MERCANTILE BANK CORP, SB-2/A, 1998-07-09

MERCANTILE BANK CORP
SB-2/A, 1998-07-09
STATE COMMERCIAL BANKS

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As filed with the Securities and Exchange Commission on July 9, 1998

Registration No. 333-56773
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 1

FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MERCANTILE BANK CORPORATION
(Name of small business issuer in its charter)

Michigan 6712 38-3360865
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
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216 North Division Avenue
Grand Rapids, Michigan 49503
(616) 242-9000
(Address and telephone number of principal executive offices
offices and principal place of business or intended place of business)

GERALD R. JOHNSON, JR., CHAIRMAN
Mercantile Bank Corporation
216 North Division Avenue
Grand Rapids, Michigan 49503
(616) 242-9000
(Name, address, and telephone number of agent for service)

COPIES TO:

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JEROME M. SCHWARTZ DONALD J. KUNZ
Dickinson Wright PLLC Honigman Miller Schwartz and Cohn
500 Woodward Avenue, Suite 4000 2290 First National Building
Detroit, Michigan 48226-3425 Detroit, Michigan 48226-3583
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Approximate date of proposed sale to the public: As soon as practicable
after the Registration Statement becomes effective.

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A)
OF THE SECURITIES ACT OF 1933, MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JULY 9, 1998

PROSPECTUS

1,000,000 SHARES

MERCANTILE LOGO

COMMON STOCK
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Mercantile Bank Corporation, a Michigan corporation (the "Company"), is
offering for sale 1,000,000 shares of its Common Stock (the "Common Stock"). The
Company is a bank holding company which owns all of the common stock of
Mercantile Bank of West Michigan, a Michigan banking corporation located in
Grand Rapids, Michigan (the "Bank"). The Common Stock of the Company is
presently quoted on the OTC Bulletin Board under the symbol "MBWM." On July ,
1998, the last reported sales price for the Common Stock was $ . Roney
Capital Markets, a division of First Chicago Capital Markets, Inc. (the
"Underwriter"), has advised the Company that it anticipates continuing its
market making activities in the Common Stock, although there can be no assurance
that an active trading market will develop.

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THE COMMON STOCK OFFERED BY THIS PROSPECTUS INVOLVES A SIGNIFICANT AMOUNT OF
RISK. SEE "RISK FACTORS" COMMENCING ON PAGE 7 FOR CERTAIN CONSIDERATIONS
RELEVANT TO AN INVESTMENT IN THE COMPANY'S COMMON STOCK.

THESE SECURITIES ARE NOT SAVINGS ACCOUNTS OR SAVINGS DEPOSITS AND THEY ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<CAPTION>
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PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC(1) DISCOUNTS(1)(2) COMPANY(1)(3)
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Per Share.............................. $ $ $
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Total(1)............................... $ $ $
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(1) The Company has granted the Underwriter a 30-day option to purchase up to
150,000 additional shares of its Common Stock solely to cover
over-allotments, if any. If the Underwriter exercises such option in full,
the Price to Public, Underwriting Discounts and Proceeds to Company will be
approximately $ , $ and $ , respectively. See
"Underwriting."

(2) The Company has agreed to indemnify the Underwriter against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(3) Before deducting estimated offering expenses payable by the Company of
$200,000.
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The shares of Common Stock are offered by the Underwriter subject to prior
sale, when, as and if delivered to and accepted by the Underwriter, and subject
to the right of the Underwriter to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that delivery of the shares of
Common Stock will be made through the facilities of The Depository Trust Company
in New York, New York on or about , 1998, against payment in immediately
available funds.
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[RONEY CAPITAL LOGO]
THE DATE OF THIS PROSPECTUS IS , 1998.
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MAP

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FORWARD-LOOKING STATEMENTS

This Prospectus contains certain forward-looking statements and information
relating to the Company as well as assumptions made by the Company based on
information currently available to the Company. When used in this Prospectus,
words such as "believe," "anticipate," "intend," "goal," "expect" and similar
expressions may identify forward-looking statements. The Company cautions
prospective purchasers of the Common Stock that such statements are not
guarantees of future events. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, but not limited to, those set forth
under "Risk Factors." Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially and adversely from those described in this Prospectus as
anticipated, believed, estimated, expected or intended. The Company undertakes
no obligation to release publicly any revisions to these forward-looking
statements to reflect events or circumstances after the date of this Prospectus
or to reflect the occurrence of unanticipated events.

-------------------------

IN CONNECTION WITH THE OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SEE
"UNDERWRITING."

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY ENGAGE IN PASSIVE
MARKET MAKING TRANSACTIONS IN THE COMMON STOCK IN ACCORDANCE WITH RULE 103 OF
REGULATION M. SEE "UNDERWRITING."

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PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements appearing elsewhere in this Prospectus.
Unless the context clearly suggests otherwise, references in this Prospectus to
the Company include the Bank. Except as otherwise indicated, all information in
this Prospectus assumes no exercise of the Underwriter's over-allotment option.

THE COMPANY

Mercantile Bank Corporation (the "Company"), a Michigan corporation, is a
bank holding company owning all of the common stock of Mercantile Bank of West
Michigan (the "Bank"), a Michigan banking corporation. The Bank commenced
business on December 15, 1997. The Bank is headquartered in Grand Rapids,
Michigan and conducts business primarily in the Kent and Ottawa County areas of
West Michigan.

The Bank has a strong commitment to community banking and offers a wide
range of financial products and services, primarily for small- to medium-sized
businesses, as well as individuals. The Bank's lending strategy focuses on
commercial lending, and, to a lesser extent, residential and consumer lending.
The Bank offers a broad array of deposit products, including checking, savings,
and money market accounts, business checking, direct deposits and certificates
of deposit.

The Company has grown significantly since the Bank opened in December 1997.
At March 31, 1998, the Company had total assets of $93.1 million, total loans of
$76.1 million, total deposits of $75.4 million, no non-performing assets, and a
ratio of allowance for loan losses to total loans of 1.57%. For the quarter
ended March 31, 1998, the Company reported a net loss of $1.1 million, or $.76
per share, basic and diluted. These results include a provision for loan losses
of $998,000, which brings the allowance for loan losses to 1.57% of total loans
as of March 31, 1998. Management has established the allowance for loan losses
based on past industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions. At March 31, 1998, the Bank exceeded all
applicable regulatory capital requirements.

MARKET AREA

The Bank's primary service area is the Kent and Ottawa County areas of West
Michigan, which includes the City of Grand Rapids, the second largest city in
the State of Michigan. Kent County has a diverse economy based primarily on
manufacturing, retail and service businesses. According to available statistical
data, Kent County has approximately 14,000 business establishments, an
unemployment rate of approximately 3%, and a median household income that is
estimated to have grown approximately 40% from 1990 to 1996.

Kent County is a significant banking market in the State of Michigan.
According to available industry data, as of June 30, 1997, total deposits in
Kent County, including those of banks, thrifts and credit unions, were
approximately $7.5 billion.

The Bank's main office is located in downtown Grand Rapids, and serves as
the Company's corporate headquarters. The Company's address is 216 North
Division Avenue, Grand Rapids, Michigan 49503. The Company's telephone number is
(616) 242-9000.

MANAGEMENT AND BOARD OF DIRECTORS

The Company has assembled a management team and a Board of Directors that
have many years of combined experience in the Bank's market area and a shared
vision and commitment to the future growth and success of the Bank.

Gerald R. Johnson, Jr., Chairman and Chief Executive Officer of the Company
and the Bank, has over 27 years experience in the financial services industry,
including 24 years of banking experience. Mr. Johnson was appointed President
and Chief Executive Officer of FMB-First Michigan Bank-Grand Rapids ("FMB-Grand
Rapids") in 1986, and served as Chairman, President and Chief Executive Officer
from 1988 to May 1997, when he resigned to organize the Company. FMB-Grand
Rapids was a subsidiary of First Michigan Bank Corporation ("FMB"), a bank
holding company headquartered in Zeeland, Michigan with
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total assets of approximately $3.6 billion when it was acquired by Huntington
Bancshares, Inc. in October 1997. In the Grand Rapids market, prior to joining
FMB-Grand Rapids, Mr. Johnson was employed in various lending capacities by
Union Bank (now part of First Chicago NBD Corp.), Pacesetter Bank-Grand Rapids
(now part of Old Kent Financial Corp.), and Manufacturers Bank (now part of
Comerica Inc.).

Michael H. Price, President and Chief Operating Officer of the Company and
the Bank, has over 17 years of banking experience, most of which was with FMB
and its subsidiary FMB-Grand Rapids. Mr. Price has spent the majority of his
banking career in commercial lending. He held the offices of Senior Lending
Officer, Senior Vice President, and then President of FMB-Grand Rapids before
joining the Bank in the fall of 1997.

Mark S. Augustyn, Senior Vice President and Commercial Loan Officer of the
Bank, joined the Bank in December 1997, and has over seven years of commercial
lending experience with FMB-Grand Rapids.

Harold L. Drenten, Senior Vice President and Business Development Officer
of the Bank, joined the Bank in January 1998, and has over 28 years of
commercial banking experience, in various capacities, but primarily in the
business development area, with FMB-Grand Rapids.

Mark R. Hoffhines, Senior Vice President and Commercial Loan Officer of the
Bank, joined the Bank in January 1998, and has over 17 years of banking
experience, primarily in the Commercial Lending area, most recently with
FMB-Grand Rapids.

Robert B. Kaminski, Senior Vice President and Secretary of the Company and
the Bank, is responsible for credit and operations of the Bank. Mr. Kaminski
worked for FMB-Grand Rapids from 1984 to 1996 in various credit and loan review
positions and worked for FMB as chief credit manager for three subsidiary banks
from 1996 until June 1997, when he left FMB to assist in organizing the Company.

Gordon L. Oosting, Senior Vice President and Commercial Loan Officer of the
Bank, joined the Bank in December 1997, and has over 16 years of commercial
lending and related experience with NBD Bank and FMB-Grand Rapids.

Charles E. Christmas, Vice President of Finance, Treasurer and Compliance
Officer of the Company and the Bank, joined the Company in April 1998, and has
over ten years of experience working with financial institutions as a bank
examiner with the Federal Deposit Insurance Corporation ("FDIC").

Deborah A. Parrent, Vice President and Branch Administrator of the Bank,
joined the Bank in September 1997, and has over 16 years of banking experience,
primarily in branch management positions, with Great Lakes BanCorp and FMB-Grand
Rapids.

The Board of Directors is comprised of individuals with a broad background
in business, real estate, education and law. In addition to Messrs. Johnson and
Price, current directors include Betty Burton (business), Peter Cordes
(business), John Gill (business), David Hecht (law), Susan Jones (marketing and
advertising), Lawrence Larsen (business), Calvin Murdock (business), Dale Visser
(real estate), Don Williams, Jr. (education) and Robert Wynalda (business).
Messrs. Larsen and Visser, and Ms. Burton are former directors of FMB-Grand
Rapids.

Messrs. Johnson and Price, the other members of the Board of Directors and
the officers of the Bank represent a significant asset to the Company. These
individuals have many years of personal experience in the Bank's primary market
and, in some cases, have worked together successfully at another financial
institution. The directors and officers assembled by the Company represent a
wide range of business, banking and investment knowledge and experience. The
Company believes that these individuals and their relationships in the Kent and
Ottawa County areas of West Michigan offer the Bank a substantial opportunity to
attract new relationships.

BUSINESS STRATEGY

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is intended to reward its employees for generating quality loans and maximizing
long-standing customer relationships. The Bank has hired 27 people, most of whom
have prior banking experience, and many of whom have previously worked together.
The Bank's officers have an average of 17 years in the banking industry.

Emphasize Community Banking. The Bank strives to maintain a strong
commitment to community banking. Management encourages and expects all employees
to participate actively in local philanthropic activities and to build
relationships in the community. Through the development of such relationships,
the Bank's goal is to attract small- to medium-sized business owners and
employees as customers who wish to conduct business with a local community bank
that demonstrates an active and knowledgeable interest in their business and
personal affairs. Management believes that the Bank is better able than its
larger competitors to deliver more timely decisions, provide customized
financial products and services and offer customers the personal attention of
senior banking officers.

Emphasize Commercial Lending in the Company's Primary Market. The Company's
lending philosophy concentrates on commercial lending which represented 96.3% of
the Bank's loan portfolio as of March 31, 1998. The emphasis on commercial
lending results in higher average loan balances compared to residential or
consumer loans, which allows the Bank to generate a greater volume of loans with
fewer people thereby improving its efficiency. Also, the Bank's commercial loan
customers contribute to core deposit growth through demand deposit
relationships, which totaled $10.6 million as of March 31, 1998, and provide the
Bank with a cost-effective source of liquidity. This emphasis on commercial
lending is intended to capitalize on the significant experience of the Bank's
lending officers.

Evaluate Acquisition Opportunities. Management intends to evaluate merger
and acquisition opportunities which may arise in West Michigan to enhance the
Company's position or expand its markets. The Company has initiated no bank or
branch acquisitions to date. The Company presently has no agreements,
commitments, understandings or arrangements to acquire any other banks or
branches and there is no assurance that the Company will be successful in taking
advantage of any such opportunities.

THE OFFERING

Securities Offered by the
Company....................... 1,000,000 shares of Common Stock. In addition,
the Company has granted the Underwriter an
option to purchase up to an additional 150,000
shares to cover over-allotments. See
"Description of Capital Stock."

Common Stock Outstanding
Before the Offering(1)........ 1,495,000 shares.

Common Stock Outstanding After
the Offering(1)............... 2,495,000 shares (2,645,000 shares if the
over-allotment option is exercised in full).

Use of Proceeds by the
Company....................... Substantially all of the net proceeds received
by the Company from the shares it is selling in
the offering will be contributed to the Bank.
It is expected that the Bank will use the funds
to support growth in assets, fund investments
in loans and securities, and for general
corporate purposes. See "Use of Proceeds."

NASD OTC Bulletin Board
Symbol........................ "MBWM."
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(1) Excludes 130,000 shares reserved for issuance pursuant to options granted or
that may be granted pursuant to the Company's 1997 Employee Stock Option
Plan.

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SUMMARY OF SELECTED FINANCIAL DATA

The following selected consolidated financial and other data are derived
from the Company's financial statements and should be read with the Consolidated
Financial Statements and Notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations." The Consolidated
Balance Sheets as of December 31, 1997 and March 31, 1998 (Unaudited), and the
Consolidated Statements of Income for the period from July 15, 1997 (date of
inception) to December 31, 1997, and for the quarter ended March 31, 1998
(Unaudited), are included elsewhere in this Prospectus.

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<CAPTION>
AT OR FOR THE
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QUARTER ENDED PERIOD THROUGH
MARCH 31, DECEMBER 31,
1998 1997(1)
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(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
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FINANCIAL CONDITION
Total assets................................................ $ 93,075 $ 24,109
Loans....................................................... 76,141 12,887
Deposits.................................................... 75,384 9,688
Securities sold under agreements to repurchase.............. 5,088 655
Shareholders' equity........................................ 12,334 13,473
SHARE INFORMATION
Net (loss) per common share -- basic and diluted............ $ (.76) $ (.27)
Book value per common share................................. $ 8.25 $ 9.01
Average shares outstanding.................................. 1,495,000 1,495,000
Shares outstanding at end of period......................... 1,495,000 1,495,000
OPERATIONS
Interest income............................................. $ 1,179 $ 154
Interest expense............................................ 579 14
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Net interest income......................................... 600 140
Provision for loan losses(2)................................ 999 193
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Net interest loss after provision for loan losses........... (399) (53)
Total noninterest income.................................... 14 --
Total noninterest expense................................... 756 351
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Loss before federal income tax.............................. (1,142) (404)
Federal income tax expense.................................. -- --
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Net loss.................................................... $ (1,142) $ (404)
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(1) Bank operations began on December 15, 1997.

(2) Management has established the allowance for loan losses based on past
industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions.

Ratio information such as return on average assets and equity is not
presented as the growth of the Company during the periods presented results in
the calculated averages not being meaningful, and would distort ratios when
income and expense items are annualized. The allowance for loan losses has been
maintained at a level of 1.57% at March 31, 1998 and 1.50% at December 31, 1997.
The Company had one office location at March 31, 1998 and December 31, 1997.

RECENT DEVELOPMENTS

At June 30, 1998, the Company had total assets of $139.6 million, total
loans of $113.4 million, total deposits of $116.7 million, and no non-performing
assets. For the quarter ended June 30, 1998, the Company reported a net loss of
$294,624, or $.20 per share, basic and diluted. These results include a
provision for loan losses of $473,000, which brings the allowance for loan
losses to 1.47% of total loans as of June 30, 1998.

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RISK FACTORS

The Common Stock offered by this Prospectus involves significant risks. The
following constitute some of the potential risks of an investment in the Common
Stock and should be carefully considered by prospective investors prior to
purchasing shares of Common Stock. The order of the following is not intended to
be indicative of the relative importance of any described risk nor is the
following intended to be inclusive of all risks of investment in the Common
Stock.

LENDING RISKS

The risk of nonpayment of loans is inherent in commercial banking, and such
nonpayment, if it occurs, would likely have a material adverse effect on the
Company's earnings and overall financial condition as well as the value of the
Common Stock. Management attempts to minimize the Bank's credit exposure by
carefully monitoring the concentration of its loans within specific industries
and through prudent loan application and approval procedures, but there can be
no assurance that such monitoring and procedures will reduce such lending risks.
The Board of Directors has instituted individual lending authorizations that
delegate to Bank officers significant lending authority, currently as high as
$1.5 million. In addition, the Bank has a significant number of loans that reach
the Bank's in-house lending limit. Non-performance of such loans may result in
credit losses that have a material adverse effect on the Bank, and could cause
insolvency and failure of the Bank; in such event, the Company's shareholders
could lose their entire investment.

IMPACT OF INTEREST RATES AND ECONOMIC CONDITIONS

The results of operations for financial institutions, including the Bank,
may be materially and adversely affected by changes in prevailing economic
conditions, including declines in real estate market values, rapid changes in
interest rates and the monetary and fiscal policies of the federal government.
The Bank's profitability is in part a function of the spread between the
interest rates earned on investments and loans and the interest rates paid on
deposits and other interest-bearing liabilities. In the early 1990s, many
banking organizations experienced historically high interest rate spreads. More
recently, interest rate spreads have generally narrowed due to changing market
conditions and competitive pricing pressure, and there can be no assurance that
such factors will not continue to exert such pressure. Although economic
conditions in the Bank's market area have been generally favorable, there can be
no assurance that such conditions will continue to prevail. Substantially all
the Bank's loans are to businesses and individuals in the West Michigan area and
any decline in the economy of this area could have an adverse impact on the
Bank. Like most banking institutions, the Bank's net interest spread and margin
will be affected by general economic conditions and other factors that influence
market interest rates and the Bank's ability to respond to changes in such
rates. At any given time, the Bank's assets and liabilities will be such that
they are affected differently by a given change in interest rates. As a result,
an increase or decrease in rates could have a material adverse effect on the
Bank's net income, capital and liquidity. While management takes measures to
guard against interest rate risk, there can be no assurance that such measures
will be effective in minimizing the exposure to such risk.

LACK OF OPERATING HISTORY AND START-UP LOSSES

The Bank commenced business on December 15, 1997 and accordingly has a very
limited operating history. The business of the Company and the Bank is subject
to the risks inherent in operating a new business. As a result of the Company's
and the Bank's substantial start-up expenses and funding of the allowance for
loan losses, the Company and the Bank have to date operated at a loss. As a
result of year-to-date losses, the Company does not expect to be profitable for
its first full year of operations. While the Company expects to achieve
profitability during its second full year of operations, there can be no
assurance if and when the Company will attain profitability.

