Business & Finance
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Business and Finance
Mon, August 17, 2009
Sun, August 16, 2009
Fri, August 14, 2009 Mercantile Bancorp, Inc.: Mercantile Bancorp Announces Second Quarter 2009 Results
QUINCY, IL--(Marketwire - August 14, 2009) - Mercantile Bancorp, Inc. (
-- Consistent Positive Operating Results Posted by Illinois, Missouri Bank Holdings -- Moderate Growth in Total Assets, Deposits and Loans Year-Over-Year -- Net Loss Includes Non-cash Goodwill Impairment Charge of $44.6 Million
Mercantile Bancorp, Inc. (
The second quarter 2009 net loss was significant due to a $44.6 million non-cash charge to reflect the calculated impairment of its goodwill. The reported loss also reflected a provision for loan losses of $10.0 million, largely related to loans at the company's subsidiary banks in Florida and Kansas, compared to a provision of $1.8 million in the second quarter of 2008. To address the asset quality issues at Royal Palm Bank in Naples, Florida and Heartland Bank in Leawood, Kansas, the Company has implemented operational and credit policy changes over the past several quarters, with a goal of minimizing future losses in the loan portfolios. Other factors contributing to the net loss in the second quarter 2009 were the non-cash write-downs of equity investments in other financial institutions of $2.5 million, and an FDIC insurance fund special assessment of $812,000.
The Company reported $1.70 billion in assets at June 30, 2009 compared with $1.69 billion at June 30, 2008 and $1.77 billion at year-end 2008. Total loans were $1.31 billion at June 30, 2009, an increase of 3.8% compared with $1.26 billion at June 30, 2008. Total deposits stood at $1.43 billion at June 30, 2009, an increase of 2.1% over total deposits of $1.40 billion at June 30, 2008.
Since 1988, the Company has grown significantly through acquisitions and recorded goodwill related to these acquisitions. However, in consideration of the severe economic downturn and current accounting rules, the Company placed more weight on the lower peer valuations used in the estimate of the fair value of its subsidiaries. As a result, the Company recorded a $44.6 million non-cash charge to reflect the impairment of its goodwill. This charge had no effect on the Company's cash balances or liquidity. In addition, because goodwill is not included in the calculation of regulatory capital ratios, the Company's regulatory ratios are not adversely affected by this impairment, with the exception of its Tier 1 leverage ratio, which was reduced due to the limitation of trust preferred securities includible in Tier 1 capital. As a result of this impairment charge, the Company has no goodwill remaining on its balance sheet as of June 30, 2009.
"The accounting process to eliminate goodwill, an intangible asset reflected on the balance sheets of the acquired subsidiary banks, can only be done by expensing it through the income statements of those banks, and the expenses are included in the consolidated income statement of the Company," said Ted T. Awerkamp, President and CEO. "The majority of the loss being recorded is not from operations, but elimination of the intangible assets recorded over many years. Although our bottom line was disappointing due to the significant non-cash charges and additional loan loss reserves, our banks' underlying operational performances were encouraging. Continuing stability in loans and deposits, combined with strong cost of funds management and appropriate controls on interest-bearing accounts contributed to a meaningful increase in the company's net interest margin in second quarter 2009."
Awerkamp continued: "Our banks in Illinois and Missouri -- Mercantile Bank, HNB Bank, Brown County State Bank and Marine Bank & Trust -- turned in stable year-over-year performances, and each recorded increased net interest income. Mercantile Bank posted 14.5% year-over-year net interest income growth and a 7.4% increase in loans. Brown County State Bank and Marine Bank & Trust received recognition from the American Bankers Association as top community bank performers. HNB bank grew deposits by 10.2% since June 30, 2008. We also continued to make progress in returning the Kansas and Florida banking operations to profitability. To demonstrate year over year growth in loans, deposits and net revenue generation during a difficult economy shows the fundamental earnings power our banks possess."
Additional Second Quarter Details and First Half Results
Second quarter 2009 net interest income was $10.9 million, which was almost identical to the prior year's second quarter. Provision for loan losses in second quarter 2009 was $10.0 million, an increase of $8.1 million over second quarter 2008. Total noninterest income, which includes the Company's brokerage and asset management fees, decreased to $3.7 million in the second quarter of 2009, compared with $4.2 million in the prior year's quarter. Second quarter 2008 results included a $943,000 gain from the sale of an equity investment.
