Good morning, everyone, and welcome to the Fourth Quarter and Full-Year 2012 Earnings Results Conference Call. All participants will be in a listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note that today’s event is being recorded. At this time, I’d like to turn the conference call over to Ms. Karen Keller. Ms. Keller, please go ahead.

Thank you, Jamie. Good morning, everyone, and thank you for joining Mercantile Bank Corporation’s conference call and webcast to discuss the company’s financial results for the fourth quarter and full-year 2012. I’m Karen Keller with Lambert Edwards, Mercantile’s Investor Relations firm. And joining me are members of their management team including Michael Price, Chairman, President and Chief Executive Officer; Robert Kaminski, Executive Vice President and Chief Operating Officer; and Chuck Christmas, Senior Vice President and Chief Financial Officer. We will begin the call with management’s prepared remarks and then open the call up to questions. However, before we begin today’s call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of revenue, earnings, and capital structure as well as statements on the plans and objectives of the company’s business. The company’s actual results may differ materially from any forward-looking statements made today due to the important factors described in the company’s latest Securities and Exchange Commission filings. The company assumes no obligation to update any forward-looking statements made during the call. If anyone does not already have a copy of the press release issued by Mercantile today, you can access it at the company’s website at www.mercbank.com. At this time, I’d like to turn the call over to Mercantile’s CEO, Mike Price. Mike?

Thank you, Karen, and good morning, everyone, and thank you for joining us today. Also on the call today is our CFO, Chuck Christmas, who will be providing details on our financial results. Chuck will be followed by Chief Operating Officer, Bob Kaminski, who will be commenting on asset quality and other operational successes. Earlier today, we released our fourth quarter and 2012 full year operating results, which not only mark the 15 year anniversary of Mercantile Bank Corporation, but also mark the year full of many successes and key milestones. On the earnings front, we continued our positive momentum by posting another quarter of solid profitability, marking the eighth consecutive profitable quarter for us. Our non-performing assets continued to decrease significantly as did the cost associated with managing them. Throughout the year, our net interest margin remained strong. As our bank grew stronger each quarter, we also achieved some other notable accomplishments. We were among the first community bank to exit entirely from the TARP program by repurchasing our preferred stock and common stock warrant in the second quarter. In the fourth quarter, we reinstated our quarterly cash dividend which has since been an increase from $0.09 to $0.10 as we announced earlier today. It is important to note that these were all completed through the use of internally generated funds and thus avoided potential common shareholder dilution, while maintaining our well capitalized position. There is a strong sense that 2012 marked an important turning point for our organization. The challenges of the past several years is substantially behind us and we have successfully transitioned into a stronger company with plans for growth. Looking forward to 2013, we are encouraged by the range of opportunities in front of us. The ongoing recovery in the Michigan economy is marked by continuing gains in manufacturing and GDP, growth in employment and personal income, and a modest improvement in the housing market. Our strong capital position creates opportunities for us to fully participate in these trends as they play out in the coming year. And our primary focus is return to building our franchise and helping our community prosper. At this time, I want to turn it over to Chuck Christmas.

Thanks, Mike, and good morning, everybody. This morning, we announced a net income of $3 million for the fourth quarter of 2012, or $0.35 per diluted share. Our fourth quarter income before federal income tax was $4.3 million, a 46% increase over the $3 million recorded during the fourth quarter of 2011. Our net income during all of 2012 was $11.5 million, or $1.30 per diluted share. Our income before federal income tax was $18.2 million for all of 2012, a 79% increase over the $10.1 million recorded during all of 2011. We believe the pre-tax comparison provides a better reflection of our improved operating results in 2012 over those of 2011 due to the year-end 2011 elimination of the valuation allowance against our net deferred tax asset, and resulting substantial federal income tax benefit we recorded at that time. In addition, we started to record federal income tax expense during the first quarter of 2012. Our 2012 operating results reflect continued improvements in many key areas of our financial condition and operating performance and are a direct result of the numerous strategies developed and implemented over the past several years as well as modestly improved economic conditions. Our dedicated efforts to home credit underwriting and administration practices have contributed to the significant decline in our nonperforming asset levels and a prudent loan portfolio. The quality of our loan portfolio continues to improve, allowing for a negative provision expense in 2012. In addition, there were further reductions in problem asset administration costs during the year. Operationally, we have continued to significantly enhance our profitability, strengthen our net interest margin, maintain our strong regulatory capital ratios, enhance our liquidity position through local deposit growth and reduced reliance on wholesale funding. In addition, our improved financial condition and operating results have led…

