##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 FOR THE QUARTERLY PERIOD ENDED September 30, 2006
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
 Commission file number 001-32434
 
 MERCANTILE BANCORP, INC.
 (Exact name of registrant as specified in its charter)
 
 Delaware
    
    37-1149138(State or other jurisdiction of
    
    (I.R.S. EmployerIncorporation or organization)
    
    Identification No.)
 440 Maine Street
Quincy, ILLINOIS 62301
(Address of principal executive offices including zip code)
 (217) 223-7300
(Registrants telephone number, including area code)
 
 þ o
  o o þ
 o þ




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##### 



MERCANTILE BANCORP, INC.
 FORM 10-Q
 September 30, 2006
TABLE OF CONTENTS
  
 PART I FINANCIAL INFORMATIONItem 1. Condensed Consolidated Financial StatementsConsolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6-11Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    12-29Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    30Item 4. Controls and Procedures
    
    
    30PART II OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    31Item 1A. Risk Factors
    
    
    31Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3. Defaults Upon Senior Securities
    
    
    31Item 4. Submission of Matters to a Vote of Security Holders
    
    
    31Item 5. Other Information
    
    
    31Item 6. Exhibits
    
    
    32Signatures
    
    
    32ExhibitsThird Amended and Restated Term Loan AgreementConstruction AgreementGeneral Conditions of the Contract for ConstructionSection 302 CertificationsSection 906 CertificationsThird Amended and Restated Term Loan AgreementConstruction AgreementGeneral Conditions of the ContractCertification of Chief Executive OfficerCertification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
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##### Table of Contents



PART I
 FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements .
 MERCANTILE BANCORP, INC.
 
 Consolidated Balance Sheets
 (In thousands, except par value and share data)
 September 30,2006
    
    
    December 31,(Unaudited)
    
    
    2005AssetsCash and due from banks
    
    $
    26,674
    
    
    $
    27,761Interest-bearing demand deposits
    
    
    15,383
    
    
    
    14,548Federal funds sold
    
    
    1,131
    
    
    
    1,845Cash and cash equivalents
    
    
    43,188
    
    
    
    44,154Available-for-sale securities
    
    
    185,760
    
    
    
    150,196Held-to-maturity securities
    
    
    12,223
    
    
    
    14,870Loans held for sale
    
    
    2,881
    
    
    
    3,635Loans, net of allowance for loan losses of $9,093 and $8,082
    
    
    898,922
    
    
    
    849,566Interest receivable
    
    
    9,795
    
    
    
    7,896Foreclosed assets held for sale, net
    
    
    438
    
    
    
    341Federal Home Loan Bank stock
    
    
    5,941
    
    
    
    5,432Equity method investments in common stock
    
    
    4,116
    
    
    
    7,105Cost method investments in common stock
    
    
    4,616
    
    
    
    3,350Deferred income taxes
    
    
    4,383
    
    
    
    4,254Mortgage servicing rights
    
    
    987
    
    
    
    1,018Cash surrender value of life insurance
    
    
    16,416
    
    
    
    15,930Premises and equipment
    
    
    19,187
    
    
    
    18,242Goodwill
    
    
    5,208
    
    
    
    5,208Core deposit intangibles
    
    
    1,474
    
    
    
    2,360Other
    
    
    6,170
    
    
    
    4,267Total assets
    
    $
    1,221,705
    
    
    $
    1,137,824Liabilities and Stockholders EquityDepositsDemand
    
    $
    97,423
    
    
    $
    104,320Savings, NOW and money market
    
    
    279,977
    
    
    
    264,008Time
    
    
    449,262
    
    
    
    450,336Brokered time
    
    
    169,433
    
    
    
    127,465Total deposits
    
    
    996,095
    
    
    
    946,129Interest rate swaps at fair value
    
    
    49
    
    
    
    238Short-term borrowings
    
    
    21,455
    
    
    
    32,587Long-term borrowings
    
    
    44,460
    
    
    
    41,410Subordinated debentures
    
    
    41,239
    
    
    
    10,310Interest payable
    
    
    5,279
    
    
    
    3,134Other
    
    
    6,182
    
    
    
    4,967Total liabilities
    
    
    1,114,759
    
    
    
    1,038,775Commitments and Contingent LiabilitiesMinority Interest
    
    
    9,187
    
    
    
    7,561Stockholders EquityCommon stock, $.42 par value; authorized 12,000,000 shares;
Issued  5,924,790 shares at September 30, 2006 and
December 31, 2005; Outstanding  5,845,745 at September 30,
2006 and 5,848,245 at December 31, 2005
    
    
    2,469
    
    
    
    2,469Additional paid-in capital
    
    
    13,144
    
    
    
    12,924Retained earnings
    
    
    83,891
    
    
    
    78,200Accumulated other comprehensive income (loss)
    
    
    (433
    )
    
    
    (848
    )99,071
    
    
    
    92,745Treasury stock, at cost  79,045 and 76,545 shares
    
    
    (1,312
    )
    
    
    (1,257
    )Total stockholders equity
    
    
    97,759
    
    
    
    91,488Total liabilities and stockholders equity
    
    $
    1,221,705
    
    
    $
    1,137,824
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##### Table of Contents



MERCANTILE BANCORP, INC.
 
