
    $
    407,000Investment in bank subsidiary
    
    
    170,111,000
    
    
    
    203,153,000Other assets
    
    
    1,455,000
    
    
    
    4,396,000Total assets
    
    $
    173,494,000
    
    
    $
    207,956,000LIABILITIES AND SHAREHOLDERS EQUITYLiabilities
    
    $
    400,000
    
    
    $
    594,000Subordinated debentures
    
    
    32,990,000
    
    
    
    32,990,000Shareholders equity
    
    
    140,104,000
    
    
    
    174,372,000Total liabilities and shareholders equity
    
    $
    173,494,000
    
    
    $
    207,956,000
  F-74




---



##### 



NOTE 22  MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL STATEMENTS
  2009
    
    
    2008
    
    
    2007IncomeDividends from subsidiaries
    
    $
    2,852,000
    
    
    $
    4,739,000
    
    
    $
    7,291,000Other
    
    
    0
    
    
    
    0
    
    
    
    19,000Total income
    
    
    2,852,000
    
    
    
    4,739,000
    
    
    
    7,310,000ExpensesInterest expense
    
    
    1,048,000
    
    
    
    1,914,000
    
    
    
    2,512,000Other operating expenses
    
    
    2,514,000
    
    
    
    2,431,000
    
    
    
    2,835,000Total expenses
    
    
    3,562,000
    
    
    
    4,345,000
    
    
    
    5,347,000Income (loss) before income tax benefit and equity in
undistributed net income (loss) of subsidiary
    
    
    (710,000
    )
    
    
    394,000
    
    
    
    1,963,000Federal income tax expense (benefit)
    
    
    1,767,000
    
    
    
    (1,417,000
    )
    
    
    (1,783,000
    )Equity in undistributed net income (loss) of subsidiary
    
    
    (49,610,000
    )
    
    
    (6,770,000
    )
    
    
    5,220,000Net income (loss)
    
    
    (52,087,000
    )
    
    
    (4,959,000
    )
    
    
    8,966,000Preferred stock dividends and accretion
    
    
    802,000
    
    
    
    0
    
    
    
    0Net income (loss) attributable to common shares
    
    $
    (52,889,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000
  F-75




---



##### 



NOTE 22  MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL STATEMENTS
  2009
    
    
    2008
    
    
    2007Cash flows from operating activitiesNet income (loss)
    
    $
    (52,087,000
    )
    
    $
    (4,959,000
    )
    
    $
    8,966,000Adjustments to reconcile net income (loss) to net
cash from operating activities:Equity in undistributed (income) loss of subsidiary
    
    
    49,610,000
    
    
    
    6,770,000
    
    
    
    (5,220,000
    )Stock-based compensation expense
    
    
    611,000
    
    
    
    654,000
    
    
    
    361,000Change in other assets
    
    
    2,798,000
    
    
    
    (1,023,000
    )
    
    
    (483,000
    )Change in other liabilities
    
    
    (194,000
    )
    
    
    (661,000
    )
    
    
    648,000Net cash from operating activities
    
    
    738,000
    
    
    
    779,000
    
    
    
    4,272,000Cash flows from investing activitiesNet capital investment into subsidiaries
    
    
    (19,000,000
    )
    
    
    0
    
    
    
    0Net cash for investing activities
    
    
    (19,000,000
    )
    
    
    0
    
    
    
    0Cash flows from financing activitiesProceeds from issuance of preferred stock and
common stock warrant, net
    
    
    20,834,000
    
    
    
    0
    
    
    
    0Stock option exercises, net
    
    
    0
    
    
    
    0
    
    
    
    56,000Employee stock purchase plan
    
    
    57,000
    
    
    
    76,000
    
    
    
    91,000Dividend reinvestment plan
    
    
    11,000
    
    
    
    40,000
    
    
    
    76,000Cash dividends on common stock
    
    
    (594,000
    )
    
    
    (2,625,000
    )
    
    
    (4,677,000
    )Cash dividends on preferred stock
    
    
    (525,000
    )
    
    
    0
    
    
    
    0Fractional shares paid
    
    
    0
    
    
    
    0
    
    
    
    (4,000
    )Net cash from (for) financing activities
    
    
    19,783,000
    
    
    
    (2,509,000
    )
    
    
    (4,458,000
    )Net change in cash and cash equivalents
    
    
    1,521,000
    
    
    
    (1,730,000
    )
    
    
    (186,000
    )Cash and cash equivalents at beginning of period
    
    
    407,000
    
    
    
    2,137,000
    
    
    
    2,323,000Cash and cash equivalents at end of period
    
    $
    1,928,000
    
    
    $
    407,000
    
    
    $
    2,137,000
 F-76




---



##### 



SIGNATURES
  MERCANTILE BANK CORPORATION/s/ Michael H. PriceMichael H. PriceChairman of the Board, President and Chief
Executive Officer  /s/ Betty S. Burton