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DEPENDENCE ON KEY PERSONNEL

The Company is dependent on the continued service of Mr. Johnson, Chairman
of the Board and Chief Executive Officer of the Company and the Bank, Mr. Price,
President and Chief Operating Officer of the Company and the Bank, and other
members of management who have relationships with customers of the Bank. The
loss of any of these officers could have an adverse affect on the Company's
growth and performance. The Company and the Bank do not have employment
agreements with, or key man life insurance on the lives of, any of their
officers.

DISCRETION IN USE OF PROCEEDS

The purpose of the offering is to provide funds that the Company can
contribute to the Bank to support asset growth, fund investments in loans and
securities, and for general corporate purposes. Management, however, will retain
discretion in employing the proceeds of the offering. See "Use of Proceeds."

GOVERNMENT REGULATION AND MONETARY POLICY

The Company and the Bank are subject to extensive state and federal
government supervision and regulation. Existing state and federal banking laws
subject the Bank to substantial limitations with respect to loans, purchase of
securities, payment of dividends and many other aspects of its banking business.
There can be no assurance that future legislation or government policy will not
adversely affect the banking industry or the operations of the Bank. Federal
economic and monetary policy may affect the Bank's ability to attract deposits,
make loans and achieve satisfactory interest spreads. See "Supervision and
Regulation."

COMPETITION

The Company and the Bank face strong competition for deposits, loans and
other financial services from numerous banks, savings banks, thrifts, credit
unions and other financial institutions as well as other entities which provide
financial services, including consumer finance companies, securities brokerage
firms, mortgage brokers, insurance companies, mutual funds, and other lending
sources and investment alternatives. Some of the financial institutions and
financial services organizations with which the Bank competes are not subject to
the same degree of regulation as the Bank. Many of the financial institutions
and financial services organizations aggressively compete for business in the
Bank's market area. Most of these competitors have been in business for many
years, have customer bases, deposits and lending limits that are substantially
larger than those of the Bank, and are able to offer certain services that the
Bank does not currently provide, including branch networks, trust services and
international banking services. In addition, most of these entities have greater
capital resources than the Bank, which, among other things, may allow them to
price their services at levels more favorable to the customer and to provide
larger credit facilities than could the Bank. See "Business -- Competition."
Additionally, recently effective legislation regarding interstate branching and
banking may increase competition in the future from out-of-state banks.

NO ANTICIPATED DIVIDENDS

The Company has not paid dividends on its Common Stock and it is
anticipated that no dividends will be paid on the Common Stock for the
foreseeable future. The Company is largely dependent upon dividends paid by the
Bank for funds to pay dividends on the Common Stock, if and when such dividends
are declared. No assurance can be given that future earnings of the Bank, and
resulting dividends to the Company, will be sufficient to permit the legal
payment of dividends to Company shareholders at any time in the future. Even if
the Company may legally declare dividends, the amount and timing of such
dividends will be at the discretion of the Company's Board of Directors. The
Board may in its sole discretion decide not to declare dividends. These shares
should not be purchased by persons who need or desire dividend income from this
investment. For a more detailed discussion of other regulatory limitations on
the payment of cash dividends by the Company, see "Dividend Policy" and
"Supervision and Regulation."

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ANTI-TAKEOVER PROVISIONS

Chapters 7A and 7B of the Michigan Business Corporation Act ("MBCA")
provide certain supermajority vote and other requirements for certain business
combinations with interested shareholders and limit voting rights of certain
acquirers of control shares. Federal law requires the approval of the Board of
Governors of the Federal Reserve System (the "Federal Reserve") prior to
acquisition of "control" of a bank holding company. The Company's Articles of
Incorporation (i) provide for a Board of Directors that is divided into three
classes of directors, (ii) provide for removal of directors only for cause,
(iii) provide specific advance notice procedures for shareholders who wish to
nominate directors, (iv) prohibit shareholder action by written consent without
a meeting, and (v) require the affirmative vote of holders of at least 66 2/3
percent of the voting stock of the Company to change any of such provisions of
the Articles of Incorporation. These provisions may have the effect of delaying
or preventing a change in control of the Company without action by the
shareholders. As a result, these provisions could adversely affect the price of
the Common Stock by, among other things, preventing a shareholder of the
Company's Common Stock from realizing a premium which might be paid as a result
of a change in control of the Company. See "Description of Capital Stock."

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation and Bylaws provide for the
indemnification of its officers and directors and insulate its directors from
liability for certain breaches of the duty of care. It is possible that the
indemnification obligations imposed under these provisions could result in a
charge against the Company's earnings and thereby affect the availability of
funds for payment of dividends to the Company's shareholders. See "Description
of Capital Stock -- Indemnification of Directors and Officers."

LIMITED TRADING MARKET EXPECTED

The Underwriter has advised the Company that it intends to use reasonable
efforts to continue quotations of the Common Stock on the OTC Bulletin Board and
to act as a market maker in the Common Stock, subject to applicable laws and
regulatory requirements, although it is not obligated to do so. Making a market
in securities involves maintaining bid and ask quotations and being able, as
principal, to effect transactions in reasonable quantities at those quoted
prices, subject to various securities laws and other regulatory requirements.
The development and maintenance of a public trading market depends, however,
upon the existence of willing buyers and sellers, the presence of which is not
within the control of the Company or any market maker. Market makers on the OTC
Bulletin Board are not required to maintain a continuous two sided market, are
required to honor firm quotations for only a limited number of shares, and are
free to withdraw firm quotations at any time. Even with a market maker, factors
such as the limited number of the shares outstanding and the absence of a
reasonable expectation of dividends within the near future mean that there can
be no assurance of an active and liquid market for the Common Stock developing
in the foreseeable future. Even if a market develops, there can be no assurance
that a market will continue, or that shareholders will be able to sell their
shares at or above the price at which these shares are being offered to the
public. Purchasers of Common Stock should carefully consider the limited
liquidity of their investment in the shares being offered by this Prospectus.

DILUTION

In the period following the offering, the offering may have a near-term
dilutive effect on earnings per share and return on equity, because the proceeds
of the offering may be invested by the Bank in short-term investments at
comparatively low interest rates. The Company's long-term strategy is to use the
additional equity raised through the offering as a base to support asset growth
which is expected to enhance per share earnings and return on equity. However,
there is no assurance that the Company will be able to achieve such growth.

9
<PAGE> 11

YEAR 2000 PROBLEM

The Company is in the process of assessing the impact of the arrival of the
year 2000 on its computerized information systems and other electronic
equipment. The "year 2000 problem" is the result of abbreviating an applicable
year with two digits rather than four. As a result, computer programs and other
devices may interpret a date field of "00" as 1900 rather than 2000. Such a
miscalculation could lead to system malfunction or complete failure. The
Company's main data processing vendor has represented to the Company that it
will be year 2000 compliant by year 2000, and has provided updates on its
progress to the Company. In addition, the Company has begun an internal
evaluation of equipment and vendor supplied products. While this effort will
involve additional costs, the amount is not expected to have a material adverse
impact on the Company's financial position, results of operations, or cash flow
in future periods. However, if the Company (or its customers or vendors) are
unable to remedy the year 2000 problems in a timely manner, there could be a
material adverse effect on the Company's business.

NEED FOR TECHNOLOGICAL CHANGE

The banking industry is undergoing rapid technological changes with
frequent introductions of new technology-driven products and services. In
addition to better serving customers, the effective use of technology increases
efficiency and enables financial institutions to reduce costs. The Company's
future success will depend in part on its ability to address the needs of its
customers by using technology to provide products and services that will satisfy
customer demands for convenience as well as to create additional efficiencies in
the Bank's operations. Many of the Bank's competitors have substantially greater
resources to invest in technological improvements. Such technology may permit
competitors to perform certain functions at a lower cost than the Bank. There
can be no assurance that the Bank will be able to effectively implement new
technology-driven products and services or be successful in marketing such
products and services to its customers.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered by this Prospectus are estimated to be $ ($ if the
Underwriter's over-allotment option is exercised in full), after deduction of
the underwriting discounts, but before deducting estimated offering expenses of
$200,000.

The Company expects to contribute substantially all of the net proceeds of
the offering to the Bank. It is anticipated that the net proceeds received by
the Bank will be used to support asset growth, fund investments in loans and
securities, and for general corporate purposes.

The sources and uses of the proceeds from the offering are set forth below:

<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
(DOLLARS IN THOUSANDS) -------- ----------
<S> <C> <C>
Sources:
Sale of 1,000,000 shares of Common Stock.................. $ 100%
Uses:
Capital contribution to the Bank(1)....................... $ %
Underwriter's discounts................................... $ %
Offering expenses......................................... $ %
-------- ---
Total uses........................................... $ 100%
======== ===
</TABLE>

- -------------------------
(1) It is anticipated that the net proceeds received by the Bank will be used to
support asset growth, fund investments in loans and securities, and for
general corporate purposes.

10
<PAGE> 12

DIVIDEND POLICY

The Company expects that Company and Bank earnings, if any, will be
retained to finance the growth of the Company and the Bank and that no dividends
will be paid for the foreseeable future. After the Bank achieves profitability,
recovers its operating deficit, and funds an adequate reserve for loan and lease
losses, the Company may consider payment of dividends. The declaration of
dividends is at the discretion of the Board of Directors, and there is no
assurance that cash dividends will be declared at any time. If and when
dividends are declared, the Company will be largely dependent upon dividends
paid by the Bank for funds to pay dividends on the Common Stock.

Under Michigan law, the Bank will be restricted as to the maximum amount of
cash dividends it may pay on its Common Stock. A Michigan state bank may not
declare cash dividends except out of net profits then on hand after deducting
its losses and bad debts and then only if the bank will have a surplus amounting
to at least 20% of its capital after the payment of the dividend. If the surplus
of a Michigan state bank is at any time less than the amount of its capital,
before the declaration of a cash dividend or dividend in kind, it must transfer
to surplus not less than 10% of its net profits for the preceding half-year (in
the case of quarterly or semi-annual dividends) or the preceding two consecutive
half-year periods (in the case of annual dividends). The ability of the Company
and the Bank to pay cash dividends is also affected by various federal and state
regulatory requirements and policies, such as the requirement to maintain
adequate capital above regulatory guidelines. See "Supervision and Regulation."
Such requirements and policies may limit the Company's ability to obtain
dividends from the Bank for its cash needs, including funds for payment of
dividends by the Company and the payment of operating expenses.

MARKET FOR COMMON STOCK AND PRICE RANGE

The Common Stock of the Company is quoted on the OTC Bulletin Board of the
National Association of Securities Dealers, Inc. (the "NASD") under the ticker
symbol "MBWM." At May 20, 1998, there were approximately 65 record holders of
the Company's Common Stock. The Company has paid no dividends since its
formation in 1997.

The following table shows the high and low bid prices by quarter during the
period from the date of the Company's initial public stock offering (October 23,
1997) through June 30, 1998. The quotations reflect bid prices as reported by
the NASD, and do not include retail mark-up, mark-down or dealer commission.

BID PRICES

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
CALENDAR YEAR 1998
First Quarter............................................... $18.50 $10.25
Second Quarter.............................................. $19.00 $14.50
CALENDAR YEAR 1997
Fourth Quarter (October 23, 1997 through December 31,
1997)..................................................... $11.75 $ 9.75
</TABLE>

11
<PAGE> 13

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
March 31, 1998 on an actual unaudited basis, and as adjusted for the sale of the
1,000,000 shares of Common Stock offered hereby and the application of the
estimated net proceeds. See "Use of Proceeds."

<TABLE>
<CAPTION>
AT MARCH 31, 1998
----------------------------
HISTORICAL AS ADJUSTED
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) ---------- -----------
<S> <C> <C>
Shareholders' equity:
Preferred stock, no par value, 1,000,000 shares
authorized, none issued................................ -- --
Common Stock, no par value, 9,000,000 shares authorized,
1,495,000 shares issued and outstanding; 2,495,000
shares issued and outstanding as
adjusted(1)............................................ $13,881 $ (2)
Retained earnings (deficit)................................. (1,546) (1,546)
Net unrealized loss on securities available for sale........ (1) (1)
------- -------
Total shareholders' equity.................................. $12,334 $
======= =======
</TABLE>

- -------------------------
(1) Excludes 130,000 shares reserved for issuance pursuant to options granted or
that may be granted pursuant to the Company's 1997 Employee Stock Option
Plan.

(2) Net of underwriting discounts and $200,000 of offering expenses expected to
be paid by the Company.

12
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

<TABLE>
<CAPTION>
AT OR FOR THE
-------------------------------
QUARTER ENDED PERIOD THROUGH
MARCH 31, DECEMBER 31,
1998 1997(1)
------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C>
FINANCIAL CONDITION
Total assets................................................ $93,075 $24,109
Loans....................................................... 76,141 12,887
Deposits.................................................... 75,384 9,688
Securities sold under agreements to repurchase.............. 5,088 655
Shareholders' equity........................................ 12,334 13,473
SHARE INFORMATION
Net (loss) per common share -- basic and diluted............ $(.76) $(.27)
Book value per common share................................. $8.25 $9.01
Average shares outstanding.................................. 1,495,000 1,495,000
Shares outstanding at end of period......................... 1,495,000 1,495,000
OPERATIONS
Interest income............................................. $ 1,179 $ 154
Interest expense............................................ 579 14
--------- ---------
Net interest income......................................... 600 140
Provision for loan losses(2)................................ 999 193
--------- ---------
Net interest loss after provision for loan losses........... (399) (53)
Total noninterest income.................................... 14 --
Total noninterest expense................................... 756 351
--------- ---------
Loss before federal income tax.............................. (1,142) (404)
Federal income tax expense.................................. -- --
--------- ---------
Net loss.................................................... $(1,142) $ (404)
========= =========
</TABLE>

- -------------------------

(1) Bank operations began on December 15, 1997.

(2) Management has established the allowance for loan losses based on past
industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions.

13
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

Mercantile Bank Corporation was incorporated on July 5, 1997 as a bank
holding company to establish and own Mercantile Bank of West Michigan. The Bank
received all necessary regulatory approvals and began operations on December 15,
1997.

The following discussion compares the financial condition of the Company
and its wholly-owned subsidiary, the Bank, at March 31, 1998 to December 31,
1997, and discusses the results of operations for the three months ended March
31, 1998. This discussion should be read in conjunction with the interim
consolidated condensed financial statements and footnotes included herein.

SUMMARY

The net operating loss for the first quarter of $1.1 million ($.76 per
share) was primarily a result of a non-cash charge of $998,800 for provision for
loan losses. The remainder of the loss, or $142,777, consists of the excess of
salary and benefit expense, normal operating costs and amortization of start-up
expenses over net interest income. The loan loss provisions during the first
several months are significant as a percentage of income as management has
funded the allowance during the period the loans are booked. In a period of
significant loan growth, loan loss provisions will have a significant impact on
net income. Management has established the allowance for loan losses based on
past industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions. Loan loss provisions are an immediate
reduction to earnings. These provisions will also continue to reduce earnings,
although more moderately, as the anticipated rate of loan growth slows relative
to the size of the Company.

Payroll and other operating expenses should decline as a percentage of
income as the Company maintains its growth. It is anticipated that the
efficiency ratio, currently at 123.2%, should decrease as the Company continues
to grow and is able to more adequately absorb the current salary and benefit
expense and amortization of prior period organization and start-up costs.

Immediate and future plans for the remainder of 1998 include the near-term
implementation of telephone banking, which is currently in the testing phase, as
well as the introduction of PC banking to both retail and commercial customers
later in the year. It is management's opinion that the use of state-of-the-art
technology will offset some of the potential advantages that establishing branch
banking locations might provide. This is especially true if ATM kiosks are
strategically located throughout the Company's market area and used in
connection with and as an adjunct to available technology.

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Assets. During the first quarter of 1998, the assets of the Company
increased from $24.1 million on December 31, 1997 to $93.1 million on March 31,
1998. This represents an increase in total assets of $69.0 million, which was
comprised of a $2.2 million increase in cash and cash equivalents, a $3.5
million increase in investment securities, and a $62.3 million increase in net
loans. The increase in assets was funded by a $65.7 million growth in deposits,
and an increase of $4.4 million in repurchase agreements, partially offset by a
$1.1 million decrease in equity. The growth in deposits is the result of
increases both in core deposits and out-of-area certificates of deposit. While
management expects continued growth, it is anticipated that this growth will
occur at a slower rate.

Net Interest Income, Average Balances, Interest Rates and Yields. The
Company's asset growth was centered primarily in loans and investment securities
and funded by capital, deposits and repurchase agreements. The following table
provides a summary of the average balances of the significant asset and
liability categories as well as the interest income and expense and effective
yield/cost associated with each.

14
<PAGE> 16

Such yields and costs are derived by dividing income or expense by the average
daily balance of assets or liabilities, respectively, for the period presented.
During the period presented, there were no nonaccrual loans.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1998
------------------------------
AVERAGE INCOME/ EFFECTIVE
BALANCE EXPENSE YIELD/COST
(DOLLARS IN THOUSANDS) ------- ------- ----------
<S> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold and interest-bearing deposits with
banks.................................................. $ 2,699 $ 33 5.54%
Investment securities -- available for sale............... 6,464 97 5.83
Loans..................................................... 48,078 1,049 8.76
------- ------ ----
Subtotal interest-earning assets....................... 57,241 1,179 8.28
Other assets.............................................. 2,567
-------
Total assets........................................... $59,808
=======
INTEREST-BEARING LIABILITIES:
Interest-bearing deposits................................. $37,632 $ 550 6.00%
Other borrowings.......................................... 2,824 29 4.12
------- ------ ----
Subtotal interest-bearing liabilities.................. 40,456 579 5.87
Noninterest-bearing deposits.............................. 6,378
Other liabilities......................................... 106
Shareholders' equity...................................... 12,868
-------
Total liabilities and shareholders' equity............. $59,808
=======
Net interest income....................................... $ 600
======
Net interest rate spread.................................. 2.41%
====
Net interest margin on earning assets..................... 2.82%
====
</TABLE>

As can be seen from the above table, net interest income for the quarter
ended March 31, 1998 was approximately $600,000. As the average balances
increase in future periods, management anticipates net interest income will
increase.

Loans. Total loans at March 31, 1998 were $76.1 million compared to $12.9
million at December 31, 1997, an increase of $63.2 million or 490.8%. The
components of the outstanding balances and percentage increase in loans from the
end of 1997 to the end of the first quarter 1998 are as follows:

<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997 PERCENT
----------------- ----------------- INCREASE/
BALANCE PERCENT BALANCE PERCENT (DECREASE)
(DOLLARS IN THOUSANDS) ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Consumer loans................................. $ 1,877 2.5% $ 15 .1% 12,413.3%
Commercial, financial and other................ 23,497 30.9 7,433 57.7 216.1
Commercial real estate construction............ 1,888 2.5 -- -- N/A
Commercial real estate mortgages............... 47,956 63.0 5,421 42.1 784.6
Residential real estate mortgages.............. 923 1.2 18 .1 5,027.8
------- ----- ------- ----- --------
$76,141 100.0% $12,887 100.0% 490.8%
======= ===== ======= ===== ========
</TABLE>

At quarter-end, commercial loans comprised 96.3% of the total loan
portfolio. The significant concentration in commercial loans and the rapid
growth of this portion of the business is in keeping with the Company's stated
strategy of focusing a substantial amount of its efforts on commercial banking.
Corporate and business lending is an area of expertise for all of the Company's
senior management team. Commercial loans are also the assets most efficiently
originated and managed by the fewest number of staff, thus reducing overhead.
The Company believes that commercial loan relationships generate core deposits,
including interest free checking accounts. The Company anticipates future growth
of these deposits, and believes such growth will lower its

15
<PAGE> 17

reliance on other higher cost funding sources, including out-of-area deposits.
The commercial sector of the business generates the greatest amount of deposits,
and is virtually the Bank's only source of significant demand deposits.

