MERCANTILE BANK CORP Stock Compensation Disclosure
NOTE 10 – STOCK-BASED COMPENSATION
Stock-based compensation plans are used to provide directors and employees with an increased incentive to contribute to our long-term performance and growth, to align the interests of directors and employees with the interests of our shareholders through the opportunity for increased stock ownership and to attract and retain directors and employees. Stock-based compensation, reported as noninterest expense in the Consolidated Statements of Income, totaled $3.5 million, $3.3 million and $3.4 million in 2025, 2024 and 2023, respectively. The Stock Incentive Plan of 2023 that was approved by shareholders in May, 2023.
Under the Stock Incentive Plan of 2023, incentive awards may include, but are not limited to, stock options, restricted stock, stock appreciation rights and stock awards. Incentive awards that are stock options or stock appreciation rights are granted with an exercise price not less than the closing price of our common stock on the date of grant. Price, vesting and expiration date parameters are determined by Mercantile’s Compensation Committee on a grant-by-grant basis. No payments are required from employees for restricted stock awards. The restricted stock awards granted during the years 2023 through 2025 fully vest after three years and, in the case of performance-based restricted stock issued to executive officers in 2023 through 2025, are subject to the attainment of pre-determined performance goals. At year-end 2025, there were approximately 292,600 shares authorized for future incentive awards.
A summary of restricted stock activity during the year ended December 31, 2025 is as follows:
| Weighted | ||||||||
| Average | ||||||||
| Shares | Fair Value | |||||||
| Nonvested at beginning of year | 228,646 | $ | 35.84 | |||||
| Grants | 84,685 | 50.34 | ||||||
| Vested | (109,158 | ) | 32.10 | |||||
| Forfeited | (4,771 | ) | 42.70 | |||||
| Nonvested at end of year | 199,402 | $ | 43.31 | |||||
Of the restricted stock shares granted in 2025 and 2023, a total of 16,589 shares and 25,239 shares, respectively, are performance-based awards made to our Named Executive Officers at the target level and are subject to the attainment of pre-determined performance goals. There were no shares granted in 2024.
We periodically grant shares of common stock to our Corporate and Bank Board Directors for retainer payments with the related expense being recorded over the period of the Directors' service, as summarized below:
| Total Cost | |||||||||
| Grant Year | Shares Granted | (in thousands) | Covered Period | ||||||
| 2022 | 11,166 | $ | 359 | June 1, 2022 - May 31, 2023 | |||||
| 2023 | 11,529 | 350 | June 1, 2023 - May 31, 2024 | ||||||
| 2024 | 11,316 | 423 | June 1, 2024 - May 31, 2025 | ||||||
| 2025 | 10,007 | 444 | June 1, 2025 - May 31, 2026 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.