 Consolidated Statements of Income
 (In thousands, except per share data)
 (Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest and Dividend IncomeLoansTaxable
    
    $
    17,028
    
    
    $
    13,300
    
    
    $
    47,375
    
    
    $
    37,523Tax exempt
    
    
    231
    
    
    
    189
    
    
    
    644
    
    
    
    520SecuritiesTaxable
    
    
    1,573
    
    
    
    1,235
    
    
    
    4,081
    
    
    
    3,669Tax exempt
    
    
    444
    
    
    
    495
    
    
    
    1,333
    
    
    
    1,298Federal funds sold
    
    
    164
    
    
    
    48
    
    
    
    216
    
    
    
    101Dividends on Federal Home Loan Bank Stock
    
    
    43
    
    
    
    58
    
    
    
    122
    
    
    
    181Deposits with financial institutions and other
    
    
    247
    
    
    
    65
    
    
    
    517
    
    
    
    219Total interest and dividend income
    
    
    19,730
    
    
    
    15,390
    
    
    
    54,288
    
    
    
    43,511Interest ExpenseDeposits
    
    
    8,647
    
    
    
    5,618
    
    
    
    22,956
    
    
    
    15,080Short-term borrowings
    
    
    472
    
    
    
    203
    
    
    
    1,139
    
    
    
    480Long-term debt
    
    
    1,236
    
    
    
    658
    
    
    
    2,504
    
    
    
    1,827Total interest expense
    
    
    10,355
    
    
    
    6,479
    
    
    
    26,599
    
    
    
    17,387Net Interest Income
    
    
    9,375
    
    
    
    8,911
    
    
    
    27,689
    
    
    
    26,124Provision for Loan Losses
    
    
    857
    
    
    
    451
    
    
    
    2,260
    
    
    
    1,680Net Interest Income After Provision For Loan Losses
    
    
    8,518
    
    
    
    8,460
    
    
    
    25,429
    
    
    
    24,444Noninterest IncomeFiduciary activities
    
    
    493
    
    
    
    451
    
    
    
    1,472
    
    
    
    1,349Brokerage fees
    
    
    249
    
    
    
    77
    
    
    
    870
    
    
    
    309Customer service fees
    
    
    930
    
    
    
    907
    
    
    
    2,669
    
    
    
    2,510Other service charges and fees
    
    
    126
    
    
    
    158
    
    
    
    460
    
    
    
    471Net gains (losses) on sales of fixed assets
    
    
    (4
    )
    
    
    
    
    
    
    (16
    )
    
    
    Net gains on loan sales
    
    
    163
    
    
    
    168
    
    
    
    455
    
    
    
    383Net gain on sale of equity method investment
    
    
    1,469
    
    
    
    
    
    
    
    1,469
    
    
    
    Loan servicing fees
    
    
    96
    
    
    
    110
    
    
    
    291
    
    
    
    279Gain (loss) on foreclosed assets, net
    
    
    1
    
    
    
    (85
    )
    
    
    (1
    )
    
    
    (58
    )Net increase in cash surrender value of life
insurance
    
    
    158
    
    
    
    150
    
    
    
    486
    
    
    
    442Income (loss) on equity method investments in
common stock
    
    
    47
    
    
    
    77
    
    
    
    230
    
    
    
    131Other
    
    
    26
    
    
    
    60
    
    
    
    139
    
    
    
    226Total noninterest income
    
    
    3,754
    
    
    
    2,073
    
    
    
    8,524
    
    
    
    6,042Noninterest ExpenseSalaries and employee benefits
    
    
    4,531
    
    
    
    3,976
    
    
    
    13,286
    
    
    
    11,873Net occupancy expense
    
    
    506
    
    
    
    442
    
    
    
    1,429
    
    
    
    1,213Equipment expense
    
    
    424
    
    
    
    408
    
    
    
    1,318
    
    
    
    1,231Deposit insurance premium
    
    
    35
    
    
    
    33
    
    
    
    97
    
    
    
    96Professional fees
    
    
    562
    
    
    
    376
    
    
    
    1,364
    
    
    
    1,093Postage and supplies
    
    
    254
    
    
    
    212
    
    
    
    682
    
    
    
    651Amortization of mortgage servicing rights
    
    
    33
    
    
    
    63
    
    
    
    190
    
    
    
    131Amortization core deposit intangible
    
    
    46
    
    
    
    54
    
    
    
    184
    
    
    
    104Other
    
    
    1,339
    
    
    
    1,411
    
    
    
    4,486
    
    
    
    4,073Total noninterest expense
    
    
    7,730
    
    
    
    6,975
    
    
    
    23,036
    
    
    
    20,465Minority Interest
    
    
    199
    
    
    
    302
    
    
    
    585
    
    
    
    529Income Before Income Taxes
    
    
    4,343
    
    
    
    3,256
    
    
    
    10,332
    
    
    
    9,492Provision For Income Taxes
    
    
    1,420
    
    
    
    634
    
    
    
    3,238
    
    
    
    2,451Net Income
    
    $
    2,923
    
    
    $
    2,622
    
    
    $
    7,094
    
    
    $
    7,041Basic Earnings Per Share
    
    $
    0.50
    
    
    $
    0.45
    
    
    $
    1.21
    
    
    $
    1.20Weighted Average Shares Outstanding
    
    
    5,847,827
    
    
    
    5,884,371
    
    
    
    5,848,104
    
    
    
    5,888,793Dividends per share
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.24
    
    
    $
    0.06
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MERCANTILE BANCORP, INC.
 