Mortgage and consumer loans increased by $943,602 and $1.7 million,
respectively, from December 31, 1997 to March 31, 1998. As the extremely rapid
growth of the commercial loan portfolio gradually slows, the retail portion
(consumer loans and residential mortgages) of the loan assets may be expected to
increase as a percentage of total loans. However, the Company's strategy for
growth and profitability is expected to result in the commercial sector of the
lending efforts and resultant assets continuing to be the dominant portfolio
category.

Final loan maturities and rate sensitivity of the loan portfolio at March
31, 1998 are as follows:

<TABLE>
<CAPTION>
MATURING OR REPRICING PERIODS
----------------------------------------------
WITHIN 3 3-12 1-5 OVER 5
MONTHS MONTHS YEARS YEARS TOTAL
(DOLLARS IN THOUSANDS) -------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Consumer loans................................... $ 834 $ -- $ 661 $ 382 $ 1,877
Commercial, financial and other.................. 14,746 70 8,344 337 23,497
Commercial real estate construction.............. 1,270 -- 618 -- 1,888
Commercial real estate mortgages................. 14,580 209 32,587 580 47,956
Residential real estate mortgages................ 17 203 703 -- 923
------- ---- ------- ------ -------
$31,447 $482 $42,913 $1,299 $76,141
======= ==== ======= ====== =======
Loans at fixed rates............................. $ 40 $482 $42,913 $1,299 $44,738
Loans at variable interest rates................. 31,403 -- -- -- 31,403
------- ---- ------- ------ -------
$31,447 $482 $42,913 $1,299 $76,141
======= ==== ======= ====== =======
</TABLE>

Deposits. The components of the outstanding balances and percentage
increase in deposits from the end of 1997 to the end of the first quarter 1998
are as follows:

<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997 PERCENT
----------------- -------------------- INCREASE/
BALANCE PERCENT BALANCE PERCENT (DECREASE)
(DOLLARS IN THOUSANDS) ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
NONINTEREST-BEARING:
Demand....................................... $10,598 14.1% $7,208 74.4% 47.1%
INTEREST-BEARING:
Checking..................................... 1,617 2.1 213 2.2 659.2
Money market................................. 144 .2 -- -- N/A
Savings...................................... 11,908 15.8 2,089 21.6 470.0
Time, under $100,000......................... 32,129 42.6 178 1.8 17,948.3
Time, $100,000 and over...................... 18,988 25.2 -- -- N/A
------- ----- ------ ----- --------
$75,384 100.0% $9,688 100.0% 678.1%
======= ===== ====== ===== ========
</TABLE>

Total deposits were $75.4 million at March 31, 1998, compared to $9.7
million at prior year-end. Of this amount, $10.6 million, or approximately 14%,
were demand deposits. Out-of-area deposits, consisting primarily of $99,000
certificates obtained from depositors located outside the Company's market area
totaled $40.5 million, or approximately 53.7% of total deposits at quarter-end.
The reliance on out-of-area deposits declined during each month of the first
quarter, with new out-of-area deposit dollars acquired as follows: $18.8 million
in January 1998; $17.9 million in February 1998; and $3.7 million in March 1998.
While the Company's business plan anticipated the reliance on out-of-area
deposits in the early stages of the Bank's development, the Company's longer
term strategy for funding the Bank is to lower its reliance on out-of-area
deposits and increase core deposits from local businesses and consumers.

16
<PAGE> 18

In addition to deposits, the Company offers Business Investment Checking, a
combined sweep account repurchase agreement, included in liabilities on the
Company's balance sheet. The amount of the Bank's Business Investment Checking
increased from $655,447 on December 31, 1997 to $5.1 million on March 31, 1998.

NONINTEREST INCOME

Noninterest income totaled $14,000 for the quarter ended March 31, 1998. As
the Bank's customer base matures, management anticipates fee income (primarily
deposit service charges) to grow.

NONINTEREST EXPENSE

The primary components of noninterest expense include salaries and
benefits, occupancy, furniture and equipment and other expense. A substantial
portion of the management team, operating staff and premises and equipment were
in place upon commencement of operations. Such expenses totaled $401,500 for
salaries and benefits and $107,550 for premises and equipment for the quarter
ended March 31, 1998. The Bank continues to hire additional personnel and invest
in premises and equipment and anticipates these costs to increase modestly. The
Bank commenced business on December 15, 1997 with 16 employees and had 22
employees as of March 31, 1998.

FEDERAL INCOME TAX

Income tax expense is the sum of the current year income tax due or
refundable and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance has been
established to the extent of net deferred tax assets due to a lack of operating
performance to ensure that it is more likely than not it would be recovered.

CAPITAL

Total capital decreased from $13.4 million at December 31, 1997 to $12.3
million, a decrease of 8.45%. This decrease is a direct result of the loss for
the period of $1.1 million, partially offset by an improvement in unrealized
loss on securities available for sale.

LIQUIDITY

Asset liability management aids the Company in achieving reasonable and
predictable earnings and liquidity while maintaining a balance between interest
earning assets and interest bearing liabilities. Liquidity management involves
the ability to meet the cash flow requirements of the Company's customers. These
customers may be either borrowers needing to meet their credit needs or
depositors wanting to withdraw funds. Management of interest rate sensitivity
attempts to avoid widely varying net interest margins and to achieve consistent
net interest income through periods of changing interest rates.

The principal sources of liquidity for the Company are maturing securities,
federal funds sold, loan payments by borrowers, investment securities, and
deposit and deposit equivalent growth.

17
<PAGE> 19

The following table sets forth the amounts of interest-earning assets and
interest-bearing liabilities outstanding at March 31, 1998, which are expected
to mature or reprice in each of the time periods shown:

<TABLE>
<CAPTION>
MATURING OR REPRICING PERIODS
-------------------------------------------------
WITHIN 3 3-12 1-5 OVER 5
MONTHS MONTHS YEARS YEARS TOTAL
(DOLLARS IN THOUSANDS) -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INTEREST-EARNING ASSETS:
Federal funds sold........................... $ 400 $ -- $ -- $ -- $ 400
Securities available for sale................ 2,004 4,492 -- -- 6,496
Total loans.................................. 31,447 482 42,913 1,299 76,141
------- -------- ------- ------- -------
33,851 4,974 42,913 1,299 83,037
INTEREST-BEARING LIABILITIES:
Savings and money market..................... 13,669 -- -- -- 13,669
Time deposits under $100,000................. 178 11,996 19,952 -- 32,126
Time deposits $100,000 and over.............. 1,577 14,745 2,666 -- 18,988
Other borrowings............................. 5,088 -- -- -- 5,088
------- -------- ------- ------- -------
20,512 26,741 22,618 -- 69,871
------- -------- ------- ------- -------
Net asset (liability) gap...................... $13,339 $(21,767) $20,295 $ 1,299 $13,166
======= ======== ======= ======= =======
Cumulative net asset (liability) gap........... $13,339 $ (8,428) $11,867 $13,166
======= ======== ======= =======
</TABLE>

The increase in investment securities was necessitated by additional
requirements for liquidity resulting from strong loan growth as well as the need
for collateral to support the Bank's combined sweep account and repurchase
agreement product. All marketable securities are classified as "available for
sale."

Management has concluded, based on current growth projections, that the
Bank is likely to have adequate funds to meet its cash requirements for at least
the next year.

DECEMBER 31, 1997

The Bank experienced significant growth in its loan portfolio during the
first 16 days of operations from December 15, 1997 to December 31, 1997. As of
December 31, 1997, the Company had a retained deficit of $404,071. This retained
deficit was primarily the result of pre-opening fees and expenses totaling
approximately $178,000 as well as $193,300 in provision expense to establish the
allowance for loan losses at a level of 1.50% of total loans. As of December 31,
1997, the Bank had total loans of $12.9 million and total assets of $24.1
million.

BUSINESS

THE COMPANY

The Company was incorporated as a Michigan corporation on July 15, 1997.
The Company was formed to acquire all of the Bank's capital stock and to engage
in the business of a bank holding company under the federal Bank Holding Company
Act of 1956, as amended (the "BHCA"). In October 1997, in connection with the
organization of the Company and the Bank, the Company sold 1,495,000 shares of
its Common Stock in an underwritten, initial public offering, at a price to the
public of $10 per share. The Company funded the capital of the Bank and paid
certain expenses from the net proceeds of the public offering.

The Bank is a Michigan banking corporation that commenced business on
December 15, 1997. The Bank has a strong commitment to community banking and
offers a wide range of financial products and services, primarily for small- to
medium-sized businesses, as well as individuals. The Bank's lending strategy
focuses on commercial lending, and, to a lesser extent, residential and consumer
lending. The Bank also offers a broad array of deposit products, including
checking, savings, and money market accounts, business checking, direct deposits
and certificates of deposit.

18
<PAGE> 20

The Company has grown significantly since the Bank opened in December 1997.
At March 31, 1998, the Company had total assets of $93.0 million, total loans of
$76.0 million, total deposits of $75.9 million, no non-performing assets, and a
ratio of allowance for loan losses to total loans of 1.57%. For the quarter
ended March 31, 1998, the Company reported a net loss of $1.1 million, or $.76
per share, basic and diluted. These results include a provision for loan losses
of $998,000, which brings the allowance for loan losses to 1.57% of total loans
as of March 31, 1998. Management has established the allowance for loan losses
based on past industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions. At March 31, 1998, the Bank exceeded all
applicable regulatory capital requirements.

MARKET AREA

BUSINESS STRATEGY

Recruit and Retain Highly Qualified Personnel. Management's strategy
focuses on investing in experienced community banking personnel and empowering
these employees to make decisions and to resolve customer problems as a means of
providing outstanding customer service. The Bank's compensation structure is
intended to reward its employees for generating quality loans and maximizing
long-standing customer relationships. The Bank has hired 27 people, most of whom
have prior banking experience, and many of whom have previously worked together.
The Bank's officers have an average of 17 years in the banking industry.

Emphasize Community Banking. The Bank strives to maintain a strong
commitment to community banking. Management encourages and expects all employees
to participate actively in local philanthropic activities and to build
relationships in the community. Through the development of such relationships,
the Bank's goal is to attract small- to medium-sized business owners and
employees as customers who wish to conduct business with a local community bank
that demonstrates an active and educated interest in their business and personal
affairs. Management believes that the Bank is better able than its larger
competitors to deliver more timely decisions, provide customized financial
products and services and offer customers the personal attention of senior
banking officers.

19
<PAGE> 21

commitments, understandings or arrangements to acquire any other banks or
branches and there is no assurance that the Company will be successful in taking
advantage of any such opportunities.

MARKETING PLAN

The Bank's marketing plan focuses on the concepts of corporate citizenship
and personal interaction within the communities the Bank serves through
promotion of, and active participation in, a number of civic organizations and
ongoing community activities. Management believes that these efforts establish
the identity and philosophy of the Bank within the communities it serves and
allow Bank officers and employees to personally interact with local business
leaders and members of the public. The marketing plan also emphasizes direct
sales calls by Bank officers. Management believes that the experience and
expertise of the Bank's senior officers allow the Bank to differentiate itself
from its competition.

The Bank's primary target is small- to medium-sized businesses, their
owners, management and employees. The Bank positions itself as a
relationship-oriented bank and strives to sell a full complement of financial
services to each of its customers.

Business Financial Services. The Bank's business calling efforts are
directed by Mr. Price, the President and Chief Operating Officer of the Bank,
whose duties include administering and coordinating the Bank's business
development efforts.

Each Bank officer is responsible for creating new business opportunities
for the Bank. The targeted list of new business customers represents a mix of
industrial, manufacturing, professional and retail clients with an emphasis on
businesses with credit needs of $5 million or less.

The Bank has an aggressive calling program based in part on the extensive
knowledge of the market possessed by the officers making contact with the
customers. The Bank also relies on a strong referral system from lawyers,
accountants and other professionals, many of whom are well known to officers of
the Bank. The Bank regularly hosts "after hours" receptions for accounting and
law firms to develop or nurture business contacts and relationships.

Consumer Financial Services. The Bank originates residential real estate
loans through its main office. Bank officers and mortgage loan originators
develop new residential mortgage applications from several sources including
real estate brokers, insurance agents, accountants, attorneys, existing
residential mortgage customers and other customers of the Bank. An extensive
selling effort generates potential customers as a result of these contacts.

The Bank, as a result of its secondary market operations, is able to offer
a variety of loan products that serve the needs of first-time home buyers by
providing five percent down payment loans and loans with no points. Customers
desiring to construct new homes are able to obtain financing as a result of the
Bank's construction loan program that is offered in addition to permanent loans.

The Bank has developed its own home equity loan, debit card and credit card
programs. The credit card transactions are processed for the Bank by an outside
service provider.

Management believes that cross-selling of the Bank's products and services
to its existing customers is vital to expanding account relationships,
generating additional sales opportunities and increasing fee income.

LOAN POLICY

As a routine part of the Bank's business, the Bank makes loans to
individuals and businesses located within the Bank's market area. The loan
policy of the Bank states that the function of the lending operation is twofold:
to provide a means for the investment of funds at a profitable rate of return
with an acceptable degree of risk, and to meet the credit needs of the
creditworthy businesses and individuals who are customers of the Bank. However,
the Board of Directors of the Bank recognizes that in the normal business of
lending, some losses on loans will be inevitable and should be considered a part
of the normal cost of doing business.

20
<PAGE> 22

The Bank's loan policy anticipates that priorities in extending loans will
change from time to time as interest rates, market conditions and competitive
factors change. The policy sets forth guidelines on a nondiscriminatory basis
for lending in accordance with applicable laws and regulations. The policy
describes various criteria in granting loans, including the ability to pay; the
character of the customer; evidence of financial responsibility; purpose of the
loan; knowledge of collateral and its value; terms of repayment; source of
repayment; payment history; and economic conditions.

The Company's Board of Directors has delegated significant lending
authority to officers of the Bank. The Board of Directors believes this
empowerment makes the Bank more responsive to its customers. The loan policy
currently specifies lending authority for certain officers up to $1.0 million,
and $1.5 million for the Chairman of the Board and President. Loan requests
exceeding $1.5 million, up to the legal lending limit of approximately $3.3
million, require approval by the Board of Directors. Generally, the Bank applies
an in-house lending limit that is less than the legal lending limit. Following
the completion of the offering, the Bank expects that these lending
authorizations and limits will be increased.

The loan policy also limits the amount of funds that may be loaned against
specified types of collateral. For certain loans secured by real estate, the
policy requires an appraisal of the property offered as collateral by a state
certified independent appraiser. The policy also provides general guidelines for
loan to value limits for other types of collateral. In addition, the loan policy
provides general guidelines as to collateral, provides for environmental policy
review, contains specific limitations with respect to loans to employees,
executive officers and directors, provides for problem loan identification,
establishes a policy for the maintenance of a loan loss reserve, provides for
loan reviews and sets forth policies for mortgage lending and other matters
relating to the Bank's lending practices.

LENDING ACTIVITY

Commercial Loans. The Bank's commercial lending group originates commercial
loans primarily in the Kent and Ottawa County areas of West Michigan. Commercial
loans are originated by six lenders, including the President and the Chairman.
The lending group has over 90 years of combined commercial lending experience.
Loans are originated for general business purposes, including working capital,
accounts receivable financing, machinery and equipment acquisition, and
commercial real estate financing including new construction and land
development.

Working capital loans are often structured as a line of credit and are
reviewed periodically in connection with the borrower's year end financial
reporting. These loans generally are secured by all of the assets of the
borrower, and have an interest rate tied to the national prime rate. Loans for
machinery and equipment purposes typically have a maturity of five to seven
years and are fully amortizing. Commercial real estate loans are usually written
with a five year maturity and amortized over a 15 year period. Commercial real
estate loans may have an interest rate that is fixed to maturity or float with a
margin over the prime rate or an U.S. Treasury Index.

The Bank evaluates many aspects of a commercial loan transaction in order
to minimize credit and interest rate risk. Underwriting includes an assessment
of management, products, markets, cash flow, capital, income and collateral. The
analysis includes a review of historical and projected financial results.
Appraisals are required by certified independent appraisers who are well known
to the Bank on certain transactions where real estate is the primary collateral,
and in some cases, where equipment is the primary collateral. In certain
situations, for creditworthy customers, the Bank may accept title reports
instead of requiring lenders' policies of title insurance.

Commercial real estate lending involves more risk than residential lending,
because loan balances are greater and repayment is dependent upon the borrower's
operation. The Bank attempts to minimize risk associated with these transactions
by generally limiting its exposure to owner operated properties of well-known
customers or new customers with an established profitable history. In many
cases, risk is further reduced by (i) limiting the amount of credit to any one
borrower to an amount less than the Bank's legal lending limit, and (ii)
avoiding certain types of commercial real estate financings.

21
<PAGE> 23

Single-Family Residential Real Estate Loans. The Bank originates
residential real estate loans in its market area according to secondary market
underwriting standards. These loans provide borrowers with a fixed or adjustable
interest rate with terms up to 30 years. Loans are sold on a servicing released
basis in the secondary market with all interest rate risk and credit risk passed
to the purchaser. The Bank from time to time may elect to underwrite certain
residential real estate loans, generally with maturities of five years or less,
to be held in its own loan portfolio.

Consumer Loans. The Bank originates consumer loans for a variety of
personal financial needs. Consumer loans include home equity lines of credit,
new and used automobiles, boat loans, credit cards and overdraft protection for
checking account customers.

Consumer loans generally have shorter terms and higher interest rates than
residential mortgage loans and, except for home equity lines of credit, usually
involve more credit risk than mortgage loans because of the type and nature of
the collateral. While the Bank does not utilize a formal credit scoring system,
the Bank believes its loans are underwritten carefully, with a strong emphasis
on the amount of the down payment, credit quality, employment stability and
monthly income. These loans are generally repaid on a monthly repayment schedule
with the source of repayment tied to the borrower's periodic income. In
addition, consumer lending collections are dependent on the borrower's
continuing financial stability, and are thus likely to be adversely affected by
job loss, illness and personal bankruptcy. In many cases, repossessed collateral
for a defaulted consumer loan will not provide an adequate source of repayment
of the outstanding loan balance because of depreciation of the underlying
collateral. The Bank believes that the generally higher yields earned on
consumer loans compensate for the increased credit risk associated with such
loans and that consumer loans are important to its efforts to serve the credit
needs of the communities and customers that it serves.