Betty S. Burton, Director
    
    /s/ Calvin D. Murdock

Calvin D. Murdock, Director/s/ David M. Cassard
    
    /s/ Michael H. PriceDavid M. Cassard, Director
    
    Michael H. Price, Chairman of the Board,President and Chief Executive Officer(principal executive officer)/s/ Edward J. Clark
    
    /s/ Merle J. PrinsEdward J. Clark, Director
    
    Merle J. Prins, Director/s/ Peter A. Cordes
    
    /s/ Timothy O. SchadPeter A. Cordes, Director
    
    Timothy O. Schad, Director/s/ Doyle A. Hayes
    
    /s/ Dale J. VisserDoyle A. Hayes, Director
    
    Dale J. Visser, Director/s/ Susan K. Jones
    
    /s/ Donald Williams, Sr.Susan K. Jones, Director
    
    Donald Williams, Sr., Director/s/ Lawrence W. Larsen
    
    /s/ Charles E. ChristmasLawrence W. Larsen, Director
    
    Charles E. Christmas, Senior Vice President,Chief Financial Officer and Treasurer(principal financial and accounting officer)




---



##### 



EXHIBIT INDEX
 EXHIBIT NO.
    
    EXHIBIT DESCRIPTION3.1
    
    Our Articles of Incorporation are incorporated by reference to
exhibit 3.1 of our Form 10-Q for the quarter ended June 30,
20093.2
    
    Our Amended and Restated Bylaws dated as of January 16, 2003
are incorporated by reference to exhibit 3.2 of our
Registration Statement on Form S-3 (Commission File No.
333-103376) that became effective on February 21, 200310.1
    
    Our 1997 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Registration Statement on
Form SB-2 (Commission File No. 333-33081) that became
effective on October 23, 1997 *10.2
    
    Our 2000 Employee Stock Option Plan is incorporated by
reference to exhibit 10.14 of our Form 10-K for the year ended
December 31, 2000 *10.3
    
    Our 2004 Employee Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form 10-Q for the quarter
ended September 30, 2004 *10.4
    
    Form of Stock Option Agreement for options under the 2004
Employee Stock Option Plan is incorporated by reference to
exhibit 10.2 of our Form 10-Q for the quarter ended September
30, 2004 *10.5
    
    Our Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.26 of our Form 10-K for the year ended
December 31, 2002 *10.6
    
    Form of Stock Option Agreement for options under the
Independent Director Stock Option Plan is incorporated by
reference to exhibit 10.1 of our Form 8-K filed October 22,
2004 *10.7
    
    Mercantile Bank of Michigan Amended and Restated Deferred
Compensation Plan for Members of the Board of Directors dated
June 29, 2006 is incorporated by reference to exhibit 10.9 of
our Form 10-K for the year ended December 31, 200710.8
    
    First Amendment dated October 25, 2007 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June 29, 2006 is
incorporated by reference to exhibit 10.10 of our Form 10-K
for the year ended December 31, 200710.9
    
    Second Amendment dated October 23, 2008 to the Mercantile Bank
of Michigan Amended and Restated Deferred Compensation Plan
for Members of the Board of Directors dated June 29, 2007 is
incorporated by reference to exhibit 10.9 of our Form 10-K for
the year ended December 31, 200810.10
    
    Agreement between Fiserv Solutions, Inc. and our bank dated
September 10, 1997, is incorporated by reference to exhibit
10.3 of our Registration Statement on Form SB-2 (Commission
File No. 333-33081) that became effective on October 23, 199710.11
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated May 12, 2000 extending the
agreement between Fiserv Solutions, Inc. and our bank dated
September 10, 1997, is incorporated by reference to exhibit
10.15 of our Form 10-K for the year ended December 31, 2000




---



##### 



EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.12
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated November 21, 2002 extending
the agreement between Fiserv Solutions, Inc. and our bank
dated September 10, 1997, is incorporated by reference to
exhibit 10.5 of our Form 10-K for the year ended December 31,
200210.13
    
    Extension Agreement of Data Processing Contract between Fiserv
Solutions, Inc. and our bank dated December 20, 2006 extending
the agreements between Fiserv Solutions, Inc. and our bank
dated September 10, 1997 and November 21, 2002 is incorporated
by reference to exhibit 10.14 of our Form 10-K for the year
ended December 31, 200710.14
    
    Amended and Restated Employment Agreement dated as of October
18, 2001, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form 10-K
for the year ended December 31, 2001 *10.15
    