Thanks, Chuck, and good morning, everyone. As we reported in the press release and highlighted by Mike and Chuck, the fourth quarter was a very strong quarter for Mercantile in terms of new client acquisition and continued improvement in asset quality. Throughout 2012, our management team has focused on working with our staff to cultivate new client relationships and further develop existing ones. Those efforts yielded a positive outcome during the fourth quarter and we are very pleased to report the acquisition of a number of great new client relationships which resulted in the strongest loan growth of the year. The Mercantile approach to community banking has continued to resonate very strongly with our client prospects and we understand that development of true long-term relationships in banking take some time. In that regard, trust, reliability and a consultative approach to offering advice are all hallmarks of our Mercantile banking team members. The results of the dedicated efforts are demonstrated in our numbers throughout the year and especially in the fourth quarter. While total loans increased $6 million during the fourth quarter, that does not tell the complete story, client acquisition efforts generated approximately $64 million in new loans mainly in relationships new to the bank. These loans consisted of a good blend of commercial, industrial and commercial real estate borrowings. We have previously discussed the competitive environment in our markets. It is significant to note in most of these relationships, a common theme is that Mercantile was able to obtain the customer’s business with a fair and competitive package, but not typically consisting of the lowest rate offered despite the presence of several other institutions vying for the business. These clients were obtained through hard work and establishing the benefits of value-added community banking that Mercantile can deliver. Our strong…

Thanks, Bob and thank you, Chuck as well. Operator at this time we’d like to entertain any questions.

At this time, we’ll begin the question-and-answer session. (Operator Instructions) Our first question comes from Stephen Geyen from Stifel, Nicolaus. Please go ahead with your question. Stephen Geyen – Stifel Nicolaus: Hey, good morning, guys, and congratulations on the anniversary.

Thanks, Stephen. Stephen Geyen – Stifel Nicolaus: Maybe a question on credit, and I think Bob might have touched on this a little bit. When you move to the 12 quarter look-back period versus, I guess, it was 10 quarter before, is that the reason for the provision, the little bit higher provision this quarter versus the release or the provision benefit fourth quarter last year?

Yeah, Steve. That’s one of the contributing factors. There are a lot of moving parts, as you might imagine, with the loan-loss reserve methodology and calculation. But again, stressing the part that we wanted to take a continued conservative approach to our calculation of our reserve, we felt that to go back and grab two additional quarters on top of the two quarters we went back with in the third quarter to extend that look-back period was a prudent thing to do because of the nature of the recovery and some of the sluggishness that we continue to see in various segments of the economy, both locally and nationally. It was the right thing to do. And because of that, we expensed a provision of $300,000 during the quarter that had the effect of increase in our reserve percentage.

Yeah. And, Stephen, this is Chuck. If I can amplify Bob’s comment, if you go back to the negative provision of $3 million we had in the second quarter that was primarily driven by two events, obviously very positive events. One was we had a net recovery during that quarter of $1.7 million and then we also had an impaired loan that had a relatively large specific reserve that we collected, and we’re able to eliminate that specific reserve. So it was really those two prior period charge-off recovery and elimination of a relatively large specific reserve that really drove that $3 million number. Notwithstanding – excluding that, you can see that we’ve been very consistent. And again to echo Bob’s comments as to how we’ve handled the level of loan loss reserve and the result in provision expense.

And the third minor thing is – this is Mike, Steve, we’ll all chime in on this, I guess, is that we also during the course of the year and certainly during the fourth quarter looked ahead as far as we could to any potential TDR situations for the next year or two, and in any situations where we could or if we identified anything that was potentially that way, we made sure we provided for and anticipated that as well. So I think all those things that you just heard from three of us really contributed to having a slight provision for the quarter, but the word you can just take away from that is, again, conservative. We’ve been that way for the last few years and it’s really, really paying off as you can see in the numbers. Stephen Geyen – Stifel Nicolaus: Okay. All right. Great. And you talked a little bit about the current conditions in the market as far as pricing and maybe you just – if you can provide some color on maybe the terms and conditions in the market. Are you getting the personal guarantees on the credits that you’re adding? I think you had about $64 million in the quarter of new credits?

Yes. Yes, that is correct. We’re continuing to hold to our knitting as far as the structure not comprising at all. The things we’re looking at in terms of what we feel is a soundly risk based structure for credits. There are some of them in the market that are willing to go with some relaxed conditions in terms of structure and in those situation then we let pass, but we’re getting both pressures from the structure, but more so from the pricing standpoint at this point. Stephen Geyen – Stifel Nicolaus: And then last question, just kind of your outlook for maybe the first half of 2013 as far as potential for growing the loans, you talked a little bit about – to put it into context that you talked about the commercial real estate runoff in 2013, certainly that had some impact on loan growth. Do you anticipate that to continue in the – or excuse me that’s 2012, do you expect that to continue in the 2013 or is that kind of the restructuring of the loan portfolio mostly complete and we can anticipate a little more growth in 2013?