Management noted that the Company held the line on operating costs, including salaries and benefits, occupancy and equipment expense. Total second quarter 2009 noninterest expense was $62.2 million, an increase of $49.9 million from $12.3 million in second quarter 2008, reflecting the 2009 goodwill impairment charge of $44.6 million, a $1.4 million increase in FDIC premiums (including the special assessment of $812,000) and an increase of $2.3 million in non-cash other-than-temporary impairment charges on the Company's equity investments in startup banks.
For the six months ended June 30, 2009, the Company reported a net loss of $52.9 million or $(6.08) per share compared with a net loss of $414,000 or $(0.05) per share in the first six months of 2008. Net interest income in the first half of 2009 was $21.1 million, nearly identical to first half 2008, while provision for loan losses increased $6.5 million in the first six months of 2009 to $13.1 million, compared to $6.6 million in first half 2008. Noninterest income for first half 2009 was $7.0 million, a decrease of $599,000 compared with $7.6 million in first half 2008, which included a $943,000 gain on sale of an equity investment. Noninterest expense increased $50.7 million, to $74.6 million in the first six months of 2009, compared to $24.0 million in the same period in 2008, due to the 2009 goodwill impairment charge and the increases in FDIC insurance premiums and noncash other-than-temporary impairment charges on the Company's equity investments in startup banks.
Net interest margin for the first half of 2009 was 2.60% compared with 2.65% a year ago; however, net interest margin for second quarter 2009 improved to 2.69% over 2.52% in first quarter 2009. The additional loan loss provisions in 2009 increased the allowance for loan losses as a percentage of total loans to 2.15% at June 30, 2009, compared with 1.31% at June 30, 2008. Management noted that the June 30, 2009 average loan to deposit ratio remained strong at 89% compared with 91% for the prior year.
Deferral of Interest Payments on Trust Preferred Securities
In June 2009 the Company deferred regularly scheduled interest payments on its outstanding $61.9 million of junior subordinated notes relating to its trust preferred securities. The terms of the junior subordinated notes and the trust documents allow the Company to defer payments of interest for up to 20 consecutive quarterly periods without default or penalty. During the deferral period, the respective trusts will likewise suspend the declaration and payment of dividends on the trust preferred securities. Also during the deferral period, the Company may not, among other things and with limited exceptions, pay cash dividends on or repurchase its common stock nor make any payment on outstanding debt obligations that rank equally with or junior to the junior subordinated notes. As previously disclosed, the Company has suspended the payment of cash dividends on its outstanding common stock.
The Company believes that the deferral of interest payments on the junior subordinated notes and the suspension of cash dividend payments on its common stock will generate approximately $5.6 million per year in additional cash flow (compared with the continuing level of interest and dividend payments in 2008) and serve to strengthen its capital ratios and those of its subsidiary banks until those banks return to a sufficient level of profitability.
"Maintaining strong capital ratios is essential for ensuring the health of the Company and its subsidiaries during these difficult economic times and is in the best long-term interest of all of our shareholders," said Awerkamp. "We believe this is the most prudent course of action and will improve our flexibility to consider other actions that may need to be taken in order to achieve our targeted capital ratios. We would expect to resume paying dividends when such payments would be consistent with our overall financial performance and capital requirements."
Capital Ratios and Three-Year Strategic Capital Plan
With the exception of the Company's Tier 1 leverage ratio, all capital ratios of the Company and its subsidiaries exceed the levels to be considered "adequately capitalized" under regulatory guidelines. At June 30, 2009, the Company had a Tier 1 leverage ratio of 3.46%, below the regulatory minimum of 4.00%. The Tier 1 leverage ratio fell below the "adequately capitalized" level due to the goodwill impairment charge of $44.6 million in the second quarter of 2009, which reduced the amount of trust preferred securities includible in Tier 1 capital. The Company's Tier 1 risk-based capital ratio of 4.52% and total risk-based capital ratio of 9.04% both exceeded the regulatory minimums of 4.00% and 8.00%, respectively. The Board of Directors has approved and submitted to the Federal Reserve Bank of St. Louis a three-year strategic and capital plan designed to strengthen the Company's and its subsidiaries' operations and capital position going forward. The company has not participated in any private, public or government issuance of equity to date.