    Employment Agreement dated as of October 18, 2001, among the
company, our bank and Robert B. Kaminski, Jr., is incorporated
by reference to exhibit 10.23 of our Form 10-K for the year
ended December 31, 2001 *10.16
    
    Employment Agreement dated as of October 18, 2001, among the
company, our bank and Charles E. Christmas, is incorporated by
reference to exhibit 10.23 of our Form 10-K for the year ended
December 31, 2001 *10.17
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Michael H. Price, is
incorporated by reference to exhibit 10.22 of our Form 10-K
for the year ended December 31, 2002 *10.18
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.23 of our Form 10-K
for the year ended December 31, 2002 *10.19
    
    Amendment to Employment Agreement dated as of October 17,
2002, among the company, our bank and Charles E. Christmas, is
incorporated by reference to exhibit 10.24 of our Form 10-K
for the year ended December 31, 2002 *10.20
    
    Amendment to Employment Agreement dated as of October 28,
2004, among the company, our bank and Robert B. Kaminski, Jr.,
is incorporated by reference to exhibit 10.21 of our Form 10-K
for the year ended December 31, 2004 *10.21
    
    Junior Subordinated Indenture between us and Wilmington Trust
Company dated September 16, 2004 providing for the issuance of
the Series A and Series B Floating Rate Junior Subordinated
Notes due 2034 is incorporated by reference to exhibit 10.1 of
our Form 8-K filed December 15, 200410.22
    
    Amended and Restated Trust Agreement dated September 16, 2004
for Mercantile Bank Capital Trust I is incorporated by
reference to exhibit 10.2 of our Form 8-K filed December 15,
200410.23
    
    Placement Agreement between us, Mercantile Bank Capital Trust
I, and SunTrust Capital Markets, Inc. dated September 16, 2004
is incorporated by reference to exhibit 10.3 of our Form 8-K
filed December 15, 200410.24
    
    Guarantee Agreement dated September 16, 2004 between
Mercantile as Guarantor and Wilmington Trust Company as
Guarantee Trustee is incorporated by reference to exhibit 10.4
of our Form 8-K filed December 15, 200410.25
    
    Form of Agreement Amending Stock Option Agreement, dated
November 17, 2005 issued under our 2004 Employee Stock Option
Plan, is incorporated by reference to exhibit 10.1 of our Form
8-K filed December 14, 2005 *




---



##### 



EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.26
    
    Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Michael H. Price is
incorporated by reference to exhibit 10.29 of our Form 10-K
for the year ended December 31, 2005 *10.27
    
    Third Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Robert B. Kaminski,
Jr. is incorporated by reference to exhibit 10.30 of our Form
10-K for the year ended December 31, 2005 *10.28
    
    Second Amendment to Employment Agreement dated as of November
17, 2005, among the company, our bank and Charles E. Christmas
is incorporated by reference to exhibit 10.31 of our Form 10-K
for the year ended December 31, 2005 *10.29
    
    Form of Mercantile Bank of Michigan Amended and Restated
Executive Deferred Compensation Agreement dated November 18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank is incorporated by reference to exhibit 10.34 of our Form
10-K for the year ended December 31, 2007 *10.30
    
    Form of First Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement dated November 18,
2006, that has been entered into between our bank and each of
Gerald R. Johnson, Jr., Michael H. Price, Robert B. Kaminski,
Jr., Charles E. Christmas, and certain other officers of our
bank, dated October 25, 2007 is incorporated by reference to
exhibit 10.35 of our Form 10-K for the year ended December 31,
2007 *10.31
    
    Form of Second Amendment to the Mercantile Bank of Michigan
Executive Deferred Compensation Agreement date November 18,
2006, that has been entered into between our bank and each of
Michael H. Price, Robert B. Kaminski, Charles E. Christmas,
and certain other officers of our bank, dated October 23, 2008
is incorporated by reference to exhibit 10.34 of our Form 10-K
for the year ended December 31, 2008 *10.32
    
    Form of Mercantile Bank of Michigan Split Dollar Agreement
that has been entered into between our bank and each of Gerald
R. Johnson, Jr., Michael H. Price, Robert B. Kaminski, Jr.,
Charles E. Christmas, and certain other officers of our bank
is incorporated by reference to exhibit 10.33 of our Form 10-K
for the year ended December 31, 2005 *10.33
    
    Director Fee Summary *10.34
    
    Lease Agreement between our bank and The Conlin Company dated
July 12, 2005 for our Ann Arbor, Michigan office is
incorporated by reference to exhibit 10.36 of our Form 10-K
for the year ended December 31, 200510.35
    
    Stock Incentive Plan of 2006 is incorporated by reference to
Appendix A of our proxy statement for our April 27, 2006
annual meeting of shareholders that was filed with the
Securities and Exchange Commission *10.36
    