If you look at the make-up of the portfolio, there continue to be some real estate credits that being our choice or the customer finding more attractive terms moving out of the bank. And so, you’ll continue to see some of that in addition to normal portfolio run-off, but we do have a pretty healthy pipeline still. Obviously, we had some nice bookings in the fourth quarter, but lenders are out there and continue to develop those relationships and we’ve got some nice things teed up for the first quarter and hopefully for the first half of the year and to the rest of the year as well certainly. But it is very competitive out there and it’s hard to predict what the competition may or may not do regarding their appetite for our being more aggressive or more want to cut prices and to go with more skinny margin structure. That happens. And again, we’re holding to our knitting and we know what types of margins we have to get to contribute to our bottom line and we know what structure we want as well. And as the fourth quarter showed, we’ve been able to serve both of those categories, profitable loans margin standpoint, well structured loans and developed relationships that customers find value into the things we can offer as a community bank. Stephen Geyen – Stifel Nicolaus: Okay, thank you.

Our next question comes from John Barber from KBW. Please go ahead with your question. John Barber – KBW: Good morning, guys.

Good morning, John.

Good morning, John. John Barber – KBW: Just had a question on your other expenses. It was down to $2.1 million versus $2.6 million last quarter. Could you just talk about what drove that decline?

Yeah. There are several things in there. I think with any company, there’s various other overhead expenses that we kind of budget in straight line expense that on a even basis throughout the year. And as we get into the late third quarter and through the fourth quarter, we start showing that up in regards to what our actual cost will be. And when we looked at some of the things that we’re accruing, a couple of things come to mind, marketing and maybe some training. We’re probably a little too aggressive on our earlier accruals given how much money that we actually did spend during that period. So that’s what most of that is. It’s just some timing differences. It’s pretty cyclical for us. So you kind of see that every year as we go through. And certainly again, like our nature is on all things, we try to be conservative on our accruals during the earlier parts of the year to make sure we don’t get backwards on some of those things as we get towards the end of the year. John Barber – KBW: Thanks, Chuck. And I know it’s early in the quarter, but have you noticed any impact from the expiration of the TAG program?

No, it really wasn’t a huge issue. Certainly, we’ve had a lot of conservation – we’ve have some, excuse me, some conversations with some depositors over the years but we really didn’t see much money moving around from different accounts here and there from the beginning, so as we expected, no significant impact in regards to the TAG going away. John Barber – KBW: Okay. And as Stephen asked about loan growth, I just had a question on the timing in this fourth quarter. It looks like your average loans were down, but the EOP were up, so were most of the loans that you booked in the fourth quarter booked at the end of the quarter?

Yeah, right on. You got it perfect. Well, vast majority was booked in December. John Barber – KBW: Okay. And I guess, my last question was just a bank in Indiana recently expanded into Michigan. I’m sure you’re aware they purchased 20 branches from Bank of America. I’m just wondering if you could comment on how you expect that to impact the competitive landscape in your market?

Well, John, this is Mike. That particular transaction won’t have a lot of impact because, as you said, they were Bank of America purchases, Old National bought Bank of America branches in an area of Southwest Michigan really that we don’t do a lot in. But I think it’s a part of a larger equation that’s going on here. I think we’re going to see much more in the way of mergers and acquisitions in these types of branch, sales and transitions that could significantly impact the competitive landscape. And as in the past typically when there’s dislocation in any of the markets we’re in, we tend to benefit from it. So we’re certainly not fearful of it, but we are aware of that 2013 might be the year that we’ve been talking about for a couple of years now where we see more mergers and acquisitions and transactions like that. John Barber – KBW: Thanks for taking my questions.

You bet. Thank you.

(Operator Instructions) And our next question comes from Daniel Cardenas of Raymond James. Please go ahead with your question. Dan Cardenas – Raymond James: Good morning, guys.

Hi, Dan.

Hi, Dan. Dan Cardenas – Raymond James: A couple of questions here. Just kind of given the top line challenges that we’re seeing and some improvement that we saw on the expense side. I mean, is there any initiatives that you could talk about that could take place in 2013 in terms of additional cost cuts or cost saving initiatives?