INVESTMENTS

The principal investment of the Company is its investment in the common
stock of the Bank. Funds retained by the Company from time to time may be
invested in various debt instruments, including but not limited to obligations
of or guaranteed by the United States, general obligations of a state or
political subdivision or agency thereof, bankers' acceptances or certificates of
deposit of United States commercial banks, or commercial paper of United States
issuers rated in the highest category by a nationally-recognized investment
rating service. Although the Company is permitted to make limited portfolio
investments in equity securities and to make equity investments in subsidiary
corporations engaged in certain non-banking activities which may include real
estate-related activities, such as mortgage banking, community development, real
estate appraisals, arranging equity financing for commercial real estate, and
owning and operating real estate used substantially by the Bank or acquired for
its future use, the Company has no present plans to make any such equity
investment. The Company's Board of Directors may alter the Company's investment
policy without shareholder approval.

The Bank may invest its funds in a wide variety of debt instruments and may
participate in the federal funds market with other depository institutions.
Subject to certain exceptions, the Bank is prohibited from investing in equity
securities. Under one such exception, in certain circumstances and with the
prior approval of the FDIC, the Bank could invest up to 10% of its total assets
in the equity securities of a subsidiary corporation engaged in certain real
estate related activities. The Bank has no present plans to make such an
investment. Real estate acquired by the Bank in satisfaction of or foreclosure
upon loans may be held by the Bank, subject to a determination by a majority of
the Bank's Board of Directors at least annually of the advisability of retaining
the property, for a period not exceeding 60 months after the date of
acquisition, or such longer period as the Commissioner of the Financial
Institutions Bureau of the Michigan Department of Consumer & Industry Services
("FIB") may approve. The Bank is also permitted to invest an aggregate amount
not in excess of two-thirds of the capital and surplus of the Bank in such real
estate as is necessary for the convenient transaction of its business. The Bank
has no present plans to make any such investment. The Bank's Board of Directors
may alter the Bank's investment policy without shareholder approval.

22
<PAGE> 24

COMPETITION

The Company and the Bank face strong competition for deposits, loans and
other financial services from numerous banks, savings banks, thrifts, credit
unions and other financial institutions as well as other entities which provide
financial services, including consumer finance companies, securities brokerage
firms, mortgage brokers, insurance companies, mutual funds, and other lending
sources and investment alternatives. Some of the financial institutions and
financial service organizations with which the Bank competes are not subject to
the same degree of regulation as the Bank. Many of the financial institutions
and financial service organizations aggressively compete for business in the
Bank's market area. Most of these competitors have been in business for many
years, have customer bases, deposits and lending limits that are substantially
larger than those of the Bank, and are able to offer certain services that the
Bank does not currently provide, including branch networks, trust services and
international banking services. In addition, most of these entities have greater
capital resources than the Bank, which, among other things, may allow them to
price their services at levels more favorable to the customer and to provide
larger credit facilities than could the Bank. Additionally, recently effective
legislation regarding interstate branching and banking may increase competition
in the future from out-of-state banks.

LEGAL PROCEEDINGS

From time to time, the Company and the Bank may be involved in various
legal proceedings that are incidental to their business. In the opinion of
management, neither the Company nor the Bank is a party to any current legal
proceedings that are material to the financial condition of the Company or the
Bank, either individually or in the aggregate.

EMPLOYEES

As of May 31, 1998, the Bank had 25 full-time and 2 part-time employees,
including 12 officers and 15 customer service, operations and other support
persons. The Company expects to add several additional employees during the next
12 months. Management believes that the Bank's relations with its employees are
good.

BANK PREMISES

The Bank is leasing a one-story building in downtown Grand Rapids, Michigan
for use as the Bank's main office and the Company's headquarters. This building
is of masonry construction and has approximately 11,000 square feet of usable
space. The Company expects that this space will be adequate for the remainder of
1998, and may consider leasing additional space in 1999. The lease for the
Bank's office has an initial term of ten years and the Bank has four, five-year
renewal options. The monthly lease payments begin at $12,487 per month in the
first year and increase each year during the term of the lease by the greater of
the annual percentage increase in the Consumer Price Index or 3%. In addition,
the Bank is required to make payments for taxes, insurance and other operating
expenses. The Bank has expended approximately $725,000 for tenant improvements
and related architectural and engineering services, and additional funds for
furniture, fixtures and other equipment.

The Bank's office is located at 216 North Division Avenue between Lyon
Street and Michigan Street in downtown Grand Rapids, Michigan. The building is
one of a few available locations in downtown Grand Rapids with on-site parking.
The parking consists of approximately 24 spaces, with no parking meters.

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<PAGE> 25

MANAGEMENT

INFORMATION ABOUT DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information about the directors and
executive officers of the Company:

<TABLE>
<CAPTION>
NAME, AGE, AND POSITION WITH HAS SERVED AS YEAR WHEN TERM AS A
THE COMPANY AND THE BANK DIRECTOR SINCE DIRECTOR EXPIRES
- ------------------------------------------------------------ -------------- -------------------
<S> <C> <C>
Betty S. Burton, 56, Director............................... 1998 1999
Peter A. Cordes, 57, Director............................... 1997 1999
C. John Gill, 64, Director.................................. 1997 2001
David M. Hecht, 61, Director................................ 1997 1999
Gerald R. Johnson, Jr., 51, Chairman of the Board, Chief
Executive Officer and Director............................ 1997 2001
Susan K. Jones, 49, Director................................ 1998 2000
Lawrence W. Larsen, 58, Director............................ 1997 2000
Calvin D. Murdock, 59, Director............................. 1997 2001
Michael H. Price, 41, President, Chief Operating Officer and
Director.................................................. 1997 2000
Dale J. Visser, 62, Director................................ 1997 2000
Donald Williams, Sr., 61, Director.......................... 1998 2001
Robert M. Wynalda, 62, Director............................. 1997 1999
Robert B. Kaminski, 36, Senior Vice President and
Secretary................................................. -- --
Charles E. Christmas, 32, Vice President of Finance and
Treasurer................................................. -- --
</TABLE>

The members of the Board of Directors of the Company are divided into three
classes, each class to be as nearly equal in number as possible, with each class
to serve a three-year term. The entire Board of Directors of the Bank is elected
annually by its shareholder, the Company. Officers of the Company and the Bank
are elected annually by their respective Boards of Directors and perform such
duties as are prescribed in the Bylaws or by the Board of Directors.

The business experience of each of the directors and executive officers of
the Company for at least the past five years is summarized below:

BETTY S. BURTON (Director). Ms. Burton is President and Chief Executive
Officer of Wonderland Business Forms, Inc. She has held director positions at
First Michigan Bank and Butterworth Hospital. She is active in the Grand Rapids
community, working with the City of Grand Rapids International Relations
Committee, the Children's Museum, Grand Rapids Foundation Distribution
Committee, and Grand Rapids Urban League as well as other organizations.
Further, she has authored numerous papers on Diversity and Women in the Work
Place and frequently speaks to school age children (kindergarten through 12th)
on topics such as "The World of Work," "Entrepreneurship," and "African American
History and Current Events." Ms. Burton resides in Grand Rapids, MI.

PETER A. CORDES (Director). Mr. Cordes has served as President and Chief
Executive Officer of GWI Engineering Inc. ("GWI") of Grand Rapids, Michigan
since 1991. GWI is engaged in the manufacturing of industrial automation systems
for customers in a variety of industries in the Midwest. Mr. Cordes purchased
GWI in 1991 and is now sole owner. Mr. Cordes is a 1966 graduate of St. Louis
University with a degree in aeronautics. He is a native of Traverse City,
Michigan and has spent the last eighteen years in West Michigan.

C. JOHN GILL (Director). Mr. Gill is the retired Chairman of the Board and
one of the owners of Gill Industries of Grand Rapids, Michigan. Mr. Gill served
as Chairman of Gill Industries from 1994 through 1997, and served as President
of Gill Industries from 1983 through 1993. Gill Industries is a manufacturing
company involved with sheet metal stampings and assemblies for the automotive
and appliance industries. Mr. Gill is a native of Lakeview, Michigan.

DAVID M. HECHT (Director). Mr. Hecht has practiced law for 37 years,
including the past 25 years in Grand Rapids. For more than the past five years
he has been the Chairman of the Grand Rapids law firm of

24
<PAGE> 26

Hecht & Lentz and is a founder of such firm. Mr. Hecht is a native of Grand
Rapids and a graduate of the University of Michigan and the University of
Wisconsin. He is the President of the Charles W. Loosemore Foundation, a Trustee
of the Grand Valley University Foundation and a Director of Hospice Foundation
of Greater Grand Rapids.

GERALD R. JOHNSON, JR. (Chairman of the Board, Chief Executive Officer and
Director). Mr. Johnson has over 27 years experience in the financial services
industry, including 24 years of commercial banking experience. Mr. Johnson was
appointed President and Chief Executive Officer of FMB-Grand Rapids in 1986, and
served as Chairman, President and Chief Executive Officer from 1988 to May 1997,
when he resigned to organize the Company. In the Grand Rapids market, prior to
joining FMB-Grand Rapids, Mr. Johnson was employed in various lending capacities
by Union Bank (now part of First Chicago NBD), Pacesetter Bank-Grand Rapids (now
part of Old Kent) and Manufacturers Bank (now part of Comerica Bank). Mr.
Johnson has been involved in charitable and community activities for many years.
He currently serves as Chairman of the Board of the Downtown YMCA, Chairman of
Residential Treatment of West Michigan, and is a board member of Life Guidance
Services and the American Heart Association of Greater Grand Rapids. Mr. Johnson
is also affiliated with the Economic Development Foundation, Grand Rapids Rotary
Club, Junior League of Grand Rapids, Project Rehab and Michigan Trails Girl
Scout Council. Mr. Johnson also has past affiliations with Hope Network, and the
Grand Rapids Area Chamber of Commerce where he was a board member for six years.

SUSAN K. JONES (Director). Ms. Jones is both a partner of the Callahan
Group, LLC and a tenured, full-time Associate Professor of Marketing at Ferris
State University in Big Rapids, Michigan. She began her firm in 1980, and joined
Ferris State in the fall of 1990. She enjoys an active volunteer career,
currently serving as secretary of the Arts Council of Greater Grand Rapids, as a
member of the Northwestern Alumni Association board, and as the West Michigan
Alumni Admissions Council Chair for Northwestern University. She is a
past-president of the Junior League of Grand Rapids, a graduate of Leadership
Grand Rapids, and currently serves as Vice President-Elect of Communications of
the West Michigan American Marketing Association, and as a trustee of the
Chicago Association of Direct Marketing Educational Foundation. She is a
resident of East Grand Rapids, Michigan.

LAWRENCE W. LARSEN (Director). Mr. Larsen is Chief Executive Officer,
President, and owner of Central Industrial Corporation of Grand Rapids,
Michigan. He began his employment with the company in 1967, and purchased it in
1975. Central Industrial Corporation is a wholesale distributor of industrial
supplies. Mr. Larsen is also an owner and director of Jet Products, Inc. of West
Carrollton, Ohio. Jet Products, Inc. designs, manufactures and sells hose reels
and related hydraulic products. Mr. Larsen is a native of Wisconsin. He has
spent the last 31 years in the Grand Rapids area. Mr. Larsen is an active
supporter of the Catholic secondary schools system in Grand Rapids. Mr. Larsen
served as a director of FMB-Grand Rapids from 1980 until June 1997, and was a
member of the Executive Loan Committee and the Audit Committee.

CALVIN D. MURDOCK (Director). Mr. Murdock is President of SF Supply ("SF")
of Grand Rapids, Michigan. He has held this position since 1994. From 1992 to
1994, he served as the General Manager of SF, and in 1991, served as SF's
Controller. SF is a wholesale distributor of commercial and industrial
electronic, electrical and automation parts, supplies and services. Mr. Murdock
is a Michigan native and a graduate of Ferris State University with a degree in
accounting. Prior to joining SF, Mr. Murdock owned and operated businesses in
the manufacturing and supply of automobile wash equipment.

MICHAEL H. PRICE (President and Chief Operating Officer). Mr. Price has
over 17 years of commercial banking experience, most of which was with FMB and
its subsidiary FMB-Grand Rapids. Spending most of his banking career in
commercial lending, Mr. Price was the Senior Lending Officer, then President of
FMB -- Grand Rapids before joining the Bank. Mr. Price has been and continues to
be very active in the Grand Rapids community. He currently serves as the Vice
Chairman of Project Rehab's Board of Directors.

DALE J. VISSER (Director). Mr. Visser is Chairman and one of the owners of
Visser Brothers Inc. of Grand Rapids, Michigan. He has served this company in
various officer positions since 1960. Visser Brothers is a construction general
contractor specializing in commercial buildings. Mr. Visser also has an
ownership interest in several real estate projects in the Grand Rapids area
including Eastbrook Mall and Breton Village Shopping

25
<PAGE> 27

Center. Mr. Visser served as a director of FMB-Grand Rapids from 1972 until June
of 1997. He is a Grand Rapids native and a graduate of the University of
Michigan with a degree in civil engineering. Mr. Visser is active in the
community having served on the boards for the Grand Rapids YMCA, Christian Rest
Home and West Side Christian School.

DONALD WILLIAMS, SR. (Director). Mr. Williams has over 30 years experience
in administration of educational programs with special emphasis on political
sensitivity. He currently is Dean of Minority Affairs and Director of the
Multicultural Center of Grand Valley State University. Further, he presently
serves as Treasurer and Past President of the Minority Affairs Council for
Michigan Universities (MACMU), Vice President for the West Michigan Coalition
for African American Men, and is a member of the Rotary Club of Grand Rapids. He
also currently holds the title of Vice President of the Coalition for
Representative Government (CRG), and is a member of the Grand Rapids Area
Chamber of Commerce Board of Directors and various other West Michigan community
organizations. Mr. Williams has also been the recipient of numerous awards in
the Grand Rapids and West Michigan community, where he currently resides.

ROBERT M. WYNALDA (Director). Mr. Wynalda is the retired Chief Executive
Officer and former owner of Wynalda Litho Inc. of Rockford, Michigan. Mr.
Wynalda held the position of Chief Executive Officer from 1970 when he founded
the company until its sale in February 1998. Wynalda Litho Inc. is a commercial
printing company serving customers from around the country. Mr. Wynalda is a
native of Grand Rapids and has spent 45 years in the printing business. Mr.
Wynalda serves on the Board of Trustees for Cornerstone College of Grand Rapids,
and formerly served as a director of a local financial institution.

ROBERT B. KAMINSKI (Senior Vice President and Secretary). Mr. Kaminski has
over 13 years of commercial banking experience, all with FMB and its
subsidiaries. From 1984 to 1993, Mr. Kaminski worked for FMB-Grand Rapids in
various capacities in the areas of credit administration and bank compliance. In
1993, Mr. Kaminski was appointed Vice President in charge of Loan Review and
served as Vice President and Manager of the Commercial Credit Department for
three of FMB's subsidiaries. Mr. Kaminski serves on the Leadership Committee for
the National Kidney Foundation of Michigan in Grand Rapids, the Board of
Directors for HELP Pregnancy Crisis Aid, Inc. and is a career mentor for Aquinas
College of Grand Rapids.

CHARLES E. CHRISTMAS (Vice President of Finance, Treasurer and Compliance
Officer). Mr. Christmas has worked with various financial institutions for over
ten years while serving as a bank examiner with the FDIC. He began his tenure
with the FDIC upon his graduation from Ferris State University. Mr. Christmas
holds a Bachelors of Science degree in Accountancy.

KEY EMPLOYEES

In addition to the directors and executive officers named above, the
Company has many experienced employees who assist the Bank in servicing its
customers and pursuing its business opportunities. These employees include,
among others, the key employees described below.

MARK S. AUGUSTYN (Senior Vice President, Commercial Loan Officer), age 29,
has over seven years of commercial banking experience, primarily in the
commercial lending area. He began his career with FMB-Grand Rapids as Credit
Analyst, and was promoted to Senior Analyst, Credit Manager, Assistant Vice
President of Commercial Lending, and finally Vice President of Commercial
Lending before joining the Bank in December 1997. Mr. Augustyn is active in the
Grand Rapids/West Michigan community. He serves as Chairman of the Finance
Committee of Residential Treatment and is a volunteer for the West Side Food
Drive.

HAROLD L. DRENTEN (Senior Vice President, Business Development Officer),
age 51, has over 28 years of commercial banking experience, all with FMB and its
subsidiary, FMB-Grand Rapids. Mr. Drenten held numerous positions at FMB-Grand
Rapids, including Branch Manager, Mortgage Department Head, Commercial Loan
Officer, and finally, Vice President of Business Development before joining the
Bank in January 1998. Mr. Drenten is an active member of the local community,
serving 15 years as a Teaching Consultant with Junior Achievement Project
Business and serving seven years as an Ambassador for the

26
<PAGE> 28

Grand Rapids Area Chamber of Commerce. He further participates in various
charity events in both Kent and Ottawa Counties.

MARK R. HOFFHINES (Senior Vice President, Commercial Loan Officer), age 39,
has over 17 years of commercial banking experience, beginning with his tenure as
a Commercial Lender at Comerica Bank in 1981. In 1986, he joined BankOne as an
Assistant Vice President of Commercial Loans, and in 1988 left to take a
position as Vice President of Commercial Loans at Great Lakes National Bank. In
1991, Mr. Hoffhines accepted a position at FMB-Grand Rapids as Vice President,
Commercial Loan Department head, where he continued to work until joining the
Bank in January 1998. Mr. Hoffhines is active in the Grand Rapids/West Michigan
community, serving as Chairman of the Board of the Kent County American Cancer
Society and also serving on the Parent Advisory Council of Forest Hills Northern
Schools.

GORDON L. OOSTING (Senior Vice President, Commercial Loan Officer), age 50,
has over 16 years of commercial banking experience, primarily in the commercial
lending area. Before working in the banking business, he held the position of
Vice President of Finance for a local manufacturing company with annual sales of
approximately $20 million. After leaving that position in 1982, Mr. Oosting
served as Vice President of Commercial Lending at NBD Bank until 1992, when, he
began work with FMB-Grand Rapids, serving as Vice President of Commercial
Lending. Mr. Oosting joined the Bank in January 1998. Mr. Oosting is active in
community events.

DEBORAH A. PARRENT (Vice President, Branch Administrator), age 46, has over
16 years of commercial banking experience, having begun her career in 1981 at
Great Lakes National Bank as a Residential Loan Officer, Business Development
Officer, and finally Branch District Manager. In 1994, she moved to FMB-Grand
Rapids, where she was a Branch Manager until her employment with the Bank. Ms.
Parrent is an active member of the Grand Rapids/West Michigan community, holding
offices in such organizations as the Junior League of Grand Rapids and Habitat
for Humanity, as well as serving as an Ambassador for the Grand Rapids Area
Chamber of Commerce. She has worked with many other community organizations
including: United Way, Family Services, YMCA, American Heart Association and
Kent County District Library. Ms. Parrent has also participated in the Economic
Club of Grand Rapids and Professional Women's Network events.

There are no family relationships among any of the Company's directors,
officers or key personnel.

EXECUTIVE COMPENSATION

The following table sets forth compensation received by the Chairman of the
Board and Chief Executive Officer of the Company and the Bank for the period
from July 15, 1997 (inception) to December 31, 1997. There were no executive
officers of the Company or the Bank whose total compensation exceeded $100,000
during 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------- ------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------------------------- ---- ------- ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
Gerald R. Johnson, Jr. ....................... 1997 $83,654 0 40,000 0
Chairman of the Board and Chief
Executive Officer
</TABLE>

Mr. Johnson and the other officers of the Bank may participate in any
benefit plans adopted for Bank employees. The Bank adopted a 401(k) plan for its
employees, effective January 1, 1998. Employees may elect to contribute up to
the lesser of 15% of their annual cash compensation or $10,000 to the 401(k)
plan for 1998, and the Bank provides a matching contribution of up to 4% of such
compensation. Neither the Company nor the Bank has an employment agreement with
any officer.