    Amendment and Restatement of Stock Incentive Plan of 2006
dated November 18, 2008 is incorporated by reference to
exhibit 10.39 of our Form 10-K for the year ended December 31,
2008 *10.37
    
    Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted in 2006
under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.1 of our Form 8-K filed November 22,
2006 *




---



##### 



EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.38
    
    Form of Notice of Grant of Incentive Stock Option and Stock
Option Agreement for incentive stock options granted after
2006 under our Stock Incentive Plan of 2006 is incorporated by
reference to exhibit 10.41 of our Form 10-K for the year ended
December 31, 2007 *10.39
    
    Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
in 2006 under our Stock Incentive Plan of 2006 is incorporated
by reference to exhibit 10.2 of our Form 8-K filed November
22, 2006 *10.40
    
    Form of Restricted Stock Award Agreement Notification of Award
and Terms and Conditions of Award for restricted stock granted
after 2006 under our Stock Incentive Plan of 2006 is
incorporated by reference to exhibit 10.43 of our Form 10-K
for the year ended December 31, 2007 *10.41
    
    Mercantile Bank Corporation Employee Stock Purchase Plan of
2002 is incorporated by reference to exhibit 10.47 of our Form
10-K for the year ended December 31, 200810.42
    
    First Amendment to Mercantile Bank Corporation Employee Stock
Purchase Plan of 2002 is incorporated by reference to exhibit
4(c) of our Registration Statement on Form S-8 (Commission
File No. 333-158280) that became effective on March 30, 200910.43
    
    Second Amendment to Mercantile Bank Corporation Employee Stock
Purchase Plan of 2002 is incorporated by reference to exhibit
4(d) of our Registration Statement on Form S-8 (Commission
File No. 333-158280) that became effective on March 30, 200910.44
    
    Lease Agreement between our bank and CD Partners LLC dated
October 2, 2007 for our Oakland County, Michigan office is
incorporated by reference to exhibit 10.47 of our Form 10-K
for the year ended December 31, 200710.45
    
    Letter Agreement, dated as of May 15, 2009, between Mercantile
Bank Corporation and the United States Department of the
Treasury, including the Securities Purchase Agreement 
Standard Terms and Schedules is incorporated by reference to
exhibit 10.1 of our Form 8-K filed May 15, 200910.46
    
    Side Letter Agreement, dated as of May 15, 2009, between
Mercantile Bank Corporation and the United States Department
of the Treasury regarding the American Recovery and
Reinvestment Act of 2009 is incorporated by reference to
exhibit 10.2 of our Form 8-K filed May 15, 200910.47
    
    Amendment to Employment Agreements, dated May 15, 2009, by and
among Mercantile Bank Corporation, Mercantile Bank of
Michigan, Michael H. Price, Robert B. Kaminski, Jr. and
Charles E. Christmas is incorporated by reference to exhibit
10.3 of our Form 8-K filed May 15, 2009 *10.48
    
    Form of Waiver executed by each of Michael H. Price, Robert B.
Kaminski, Jr. and Charles E. Christmas is incorporated by
reference to exhibit 10.4 of our Form 8-K filed May 15, 200910.49
    
    Amendment to Commercial Lease between our bank and Jerry
Helmer and Ruthann Helmer dated August 14, 2007 for our Ann
Arbor, Michigan office is incorporated by reference to exhibit
10.5 of our Form 10-Q for the quarter ended June 30, 2009




---



##### 



EXHIBIT NO.
    
    EXHIBIT DESCRIPTION10.50
    
    Termination of Lease Agreement between our bank and CD
Partners LLC dated May 21, 2009 for our Oakland County,
Michigan office is incorporated by reference to exhibit 10.6
of our Form 10-Q for the quarter ended June 30, 200910.51
    
    Termination of Lease Agreement between our bank and Jerry
Helmer and Ruthann Helmer dated July 22, 2009 for our Ann
Arbor, Michigan office is incorporated by reference to exhibit
10.7 of our Form 10-Q for the quarter ended June 30, 200910.52
    
    Warrant to Purchase Common Stock of Mercantile Bank
Corporation, dated May 15, 2009 is incorporated by reference
to exhibit 4.2 of our Form 8-K filed May 15, 200921
    
    Subsidiaries of the company is incorporated by reference to
exhibit 21 of our Form 10-K for the year ended December 31,
200823
    
    Consent of BDO Seidman, LLP31
    
    Rule 13a-14(a) Certifications32.1
    
    Section 1350 Chief Executive Officer Certification32.2
    
    Section 1350 Chief Financial Officer Certification99.1
    
    First fiscal year certification of our principal executive
officer and principal financial officer required because of
our participation in the Capital Purchase Program of the
Troubled Asset Relief Program
 
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    Management contract or compensatory plan