Well, I’ll start with that, Dan, and certainly I’ll let Chuck and Bob add in on any of the areas that I might miss, because they are significant. But as far as expense reductions, we continue to be very, very optimistic, as we were a year ago about 2012. We are about 2013 as well because we saw some great reductions in things like FDIC expense. While that won’t certainly be to the level it was. We don’t expect any increase along those lines, but other more tangible things. We still see a great opportunity for us to reduce bad debt expense. That came down significantly for us in 2012. We see no reason, as you saw the massive reduction in NPAs we had during the fourth quarter, especially but certainly for the whole year, that should trend down fairly significantly in any of those types of related costs. We’ve been very judicious in the years past with salary increases, bonuses and that type of thing. We certainly increased those in 2012, but we don’t see the same percentage increase for 2013. So that should be well managed. And the rest of our expenses, pretty much like the history of this bank for the 15 years we’ve been around, whether the ties have been good or bad, we expect them to remain very, very well managed. Dan Cardenas – Raymond James: Okay. So, then as we look at efficiency ratio for you, guys, I mean, some good improvement on the sequential quarter basis and I think you guys are around the 66 percentage. Is that kind of where we should expect you to be or the mid-60s here for 2013?

Yes – go ahead, Chuck.

Yeah, Dan, this is Chuck. I think it really goes on – again, to echo Mike’s comments, really what’s going to be the driver of that change in any one degree is going to be the bad debt cost. Because like Mike said, we don’t expect any major changes in any other line items there. And we think the margin will stay relatively steady. And if we can get a little bit of growth like we think we can on the balance sheet, I would think mid to upper 60s is probably where we will come in during the year. Dan Cardenas – Raymond James: And then relating to the margin, I mean what are the leverage you can pull, I mean, obviously it looks like there still might be some room on the cost of fund side. Is it going to be more just debt reduction that helps you maintain a margin or what exactly is...

Yeah, obviously a lot of moving parts there. I think if we can go over the cost of funds first, probably the easier one, we still have some additional benefits with our cost of funds, especially here in the first quarter. We do have a relatively large volume of some higher cost in brokered CDs as well as some local CDs maturing here during the first quarter that will start getting the benefit of during the quarter and obviously a whole benefit in the second quarter. We certainly continue to look at local deposit rates. They are obviously very, very low already. But we were able to – during the course of 2012 and including – during the fourth quarter of 2012, we’re able to put some further, relatively small but meaningful reductions in local deposit rates that will start getting the full benefit of here in this quarter and obviously we’ll continue to take a look at that. So there are still some ability to lower that cost of funds as we go forward especially here in the first quarter, certainly not the degree that we saw two and three years ago. But we had a 10 basis point reduction if you take at the average earning assets during the fourth quarter and it was down 7 basis points before that and 8 basis points. So, I think somewhere in there we’ll see over the next couple of quarters. With regards to the yield on earning assets, we certainly feel pressures with the loan portfolio as well as securities portfolio. As I mentioned the loan portfolio, we’re booking some nice credits, some well very strong financially. They are deserving some relatively lower rates compared to what our average rate in our portfolio. We do have some fixed rate loans…

Yeah. That’s a good question, Dan. We get asked that a lot and we clearly are seeing more activity in the M&A area than we’ve seen in a long, long time and I think it’s healthy for the industry. One of the things that we’ve said consistently and we stick to that statement is that, we clearly make it well known that our number one goal is always organic growth but we are very happy that if the right M&A activity came along, we certainly would be well poised to consider it. And so, as we’ve said for throughout our 15 years, we are always open to those types of situations and because we’ve done we think a pretty darn good job of getting our balance sheet and income statement back in order, we’re well poised to take advantage of any of those opportunities that might come our way in 2013. Dan Cardenas – Raymond James: Okay, great. Thanks. Good quarter, guys.

Yeah. Thank you, Dan.

Thanks, Dan.

And at this time, I’m showing no additional questions. I’d like to turn the conference call back over to Mr. Price for any closing remarks.

Well, thank you very much. We have accomplished much in our first 15 years and although our team is justifiably proud of those achievements, we look forward to more and loftier milestones in the next 15 years. Our dedicated team is motivated to build on our success and we remain convinced in our longstanding relationship and proven excellence in community banking will serve us well as we continue on the path of achieving efficient and profitable growth. Thank you for joining us this morning and for your interest in our company. We look forward to talking with you again after our first quarter results. At this time, we – that finishes the call.

Ladies and gentlemen, the conference call has now concluded. We thank you for attending today’s presentation. You may now disconnect your telephone lines.