27
<PAGE> 29

OPTIONS GRANTED IN 1997

Under the Company's 1997 Employee Stock Option Plan, stock options are
granted to the Company's and the Bank's senior management and other key
employees. The Board of Directors of the Company is responsible for awarding the
stock options. These options are awarded to give senior management and key
employees an additional interest in the Company from a shareholder's
perspective, and enable them to participate in the future growth and
profitability of the Company. In making awards, the Board may consider the
position and responsibilities of the employee, the nature and value of his or
her services and accomplishments, the present and potential contribution of the
employee to the success of the Company, and such other factors as the Board may
deem relevant.

The following table provides information on options granted to the named
executive during the period from July 15, 1997 (inception) to December 31, 1997:

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
NUMBER OF
SHARES % OF TOTAL
UNDERLYING OPTIONS GRANTED EXERCISE OR
OPTIONS TO EMPLOYEES IN BASE PRICE
NAME GRANTED(1) 1997 PER SHARE(2) EXPIRATION DATE
---- ---------- --------------- ------------ ---------------
<S> <C> <C> <C> <C>
Gerald R. Johnson, Jr. .................... 40,000 51% $10.00 July 21, 2007
Chairman of the Board and
Chief Executive Officer
</TABLE>

- -------------------------
(1) The option was immediately exercisable for 10,000 shares as of July 22,
1997, and becomes exercisable for an additional 10,000 of the shares covered
by the option on each July 22 thereafter, until July 22, 2000, when it is
exercisable in full for all 40,000 shares.

(2) The exercise price equals the price at which the Company offered its stock
to the public in its initial public offering. The exercise price may be paid
in cash, by the delivery of previously owned shares, or a combination
thereof.

AGGREGATED STOCK OPTION EXERCISES IN 1997 AND YEAR END OPTION VALUES

The following table provides information on the exercise of stock options
during the year ended December 31, 1997 by the named executive and the value of
unexercised options at December 31, 1997:

<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS AT
SHARES OPTIONS AT 12/31/97 12/31/97(1)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ----------- -------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gerald R. Johnson, Jr. .......... None N/A 10,000/30,000 $5,000/$15,000
Chairman of the Board and Chief
Executive Officer
</TABLE>

- -------------------------
(1) Values are calculated by subtracting the exercise price from the fair market
value of the underlying Common Stock. For purposes of this table, fair
market value is deemed to be $10.50 per share, the average of the closing
bid and asked prices reported on the OTC Bulletin Board on December 31,
1997.

DIRECTORS COMPENSATION

During 1997, the first year of the Company's operation, no compensation was
paid to any director of the Company or the Bank for their services in such
capacities. Depending on the structure and operation of the Company, the
operations of the Bank and other factors, the Company's and the Bank's Boards of
Directors may hereafter determine that reasonable fees or compensation are
appropriate. In that event it is likely that directors of the Company and the
Bank would receive compensation, such as meeting fees, which would be consistent
with the compensation paid to directors of financial institution holding
companies and banks of similar size.

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<PAGE> 30

RELATED PARTY TRANSACTIONS

BANKING TRANSACTIONS

The Bank has had, and expects in the future to have, loan and other
financial transactions in the ordinary course of business with the Company's
directors, executive officers and principal shareholders (and their associates)
on substantially the same terms as those prevailing for comparable transactions
with others. All such transactions (i) were made in the ordinary course of
business, (ii) were made on substantially the same terms, including interest
rates and collateral on loans, as those prevailing at the time for comparable
transactions with other persons, and (iii) in the opinion of management did not
involve more than the normal risk of collectibility or present other unfavorable
features.

As of May 31, 1998, the Bank had outstanding 16 loans to 6 of the directors
or executive officers of the Company totaling approximately $3.6 million in
aggregate amount, under commitments totaling approximately $7.5 million. As of
December 31, 1997, the Bank had outstanding 14 loans to 4 of the directors or
executive officers of the Company totaling approximately $2.1 million in
aggregate amount, under commitments totaling approximately $5.9 million.

RENOVATION CONTRACT WITH VISSER BROTHERS

In 1997, the Bank contracted with Visser Brothers Inc. to renovate the
building that the Bank is leasing for its main office. Dale Visser and Bruce
Visser, who are brothers, are owners of a substantial majority of Visser
Brothers. Dale Visser is a member of the Board of Directors of the Company and
the Bank, and both were organizers of the Bank. The contract provided for the
payment of approximately $450,000 to Visser Brothers for renovation work that it
performed under its base bid, and an additional approximately $150,000 for work
that was specified in the contract to be performed by a separate supplier. The
contract was awarded to Visser Brothers after being submitted for bids. The
renovations were completed in December 1997 pursuant to specifications provided
by the Bank's architect.

LOANS FROM ORGANIZERS

In 1997, during the organization of the Bank and the Company, the members
of the initial Board of Directors of the Company and the Bank loaned
approximately $278,500 in aggregate amount to the Company to cover
organizational expenses of the Bank and the Company. Interest was payable on the
loans at the rate of 5% per annum. All of these loans were repaid by the Company
in October 1997 from the net proceeds of the Company's initial public offering.

29
<PAGE> 31

SECURITY OWNERSHIP

The following table presents information regarding the beneficial ownership
of the Company's Common Stock as of May 15, 1998, and immediately following the
offering, by the (i) the directors and executive officers of the Company, and
(ii) all directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
PERCENT OF CLASS
AMOUNT BENEFICIALLY
BENEFICIALLY OWNED(5)
NAME OF BENEFICIAL OWNER OWNED(1) PRIOR TO OFFERING
- ------------------------------------------------------------ ------------ -----------------
<S> <C> <C>
Betty S. Burton............................................. 2,000 *
Peter A. Cordes............................................. 25,000 1.7%
C. John Gill................................................ 28,000 1.9%
David M. Hecht.............................................. 50,000 3.3%
Gerald R. Johnson, Jr. ..................................... 60,342(2) 4.0%
Susan K. Jones.............................................. 850 *
Lawrence W. Larsen.......................................... 13,500 *
Calvin D. Murdock........................................... 15,000 1.0%
Michael H. Price............................................ 8,019(3) *
Dale J. Visser.............................................. 50,000 3.3%
Donald Williams, Sr. ....................................... -- *
Robert M. Wynalda........................................... 50,000 3.3%
Robert B. Kaminski.......................................... 5,671(4) *
Charles E. Christmas........................................ -- *
All directors and executive officers of the Company as a
group (14 persons)........................................ 308,382 20.3%
</TABLE>

- -------------------------
* less than one percent.

(1) Some or all of the Common Stock listed may be held jointly with, or for the
benefit of, spouses, children, or grandchildren of, or various trusts
established by, the person indicated.

(2) Includes 10,000 shares that such person has the right to acquire within 60
days of May 15, 1998, pursuant to the Company's 1997 Employee Stock Option
Plan and 342 shares that such person owns under the Bank's 401(k) Plan. Such
person also holds an option under the Employee Stock Option Plan to purchase
an additional 10,000 shares, which has not yet vested.

(3) Includes 7,000 shares that such person has the right to acquire within 60
days of May 15, 1998, pursuant to the Company's 1997 Employee Stock Option
Plan and 319 shares that such person owns under the Bank's 401(k) Plan. Such
person also holds an option under the Employee Stock Option Plan to purchase
an additional 14,000 shares, which has not yet vested.

(4) Includes 5,000 shares that such person has the right to acquire within 60
days of May 15, 1998, pursuant to the Company's 1997 Employee Stock Option
Plan and 671 shares that such person owns under the Bank's 401(k) Plan.

(5) The percentages shown are based on the 1,495,000 shares of the Company's
Common Stock outstanding as of May 15, 1998, plus the number of shares that
the named person or group has the right to acquire within 60 days of May 15,
1998. The percentages shown do not reflect the 1,000,000 additional shares
that will be outstanding following the completion of the offering, or any
shares of Common Stock that may be acquired in the offering. The Company
expects that the percentage ownership shown in the table will decrease
significantly as a result of the issuance of the shares in the offering.

To the best of the Company's knowledge, as of May 15, 1998, no person owned
more than 5% of the Company's outstanding Common Stock.

30
<PAGE> 32

SUPERVISION AND REGULATION

GENERAL

Financial institutions and their holding companies are extensively
regulated under federal and state law and regulations. Such provisions
applicable to banks and their holding companies regulate, among other things,
the scope of business, investments, reserves against deposits, capital levels
relative to operations, lending activities and practices, nature and amount of
collateral for loans, establishment of branches, mergers, consolidations and
dividends. The system of supervision and regulation applicable to the Company
and the Bank establishes a comprehensive framework for their respective
operations and is intended primarily for the protection of the FDIC's deposit
insurance funds, the depositors of the Bank, and the public, rather than
shareholders of the Bank or the Company. Any change in government regulation may
have a material effect on the business of the Company and the Bank.

There has been significant legislative and regulatory change relating to
the financial services industry in recent years. Non-bank financial
institutions, such as securities brokerage firms, insurance companies and money
market funds, have been permitted to engage in activities that directly compete
with traditional bank business. The services that banks are permitted to provide
and the types of accounts banks may offer to depositors have been expanded.
Geographic constraints on the operations of financial institutions and their
holding companies have been relaxed.

THE COMPANY

General. The Company is a registered bank holding company, subject to
supervision and examination by the Federal Reserve. The Company is required to
make periodic reports to the Federal Reserve and to furnish such other
information as the Federal Reserve may require under the BHCA.

Federal Reserve policy requires a bank holding company such as the Company
to serve as a source of financial and managerial strength to its banking
subsidiaries. Under this policy, a bank holding company must use available
resources to provide adequate capital funds to a troubled banking subsidiary,
even if it is not otherwise obligated to do so. In addition, in certain
circumstances a Michigan state bank having impaired capital may be required by
the Commissioner of the FIB either to restore the bank's capital by a special
assessment upon its shareholders, or to initiate the liquidation of the bank.

Investments and Activities. In general, the BHCA requires a bank holding
company to obtain prior approval of the Federal Reserve before it may merge with
or consolidate into another bank holding company, acquire substantially all the
assets of any bank or bank holding company, or acquire ownership or control of
any voting shares of any bank or bank holding company, if after such
acquisition, it would own or control, directly or indirectly, more than 5% of
the voting shares of such bank holding company or bank. In acting on such
applications, the Federal Reserve considers statutory factors, including the
financial and managerial condition of the parties, their record of performance
under the Community Reinvestment Act, and the impact upon competition in
relevant geographic and product markets.

The BHCA also prohibits a bank holding company, with certain exceptions,
from acquiring direct or indirect ownership or control of more than 5% of the
voting shares of any company that is not a bank, and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries. Upon notice to the Federal
Reserve, bank holding companies may engage in, and may own shares of companies
engaged in, certain businesses found by the Federal Reserve to be so closely
related to banking or the management or control of banks as to be a proper
incident thereto. Under current Federal Reserve regulations, a holding company
and its non-bank subsidiaries are permitted to engage in financial and
investment advisory, sales and consumer finance, equipment leasing, data
processing, discount securities brokerage, mortgage banking and brokerage, and
other activities. These activities are subject to certain limitations imposed by
the regulations.

Capital Requirements. The Federal Reserve's capital guidelines establish
the following minimum regulatory capital requirements for bank holding
companies: (i) a leverage capital requirement expressed as a percentage of total
assets, (ii) a qualifying capital requirement expressed as a percentage of
risk-weighted

31
<PAGE> 33

assets, (iii) a Tier 1 leverage requirement expressed as a percentage of total
assets, and (iv) for bank holding companies having defined trading activities
equal to 10% or more of total assets (or $1 billion, whichever is less), a
risk-based capital ratio adjusted for market risk. The leverage capital
requirement consists of a minimum ratio of total capital to total assets of 6%,
with an expressed expectation that banking organizations generally should
operate above such minimum level. The qualifying capital requirement consists of
a minimum ratio of total qualifying capital to total risk-weighted assets of 8%,
of which at least one-half must be Tier 1 capital (which consists principally of
shareholders' equity). The Tier 1 leverage requirement consists of a minimum
ratio of Tier 1 capital to total assets of 3% for the most highly rated
companies, with minimum requirements of 4% to 5% for all others. The Company is
not currently subject to the capital ratio requirement relative to market risk.

Each of the capital guidelines currently used by the Federal Reserve is a
minimum requirement, and higher capital levels will be required if warranted by
the particular circumstances or risk profiles of individual banking
organizations. Further, any banking organization (such as the Company)
experiencing or anticipating significant growth would be expected to maintain
capital ratios, including tangible capital positions (i.e., Tier 1 capital less
all intangible assets), well above the minimum levels. The Federal Reserve's
regulations provide that the capital guidelines will generally be applied on a
bank-only (rather than a consolidated) basis in the case of a bank holding
company (such as the Company) with less than $150 million in total consolidated
assets.

THE BANK

General. The Bank is a Michigan-chartered bank, subject to supervision and
examination by the FIB. Deposit accounts with the Bank are insured by the FDIC
pursuant to the Federal Deposit Insurance Act ("FDIA") and regulations issued
thereunder by the FDIC. Federal Reserve and FDIC regulations affect many
activities of the Bank, including the permissible types and amounts of loans,
investments, capital adequacy, branching, interest payable on deposits, required
reserves, and the safety and soundness of the Bank's practices. The regulations
are intended primarily for the protection of the Bank's depositors and
customers, and not the shareholders of the Bank or the Company. The Bank is
regulated and examined by the FDIC, and is not a member of the Federal Reserve
System.

The Bank is subject to certain restrictions imposed by the Federal Reserve
Act on any extensions of credit to the Company or its subsidiaries, on
investments in the stock or other securities of the Company or its subsidiaries,
and the acceptance of the stock or other securities of the Company or its
subsidiaries as collateral for loans to any person. Federal law places
restrictions on the amount and nature of loans to executive officers, directors
and controlling persons of banks insured by the FDIC and holding companies
controlling such banks.

Capital Requirements. The FDIC's capital guidelines for state chartered,
FDIC-insured non-member banks (such as the Bank) include (a) a leverage measure,
consisting of a minimum ratio of Tier 1 capital to total assets of 3% for the
most highly-rated banks and a minimum requirement of 4% to 5% for all others,
and (b) a risk-based capital measure consisting of a minimum ratio of qualifying
total capital to risk-weighted assets of 8%, at least one-half of which must be
Tier 1 capital. Tier 1 capital consists principally of shareholders' equity. In
addition, the FDIC has adopted requirements for each such bank having defined
trading activities as shown on its most recent Consolidated Report of Condition
and Income ("Call Report") in an amount equal to 10% or more of its total assets
(or $1 billion, whichever is less) (i) to measure its market risk using an
internal value-at-risk model conforming to the FDIC's capital guidelines, and
(ii) to maintain a commensurate amount of additional capital to reflect such
risk. The FDIC's capital guidelines establish minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions.

In addition to the foregoing, under the terms of the FDIC Order granting
the Bank deposit insurance coverage, the Bank is required to maintain a ratio of
Tier 1 capital to total assets of not less than 8% until December 15, 2000. The
regulatory capital ratios of the Company and the Bank, respectively, at March
31, 1998, and December 31, 1997, are set forth in Note 13 of the Notes to
Consolidated Financial Statements of the Company elsewhere in this Prospectus.

32
<PAGE> 34

Prompt Corrective Action. Among other things, the FDIA requires the federal
depository institution regulators to take prompt corrective action in respect of
depository institutions that do not meet minimum capital requirements. The scope
and degree of regulatory intervention is linked to the capital category in which
a depository institution falls. The FDIA and the implementing regulations of the
Federal depository institution regulators establish five capital categories,
ranging from "well capitalized" to "critically undercapitalized," based upon an
institution's qualifying capital to risk-based assets, Tier 1 capital to
risk-based assets, and Tier 1 capital to total assets ratios. Each depository
institution is periodically assigned to a capital category, generally on the
basis of its most recent Call Report.

Depending upon the capital category in which an institution falls, the
regulators' corrective powers include: requiring the submission of a capital
restoration plan; placing limits on asset growth and restrictions on activities;
requiring the institution to issue additional capital stock (including
additional voting stock) or to be acquired; restricting transactions with
affiliates; restricting the interest rate the institution may pay on deposits;
ordering a new election of directors of the institution; requiring that senior
executive officers or directors be dismissed; prohibiting the institution from
accepting deposits from correspondent banks; requiring the institution to divest
certain subsidiaries; prohibiting the payment of principal or interest on
subordinated debt; and ultimately, appointing a receiver for the institution.

DIVIDENDS

The Company is a corporation separate and distinct from the Bank. The
ability of the Company to obtain funds for the payment of dividends and for
other cash requirements will be dependent on the amount of dividends that may be
declared by its subsidiary, the Bank. The Bank is subject to limitations on the
dividends it may pay to the Company.

As a banking corporation organized under Michigan law, the Bank will be
restricted as to the maximum amount of dividends it may pay on its common stock.
The Bank may not pay dividends except out of net profits after deducting its
losses and bad debts. The Bank may not declare or pay a dividend unless it will
have a surplus amounting to at least 20% of its capital after the payment of the
dividend. If the Bank has a surplus less than the amount of its capital it may
not declare or pay any dividend until an amount equal to at least 10% of net
profits for the preceding half year (in the case of quarterly or semiannual
dividends) or full year (in the case of annual dividends) has been transferred
to surplus. The Bank may, with the approval of the Commissioner of the FIB, by
vote of shareholders owning two-thirds of the stock eligible to vote increase
its capital stock by a declaration of a stock dividend, provided that after the
increase its surplus equals at least 20% of its capital stock, as increased. The
Bank may not declare or pay any dividend on its common stock until the
cumulative dividends on preferred stock (should any such stock be issued and
outstanding) have been paid in full. The Bank has no present plans to issue
preferred stock.

The FDIA generally prohibits a depository institution from making any
capital distribution (including payment of a dividend) or paying any management
fee to its holding company if the depository institution would thereafter be
undercapitalized. The FDIC may prevent an insured bank from paying dividends if
the bank is in default of payment of any assessment due to the FDIC. In
addition, payment of dividends by a bank may be prevented by the applicable
federal regulatory authority if such payment is determined, by reason of the
financial condition of such bank, to be an unsafe and unsound banking practice.

It is the policy of the Federal Reserve that a bank holding company should
not pay cash dividends unless (i) the organization's net income available to
common equity for the past year is sufficient to fully fund the dividends, and
(ii) the prospective rate of earnings retention appears consistent with the
organization's capital needs, asset quality, and overall financial condition.
For small bank holding companies (those with less than $150 million in assets),
the Federal Reserve's position is that such companies should not pay dividends
so long as they have a debt-to-equity ratio of 1:1 or greater. The Federal
Reserve has also expressed the view that a bank holding company should not pay
cash dividends that can only be funded in ways that weaken the bank holding
company's financial health, such as by borrowing.

Additionally, the Federal Reserve possesses enforcement powers over bank
holding companies and their nonbank subsidiaries to prevent or remedy actions
that represent unsafe or unsound practices or violations of

33
<PAGE> 35

applicable statutes and regulations. Among these powers is the ability in
appropriate cases to proscribe the payment of dividends by banks and bank
holding companies. Similar enforcement powers over the Bank are possessed by the
FDIC. The "prompt corrective action" provisions of the FDIA impose further
restrictions on the payment of dividends by insured banks which fail to meet
specified capital levels and, in some cases, their parent bank holding
companies. In addition to the restrictions on dividends imposed by the Federal
Reserve, the MBCA imposes certain restrictions on the declaration and payment of
dividends by Michigan corporations such as the Company. See "Description of
Capital Stock -- Common Stock -- Dividend Rights."

DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 9,000,000 shares of
Common Stock and 1,000,000 shares of Preferred Stock. As of the date of this
Prospectus, there are 1,495,000 shares of Common Stock issued and outstanding.
No shares of Preferred Stock have been issued by the Company.

Michigan law allows the Company's Board of Directors to issue additional
shares of stock up to the total amount of Common Stock and Preferred Stock
authorized without obtaining the prior approval of the shareholders.

PREFERRED STOCK

The Board of Directors of the Company is authorized to issue Preferred
Stock, in one or more series, from time to time, with such voting powers, full
or limited but not to exceed one vote per share, or without voting powers, and
with such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitation or restrictions thereof, as
may be provided in the resolution or resolutions adopted by the Board of
Directors. The authority of the Board of Directors includes, but is not limited
to, the determination or fixing of the following with respect to shares of such
class or any series thereof: (i) the number of shares and designation of such
series; (ii) the dividend rate and whether dividends are to be cumulative; (iii)
whether shares are to be redeemable, and, if so, whether redeemable for cash,
property or rights; (iv) the rights to which the holders of shares shall be
entitled, and the preferences, if any, over any other series; (v) whether the
shares shall be subject to the operation of a purchase, retirement or sinking
fund, and, if so, upon what conditions; (vi) whether the shares shall be
convertible into or exchangeable for shares of any other class or of any other
series of any class of capital stock and the terms and conditions of such
conversion or exchange; (vii) the voting powers, full or limited, if any, of the
shares; (viii) whether the issuance of any additional shares, or of any shares
of any other series, shall be subject to restrictions as to issuance, or as to
the powers, preferences or rights of any such other series; and (ix) any other
preferences, privileges and powers and relative, participating, optional or
other special rights and qualifications, limitations or restrictions.

COMMON STOCK

Dividend Rights

Subject to any prior rights of any holders of Preferred Stock then
outstanding, the holders of the Common Stock will be entitled to dividends when,
as and if declared by the Company's Board of Directors out of funds legally
available therefor. Under Michigan law, dividends may be legally declared or
paid only if after the distribution the Company can pay its debts as they come
due in the usual course of business and the Company's total assets equal or
exceed the sum of its liabilities plus the amount that would be needed to
satisfy the preferential rights upon dissolution of any holders of preferred
stock then outstanding whose preferential rights are superior to those receiving
the distribution.

Funds for the payment of dividends by the Company are expected to be
obtained primarily from dividends of the Bank. There can be no assurance that
the Company will have funds available for dividends, or that if funds are
available, that dividends will be declared by the Company's Board of Directors.
As the Bank is not expected to be profitable during its start up period, the
Company does not expect to be in a position to declare dividends at any time in
the foreseeable future.

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<PAGE> 36

Voting Rights

Subject to the rights, if any, of holders of shares of Preferred Stock then
outstanding, all voting rights are vested in the holders of shares of Common
Stock. Each share of Common Stock entitles the holder thereof to one vote on all
matters, including the election of directors. Shareholders of the Company do not
have cumulative voting rights.

Preemptive Rights

Holders of Common Stock do not have preemptive rights.

Liquidation Rights

Subject to any rights of any Preferred Stock then outstanding, holders of
Common Stock are entitled to share on a pro rata basis in the net assets of the
Company which remain after satisfaction of all liabilities.

Transfer Agent

State Street Bank & Trust Company of Boston, Massachusetts, serves as the
transfer agent of the Company's Common Stock.

CERTAIN CHARTER PROVISIONS

The following provisions of the Company's Articles of Incorporation may
delay, defer, prevent, or make it more difficult for a person to acquire the
Company or to change control of the Company's Board of Directors, thereby
reducing the Company's vulnerability to an unsolicited takeover attempt.

Classification of the Board of Directors

The Company's Articles of Incorporation provide for the Board of Directors
to be divided into three classes with staggered terms; each class to be as
nearly equal in number as possible. Each director is elected for a three year
term. Approximately one-third of the Board positions are filled by a shareholder
vote each year. Any vacancies in the Board, or newly created director positions,
may be filled by vote of the directors then in office. The Company's Articles of
Incorporation provide that the number of directors shall be fixed by majority of
the Board at no fewer than six nor more than fifteen.

Removal of Directors

The MBCA provides that, unless the articles of incorporation otherwise
provide, shareholders may remove a director or the entire Board of Directors
with or without cause. The Company's Articles of Incorporation provide that a
director may be removed only for cause and only by the affirmative vote of the
holders of a majority of the voting power of all the shares of the Company
entitled to vote generally in the election of directors.

Filling Vacancies on the Board of Directors

The Company's Articles of Incorporation provide that a new director chosen
to fill a vacancy on the Board of Directors will serve for the remainder of the
full term of the class in which the vacancy occurred.

Nominations of Director Candidates

The Company's Articles of Incorporation include a provision governing
nominations of director candidates. Nominations for the election of directors
may be made by the Board of Directors, a nominating committee appointed by the
Board of Directors, or any shareholder entitled to vote for directors. In the
case of a shareholder nomination, the Articles of Incorporation provide certain
procedures that must be followed. A shareholder intending to nominate candidates
for election must deliver written notice containing certain

35
<PAGE> 37

specified information to the Secretary of the Company at least sixty (60) days
but not more than ninety (90) days prior to the anniversary date of the
immediately preceding annual meeting of shareholders.

Certain Shareholder Action

The Company's Articles of Incorporation require that any shareholder action
must be taken at an annual or special meeting of shareholders, that any meeting
of shareholders must be called by the Board of Directors or the Chairman of the
Board, and, unless otherwise provided by law, prohibit shareholder action by
written consent. Shareholders of the Company are not permitted to call a special
meeting of shareholders or require that the Board call such a special meeting.
The MBCA permits shareholders holding 10% or more of all of the shares entitled
to vote at a meeting to request the Circuit Court of the County in which the
Company's principal place of business or registered office is located to order a
special meeting of shareholders for good cause shown.

Increased Shareholders Vote for Alteration, Amendment or Repeal of Article
Provisions

The Company's Articles of Incorporation require the affirmative vote of the
holders of at least 66 2/3 percent of the voting stock of the Company entitled
to vote generally in the election of directors for the alteration, amendment or
repeal of, or the adoption of any provision inconsistent with the foregoing
provisions of the Company's Articles of Incorporation.

CERTAIN ANTI-TAKEOVER PROVISIONS

Michigan Fair Price Act. Certain provisions of the MBCA establish a
statutory scheme similar to the supermajority and fair price provisions found in
many corporate charters (the "Fair Price Act"). The Fair Price Act provides that
a supermajority vote of 90 percent of the shareholders and no less than
two-thirds of the votes of noninterested shareholders must approve a "business
combination." The Fair Price Act defines a "business combination" to encompass
any merger, consolidation, share exchange, sale of assets, stock issue,
liquidation, or reclassification of securities involving an "interested
shareholder" or certain "affiliates." An "interested shareholder" is generally
any person who owns 10 percent or more of the outstanding voting shares of the
Company. An "affiliate" is a person who directly or indirectly controls, is
controlled by, or is under common control with, a specified person.

The supermajority vote required by the Fair Price Act does not apply to
business combinations that satisfy certain conditions. These conditions include,
among others: (i) the purchase price to be paid for the shares of the Company in
the business combination must be at least equal to the highest of either (a) the
market value of the shares or (b) the highest per share price paid by the
interested shareholder within the preceding two-year period or in the
transaction in which the shareholder became an interested shareholder, whichever
is higher; and (ii) once becoming an interested shareholder, the person may not
become the beneficial owner of any additional shares of the Company except as
part of the transaction which resulted in the interested shareholder becoming an
interested shareholder or by virtue of proportionate stock splits or stock
dividends.

The requirements of the Fair Price Act do not apply to business
combinations with an interested shareholder that the Board of Directors has
approved or exempted from the requirements of the Fair Price Act by resolution
prior to the time that the interested shareholder first became an interested
shareholder.

Control Share Act. The MBCA regulates the acquisition of "control shares"
of large public Michigan corporations (the "Control Share Act"). Following
completion of the offering, the Control Share Act is expected to apply to the
Company and its shareholders.

The Control Share Act establishes procedures governing "control share
acquisitions." A control share acquisition is defined as an acquisition of
shares by an acquiror which, when combined with other shares held by that person
or entity, would give the acquiror voting power, alone or as part of a group, at
or above any of the following thresholds: 20 percent, 33 1/3 percent or 50
percent. Under the Control Share Act, an acquiror may not vote "control shares"
unless the Company's disinterested shareholders (defined to exclude the

36
<PAGE> 38

acquiring person, officers of the target Company, and directors of the target
Company who are also employees of the Company) vote to confer voting rights on
the control shares. The Control Share Act does not affect the voting rights of
shares owned by an acquiring person prior to the control share acquisition.

The Control Share Act entitles corporations to redeem control shares from
the acquiring person under certain circumstances. In other cases, the Control
Share Act confers dissenters' right upon all of the corporation's shareholders
except the acquiring person.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Articles of Incorporation provide that the Company shall
indemnify its present and past directors, officers, and such other persons as
the Board of Directors may authorize, to the fullest extent permitted by law.

The Company's Bylaws contain indemnification provisions concerning third
party actions as well as actions in the right of the Company. The Bylaws provide
that the Company shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Company) by reason of the fact
that he or she is or was a director or officer of the Company, or while serving
as such a director or officer, is or was serving at the request of the Company
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorney's fees),
judgments, penalties, fees and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the Company or its
shareholders, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.

FDIC regulations impose limitations on indemnification payments which could
restrict, in certain circumstances, payments by the Company or the Bank to their
respective directors or officers otherwise permitted under the MBCA or the
Michigan Banking Code, respectively.

With respect to derivative actions, the Bylaws provide that the Company
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the Company, or, while serving
as such a director or officer, is or was serving at the request of the Company
as a director, officer, partner, trustee, employee or agent of another foreign
or domestic Company, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses (including attorney's fees) and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with the action or suit if he or she acted in good faith and in a
manner he or she reasonably believed to be in or not opposed to the best
interests of the Company or its shareholders. No indemnification is provided in
the Bylaws in respect of any claim, issue or matter in which such person has
been found liable to the Company except to the extent that a court of competent
jurisdiction determines upon application that, despite the adjudication of
liability but in view of all circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which such court shall
deem proper.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions discussed above or otherwise, the Company has been
advised that in the opinion of the Securities and Exchange Commission (the
"SEC") such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

The Company has purchased directors' and officers' liability insurance for
directors and officers of the Company and the Bank.

LIMITATION OF DIRECTOR LIABILITY

The MBCA permits corporations to limit the personal liability of their
directors in certain circumstances The Company's Articles of Incorporation
provide that a director of the Company shall not be personally liable
37
<PAGE> 39

to the Company or its shareholders for monetary damages for breach of the
director's fiduciary duty. However, they do not eliminate or limit the liability
of a director for any breach of a duty, act or omission for which the
elimination or limitation of liability is not permitted by the MBCA, currently
including, without limitation, the following: (1) breach of the director's duty
of loyalty to the Company or its shareholders; (2) acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law; (3)
illegal loans, distributions of dividends or assets, or stock purchases as
described in Section 551(1) of the MBCA; and (4) transactions from which the
director derived an improper personal benefit.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the offering, the Company expects to have 2,495,000
shares of its Common Stock outstanding. The 1,000,000 shares of the Company's
Common Stock sold in the offering (plus any additional shares sold upon the
Underwriters' exercise of their over-allotment option) have been registered with
the SEC under the Securities Act and may generally be resold without
registration under the Securities Act unless they were acquired by directors,
executive officers, or other affiliates of the Company (collectively,
"Affiliates"). Affiliates of the Company may generally only sell shares of the
Common Stock pursuant to Rule 144 under the Securities Act.

In general, under Rule 144 as currently in effect, an affiliate (as defined
in Rule 144) of the Company may sell shares of Common Stock within any
three-month period in an amount limited to the greater of 1% of the outstanding
shares of the Company's Common Stock or the average weekly trading volume in the
Company's Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain manner-of-sale provisions, holding
periods for restricted shares, notice requirements, and the availability of
current public information about the Company.

The Company, and the directors and executive officers of the Company, have
agreed, or will agree, that they will not issue, offer for sale, sell, transfer,
grant options to purchase or otherwise dispose of any shares of Common Stock
without the prior written consent of the Underwriter, for a period of 150 days
from the date of this Prospectus (the "Lock-Up"), except that (i) the Company
may issue shares upon the exercise of options under the Company's 1997 Employee
Stock Option Plan, and (ii) the directors and executive officers may give Common
Stock owned by them to others who have agreed in writing to be bound by the same
agreement. Approximately 288,382 shares of Common Stock are subject to the
Lock-Up.

As of June 1, 1998, the Company had issued options to seven employees to
purchase an aggregate of 90,750 shares of its Common Stock at exercise prices
ranging from $10 to $13 per share pursuant to the Company's 1997 Employee Stock
Option Plan. These options have expiration dates ranging from July 2007 to
January 2008. The Company has reserved for issuance under the Plan 130,000
shares of Common Stock, including the 90,750 shares already subject to
outstanding options. As of June 1, 1998, no options granted under the Plan had
been exercised.

Prior to the offering, there has been only a limited public trading market
for the Common Stock, and no predictions can be made as to the effect, if any,
that sales of shares or the availability of shares for sale will have on the
prevailing market price of the Common Stock after completion of the offering.
Nevertheless, sales of substantial amounts of Common Stock in the public market
could have an adverse effect on prevailing market prices.

38
<PAGE> 40

UNDERWRITING

The Underwriter has agreed, subject to the terms and conditions of the
Underwriting Agreement, that it will purchase from the Company, on a firm
commitment basis, 1,000,000 shares of Common Stock. The Underwriting Agreement
provides that the obligations of the Underwriter thereunder are subject to
certain conditions and provides for the Company's payment of certain expenses
incurred in connection with the review of the underwriting arrangements for the
offering by the NASD. The Underwriter is obligated to purchase all 1,000,000 of
the shares of Common Stock offered by this Prospectus (excluding the additional
150,000 shares covered by the over-allotment option granted to the Underwriter)
if any are purchased.

If the Underwriting Agreement is terminated, except in certain limited
cases, the Underwriting Agreement provides that the Company will reimburse the
Underwriter for all accountable out-of-pocket expenses incurred by it in
connection with the proposed purchase and sale of the Common Stock, up to a
maximum of $50,000.

The Company and the Underwriter have agreed that the Underwriter will
purchase the 1,000,000 shares of Common Stock offered hereunder at a price to
the public of $ per share less underwriting discounts of $ per
share. The Underwriter proposes to offer the Common Stock to selected dealers
who are members of the NASD at a price of $ per share less a concession
not in excess of $ per share. The Underwriter may allow, and such
dealers may re-allow, concessions not in excess of $ per share to
certain other brokers and dealers. After the Common Stock is released for sale
to the public, the offering price and other selling terms may from time to time
be varied by the Underwriter.

The Company, and the directors and executive officers of the Company, have
agreed to be subject to certain lock-up restrictions as described above in
"Shares Eligible for Future Sale."

The Underwriter has informed the Company that the Underwriter does not
intend to make sales to any accounts over which the Underwriter exercise
discretionary authority.

The Company has granted the Underwriter an option, exercisable within 30
days after the date of the offering, to purchase up to an additional 150,000
shares of Common Stock from the Company to cover over-allotments, if any, at the
same price per share as is to be paid by the Underwriter for the other shares
offered by this Prospectus. The Underwriter may purchase such shares only to
cover over-allotments, if any, in connection with the offering.

The Underwriting Agreement contains indemnity provisions between the
Underwriter and the Company and the controlling persons thereof against certain
liabilities, including liabilities arising under the Securities Act. The Company
is generally obligated to indemnify the Underwriter and its controlling persons
in connection with losses or claims arising out of any untrue statement of a
material fact contained in this Prospectus or in related documents filed with
the Commission or with any state securities administrator, or any emission of
certain material facts from such documents.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports with the SEC. Such reports can be inspected
and copied at the public reference facilities of the SEC at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the SEC's regional offices at Suite
1400, 500 West Madison Street, Chicago, Illinois 60661, and 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material can be
obtained from the Public Reference Section of the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Company is required to file
electronic versions of these documents with the SEC through the SEC's Electronic
Data Gathering, Analysis and Retrieval (EDGAR) system. The SEC maintains a World
Wide Web site at http://www.sec.gov. that contains reports, proxy and
information statements and other information regarding issuers that file
electronically with the SEC.

Although the Company is not required by Section 15(d) of the Exchange Act
to do so, the Company intends to furnish its shareholders with annual reports
containing audited financial information.
39
<PAGE> 41

This Prospectus constitutes a part of a Registration Statement on Form SB-2
filed by the Company with the SEC under the Securities Act. This Prospectus
omits certain of the information contained in the Registration Statement, and
reference is made to the Registration Statement and related exhibits for further
information with respect to the Company and the securities offered by this
Prospectus. Any statements contained in this Prospectus concerning the
provisions of any document are not necessarily complete, and in such instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC. Each such statement is
qualified in its entirety by such reference.

LEGAL MATTERS

The legality of the Common Stock offered hereby will be passed upon for the
Company by Dickinson Wright PLLC, Detroit, Michigan. Honigman Miller Schwartz
and Cohn, Detroit, Michigan, is acting as counsel for the Underwriter in
connection with certain legal matters relating to the shares of Common Stock
offered by this Prospectus. As of June 1, 1998, members of Dickinson Wright PLLC
who perform services for the Company, owned approximately 4,975 shares of Common
Stock of the Company.

EXPERTS

The financial statements of the Company as of December 31, 1997, and for
the period July 15, 1997 (inception) through December 31, 1997, included in this
Prospectus have been audited by Crowe, Chizek and Company LLP, independent
public accountants, as indicated in their report with respect thereto. Such
financial statements and their report have been included herein in reliance upon
the authority of said firm as experts in accounting and auditing.

40
<PAGE> 42

MERCANTILE BANK CORPORATION
GRAND RAPIDS, MICHIGAN
CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

CONTENTS

<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Financial Statements
Consolidated Balance Sheets............................... F-3
Consolidated Statements of Income......................... F-4
Consolidated Statements of Comprehensive Income........... F-5
Consolidated Statements of Changes in Shareholders'
Equity................................................. F-6
Consolidated Statements of Cash Flows..................... F-7
Notes to Consolidated Financial Statements................ F-8
</TABLE>

F-1
<PAGE> 43

CROWE CHIZEK LOGO

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Mercantile Bank Corporation
Grand Rapids, Michigan

We have audited the accompanying consolidated balance sheet of Mercantile
Bank Corporation as of December 31, 1997 and the related statements of income,
comprehensive income, changes in shareholders' equity and cash flows for the
period from July 15, 1997 (date of inception) through December 31, 1997. These
financial statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to in the
first paragraph present fairly, in all material respects, the financial position
of Mercantile Bank Corporation at December 31, 1997, and the results of its
operations and its cash flows for the period from July 15, 1997 (date of
inception) through December 31, 1997 in conformity with generally accepted
accounting principles.