As previously disclosed, Heartland Bank and Royal Palm Bank are subject to directives by bank regulatory agencies. On March 9, 2009, Heartland Bank entered into an enforcement order with the Federal Deposit Insurance Corporation ("FDIC"), and the Kansas Office of the State Bank Commissioner. On May 30, 2009, Royal Palm Bank entered into an enforcement order with the FDIC and the Florida Office of Financial Regulation. As of June 30, 2009, Heartland Bank and Royal Palm Bank were in material compliance with these directives. The Company currently anticipates that its Tier 1 leverage ratio will not reach the adequately capitalized level, nor will Royal Palm Bank meet the regulatory capital ratio targets set forth in its order, by September 30, 2009. The Company's capital plan contemplates bringing the Company and Royal Palm Bank into compliance with these targets by December 31, 2009.
Evaluation of Strategic Alternatives
The Board of Directors has initiated a process to identify and evaluate a broad range of strategic alternatives to further strengthen the Company's capital base and enhance shareholder value. These strategic alternatives may include asset sales, rationalization of non-core business operations, capital raising and other recapitalization transactions. As part of this process, the Board has created a special committee (the "Special Committee") of independent directors to develop, evaluate and oversee any strategic alternatives that the Company may pursue. The Special Committee has retained outside financial and legal advisors to assist with its evaluation, oversight and execution.
Loan Agreement Waiver
As of June 30, 2009, the Company was current on its interest payments, but in breach of three financial performance covenants under its loan agreement with Great River Bancshares, Inc. ("Great River"). On August 10, 2009, the Company and Great River entered into a waiver that, among other things, waived the Company's breaches of the three financial covenants and extended the maturity date of a principal payment under one of the term loans subject to the loan agreement with Great River from June 30, 2009, to September 30, 2009. As a result of this waiver, the Company is not considered in breach of this loan agreement at this time. However, the Company anticipates that it may need to seek further waivers from Great River related to these financial covenants during the period ending September 30, 2009.
Individual Bank Operating Highlights
Mercantile Bank, the Company's largest institution with facilities in central Illinois, western Missouri and Carmel, Indiana, grew net interest income 14.5% to $10.2 million for the first six months of 2009 from $8.9 million a year ago. Net interest margin for the first half of 2009 was 2.88%, down from 2.98% in the same period a year ago, but a significant improvement from 2.67% in the first quarter of 2009. The bank's first half earnings performance was adversely impacted by a $1.8 million loan loss provision relating to a commercial real estate participation loan originated by Royal Palm Bank.
"Both Royal Palm and Mercantile Bank took conservative positions in reserving for this loan, and we believe there is a possibility both banks could recover a significant amount once the foreclosure and sale process is completed," said Awerkamp.
As of June 30, 2009, total assets were $751.0 million, a 3.2% increase compared with $728.0 million the year before, while loans increased 7.4% to $559.6 million compared with $520.8 million as of June 30, 2008. "Operationally, Mercantile Bank has performed well in finding lending opportunities and growing deposits," said Awerkamp. "In 2008, we opened a new main bank facility in Quincy, Illinois that has provided improved access and convenience for our customers. In addition, the facility gives us enhanced operational and technological capabilities at the bank and the holding company, which has helped drive efficiency."
HNB Bank, headquartered in Hannibal, Missouri, reported net interest income of $6.1 million in the first half of 2009 compared with $6.0 million a year ago. The bank's net interest margin for the first six months of 2009 was 3.93% compared with 4.21% the previous year, but reflected an improvement compared with the 3.78% net interest margin in the first quarter of 2009. Noninterest income, reflecting significant growth in mortgage loan refinancing revenues, increased to $1.9 million in the first half of 2009 compared with $1.5 million the prior year. Total loans increased 4.5% to $271.1 million at June 30, 2009 compared with $259.3 million a year ago.