 Consolidated Statements of Cash Flows
 (In thousands)
 (Unaudited)
 Nine Months Ended September 30
    
    2006
    
    
    2005Operating ActivitiesNet income
    
    $
    7,094
    
    
    $
    7,041Items not requiring (providing) cashDepreciation
    
    
    1,110
    
    
    
    926Provision for loan losses
    
    
    2,260
    
    
    
    1,680Amortization of premiums and discounts on securities
    
    
    780
    
    
    
    751Amortization of core deposit intangibles
    
    
    184
    
    
    
    104Deferred income taxes
    
    
    (415
    )
    
    
    (673
    )Net gains on loan sales
    
    
    (455
    )
    
    
    (383
    )Loss on sale of premises and equipment
    
    
    16
    
    
    
    Net losses on sales of foreclosed assets
    
    
    1
    
    
    
    58Amortization of mortgage servicing rights
    
    
    190
    
    
    
    131Gain on sale of equity method investment
    
    
    (1,469
    )
    
    
    Income on equity method investments in common stock
    
    
    (230
    )
    
    
    (131
    )Federal Home Loan Bank stock dividends
    
    
    (47
    )
    
    
    (181
    )Net increase in cash surrender value of life insurance
    
    
    (486
    )
    
    
    (442
    )Minority interest in earnings of subsidiaries
    
    
    585
    
    
    
    529Changes inLoans originated for sale
    
    
    (29,009
    )
    
    
    (20,434
    )Proceeds from sales of loans
    
    
    30,059
    
    
    
    21,060Interest receivable
    
    
    (1,899
    )
    
    
    (1,545
    )Other assets
    
    
    (1,903
    )
    
    
    (1,181
    )Interest payable
    
    
    2,145
    
    
    
    860Other liabilities
    
    
    1,215
    
    
    
    1,501Net cash provided by operating activities
    
    
    9,726
    
    
    
    9,671Investing ActivitiesPurchases of available-for-sale securities
    
    
    (96,396
    )
    
    
    (47,385
    )Proceeds from maturities of available-for-sale securities
    
    
    64,678
    
    
    
    45,491Proceeds from maturities of held-to-maturity securities
    
    
    2,560
    
    
    
    3,506Proceeds from sales of equity method investment
    
    
    1,347
    
    
    
    Net change in loans
    
    
    (51,994
    )
    
    
    (53,388
    )Purchases of premises and equipment
    
    
    (2,113
    )
    
    
    (2,883
    )Proceeds from sales of premises and equipment
    
    
    42
    
    
    
    Proceeds from the sales of foreclosed assets
    
    
    280
    
    
    
    466Purchase of Federal Home Loan Bank stock
    
    
    (839
    )
    
    
    (125
    )Proceeds from sales of Federal Home Loan Bank stock
    
    
    377
    
    
    
    Purchase of equity method investment in common stock
    
    
    
    
    
    
    (3,061
    )Purchase of cost method investments
    
    
    (1,266
    )
    
    
    (310
    )Net cash used in investing activities
    
    
    (83,324
    )
    
    
    (57,689
    )Financing ActivitiesNet increase in demand deposits, money market, NOW and savings accounts
    
    
    9,072
    
    
    
    12,319Net increase in time and brokered time deposits
    
    
    40,894
    
    
    
    45,540Net decrease in short-term borrowings
    
    
    (11,132
    )
    
    
    (4,324
    )Proceeds from long-term debt and subordinated debentures
    
    
    43,129
    
    
    
    12,212Payments on long-term debt and subordinated debentures
    
    
    (9,150
    )
    
    
    (4,250
    )Proceeds from issuance of stock to minority interest of Mid-America
    
    
    1,277
    
    
    
    2,715Repurchase of common stock
    
    
    (55
    )
    
    
    (453
    )Dividends paid
    
    
    (1,403
    )
    
    
    (354
    )Dividends paid to minority interest
    
    
    
    
    
    
    (54
    )Net cash provided by financing activities
    
    
    72,632
    
    
    
    63,351Increase (Decrease) In Cash and Cash Equivalents
    
    
    (966
    )
    
    
    15,333Cash and Cash Equivalents, Beginning of Period
    
    
    44,154
    
    
    
    39,719Cash and Cash Equivalents, End of Period
    
    $
    43,188
    
    
    $
    55,052Supplemental Cash Flows InformationInterest paid
    
    $
    24,454
    
    
    $
    16,527Income taxes paid, net of refunds
    
    $
    3,510
    
    
    $
    2,976Real estate acquired in settlement of loans
    
    $
    378
    
    
    $
    421Available-for sale securities received from sale of equity method investments
    
    $
    4,032
    
    
    $
    Increase in additional paid-in capital due to issuance of stock to minority
interest of Mid-America
    
    $
    220
    
    
    $
    281Increase in core deposit intangibles due to purchase of stock of Mid-America
at a price over book
    
    $
    
    
    
    $
    195Decrease in core deposit intangibles from sale of equity method investment
    
    $
    702
    
    
    $
    
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MERCANTILE BANCORP, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(table dollar amounts in thousands)
 1. BASIS OF PRESENTATION
    2. EARNINGS PER COMMON SHARE
  3. ACCOUNTING CHANGES
   6




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4. OFF BALANCE SHEET CREDIT COMMITMENTS
    5. CRITICAL ACCOUNTING POLICIES
   7




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6. ROYAL PALM ACQUISITION
  7. COST METHOD INVESTMENTS
   8




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8. EQUITY METHOD INVESTMENTS
  9. STOCK SPLIT
  10. TRUST PREFERRED SECURITIES
   9




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11. COMMITMENT
  12. COMPREHENSIVE INCOME
  For the Three MonthsEnded September 30,2006
    
    
    2005Net income
    
    $
    2,923
    
    
    $
    2,622Other comprehensive income (loss):Unrealized appreciation (depreciation) on
available-for-sale securities:Unrealized appreciation (depreciation)
on available-for-sale securities, net of
tax expense (benefit) of $736 for 2006
and $(201) for 2005
    