/s/ CROWE, CHIZEK AND COMPANY LLP

CROWE, CHIZEK AND COMPANY LLP

Grand Rapids, Michigan
February 6, 1998

F-2
<PAGE> 44

MERCANTILE BANK CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31 DECEMBER 31
1998 1997
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and due from banks................................... $ 6,175,366 $ 153,300
Short term investments.................................... 2,753,575 3,250,000
Federal funds sold........................................ 400,000 3,700,000
----------- -----------
Total cash and cash equivalents...................... 9,328,941 7,103,300
Securities available for sale............................. 6,495,983 2,997,500
Total loans............................................... 76,140,669 12,886,763
Allowance for loan losses................................. (1,192,100) (193,300)
----------- -----------
Total loans, net..................................... 74,948,569 12,693,463
Premises and equipment -- net............................. 1,316,711 953,982
Organizational costs -- net............................... 76,496 74,871
Accrued interest receivable............................... 481,766 52,811
Other assets.............................................. 426,973 233,258
----------- -----------
Total assets......................................... $93,075,439 $24,109,185
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Noninterest-bearing.................................... $10,598,157 $ 7,207,482
Interest-bearing....................................... 64,786,174 2,480,782
----------- -----------
Total................................................ 75,384,331 9,688,264
Securities sold under agreements to repurchase............ 5,088,198 655,447
Accrued expenses and other liabilities.................... 268,433 292,204
----------- -----------
Total liabilities.................................... 80,740,962 10,635,915
Shareholders' equity
Preferred stock, no par value; 1,000,000 shares
authorized, none issued
Common stock, no par value: 9,000,000 shares authorized
and 1,495,000 shares outstanding....................... 13,880,972 13,880,972
Retained deficit.......................................... (1,545,648) (404,071)
Net unrealized loss on securities available for sale...... (847) (3,631)
----------- -----------
Total shareholders' equity............................. 12,334,477 13,473,270
----------- -----------
Total liabilities and shareholders' equity........... $93,075,439 $24,109,185
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.
F-3
<PAGE> 45

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
Interest income
Loans, including fees..................................... $ 1,047,970 $ 25,761
Federal funds sold........................................ 33,345
Securities................................................ 97,390 127,868
----------- ----------
Total interest income.................................. 1,178,705 153,629
Interest expense
Deposits.................................................. 550,279 5,760
Other..................................................... 28,662 7,894
----------- ----------
Total interest expense................................. 578,941 13,654
----------- ----------
NET INTEREST INCOME......................................... 599,764 139,975
Provision for loan losses................................... (998,800) (193,300)
----------- ----------
NET INTEREST LOSS AFTER PROVISION FOR LOAN LOSSES........... (399,036) (53,325)
Noninterest income
Other income.............................................. 14,440 45
----------- ----------
Total noninterest income............................... 14,440 45
Noninterest expense
Salaries and benefits..................................... 401,580 254,771
Occupancy................................................. 68,374 39,101
Furniture and equipment................................... 39,176 5,907
Other expense............................................. 247,851 51,012
----------- ----------
Total noninterest expenses............................. 756,981 350,791
----------- ----------
LOSS BEFORE FEDERAL INCOME TAX.............................. (1,141,577) (404,071)
Federal income tax expense.................................. 0 0
----------- ----------
NET LOSS.................................................... $(1,141,577) $ (404,071)
=========== ==========
Basic and diluted loss per share............................ $ (.76) $ (.27)
=========== ==========
Average shares outstanding.................................. 1,495,000 1,495,000
=========== ==========
</TABLE>

See accompanying notes to consolidated financial statements.
F-4
<PAGE> 46

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
NET LOSS.................................................... $(1,141,577) $(404,071)
Other comprehensive income, net of tax
Change in unrealized gains (losses) on securities......... 2,784 (3,631)
----------- ---------
COMPREHENSIVE LOSS.......................................... $(1,138,793) $(407,702)
=========== =========
</TABLE>

See accompanying notes to consolidated financial statements.
F-5
<PAGE> 47

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998 (UNAUDITED) AND PERIOD FROM JULY 15, 1997
(DATE OF INCEPTION) THROUGH DECEMBER 31, 1997

<TABLE>
<CAPTION>
NET UNREALIZED
LOSS ON
SECURITIES TOTAL
COMMON RETAINED AVAILABLE SHAREHOLDERS'
STOCK EARNINGS FOR SALE EQUITY
----------- ----------- -------------- -------------
<S> <C> <C> <C> <C>
BALANCE, JULY 15, 1997 (DATE OF
INCEPTION).............................. $ 0 $ 0 $ 0 $ 0
Common stock sale, December 15, 1997...... 13,880,972 13,880,972
Net loss for the period from July 15, 1997
(date of inception) through December 31,
1997.................................... (404,071) (404,071)
Unrealized loss on securities available
for sale, net of tax.................... (3,631) (3,631)
----------- ----------- ------- -----------
BALANCE, DECEMBER 31, 1997................ 13,880,972 (404,071) (3,631) 13,473,270
Net income for the period from January 1,
1998 through March 31, 1998............. (1,141,577) (1,141,577)
Unrealized gain on securities available
for sale, net of tax.................... 2,784 2,784
----------- ----------- ------- -----------
BALANCE, MARCH 31, 1998................... $13,880,972 $(1,545,648) $ (847) $12,334,477
=========== =========== ======= ===========
</TABLE>

See accompanying notes to consolidated financial statements.
F-6
<PAGE> 48

MERCANTILE BANK CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss.................................................. $(1,141,577) $ (404,071)
Adjustments to reconcile net loss to net cash from
operating activities
Depreciation and amortization.......................... 42,806 119
Provision for loan losses.............................. 998,800 193,300
Gain on sale of loans.................................. (14,137)
Loans originated for sale.............................. (1,209,620)
Proceeds from loans sold............................... 1,223,757
Net change in
Organizational costs................................. (1,625) (74,871)
Accrued interest receivable and other assets......... (622,670) (286,069)
Accrued expenses and other liabilities............... (23,772) 292,204
----------- ------------
Net cash from operating activities................ (748,038) (279,388)
CASH FLOWS FROM INVESTING ACTIVITIES
Net increase in loans..................................... (63,253,906) (12,886,763)
Purchase of
Securities available for sale.......................... (3,496,607) (3,001,250)
Premises and equipment, net............................ (404,626) (953,982)
----------- ------------
Net cash from investing activities................ (67,155,139) (16,841,995)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of 1,495,000 shares of common stock.... 13,880,972
Net increase in deposits.................................. 65,696,067 9,688,264
Net increase in securities sold under agreements to
repurchase............................................. 4,432,751 655,447
----------- ------------
Net cash from financing activities................ 70,128,818 24,224,683
----------- ------------
Net change in cash and cash equivalents..................... 2,225,641 7,103,300
Cash and cash equivalents at beginning of period............ 7,103,300 0
----------- ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 9,328,941 $ 7,103,300
=========== ============
Supplemental disclosures of cash flow information
Cash paid during the period for
Interest............................................... $ 445,820 $ 1,391
</TABLE>

See accompanying notes to consolidated financial statements.
F-7
<PAGE> 49

MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
the accounts of Mercantile Bank Corporation and its wholly-owned subsidiary,
Mercantile Bank of West Michigan, after elimination of significant intercompany
transactions and accounts.

Nature of Operations: Mercantile Bank Corporation ("Corporation") was
incorporated on July 15, 1997 as a bank holding company to establish and own
Mercantile Bank of West Michigan (Bank) based in Grand Rapids, Michigan. The
Bank is a community-based financial institution. The Bank's loan and deposit
accounts are primarily with customers located in western Michigan, within Kent
County. The Bank began operations on December 15, 1997, after several months of
work by incorporators and employees in preparing applications with the various
regulatory agencies and obtaining insurance and building space. A portion of the
costs incurred prior to opening, those associated with organizational costs
($76,148), have been capitalized and are being amortized over 60 months, while
the remaining costs were expensed ($177,584) and are included in the 1997 income
statement.

Use of Estimates: To prepare financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions based on available information. These estimates and assumptions
affect the amounts reported in the financial statements and the disclosures
provided, and future results could differ. The allowance for loan losses and the
fair values of financial instruments are particularly subject to change.

Cash Flow Reporting: Cash and cash equivalents include cash on hand, demand
deposits with other financial institutions, short-term investments (securities
with daily put provisions) and federal funds sold. Cash flows are reported net
for customer loan and deposit transactions, interest-bearing time deposits with
other financial institutions and short-term borrowings with maturities of 90
days or less.

Comprehensive Income: Under a new accounting standard, comprehensive income
is now reported for all periods. Comprehensive income includes both net income
and other comprehensive income. Other comprehensive income includes the change
in unrealized gains and losses on securities available for sale.

Securities: Securities available for sale consist of those securities which
might be sold prior to maturity due to changes in interest rates, prepayment
risks, yield and availability of alternative investments, liquidity needs or
other factors. Securities classified as available for sale are reported at their
fair value and the related unrealized holding gain or loss is reported, net of
related income tax effects, as a separate component of shareholders' equity,
until realized.

Premiums and discounts on securities are recognized in interest income
using the interest method over the estimated life of the security. Gains and
losses on the sale of securities available for sale are determined based upon
amortized cost of the specific security sold.

Loans: Loans are reported at the principal balance outstanding, net of
deferred loan fees and costs. Interest income is reported on the interest method
and includes amortization of net deferred loan fees and costs over the loan
term.

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance, increased by the provision for loan losses and recoveries, and
decreased by charge-offs. Management estimates the allowance balance required
based on past industry loan loss experience, known and inherent risks in similar
portfolios, and economic conditions. Allocations of the allowance may be made
for specific loans, but the entire allowance is available for any loan that, in
management's judgment, should be charged-off.

Loan impairment is reported when full payment under the loan terms is not
expected. Impairment is evaluated in aggregate for smaller-balance loans of
similar nature such as residential mortgage, consumer and
F-8
<PAGE> 50
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

credit card loans, and on an individual loan basis for other loans. If a loan is
impaired, a portion of the allowance is allocated so that the loan is reported,
net, at the present value of estimated future cash flows using the loan's
existing rate. Loans are evaluated for impairment when payments are delayed,
typically 90 days or more, or when the internal grading system indicates a
doubtful classification. There were no loans classified as impaired as of
December 31, 1997 or for the period from July 15, 1997 (date of inception)
through March 31, 1998.

Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using both straight-line and
accelerated methods over the estimated useful lives of the respective assets.
Maintenance, repairs and minor alterations are charged to current operations as
expenditures occur and major improvements are capitalized. These assets are
reviewed for impairment under SFAS No. 121 when events indicate the carrying
amount may not be recoverable.

Stock Options: No expense for stock options is recorded, as the grant price
equals the market price of the stock at grant date. Pro-forma disclosures show
the effect on income and earnings per share had the options' fair value been
recorded using an option pricing model. The pro-forma effect is expected to
increase in the future. Options granted vest over two years and have a maximum
term of ten years.

Income Taxes: Income tax expense is the sum of the current year income tax
due or refundable and the change in deferred tax assets and liabilities.
Deferred tax assets and liabilities are the expected future tax consequences of
temporary differences between the carrying amounts and tax bases of assets and
liabilities, computed using enacted tax rates. A valuation allowance has been
established to the extent of net deferred tax assets due to a lack of operating
performance to ensure that it is more likely than not it would be recovered.

Fair Values of Financial Instruments: Fair values of financial instruments
are estimated using relevant market information and other assumptions, as more
fully disclosed separately. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, especially in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates. The fair value estimates of existing on- and
off-balance sheet financial instruments does not include the value of
anticipated future business or the values of assets and liabilities not
considered financial instruments.

Dividend Restriction: The Corporation and Bank are subject to banking
regulations which require the maintenance of certain capital levels and which
may limit the amount of dividends which may be paid.

Earnings (Loss) Per Share: Basic earnings (loss) per share is based on
weighted average common shares outstanding. Diluted earnings (loss) per share
further assumes issuance of any dilutive potential common shares.

F-9
<PAGE> 51
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

NOTE 2 -- SECURITIES

The amortized cost and fair values of securities were as follows:

AVAILABLE FOR SALE

<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUES
--------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
MARCH 31, 1998 (UNAUDITED)
U.S. Treasury securities....................... $6,496,830 $1,125 $(1,972) $6,495,983
========== ====== ======= ==========
DECEMBER 31, 1997
U.S. Treasury securities....................... $3,001,131 $ 0 $(3,631) $2,997,500
========== ====== ======= ==========
</TABLE>

The amortized cost and fair values of debt investment securities, by
contractual maturity, are shown below. Expected maturities may differ from
contractual maturities because borrowers may have the right to call or prepay
obligations with or without call or prepayment penalties.

<TABLE>
<CAPTION>
AMORTIZED
COST FAIR VALUES
--------- -----------
<S> <C> <C>
MARCH 31, 1998 (UNAUDITED)
Due in three months or less............................... $2,003,287 $2,003,750
Due in three months through one year...................... 4,493,543 4,492,233
---------- ----------
$6,496,830 $6,495,983
========== ==========
DECEMBER 31, 1997
Due in one year or less................................... $3,001,131 $2,997,500
========== ==========
</TABLE>

There were no sales of securities for the period from July 15, 1997 (date
of inception) through December 31, 1997, or for the period from January 1, 1997
through March 31, 1998 (Unaudited).

Securities with a par value of approximately $500,000, were pledged to
secure public deposits and for various other purposes as required or permitted
by law at March 31, 1998 (Unaudited) and December 31, 1997. Securities with a
par value of $6,000,000 and $2,500,000 were pledged to secure short-term
borrowings at March 31, 1998 (Unaudited) and December 31, 1997, respectively.

NOTE 3 -- LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are as follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Mortgage -- residential............................ $ 923,000
Commercial......................................... 73,340,669 $12,700,651
Consumer........................................... 1,877,000 186,112
----------- -----------
$76,140,669 $12,886,763
=========== ===========
</TABLE>

F-10
<PAGE> 52
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

Activity in the allowance for loan losses is as follows:

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
Balance at beginning of period.................. $ 193,300 $ 0
Provision charged to operating expense........ 998,800 193,300
---------- --------
Balance at end of period........................ $1,192,100 $193,300
========== ========
</TABLE>

There were no impaired loans at March 31, 1998 or December 31, 1997.

NOTE 4 -- PREMISES AND EQUIPMENT -- NET

Premises and equipment are as follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
Leasehold improvements.......................... $ 714,383 $545,401
Furniture and equipment......................... 644,225 408,581
---------- --------
1,358,608 953,982
Less accumulated depreciation................... (41,897)
---------- --------
Balance at end of period...................... $1,316,711 $953,982
========== ========
</TABLE>

NOTE 5 -- DEPOSITS

Deposits are summarized as follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
Noninterest-bearing demand deposit accounts..... $10,598,157 $7,207,482
Money fund checking............................. 1,761,000 213,218
Savings accounts................................ 11,908,000 2,089,539
Certificates of deposit......................... 51,117,174 178,025
----------- ----------
$75,384,331 $9,688,264
=========== ==========
</TABLE>

Maturities of deposits with a term of over one year were as follows, for
the next five years:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(UNAUDITED)
<S> <C> <C>
1998............................................ $28,496,000 $ 57,862
1999............................................ 22,621,174 120,163
2000............................................
----------- --------
$51,117,174 $178,025
=========== ========
</TABLE>

There were no time deposit accounts of $100,000 or more at year-end 1997.
At March 31, 1998, there were approximately $18,988,000 in time deposits over
$100,000.

F-11
<PAGE> 53
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

NOTE 6 -- BORROWINGS

Information relating to securities sold under agreements to repurchase
follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Outstanding balance.................................... $5,088,198 $655,447
Average interest rate.................................. 4.70% 4.70%
MARCH 31 DECEMBER 31
1998 1997
---------- --------
(UNAUDITED)
Average balance........................................ $2,777,086 $ 3,853
Average interest rate.................................. 4.70% 4.70%
Maximum outstanding at any month end................... $5,088,198 $655,447
</TABLE>

Securities sold under agreements to repurchase (repurchase agreements)
generally have original maturities of less than one year. Repurchase agreements
are treated as financings and the obligations to repurchase securities sold are
reflected as liabilities. Securities involved with the agreements are recorded
as assets of the Bank and are primarily held in safekeeping by correspondent
banks. Repurchase agreements are offered principally to certain large deposit
customers as deposit equivalent investments.

NOTE 7 -- FEDERAL INCOME TAXES

The Corporation recorded no current or deferred benefit for income taxes as
a result of recording the valuation allowance in the amount of net deferred tax
assets.

Deferred tax assets consist of:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Deferred tax assets
Start-up/pre-opening expenses............................. $ 92,722 $ 97,811
Provision for loan losses................................. 339,592 65,722
--------- ---------
Net deferred tax asset...................................... 432,314 163,533
Valuation allowance for deferred tax assets................. (432,314) (163,533)
--------- ---------
Net deferred tax asset after valuation allowance..... $ 0 $ 0
========= =========
</TABLE>

As a result of the valuation allowance, the Corporation's effective tax
rate was reduced from the statutory rate of 34% to 0%.

F-12
<PAGE> 54
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

NOTE 8 -- STOCK OPTION PLAN

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
Stock options outstanding
Beginning.................................... 77,750 0
Granted...................................... 13,000 77,750
----------- ---------
Ending.................................. 90,750 77,750
=========== =========
Minimum exercise price....................... $ 10.00 $ 10.00
Maximum exercise price....................... 13.00 11.75
Average exercise price....................... 10.78 10.75
Average remaining option term................ 9.5 years 9.8 years
Estimated fair value of stock options
granted:..................................... $ 67,080 $ 340,863
Assumptions used:
Risk-free interest rate................... 5.62% 6.01%
Expected option life...................... 7 years 7 years
Expected stock volatility................. 25% 25%
Expected dividends........................ 0% 0%
Pro-forma (loss) per share, assuming SFAS 123
fair value method was used for stock options:
Net loss..................................... $(1,191,871) $(448,029)
Basic and diluted loss per share............. (0.80) (0.30)
</TABLE>

NOTE 9 -- RELATED PARTIES

Certain directors and executive officers of the Corporation, including
their immediate families and companies in which they are principal owners, were
loan customers of the Bank. At March 31, 1998 (Unaudited) and December 31, 1997,
the Bank had approximately $7,285,000 and $5,940,000 in loan commitments to
directors and executive officers, of which approximately $3,369,000 and
$2,147,000 were outstanding at March 31, 1998 (Unaudited) and December 31, 1997.

Related party deposits totaled approximately $12,196,000 and $416,000 at
March 31, 1998 (Unaudited) and December 31, 1997.

NOTE 10 -- COMMITMENTS AND OFF-BALANCE-SHEET RISK

Some financial instruments are used to meet customer financing needs and to
reduce exposure to interest rate changes. These financial instruments include
commitments to extend credit and standby letters of credit. These involve, to
varying degrees, credit and interest-rate risk in excess of the amount reported
in the financial statements.

Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the commitment, and
generally have fixed expiration dates. Standby letters of credit are conditional
commitments to guarantee a customer's performance to a third party. Exposure to
credit loss if the other party does not perform is represented by the
contractual amount for commitments to extend credit

F-13
<PAGE> 55
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

and standby letters of credit. Collateral or other security is normally not
obtained for these financial instruments prior to their use, and many of the
commitments are expected to expire without being used.