Brown County State Bank, operating in the Western Illinois communities of Mt. Sterling and Golden, continued to perform solidly. The bank reported net income of $702,000 for the first six months of 2009 compared with $585,000 the prior year, reflecting growth in net interest income to $1.6 million from $1.3 million a year ago.
The bank expanded its net interest margin to 4.17% for the first six months of 2009 compared with 3.64% in the prior year, primarily by dramatically lowering its cost of funds to 1.95% for the first half of 2009 from 2.75% for the same period in 2008. Total loans increased 5.5% to $64.9 million at June 30, 2009 compared with $61.5 million a year ago. In June 2009, the bank was ranked 12th by the American Bankers Association in the best return on average equity among non-subchapter S community banks and thrifts under $100 million in assets in the United States.
Marine Bank & Trust based in Carthage, Illinois, ranked 67th in highest return on average equity among non-subchapter S banks between $100 million and $3 billion in assets of US banks in the same ABA survey. At June 30, 2009, Marine Bank reported record loans and deposits and its best-ever net interest income. Total loans increased 7.9% to $138.6 million at June 30, 2009 compared with $128.4 million a year ago, while deposits grew 14.1% to $172.2 million from $150.9 million the prior year. First half 2009 net interest income was $3.3 million compared with $3.0 million for the same period in 2008.
"Brown County and Marine have turned in remarkably consistent, positive performances, while demonstrating growth and improving margins in less-than-optimal market conditions," said Awerkamp.
Heartland Bank, based in Leawood, Kansas, has in past quarters addressed asset quality issues caused by isolated investment and loan participation decisions, and was able to reduce its loan loss provision to $945,000 in the first half of 2009, compared to $1.8 million in the first half of 2008. However, the high levels of nonperforming assets remaining on its balance sheet caused net interest income to decline from $2.5 million for the first six months of 2008 to $1.1 million in 2009. Mercantile Bancorp owns 56% of Mid-America Bancorp, Inc., which is the sole shareholder of Heartland Bank. Mid-America reported a net loss of $2.1 million for the first half of 2009, with $1.2 million of that loss included in Mercantile's consolidated results.
"Working with Heartland's management team, and with relative confidence we have reserved for most of the troubled loans, we are moving as quickly as possible to liquidate assets securing these loans and return recovered cash to a working status where it can be used for bank activities and lending," said Awerkamp. "Putting these asset-related issues behind us will enable Heartland to focus on building loans and deposits and return to profitability."
Royal Palm Bank, based in Naples, is working through loan and loan participation issues, and contending with a depressed real estate market in Florida. Awerkamp said the bank's management team, which was installed in 2008 to turn the institution around, has focused on identifying and managing the problem loans, but has also been attentive to positioning the bank for the future. Loans, deposits and assets are all up compared with last year's second quarter.
"The basic rationale for Mercantile acquiring Royal Palm hasn't changed," said Awerkamp. "The markets the bank serves are historically strong, with above-average income levels and growth rates. The rapid decline in Florida real estate values and abrupt cessation of many real estate development projects had a profound impact on virtually every Florida-based bank. Once the economy stabilizes, we believe the improvement will be more rapid in the Naples and Marco Island markets than in other parts of Florida. In addition, liquidating foreclosed assets in Florida is a slower process than in many states, which has prolonged the recovery efforts, but we do anticipate a return to profitability in the long run."
Royal Palm reported a net loss of $33.3 million for the first half of 2009, compared to a net loss of $2.5 million the prior year. Included in the 2009 loss was a goodwill impairment charge of $26.6 million, representing the carrying value of goodwill on Royal Palm's balance sheet. As of June 30, 2009, total loans were $127.8 million, a 5.6% increase compared with $121.1 million the year before, while deposits increased 12.8% to $144.3 million compared with $127.9 million as of June 30, 2008.