    
    1,192
    
    
    
    (343
    )Less reclassification adjustment for
realized gains (losses), net of tax
expense (benefit) of $0 for 2006 and $0
for 2005
    
    
    
    
    
    
    Net change in unrealized
appreciation (depreciation) on
available-for-sale securities, net
of tax expense (benefit) of $736 for
2006 and $(201) for 2005
    
    
    1,192
    
    
    
    (343
    )Accumulated other comprehensive income (loss)
of equity method investee
    
    
    42
    
    
    
    (15
    )Unrealized gain (loss) on interest rate swaps:Unrealized holding gain (losses), net of
tax expense (benefit) of $0 for 2006 and
$(36) for 2005
    
    
    1
    
    
    
    (63
    )Less reclassification adjustment to
interest expense, net of tax expense
(benefit) of $(34) for 2006 and $(7) for
2005
    
    
    (56
    )
    
    
    (12
    )Net change in unrealized gain (loss)
on interest rate swaps, net of tax
expense (benefit) of $34 for 2006
and $(29) for 2005
    
    
    57
    
    
    
    (51
    )Total other comprehensive income (loss), net of tax
    
    
    1,291
    
    
    
    (409
    )Comprehensive income
    
    $
    4,214
    
    
    $
    2,213
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For the Nine MonthsEnded September 30,2006
    
    
    2005Net income
    
    $
    7,094
    
    
    $
    7,041Other comprehensive income (loss):Unrealized appreciation (depreciation) on
available-for-sale securities:Unrealized appreciation (depreciation) on
available-for-sale securities, net of tax
expense (benefit) of $213 for 2006 and
$(593) for 2005
    
    
    298
    
    
    
    (982
    )Less reclassification adjustment for
realized gains (losses), net of tax expense
(benefit) of $0 for 2006 and $0 for 2005
    
    
    
    
    
    
    Net change in unrealized appreciation
(depreciation) on available-for-sale
securities, net of tax expense
(benefit) of $213 for 2006 and $(593)
for 2005
    
    
    298
    
    
    
    (982
    )Accumulated other comprehensive income (loss) of
equity method investee
    
    
    5
    
    
    
    (18
    )Unrealized gains (losses) on interest rate swaps:Unrealized holding gains (losses), net of
tax expense (benefit) of $(11) for 2006 and
$(42) for 2005
    
    
    (21
    )
    
    
    (73
    )Less reclassification adjustment to
interest income (expense), net of tax
expense (benefit) of $(92) for 2006 and
$(1) for 2005
    
    
    (138
    )
    
    
    (2
    )Net change in unrealized gain (loss) on
interest rate swaps, net of tax expense
(benefit) of $72 for 2006 and $(41) for
2005
    
    
    117
    
    
    
    (71
    )Total other comprehensive loss, net of tax
    
    
    420
    
    
    
    (1,071
    )Comprehensive income
    
    $
    7,514
    
    
    $
    5,970
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Special Cautionary Notice Regarding Forward-looking Statements
  
    
    general business and economic conditions in the markets
the Company serves change or are less favorable than it
expected;
    
    deposit attrition, operating costs, customer loss and
business disruption are greater than the Company
expected;
    
    competitive factors including product and pricing
pressures among financial services organizations may
increase;
    
    changes in the interest rate environment reduce the Companys interest margins;
    
    changes in market rates and prices may adversely impact
securities, loans, deposits, mortgage servicing rights,
and other financial instruments;
    
    legislative or regulatory developments including
changes in laws concerning taxes, banking, securities,
insurance and other aspects of the financial securities
industry may adversely affect the Companys business;
    
    personal or commercial bankruptcies increase;
    
    the Companys ability to expand and grow its business
and operations, including the establishment of
additional branches and acquisition of additional banks
or branches of banks may be more difficult or costly
than the Company expected;
    
    any future acquisitions may be more difficult to
integrate than expected and the Company may be unable
to realize any cost savings and revenue enhancements
the Company may have projected in connection with such
acquisitions;
    
    changes in accounting principles, policies or guidelines;
    
    changes occur in the securities markets; and
    
    technology-related changes may be harder to make or more expensive than the Company anticipated.
  12




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General
  
    
    Mercantile Trust & Savings Bank (MTSB), located in Quincy, Illinois;
    
    State Bank of Augusta (Augusta), located in Augusta, Illinois;
    
    Marine Bank & Trust (Marine Bank), located in Carthage, Illinois;
    
    Perry State Bank (Perry), located in Perry, Missouri;
    
    Brown County State Bank (Brown County), located in Mt. Sterling, Illinois; and
    
    Farmers State Bank of Northern Missouri (Farmers), located in Savannah, Missouri.
  
 
  
 
 
 
 
 
 
 
   13




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##### Table of Contents



Results of Operations
 Comparison of Operating Results for the Three Months Ended September 30, 2006 and 2005
 Overview
   Net Interest Income.
 14




---



##### Table of Contents



15




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##### Table of Contents



For the three months ended September 302006
    
    
    2005Average
    
    
    Income/
    
    
    
    
    
    
    Average
    
    
    Income/Balance
    
    
    Expense
    
    
    Yield/Rate
    
    
    Balance
    
    
    Expense
    
    
    Yield/Rate(dollars in thousands)AssetsInterest-bearing demand
deposits and other
    
    $
    27,001
    
    
    $
    247
    
    
    
    3.66
    %
    
    $
    5,260
    
    
    $
    65
    
    
    
    4.94
    %Federal funds sold
    
    
    12,800
    
    
    
    164
    
    
    
