Mercantile Bancorp (MBR) Announces 2009 Financial Results

QUINCY, IL–(Marketwire – 04/06/10) – Mercantile Bancorp, Inc. (AMEX:MBR – News)

 
--  Debt Reduction Completed, Capital Structure Strengthened
--  Successful Debt Exchange for Missouri Bank
--  Sale of Two Illinois Banks
--  Core Bank Operating Results Remain Solid

Mercantile Bancorp, Inc. (AMEX:MBR – News) today reported an unaudited net loss from both continuing and discontinued operations of $4.3 million or $(.49) per share for the quarter ended December 31, 2009, compared with a net loss of $6.7 million or $(0.77) per share in fourth quarter 2008.

For the year ended December 31, 2009, the Company reported a net loss from both continuing and discontinued operations of $58.5 million or $(6.72) per share compared with a net loss of $8.8 million or $(1.01) per share in 2008. A significant portion of the 2009 net loss was attributable to non-cash expenses, including a $44.6 million goodwill impairment loss, $2.9 million in write-downs of foreclosed assets and $3.4 million in other-than-temporary impairments related to equity investments.

In 2009, the Company’s continuing operations reported net interest income of $21.2 million compared with $21.8 million in 2008. Provision for loan losses decreased to $22.1 million in 2009 from $23.2 million the previous year. Total noninterest income in 2009 was $7.8 million compared with $9.2 million in 2008. Total noninterest expense in 2009 increased to $71.5 million, compared with $38.6 million in 2008, primarily due to a $30.4 million goodwill impairment charge, and FDIC insurance premiums that included a one-time special assessment escalating to $2.8 million in 2009 versus $0.8 million in 2008, and expenses related to the Company’s recapitalization activities.

The Company’s net loss from discontinued operations was $8.0 million in 2009 compared to net income of $7.8 million in 2008. Included in the net loss from discontinued operations in 2009 was a goodwill impairment charge of $14.0 million related to the Company’s acquisition of HNB National Bank in 2007 and subsequent disposition in 2009.

Total assets at December 31, 2009, were $1.4 billion compared with $1.8 billion at year-end 2008 while total loans, net of allowance for loan losses, were $757.1 million at year-end 2009 compared with $1.3 billion at year-end 2008. Total deposits at December 31, 2009 were $954.5 million compared with $1.5 billion at December 31, 2008.

As previously disclosed, in December 2009 the Company completed the exchange of one of its wholly-owned subsidiary banks, HNB National Bank, located in Hannibal, Missouri for the retirement of $28 million in debt. In November 2009, the Company had reached agreement to sell two of its Illinois subsidiaries, Marine Bank & Trust and Brown County State Bank, in a transaction for cash that closed in February 2010. Part of the proceeds from this sale was used to repay an additional $16 million in debt.

Because of the exchange and sale of these subsidiary banks, the Company’s consolidated balance sheet as of December 31, 2009, excludes HNB National Bank. The assets and liabilities of Marine Bank & Trust and Brown County State Bank are included in the December 31, 2009 balance sheet, but are reflected as “Discontinued operations, assets held for sale” and “Discontinued operations, liabilities held for sale.” The consolidated statement of operations for 2009, as well as the restated statement of operations for 2008, reflects the income and expenses of all three banks as “Income (loss) from discontinued operations.”

For the quarter ended December 31, 2009, the Company reported net interest income from continuing operations of $5.5 million compared with $4.9 million in fourth quarter 2008. Provision for loan losses decreased to $4.4 million in fourth quarter 2009 from $8.6 million in the same period a year ago. Total noninterest income in fourth quarter 2009 was $1.8 million compared with $1.7 million in fourth quarter 2008.

“We have emerged in 2010 smaller and with a new mission,” said Ted T. Awerkamp, President and CEO. “We took a number of meaningful actions in 2009 to bolster the Company’s capital position and provide the foundation needed to pursue future opportunities. That said, however, we will implement additional changes in 2010 to reduce our cost structure. Aggressive plans have been developed and will be executed as the year unfolds to address our new size and a new direction this industry is taking. We have achieved much through a difficult stretch, but there is still work to do and it will be done in 2010.

“Our ongoing subsidiary institutions, Mercantile Bank, Heartland Bank and Royal Palm Bank, exceed regulatory standards for being well capitalized. Mercantile Bank recorded continuing stable operational performance. Heartland and Royal Palm both faced numerous difficulties in 2009, but have made excellent progress in stabilizing their loan portfolios and are positioning themselves for recovery.”

Awerkamp continued: “We believe the Company’s fourth quarter 2009 performance from continuing operations provides some valuable insights about our potential for the future. Net interest income increased, and the reduction in long-term debt will be a further benefit in that area. We also saw a significant decline in the provision for loan losses as we have worked diligently to address asset-quality issues. Increased fiduciary activities reflect an improving stock market and we also demonstrated sound operational controls in our expense items.

“Operational performance at our core Mercantile Bank franchise was on-plan as it recorded growth in a number of areas and experienced minimal issues related to problem loans. Royal Palm Bank, which we were able to recapitalize following our successful multi-step recapitalization and debt reduction plan at the holding company, is moving forward with its recovery, although slower than anyone would like. The Southwestern Florida economy remains one of nation’s most challenged areas because of its dependence on real estate and a backlogged court system.

“Heartland Bank in Leawood, Kansas has worked through many loan-related issues. We are confident in that bank’s prospects as the Kansas City area economy recovers. With the recapitalization of the holding company, including significant debt reduction, we’re confident in our ability to provide strong and stable support for our subsidiary banks.”

Awerkamp noted the management team at Heartland Bank, working closely with Mercantile Bancorp management, generated consecutive quarter improvements in net interest margin in 2009. Mercantile has a 56% controlling interest in Heartland’s parent corporation, Mid-America Bancorp, Inc. Awerkamp explained that Heartland has been aggressive in reserving for potential losses and in working to liquidate their problem assets. In 2009 the Company’s net loss related to its interest in Mid-America declined to $2.3 million compared with $4.1 million in 2008.

Outlook

Awerkamp concluded, “The deliberate and decisive actions taken have contracted the Company, but soundly position it to go forward with reduced debt, a solid capital footing and sound management teams. We retain considerable future upside in our Illinois, Indiana, Missouri, Kansas and Florida markets, particularly as the economy strengthens. Expense contraction and organizational streamlining to fit our new size will be achieved from the top down. We remain an institution with considerable earnings power.

“Our core markets have delivered solid returns for Mercantile Bancorp and our shareholders for many years. Despite low visibility for the economy and banking industry, we continue serving our customers and shareholders well, and maintaining our banks and Company as pillars of strength in the communities we diligently serve. We have taken corrective steps to get through the worst of the current times; we now will take steps to adapt to our new size and changing industry dynamics.”

About Mercantile Bancorp

Mercantile Bancorp, Inc. is a Quincy, Illinois-based bank holding company with majority-owned subsidiaries consisting of one bank in Illinois and one each in 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 http://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, 2009, and Forms 10-Q for the quarters ended March 31, 2009, June 30, 2009 and September 30, 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.