Outlook
Awerkamp concluded: "Although difficulties at our Florida and Kansas subsidiaries have placed a strain on the Company and have had a profound negative impact on earnings during the past few quarters, we believe the core fundamentals of all our banks are sound. We anticipate that additional loan loss reserves may be required at Royal Palm until the southwest Florida economy stabilizes, but we believe that loan loss issues at Heartland are under control. We expect the remainder of the year to be challenging; however, we continue to see signs of economic improvement in most of our markets. Our banks have captured new business and have done well in retaining customers and core deposits. Our management teams are actively managing their balance sheets, monitoring non-performing assets and improving net interest margins. We believe our problem loans have been largely identified and we've reserved aggressively. We anticipate improved bottom line performance in the second half of 2009 compared to the first half."
About Mercantile Bancorp
Mercantile Bancorp, Inc. is a Quincy, Illinois-based bank holding company with majority-owned subsidiaries consisting of three banks in Illinois and one each in Missouri, Kansas, and Florida, where the Company conducts full-service commercial and consumer banking business, engages in mortgage banking, trust services and asset management, and provides other financial services and products. The Company also operates a Mercantile Bank branch office in Indiana. In addition, the Company has minority investments in eight community banks in Missouri, Georgia, Florida, Colorado, California and Tennessee. Further information is available on the company's website at [ www.mercbanx.com ].
Forward-Looking Statements
This press release may contain "forward-looking statements" which reflect the Company's current views with respect to future events and financial performance. The Private Securities Litigation Reform Act of 1995 ("the Act") provides a safe harbor for forward-looking statements that are identified as such and are accompanied by the identification of important factors that could cause actual results to differ materially from the forward-looking statements. For these statements, the Company, together with its subsidiaries, claims the protection afforded by the safe harbor in the Act. Forward-looking statements are not based on historical information, but rather are related to future operations, strategies, financial results or other developments. Forward-looking statements are based on management's expectations as well as certain assumptions and estimates made by, and information available to, management at the time the statements are made. Those statements are based on general assumptions and are subject to various risks, uncertainties and other factors that may cause actual results to differ materially from the views, beliefs and projections expressed in such statements. These risks, uncertainties and other factors that may cause actual results to differ from expectations, are set forth in our Annual Report on Form 10-K for the year ended December 31, 2008, and Form 10-Q for the quarter ended March 31, 2009, as on file with the Securities and Exchange Commission, and include, among other factors, the following: general business and economic conditions on both a regional and national level; fluctuations in real estate values; the level and volatility of the capital markets, interest rates, and other market indices; changes in consumer and investor confidence in, and the related impact on, financial markets and institutions; estimates of fair value of certain Company assets and liabilities; federal and state legislative and regulatory actions; various monetary and fiscal policies and governmental regulations; changes in accounting standards, rules and interpretations and their impact on the Company's financial statements. The words "believe," "expect," "anticipate," "project," and similar expressions often signify forward-looking statements. You should not place undue reliance on any forward-looking statements. Any forward-looking statements in this release speak only as of the date of the release, and we do not assume any obligation to update the forward-looking statements or to update the reasons why actual results could differ from those contained in the forward-looking statements.