    5.13
    %
    
    
    9,177
    
    
    
    48
    
    
    
    2.09
    %Securities:TaxableU.S. treasuries
and government
agencies
    
    
    25,419
    
    
    
    311
    
    
    
    4.89
    %
    
    
    6,665
    
    
    
    58
    
    
    
    3.48
    %Mortgage-backed
securities
    
    
    40,539
    
    
    
    505
    
    
    
    4.98
    %
    
    
    53,626
    
    
    
    562
    
    
    
    4.19
    %Other securities
    
    
    65,136
    
    
    
    757
    
    
    
    4.65
    %
    
    
    61,397
    
    
    
    615
    
    
    
    4.01
    %Total taxable
    
    
    131,094
    
    
    
    1,573
    
    
    
    4.80
    %
    
    
    121,688
    
    
    
    1,235
    
    
    
    4.06
    %Non-taxable  State and
political subdivision (3)
    
    
    48,556
    
    
    
    444
    
    
    
    3.66
    %
    
    
    51,618
    
    
    
    495
    
    
    
    3.84
    %Loans (net of unearned
discount ) (1)(2)
    
    
    911,811
    
    
    
    17,259
    
    
    
    7.57
    %
    
    
    816,726
    
    
    
    13,489
    
    
    
    6.61
    %Federal Home Loan Bank
stock
    
    
    5,845
    
    
    
    43
    
    
    
    2.94
    %
    
    
    5,358
    
    
    
    58
    
    
    
    4.33
    %Total
interest-earning
assets (1)
    
    
    1,137,107
    
    
    $
    19,730
    
    
    
    6.94
    %
    
    
    1,009,827
    
    
    $
    15,390
    
    
    
    6.10
    %Cash and due from banks
    
    
    24,285
    
    
    
    
    
    
    
    
    
    
    
    20,712Interest receivable
    
    
    9,198
    
    
    
    
    
    
    
    
    
    
    
    7,047Foreclosed assets held for
sale, net
    
    
    445
    
    
    
    
    
    
    
    
    
    
    
    474Equity method investments
in common stock
    
    
    4,088
    
    
    
    
    
    
    
    
    
    
    
    6,931Cost method investments in
common stock
    
    
    3,538
    
    
    
    
    
    
    
    
    
    
    
    1,849Cash surrender value of
life insurance
    
    
    16,332
    
    
    
    
    
    
    
    
    
    
    
    15,686Premises and equipment
    
    
    18,759
    
    
    
    
    
    
    
    
    
    
    
    17,609Other
    
    
    19,243
    
    
    
    
    
    
    
    
    
    
    
    15,844Allowance for loan losses
    
    
    (8,834
    )
    
    
    
    
    
    
    
    
    
    
    (7,610
    )Total assets
    
    $
    1,224,161
    
    
    
    
    
    
    
    
    
    
    $
    1,088,369Liabilities and Stockholders EquityInterest-bearing
transaction deposits
    
    $
    102,542
    
    
    $
    352
    
    
    
    1.37
    %
    
    $
    110,299
    
    
    $
    287
    
    
    
    1.04
    %Savings deposits
    
    
    54,701
    
    
    
    246
    
    
    
    1.80
    %
    
    
    52,119
    
    
    
    134
    
    
    
    1.03
    %Money-market deposits
    
    
    126,696
    
    
    
    1,086
    
    
    
    3.43
    %
    
    
    107,097
    
    
    
    586
    
    
    
    2.19
    %Time and brokered time
deposits
    
    
    609,804
    
    
    
    6,963
    
    
    
    4.57
    %
    
    
    552,380
    
    
    
    4,611
    
    
    
    3.34
    %Short-term borrowings
    
    
    36,339
    
    
    
    472
    
    
    
    5.20
    %
    
    
    17,823
    
    
    
    203
    
    
    
    4.56
    %Long-term borrowings
    
    
    84,909
    
    
    
    1,236
    
    
    
    5.82
    %
    
    
    55,597
    
    
    
    658
    
    
    
    4.73
    %Total
interest-bearing
liabilities
    
    
    1,014,991
    
    
    $
    10,355
    
    
    
    4.08
    %
    
    
    895,315
    
    
    $
    6,479
    
    
    
    2.89
    %Demand deposits
    
    
    92,753
    
    
    
    
    
    
    
    
    
    
    
    88,512Interest payable
    
    
    5,001
    
    
    
    
    
    
    
    
    
    
    
    2,942Other liabilities
    
    
    5,588
    
    
    
    
    
    
    
    
    
    
    
    4,668Minority interest
    
    
    9,041
    
    
    
    
    
    
    
    
    
    
    
    6,082Stockholders equity
    
    
    96,787
    
    
    
    
    
    
    
    
    
    
    
    90,850Total
liabilities and
stockholders
equity
    
    $
    1,224,161
    
    
    
    
    
    
    
    
    
    
    $
    1,088,369Interest spread
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    3.20
    %Net interest income
    
    
    
    
    
    $
    9,375
    
    
    
    
    
    
    
    
    
    
    $
    8,911Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.30
    %
    
    
    
    
    
    
    
    
    
    
    3.53
    %Interest-earning assets to
interest-bearing
liabilities
    
    
    112.05
    %
    
    
    
    
    
    
    
    
    
    
    112.79
    %
 
 (1)
    
    Non-accrual loans have been included in average loans, net of unearned discount(2)
    
    Includes loans held for sale(3)
    
    The tax exempt income for state and political subdivisions in not recorded on a tax equivalent basis. 16




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##### Table of Contents



For the three months ended September 30,2006 versus 2005(dollars in thousands)Increase (Decrease) Due toChange inVolume
    