A summary of the notional or contractual amounts of financial instruments
with off-balance-sheet risk follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
Commitments to make loans........................... $ 4,803,967 $7,198,584
Commercial unused lines of credit................... 21,084,366 3,701,272
Consumer unused lines of credit..................... 1,348,894 64,356
</TABLE>

Commitments to make loans generally have termination dates of one year or
less and may require a fee. Since many of the above commitments expire without
being used, the above amounts do not necessarily represent future cash
commitments. No losses are anticipated as a result of these transactions.

The Bank leases the main office facility under an operating lease
agreement. Total rental expense for the lease for 1997 was $37,463. Rental
expense through March 31, 1998 (Unaudited) was $37,463. Future minimum rentals
under this lease are as follows:

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
1998................................................ $112,387 $149,850
1999................................................ 149,850 149,850
2000................................................ 149,850 149,850
2001................................................ 149,850 149,850
2002................................................ 149,850 149,850
2003................................................ 149,850
</TABLE>

NOTE 11 -- FAIR VALUES OF FINANCIAL INSTRUMENTS

The Bank opened for operations on December 15, 1997. As there have been no
significant changes in interest rates from December 15, 1997 to year end or
through March 31, 1998, the values shown on the balance sheet approximate market
value at December 31, 1997 and March 31, 1998. The interest rates offered by the
Bank for its loan and deposit products stayed the same during those time
periods. Investment securities are disclosed at fair value in Note 2.

While the estimates of fair value are based on management's judgment of the
most appropriate factors, there is no assurance that were the Bank to have
disposed of such items at December 31, 1997 or March 31, 1998, the estimated
fair values would necessarily have been achieved at those dates, since market
values may differ depending on various circumstances. The estimated fair values
at December 31, 1997 and March 31, 1998 should not necessarily be considered to
apply to subsequent dates.

In addition, other assets and liabilities of the Bank that are not defined
as financial instruments are not included in the above disclosures, such as
property and equipment. Also, non-financial instruments typically not recognized
in the financial statements nevertheless may have value but are not included in
the above disclosures. These include, among other items, the estimated earnings
power of core deposit accounts, the trained work force, customer goodwill and
similar items.

F-14
<PAGE> 56
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

NOTE 12 -- EMPLOYEE BENEFIT PLANS

The Corporation established a 401(k) plan effective January 1, 1998,
covering substantially all its employees. The Corporation's first quarter 1998
matching 401(k) contribution charged to expense was $15,771. The percent of the
Corporation's matching contributions to the 401(k) is determined annually by the
Board of Directors.

NOTE 13 -- REGULATORY MATTERS

The Corporation and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy guidelines and prompt
corrective action regulations involve quantitative measures of assets,
liabilities, and certain off-balance-sheet items calculated under regulatory
accounting practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk weightings, and other
factors, and the regulators can lower classifications in certain cases. Failure
to meet various capital requirements can initiate regulatory action that could
have a direct material effect on the financial statements.

The prompt corrective action regulations provide five classifications,
including well capitalized, adequately capitalized, undercapitalized,
significantly undercapitalized, and critically undercapitalized, although these
terms are not used to represent overall financial condition. If adequately
capitalized, regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and plans for capital restoration are required. The minimum
requirements are:

<TABLE>
<CAPTION>
CAPITAL TO RISK-
WEIGHTED ASSETS
------------------ TIER 1 CAPITAL
TOTAL TIER 1 TO AVERAGE ASSETS
----- ------ -----------------
<S> <C> <C> <C>
Well capitalized................................ 10% 6% 5%
Adequately capitalized.......................... 8 4 4
Undercapitalized................................ ,8 ,4 ,4
</TABLE>

At March 31, 1998 and December 31, 1997, actual capital levels (in
thousands) and minimum required levels for the Corporation and the Bank were:

<TABLE>
<CAPTION>
MINIMUM
REQUIRED TO BE
MINIMUM WELL CAPITALIZED
REQUIRED FOR UNDER PROMPT
CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES REGULATIONS
------------------ ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
MARCH 31, 1998 (UNAUDITED)
Total capital (to risk weighted assets)
Consolidated................................. $13,360 16.3% $6,564 8.0% $8,204 10.0%
Bank......................................... 12,759 15.6 6,556 8.0 8,195 10.0
Tier 1 capital (to risk weighted assets)
Consolidated................................. 12,334 15.0 3,282 4.0 4,923 6.0
Bank......................................... 11,735 14.3 3,272 4.0 4,917 6.0
Tier 1 capital (to average assets)
Consolidated................................. 12,334 20.7 2,387 4.0 2,984 5.0
Bank......................................... 11,735 19.7 2,383 4.0 2,979 5.0
</TABLE>

F-15
<PAGE> 57
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

<TABLE>
<CAPTION>
MINIMUM
REQUIRED TO BE
MINIMUM WELL CAPITALIZED
REQUIRED FOR UNDER PROMPT
CAPITAL ADEQUACY CORRECTIVE ACTION
ACTUAL PURPOSES REGULATIONS
------------------ ----------------- -----------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997
Total capital (to risk weighted assets)
Consolidated................................. $13,595 78.1% $1,392 8.0% $1,740 10.0%
Bank......................................... 13,056 75.6 1,382 8.0 1,728 10.0
Tier 1 capital (to risk weighted assets)
Consolidated................................. 13,402 77.0 696 4.0 1,044 6.0
Bank......................................... 12,863 74.5 691 4.0 1,037 6.0
Tier 1 capital (to average assets)
Consolidated................................. 13,402 69.7 769 4.0 961 5.0
Bank......................................... 12,863 69.3 743 4.0 928 5.0
</TABLE>

The Corporation and Bank were categorized as well capitalized at March 31,
1998 (Unaudited) and year end 1997.

NOTE 14 -- MERCANTILE BANK CORPORATION (PARENT COMPANY ONLY)
CONDENSED FINANCIAL STATEMENTS

Following are condensed parent company only financial statements.

CONDENSED BALANCE SHEET

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................. $ 513,761 $ 536,824
Investment in subsidiary.................................. 11,733,934 12,862,806
Other assets.............................................. 95,926 126,545
----------- -----------
Total assets........................................... $12,343,621 $13,526,175
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities............................................... $ 9,144 $ 52,905
Shareholders' equity...................................... 12,334,477 13,473,270
----------- -----------
Total liabilities and shareholders' equity............. $12,343,621 $13,526,175
=========== ===========
</TABLE>

F-16
<PAGE> 58
MERCANTILE BANK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997

CONDENSED STATEMENT OF INCOME

<TABLE>
<CAPTION>
PERIOD FROM
JULY 15, 1997
THREE MONTHS (DATE OF INCEPTION)
ENDED THROUGH
MARCH 31, 1998 DECEMBER 31, 1997
-------------- -------------------
(UNAUDITED)
<S> <C> <C>
Income
Other..................................................... $ 7,109 $ 32,781
----------- ---------
Total income........................................... 7,109 32,781
Expenses
Other operating expenses.................................. 17,030 303,289
----------- ---------
Loss before income tax and equity in undistributed net loss
of subsidiaries........................................... (9,921) (270,508)
Federal income tax expense..................................
Equity in undistributed net loss of subsidiary.............. (1,131,656) (133,563)
----------- ---------
NET LOSS.................................................... $(1,141,577) $(404,071)
=========== =========
</TABLE>

CONDENSED STATEMENT OF CASH FLOWS

F-17
<PAGE> 59

MERCANTILE BANK OF WEST MICHIGAN

EMPLOYEES

LOGO

FRONT ROW LEFT TO RIGHT -- Employee (years experience)

Joy Hulst (Over 20 years) - Carolyn DeNeut (Over 9 years) - Michael Price (Over
17 years)

Gerald Johnson, Jr. (Over 27 years) - Deborah Parrent (Over 16 years) - Diane
Young (Over 29 years)

MIDDLE ROW LEFT TO RIGHT -- Employee (years experience)

Melissa Sheffer (Over 6 years) - Mark Augustyn (Over 7 years)

Latasha Cooperwood (Over 7 years) - Jeff Peterson (Over 1 year -- recent college
graduate)

Mildred Johnson (Over 1 year -- recent college graduate) - Kelly Hawley (Over 5
years)

Brenda Ingersoll (Over 10 years) - Susan Hoffman (Over 10 years) - Joann Yates
(Over 4 years)

Tracy Skipper (Over 5 years) - Lisa Bernhardt (Over 12 years)

BACK ROW LEFT TO RIGHT -- Employee (years experience)

Julie VanDyke (Over 5 years) - John Schulte (Over 4 years) - Mike Sankey (Over
26 years)

Harold Drenten (Over 28 years) - Mark Hoffhines (Over 17 years) - Terri
VanEerden (Over 6 years)

Judy Beak (Over 5 years) - Kevin Betser (Over 6 years) - Robert Kaminski (Over
13 years)

Gordon Oosting (Over 16 years) - Charles Christmas (Over 10 years)

<PAGE> 60

- ------------------------------------------------------
- ------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OFFERED HEREBY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH
THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO
ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.

---------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Forward-Looking Statements............ 2
Prospectus Summary.................... 3
Risk Factors.......................... 7
Use of Proceeds....................... 10
Dividend Policy....................... 11
Market for Common Stock and Price
Range............................... 11
Capitalization........................ 12
Selected Consolidated Financial
Data................................ 13
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 14
Business.............................. 18
Management............................ 24
Related Party Transactions............ 29
Security Ownership.................... 30
Supervision and Regulation............ 31
Description of Capital Stock.......... 34
Shares Eligible for Future Sale....... 38
Underwriting.......................... 39
Available Information................. 39
Legal Matters......................... 40
Experts............................... 40
Index to Financial Statements......... F-1
</TABLE>

- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------

1,000,000 SHARES

MERCANTILE LOGO

COMMON STOCK

-------------------------

PROSPECTUS
-------------------------

RONEY CAPITAL MARKETS LOGO
, 1998

- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 61

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

The registrant's Articles of Incorporation provide that the registrant
shall indemnify its present and past directors, officers, and such other persons
as the Board of Directors may authorize, to the full extent permitted by law.

The registrant's Bylaws contain indemnification provisions concerning third
party actions as well as actions in the right of the registrant. The Bylaws
provide that the registrant shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the registrant) by reason of the
fact that he or she is or was a director or officer of the registrant or is, or
while serving as such a director or officer was, serving at the request of the
registrant as a director, officer, partner, trustee, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise, whether for profit or not, against expenses (including
attorney's fees), judgments, penalties, fees and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
registrant or its shareholders, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.

With respect to derivative actions, the Bylaws provide that the registrant
shall indemnify any person who was or is a party to or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the registrant to procure a judgment in its favor by reason of the fact
that he or she is or was a director or officer of the registrant, or is or was
serving at the request of the registrant as a director, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise against expenses
(,including attorney's fees) actually and reasonably incurred by him or her in
connection with the defense or settlement of such judgment or suit if he or she
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of the registrant or its shareholders and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person has been found liable to the registrant unless
and only to the extent that the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnify for such expenses which such court shall deem proper.

The registrant's Articles of Incorporation provide that a director of the
registrant shall not be personally liable to the registrant or its shareholders
for monetary damages for breach of the director's fiduciary duty. However, it
does not eliminate or limit the liability of a director for any breach of a
duty, act or omission for which the elimination or limitation of liability is
not permitted by the MBCA, currently 'including, without limitations the
following: (1) breach of the director's duty of loyalty to the registrant or its
shareholders; (2) acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law; (3) illegal loans,
distributions of dividends or assets, or stock purchases as described in Section
551(l) of MBCA; and (4) transactions from which the director derived an improper
personal benefit.

The Company has purchased directors' and officers' liability insurance for
directors and officers of the Company and the Bank.

II-1
<PAGE> 62

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the various expenses in connection with the
sale and distribution of the Common Stock being registered, other than
underwriting discounts and commissions. All amounts shown are estimates, except
the SEC registration fee and the NASD filing fee, and assume the sale of
1,000,000 shares in the offering.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 5,663
NASD filing fee............................................. 2,369
Printing and mailing expenses............................... 30,000
Fees and expenses of counsel................................ 100,000
Accounting and related expenses............................. 20,000
Blue Sky fees and expenses (including counsel fees)......... 35,000
Registrar and Transfer Agent fees........................... 3,500
Miscellaneous............................................... 3,468
--------
Total....................................................... $200,000
========
</TABLE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

During the period from July 1997 through October 1997, the registrant
borrowed approximately $278,500 from members of the registrant's initial Board
of Directors to pay organizational and related expenses. These loans were repaid
in October, 1997 from the net proceeds of the registrant's initial public
offering. To the extent that such transactions would be deemed to involve the
offer or sale of a security, the registrant would claim an exemption under Rule
504 of Regulation D or Section 4(2) of the Securities Act of 1933 for such
transactions. In July, 1997, the registrant sold one share of its Common Stock
to Gerald R. Johnson, Jr., the Chairman of the Board and Chief Executive Officer
of the registrant, for $10. The registrant claims an exemption for such sale
pursuant to Rule 504 of Regulation D or Section 4(2). During the period from
July, 1997 through January, 1998, the Company issued options for 90,750 shares
of its Common Stock to seven employees of the Company pursuant to the Company's
1997 Employee Stock Option Plan. These options have exercise prices ranging from
$10 to $13 per share. Such option grants either do not constitute a sale, or if
they do, the registrant claims an exemption for such sales pursuant to Rule 504
of Regulation D or Section 4(2). The Company established a 401(k) plan effective
January 1, 1998. One of the investment options under the plan permits investment
by employees in stock of the Company through the plan. In such cases, the plan
purchases the Common Stock in the open market. The Company is considering
registering the Common Stock of the Company purchased under the Plan.

II-2
<PAGE> 63

ITEM 27. EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- ------- -------------------
<C> <S>
1 Form of Underwriting Agreement(1)
3.1 Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Company's Registration Statement on Form
SB-2 (Commission File No. 333-33081) that became effective
on October 23, 1997
3.2 Bylaws of the Company are incorporated by reference to
exhibit 3.2 of the Company's Registration Statement on Form
SB-2 (Commission File No. 333-33081) which became effective
on October 23, 1997
4.1 Specimen Stock Certificate of the Company is incorporated by
reference to exhibit 4.1 of the Company's Registration
Statement on Form SB-2 (Commission File No. 333-33081) which
became effective on October 23, 1997
5 Opinion of Dickinson Wright PLLC(1)
10.1 1997 Employee Stock Option Plan is incorporated by reference
to exhibit 10.1 of the Company's Registration Statement on
Form SB-2 (Commission File No. 333-33081) which became
effective on October 23, 1997 (Management contract or
compensatory plan)
10.2 Lease Agreement between the Company and Division Avenue
Partners, L.L.C. dated August 16, 1997, is incorporated by
reference to exhibit 10.2 of the Company's Registration
Statement on Form SB-2 (Commission File No. 333-33081) which
became effective October 23, 1997
21 Subsidiaries of the registrant is incorporated by reference
to exhibit 21 of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997 (Commission File
No. 333-33081)
23.1 Consent of Independent Auditors
23.2 Consent of Counsel is included in Exhibit 5 to this
Registration Statement(1)
</TABLE>

- -------------------------

(1) Previously filed.

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes as follows:

(1) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against liabilities
arising under the Securities Act (other than the payment by the registrant of
expenses incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.

(2) The registrant will:

(i) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant under Rule 424(b)(1), or (4) or
497(h) under the Securities Act as part of this Registration Statement as
of the time the SEC declared it effective; and

(ii) For determining any liability under the Securities Act, treat
each post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.

II-3
<PAGE> 64

SIGNATURES

In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment to
Registration Statement to be signed on its behalf by the undersigned, in the
City of Grand Rapids, State of Michigan, on July 8, 1998.

MERCANTILE BANK CORPORATION

By: /s/ GERALD R. JOHNSON, JR.
------------------------------------
Gerald R. Johnson, Jr., Chairman
of the Board and Chief Executive
Officer

In accordance with the requirements of the Securities Act of 1933, this
Amendment to Registration Statement was signed by the following persons in the
capacities indicated on July 8, 1998.

<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>

Director
- -----------------------------------------------------
Betty S. Burton

/s/ PETER A. CORDES Director
- -----------------------------------------------------
Peter A. Cordes

/s/ C. JOHN GILL Director
- -----------------------------------------------------
C. John Gill

/s/ DAVID M. HECHT Director
- -----------------------------------------------------
David M. Hecht

/s/ GERALD R. JOHNSON, JR. Chairman of the Board, Chief Executive Officer, and
- ----------------------------------------------------- Director (principal executive officer, principal
Gerald R. Johnson, Jr. financial officer and principal accounting officer)

/s/ SUSAN K. JONES Director
- -----------------------------------------------------
Susan K. Jones

Director
- -----------------------------------------------------
Lawrence W. Larsen

/s/ CALVIN D. MURDOCK Director
- -----------------------------------------------------
Calvin D. Murdock

/s/ MICHAEL H. PRICE President, Chief Operating Officer and Director
- -----------------------------------------------------
Michael H. Price

/s/ DALE J. VISSER Director
- -----------------------------------------------------
Dale J. Visser

/s/ DONALD WILLIAMS, SR. Director
- -----------------------------------------------------
Donald Williams, Sr.

/s/ ROBERT M. WYNALDA Director
- -----------------------------------------------------
Robert M. Wynalda

/s/ CHARLES E. CHRISTMAS Vice President of Finance and Treasurer
- ----------------------------------------------------- (Principal Financial and Accounting Officer)
Charles E. Christmas
</TABLE>

II-4
<PAGE> 65

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT DESCRIPTION PAGE
- ------- ------------------- ------------
<C> <S> <C>
1 Form of Underwriting Agreement(1)
3.1 Articles of Incorporation are incorporated by reference to
exhibit 3.1 of the Company's Registration Statement on Form
SB-2 (Commission File No. 333-33081) that became effective
on October 23, 1997
3.2 Bylaws of the Company are incorporated by reference to
exhibit 3.2 of the Company's Registration Statement on Form
SB-2 (Commission File No. 333-33081) which became effective
on October 23, 1997
4.1 Specimen Stock Certificate of the Company is incorporated by
reference to exhibit 4.1 of the Company's Registration
Statement on Form SB-2 (Commission File No. 333-33081) which
became effective on October 23, 1997
5 Opinion of Dickinson Wright PLLC(1)
10.1 1997 Employee Stock Option Plan is incorporated by reference
to exhibit 10.1 of the Company's Registration Statement on
Form SB-2 (Commission File No. 333-33081) which became
effective on October 23, 1997 (Management contract or
compensatory plan)
10.2 Lease Agreement between the Company and Division Avenue
Partners, L.L.C. dated August 16, 1997, is incorporated by
reference to exhibit 10.2 of the Company's Registration
Statement on Form SB-2 (Commission File No. 333-33081) which
became effective October 23, 1997
21 Subsidiaries of the registrant is incorporated by reference
to exhibit 21 of the Company's Annual Report on Form 10-KSB
for the fiscal year ended December 31, 1997 (Commission File
No. 333-33081)
23.1 Consent of Independent Auditors
23.2 Consent of Counsel is included in Exhibit 5 to this
Registration Statement(1)
</TABLE>

- -------------------------

(1) Previously filed

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the use of our report dated February 6, 1998 on
the consolidated financial statements of Mercantile Bank Corporation for the
period ended December 31, 1997, to be included within the Registration
Statement on Form SB-2 and Prospectus of Mercantile Bank Corporation. We also
consent to the use of our name as "Experts" in the Prospectus.

/s/ Crowe, Chizek and Company LLP

Grand Rapids, Michigan
July 9, 1998