FINANCIAL TABLES FOLLOW:
MERCANTILE BANCORP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2009 2008 ------------ ------------ (In Thousands) (Unaudited) ASSETS Cash and cash equivalents $ 100,993 $ 89,821 Securities 193,793 194,097 Loans held for sale 3,742 4,366 Loans, net of allowance for loan losses 1,277,454 1,315,907 Premises and equipment 39,573 40,616 Interest receivable 8,756 10,240 Cash surrender value of life insurance 26,792 25,278 Goodwill - 44,653 Other 48,473 50,005 ------------ ------------ Total assets $ 1,699,576 $ 1,774,983 ============ ============ LIABILITIES AND STOCKHOLDERS’ EQUITY Liabilities: Deposits $ 1,426,779 $ 1,462,276 Short-term borrowings 85,020 49,227 Long-term debt 120,410 146,519 Interest payable 4,644 4,280 Other 10,937 7,989 ------------ ------------ Total liabilities 1,647,790 1,670,291 ------------ ------------ Total Mercantile Bancorp, Inc. stockholders’ equity 46,979 98,957 ------------ ------------ Noncontrolling Interest 4,807 5,735 ------------ ------------ Total equity 51,786 104,692 ------------ ------------ Total liabilities and equity $ 1,699,576 $ 1,774,983 ============ ============ MERCANTILE BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME Six Months Ended ------------------------ June 30, June 30, 2009 2008 ----------- ----------- (In Thousands) (Unaudited) Interest Income: Loans and fees on loans $ 37,896 $ 42,282 Securities: Taxable 3,379 3,951 Tax exempt 839 1,013 Other 187 540 ----------- ----------- Total interest income 42,301 47,786 ----------- ----------- Interest Expense: Deposits 16,877 21,877 Short-term borrowings 1,218 583 Long-term debt 3,118 4,227 ----------- ----------- Total interest expense 21,213 26,687 ----------- ----------- Net Interest Income 21,088 21,099 Provision for Loan Losses 13,145 6,603 ----------- ----------- Net Interest Income After Provision for Loan Losses 7,943 14,496 ----------- ----------- Noninterest Income: Fiduciary activities 1,301 1,380 Brokerage fees 558 917 Customer service fees 1,824 2,225 Other service charges and fees 592 434 Net gains on loan sales 1,441 643 Net gains on investments in common stock - 943 Other 1,294 803 ----------- ----------- Total noninterest income 7,010 7,609 ----------- ----------- Noninterest Expense: Salaries and employee benefits 13,311 13,898 Net occupancy expense 1,760 1,750 Equipment expense 1,658 1,690 Deposit insurance premium 2,340 223 Professional fees 1,717 1,123 Postage and supplies 601 634 Net (gains) losses on sale of assets 14 (376) Losses on foreclosed assets 1,613 493 Other than temporary losses on available-for-sale and cost method investments 2,546 264 Goodwill Impairment Loss 44,650 - Other 4,435 4,022 ----------- ----------- Total noninterest expense 74,645 23,985 Income (Loss) Before Income Taxes and Noncontrolling Interest (59,692) (1,880) Income Tax Benefit (5,843) (1,074) ----------- ----------- Net Income (Loss) (53,849) (806) Less: Net Income (Loss) attributable to Noncontrolling Interest (927) (392) ----------- ----------- Net Income (Loss) attributable to Mercantile Bancorp, Inc. $ (52,922) $ (414) =========== =========== MERCANTILE BANCORP, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME Three Months Ended ------------------------ June 30, June 30, 2009 2008 ----------- ----------- (In Thousands) (Unaudited) Interest Income: Loans and fees on loans $ 18,924 $ 20,572 Securities: Taxable 1,666 1,982 Tax exempt 412 473 Other 96 195 ----------- ----------- Total interest income 21,098 23,222 ----------- ----------- Interest Expense: Deposits 8,015 10,064 Short-term borrowings 641 235 Long-term debt 1,581 2,023 ----------- ----------- Total interest expense 10,237 12,322 ----------- ----------- Net Interest Income 10,861 10,900 Provision for Loan Losses 9,965 1,834 ----------- ----------- Net Interest Income After Provision for Loan Losses 896 9,066 ----------- ----------- Noninterest Income: Fiduciary activities 650 690 Brokerage fees 320 501 Customer service fees 984 1,125 Other service charges and fees 333 234 Net gains on