    
    Rate
    
    
    TotalIncrease (decrease) in interest income:Interest-bearing bank deposits
    
    $
    203
    
    
    $
    (21
    )
    
    $
    182Federal funds sold
    
    
    25
    
    
    
    91
    
    
    
    116Investment securities:U.S. Treasuries and Agencies
    
    
    221
    
    
    
    32
    
    
    
    253Mortgage-backed securities
    
    
    (152
    )
    
    
    95
    
    
    
    (57
    )States and political subdivision (1)
    
    
    (29
    )
    
    
    (22
    )
    
    
    (51
    )Other securities
    
    
    39
    
    
    
    103
    
    
    
    142Loans (net of unearned discounts)
    
    
    1,672
    
    
    
    2,098
    
    
    
    3,770Federal Home Loan Bank stock
    
    
    5
    
    
    
    (20
    )
    
    
    (15
    )Change in interest income (1)
    
    
    1,984
    
    
    
    2,356
    
    
    
    4,340Increase (decrease) in interest expense:Interest-bearing transaction deposits
    
    
    (21
    )
    
    
    86
    
    
    
    65Savings deposits
    
    
    7
    
    
    
    105
    
    
    
    112Money-market deposits
    
    
    122
    
    
    
    378
    
    
    
    500Time and brokered time deposits
    
    
    520
    
    
    
    1,832
    
    
    
    2,352Short-term borrowings
    
    
    237
    
    
    
    32
    
    
    
    269Long-term debt
    
    
    402
    
    
    
    176
    
    
    
    578Change in interest expense
    
    
    1,267
    
    
    
    2,609
    
    
    
    3,876Increase in net interest income (1)
    
    $
    717
    
    
    $
    (253
    )
    
    $
    464
 
 (1)
    
    The tax exempt income for state and political subdivisions is not recorded on a tax equivalent basis. Provision for Loan Losses.
 Noninterest Income.
 17




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##### Table of Contents



For the Three Months EndedSeptember 30(dollars in thousands)2006
    
    
    2005Fiduciary activities
    
    $
    493
    
    
    $
    451Brokerage fees
    
    
    249
    
    
    
    77Customer service fees
    
    
    930
    
    
    
    907Other service charges and fees
    
    
    126
    
    
    
    158Net gains on loan sales
    
    
    163
    
    
    
    168Net gains (losses) on sales of fixed assets
    
    
    (4
    )
    
    
    Net gains (losses) on sales of foreclosed assets
    
    
    1
    
    
    
    (85
    )Net gain on sale of equity method investment
    
    
    1,469
    
    
    
    Loan servicing fees
    
    
    96
    
    
    
    110Net increase in cash surrender value of life insurance
    
    
    158
    
    
    
    150Income on equity method investments in common stock
    
    
    47
    
    
    
    77Other
    
    
    26
    
    
    
    60Total noninterest income
    
    $
    3,754
    
    
    $
    2,073
   Noninterest Expense
  For the Three Months EndedSeptember 30(dollars in thousands)2006
    
    
    2005Salaries and employee benefits
    
    $
    4,531
    
    
    $
    3,976Net occupancy expense
    
    
    506
    
    
    
    442Equipment expense
    
    
    424
    
    
    
    408Deposit insurance premium
    
    
    35
    
    
    
    33Professional fees
    
    
    562
    
    
    
    376Postage and supplies
    
    
    254
    
    
    
    212Amortization of mortgage servicing rights
    
    
    33
    
    
    
    63Amortization of core deposit intangibles
    
    
    46
    
    
    
    54Other
    
    
    1,339
    
    
    
    1,411Total noninterest expense
    
    $
    7,730
    
    
    $
    6,975
 18




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##### Table of Contents



Minority Interest
 Provision for Income Taxes.
 Results of Operations
 Comparison of Operating Results for the Nine Months Ended September 30, 2006 and 2005
 Overview
  Net Interest Income
 19




---



##### Table of Contents



20




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##### Table of Contents



For the nine months ended September 302006
    
    
    
    
    
    
    
    
    
    
    2005Income/
    
    
    
    
    
    
    
    
    
    
    Income/Average Balance
    
    
    Expense
    
    
    Yield/Rate
    
    
    Average Balance
    
    
    Expense
    
    
    Yield/Rate(dollars in thousands)AssetsInterest-bearing demand
deposits and other
    
    $
    21,219
    
    
    $
    517
    
    
    
    3.25
    %
    
    $
    8,515
    
    
    $
    219
    
    
    
    3.43
    %Federal funds sold
    
    
    5,853
    
    
    
    216
    
    
    
    4.92
    %
    
    
    6,025
    
    
    
    101
    
    
    
    2.24
    %Securities:Taxable
U.S. treasuries
and government
agencies
    
    
    14,431
    
    
    
    482
    
    
    
    4.45
    %
    
    
    6,341
    
    
    
    150
    
    
    
    3.15
    %Mortgage-backed
securities
    
    
    43,933
    
    
    
    1,568
    
    
    
    4.76
    %
    
    
    56,794
    
    
    
    1,770
    
    
    
    4.16
    %Other securities
    
    
    58,278
    
    
    
    2,031
    
    
    
    4.65
    %
    
    
    63,975
    
    
    
    1,749
    
    
    
    3.65
    %Total taxable
    
    
    116,642
    
    
    
    4,081
    
    
    
    4.66
    %
    
    
    127,110
    
    
    
    3,669
    
    
    
    3.85
    %Non-taxable  State and
political subdivision (3)
    
    
    48,660
    
    
    
    1,333
    
    
    
    3.65
    %
    
    
    44,815
    
    
    
    1,298
    
    
    
    3.86
    %Loans (net of unearned
discount ) (1)(2)
    
    
    885,529
    
    
    
    48,019
    
    
    
    7.23
    %
    
    
    796,884
    
    
    
    38,043
    
    
    
    6.37
    %Federal Home Loan Bank
stock
    
    
    5,573
    
    
    
    122
    
    
    
    2.92
    %
    
    
    5,247
    
    
    
    181
    
    
    
    4.60
    %Total
interest-earning
assets (1)
    
    
    1,083,476
    
    
    $
    54,288
    
    
    
    6.68
    %
    
    
    988,596
    
    
    $
    43,511
    
    
    
    5.87
    %Cash and due from banks
    
    
    24,035
    
    
    
    
    
    
    
    
    
    
    
    22,287Interest receivable
    
    
    8,247
    
    
    
    
    
    
    
    
    
    
    
    6,520Foreclosed assets held for
sale, net
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    570Equity method investments
in common stock
    
    
    6,155
    
    
    
    
    
    
    
    
    
    
    
    6,216Cost method investments in
common stock
    
    
    3,135
    
    
    
    
    
    
    
    
    
    
    
    1,849Cash surrender value of
life insurance
    
    
    16,175
    
    
    
    
    
    
    
    
    
    
    
    15,543Premises and equipment
    
    
    18,597
    
    
    
    
    
    
    
    
    
    
    
    16,959Other
    
    
    18,617
    
    
    
    
    
    
    
    
    
    
    
    14,355Allowance for loan loss
    
    
    (8,427
    )
    
    
    
    
    
    
    
    
    
    
    (7,404
    )Total assets
    
    $
    1,170,430
    
    
    
    
    
    
    
    
    
    
    $
    1,065,491Liabilities and Stockholders EquityInterest-bearing
transaction deposits
    
    $
    107,121
    
    
    $
    1,095
    
    
    
    1.36
    %
    
    $
    111,507
    
    
    $
    767
    
    
    
    0.92
    %Savings deposits
    
    
    52,495
    
    
    
    544
    
    
    
    1.38
    %
    
    
    55,591
    
    
    
    400
    
    
    
    0.96
    %Money-market deposits
    
    
    115,741
    
    
    
    2,696
    
    
    
    3.11
    %
    
    
    98,933
    
    
    
    1,352
    
    
    
    1.82
    %Time and brokered time
deposits
    
    
    592,948
    
    
    
    18,621
    
    
    
    4.19
    %
    
    
    536,364
    
    
    
    12,561
    
    
    
    3.12
    %Short-term borrowings
    
    
    31,014
    
    
    
    1,139
    
    
    
    4.90
    %
    
    
    22,539
    
    
    
    480
    
    
    
    2.84
    %Long-term borrowings
    
    
    61,152
    
    
    
    2,504
    
    
    
    5.46
    %
    
    
    49,522
    
    
    
    1,827
    
    
    
    4.92
    %Total
interest-bearing
liabilities
    
    
    960,471
    
    
    $
    26,599
    
    
    
    3.69
    %
    
    
    874,456
    
    
    $
    17,387
    
    
    
    2.65
    %Demand deposits
    
    
    97,365
    
    
    
    
    
    
    
    
    
    
    
    89,920Interest payable
    
    
    4,103
    
    
    
    
    
    
    
    
    
    
    
    2,659Other liabilities
    
    
    5,801
    
    
    
    
    
    
    
    
    
    
    
    4,438Minority interest
    
    
    8,282
    
    
    
    
    
    
    
    
    
    
    
    4,514Stockholders equity
    
    
    94,408
    
    
    
    
    
    
    
    
    
    
    
    89,504Total
liabilities and
stockholders
equity
    
    $
    1,170,430
    
    
    
    
    
    
    
    
    
    
    $
    1,065,491Interest spread
    
    
    
    
    
    
    
    
    
    
    2.99
    %
    
    
    
    
    
    
    
    
    
    
    3.22
    %Net interest income
    
    
    
    
    
    $
    27,689
    
    
    
    
    
    
    
    
    
    
    $
    26,124Net interest margin
    
    
    
    
    
    
    
    
    
    
    3.41
    %
    
    
    
    
    
    
    
    
    
    
    3.52
    %Interest-earning assets to
interest-bearing
liabilities
    
    
    112.81
    %
    
    
    
    
    
    
    
    
    
    
    113.05
    %
 
 (1)
    
    Non-accrual loans have been included in average loans, net of unearned discount(2)
    
    Includes loans held for sale(3)
    
    The tax exempt income for state and political subdivisions in not recorded on a tax equivalent basis. 21




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##### Table of Contents



For the nine months ended September 30,2006 versus 2005(dollars in thousands)Increase (Decrease) Due to Change inVolume
    
    
    Rate
    
    
    TotalIncrease (decrease) in interest income:Interest-bearing bank deposits
    
    $
    310
    
    
    $
    (12
    )
    
    $
    298Federal funds sold
    
    
    (3
    )
    
    
    118
    
    
    
    115Investment securities:U.S. Treasuries and Agencies
    
    
    251
    
    
    
    81
    
    
    
    332Mortgage-backed securities
    
    
    (436
    )
    
    
    234
    
    
    
    (202
    )States and political subdivision (1)
    
    
    108
    
    
    
    (73
    )
    
    
    35Other securities
    
    
    (166
    )
    
    
    448
    
    
    
    282Loans (net of unearned discounts)
    
    
    4,491
    
    
    
    5,485
    
    
    