loan sales 631 280 Net gains on investments in common stock - 943 Other 825 474 ----------- ----------- Total noninterest income 3,743 4,247 ----------- ----------- Noninterest Expense: Salaries and employee benefits 6,604 6,997 Net occupancy expense 860 865 Equipment expense 864 916 Deposit insurance premium 1,508 118 Professional fees 1,082 548 Postage and supplies 265 333 Net (gains) losses on sale of assets 1 15 Net gains (losses) on foreclosed assets 1,485 (11) Other than temporary losses on available-for-sale and cost method investments 2,546 264 Goodwill Impairment Loss 44,650 - Other 2,307 2,240 ----------- ----------- Total noninterest expense 62,172 12,285 Income (Loss) Before Income Taxes and Noncontrolling Interest (57,533) 1,028 Income Tax (Benefit) (4,849) (130) ----------- ----------- Net Income (Loss) (52,684) 1,158 Less: Net Income (Loss) attributable to Noncontrolling Interest (638) (105) ----------- ----------- Net Income (Loss) attributable to Mercantile Bancorp, Inc. $ (52,046) $ 1,263 =========== =========== MERCANTILE BANCORP, INC. SELECTED FINANCIAL HIGHLIGHTS Six Months Ended ------------------------ June 30, June 30, 2009 2008 ----------- ----------- (Dollars In Thousands except share data) (Unaudited) EARNINGS AND PER SHARE DATA (1) Basic Earnings Per Share $ (6.08) $ (.05) Weighted average shares outstanding 8,703,330 8,707,577 Cash dividends paid per share N/A $ .12 Book value per share $ 5.40 $ 12.10 Tangible book value per share (2) $ 4.97 $ 6.56 Ending number of common shares outstanding 8,703,330 8,707,577 AVERAGE BALANCES Assets $ 1,778,466 $ 1,654,191 Securities $ 194,670 $ 216,521 Loans (3) $ 1,324,219 $ 1,223,233 Earning assets $ 1,619,110 $ 1,485,346 Deposits $ 1,482,226 $ 1,340,116 Interest bearing liabilities $ 1,522,099 $ 1,397,046 Stockholders’ equity $ 97,606 $ 107,943 END OF PERIOD FINANCIAL DATA Net interest income $ 21,088 $ 21,099 Loans (3) $ 1,309,285 $ 1,260,834 Allowance for loan losses $ 28,089 $ 16,463 PERFORMANCE RATIOS Return on average assets (6.00%) (.05%) Return on average equity (108.31%) (.77%) Net interest margin 2.60% 2.65% Interest spread 2.44% 2.42% Efficiency ratio 266% 84% Allowance for loan losses to loans (3) 2.15% 1.31% Allowance as a percentage of non-performing loans 44% 54% Average loan to deposit ratio 89% 91% Dividend payout ratio N/A N/A ASSET QUALITY Net charge-offs $ 8,523 $ 2,934 Non-performing loans $ 63,875 $ 30,455 Other non-performing assets $ 9,884 $ 4,755 (1) Reflects 3-for-2 stock-split in December 2007 (2) Net of goodwill and core deposit intangibles (3) Loans include loans held for sale and nonaccrual loans MERCANTILE BANCORP, INC. SELECTED FINANCIAL HIGHLIGHTS Three Months Ended ------------------------ June 30, June 30, 2009 2008 ----------- ----------- (Dollars In Thousands except share data) (Unaudited) EARNINGS AND PER SHARE DATA (1) Basic Earnings Per Share $ (5.98) $ .15 Weighted average shares outstanding 8,703,330 8,705,499 Cash dividends paid per share N/A $ .06 Book value per share $ 5.40 $ 12.10 Tangible book value per share (2) $ 4.97 $ 6.56 Ending number of common shares outstanding 8,703,330 8,703,455 AVERAGE BALANCES Assets $ 1,773,351 $ 1,664,661 Securities $ 192,979 $ 214,270 Loans (3) $ 1,319,764 $ 1,240,179 Earning assets $ 1,616,415 $ 1,496,749 Deposits $ 1,483,194 $ 1,360,667 Interest bearing liabilities $ 1,513,122 $ 1,405,614 Stockholders’ equity $ 96,390 $ 106,819 END OF PERIOD FINANCIAL DATA Net interest income $ 10,861 $ 10,900 Loans (3) $ 1,309,285 $ 1,260,834 Allowance for loan losses $ 28,089 $ 16,463 PERFORMANCE RATIOS Return on average assets (11.77%) (.30%) Return on average equity (216.57%) (4.74%) Net interest margin 2.69% 2.53% Interest spread 2.51% 2.32% Efficiency ratio 426% 81% Allowance for loan losses to loans (3) 2.15% 1.31% Allowance as a percentage of non-performing loans 44% 54% Average loan to deposit ratio 89% 91% Dividend payout ratio N/A 40% ASSET QUALITY Net charge-offs $ 3,820 $ 2,498 Non-performing loans $ 63,875 $ 30,455 Other non-performing assets $ 9,884 $ 4,755 (1) Reflects 3-for-2 stock-split in December 2007 (2) Net of goodwill and core deposit intangibles (3) Loans include loans held for sale and nonaccrual loans