    9,976Federal Home Loan Bank stock
    
    
    11
    
    
    
    (70
    )
    
    
    (59
    )Change in interest income (1)
    
    
    4,566
    
    
    
    6,211
    
    
    
    10,777Increase (decrease) in interest expense:Interest-bearing transaction deposits
    
    
    (31
    )
    
    
    359
    
    
    
    328Savings deposits
    
    
    (23
    )
    
    
    167
    
    
    
    144Money-market deposits
    
    
    261
    
    
    
    1,083
    
    
    
    1,344Time and brokered time deposits
    
    
    1,432
    
    
    
    4,628
    
    
    
    6,060Short-term borrowings
    
    
    225
    
    
    
    434
    
    
    
    659Long-term debt
    
    
    461
    
    
    
    216
    
    
    
    677Change in interest expense
    
    
    2,325
    
    
    
    6,887
    
    
    
    9,212Increase in net interest income (1)
    
    $
    2,241
    
    
    $
    (676
    )
    
    $
    1,565
 
 (1)
    
    The tax exempt income for state and political subdivisions is not recorded on a tax equivalent basis. Provision for Loan Losses
 Noninterest Income
 22




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##### Table of Contents



For the Nine Months EndedSeptember 30(dollars in thousands)2006
    
    
    2005Fiduciary activities
    
    $
    1,472
    
    
    $
    1,349Brokerage fees
    
    
    870
    
    
    
    309Customer service fees
    
    
    2,669
    
    
    
    2,510Other service charges and fees
    
    
    460
    
    
    
    471Net gains on loan sales
    
    
    455
    
    
    
    383Net losses on sales of fixed assets
    
    
    (16
    )
    
    
    Net losses on sales of foreclosed assets
    
    
    (1
    )
    
    
    (58
    )Net gain on sale of equity method investment
    
    
    1,469
    
    
    
    Loan servicing fees
    
    
    291
    
    
    
    279Net increase in cash surrender value of life insurance
    
    
    486
    
    
    
    442Income on equity method investments in common stock
    
    
    230
    
    
    
    131Other
    
    
    139
    
    
    
    226Total noninterest income
    
    $
    8,524
    
    
    $
    6,042
     Noninterest Expense
 23




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##### Table of Contents



For the Nine Months EndedSeptember 30(dollars in thousands)2006
    
    
    2005Salaries and employee benefits
    
    $
    13,286
    
    
    $
    11,873Net occupancy expense
    
    
    1,429
    
    
    
    1,213Equipment expense
    
    
    1,318
    
    
    
    1,231Deposit insurance premium
    
    
    97
    
    
    
    96Professional fees
    
    
    1,364
    
    
    
    1,093Postage and supplies
    
    
    682
    
    
    
    651Amortization of mortgage servicing rights
    
    
    190
    
    
    
    131Amortization of core deposit intangibles
    
    
    184
    
    
    
    104Other
    
    
    4,486
    
    
    
    4,073Total noninterest expense
    
    $
    23,036
    
    
    $
    20,465
     Minority Interest
 24




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##### Table of Contents



Provision for Income Taxes.
 Financial Condition
 September 30, 2006 Compared to December 31, 2005
 Loan Portfolio
  September 30, 2006
    
    
    December 31, 2005Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent(dollars in thousands)Commercial, financial, and
agricultural
    
    $
    223,386
    
    
    
    24.52
    %
    
    $
    240,231
    
    
    
    27.89
    %Real estate  farmland
    
    
    72,612
    
    
    
    7.97
    %
    
    
    66,172
    
    
    
    7.68
    %Real estate  construction
    
    
    95,280
    
    
    
    10.46
    %
    
    
    48,612
    
    
    
    5.64
    %Real estate  commercial
    
    
    170,226
    
    
    
    18.69
    %
    
    
    178,395
    
    
    
    20.71
    %Real estate  residential (1)
    
    
    228,941
    
    
    
    25.13
    %
    
    
    213,581
    
    
    
    24.80
    %Installment loans to individuals
    
    
    120,451
    
    
    
    13.23
    %
    
    
    114,292
    
    
    
    13.28
    %Total loans
    
    
    910,896
    
    
    
    100.00
    %
    
    
    861,283
    
    
    
    100.00
    %Allowance for loan losses
    
    
    9,093
    
    
    
    
    
    
    
    8,082Total loans, including loans
held for sale, net of allowance
for loan losses
    
    $
    901,803
    
    
    
    
    
    
    $
    853,201
 
 (1)
    
    Includes loans held for sale Nonperforming Assets
  25




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##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005Nonaccrual loans
Commercial, financial, and agricultural
    
    $
    1,268
    
    
    $
    1,727Real estate  farmland
    
    
    45
    
    
    
    105Real estate  construction
    
    
    
    
    
    
    Real estate  commercial
    
    
    699
    
    
    
    417Real estate  residential
    
    
    916
    
    
    
    839Installment loans to individuals
    
    
    297
    
    
    
    544Total nonaccrual loans
    
    
    3,225
    
    
    
    3,632Loans 90 days past due and still accruing
    
    
    1,653
    
    
    
    1,342Restructured loans
    
    
    4
    
    
    
    6Total nonperforming loans
    
    
    4,882
    
    
    
    4,980Repossessed assets
    
    
    576
    
    
    
    494Other assets acquired in satisfaction of debt previously
contracted
    
    
    
    
    
    
    Total nonperforming other assets
    
    
    576
    
    
    
    494Total nonperforming loans and nonperforming other assets
    
    $
    5,458
    
    
    $
    5,474Nonperforming loans to loans, before allowance for loan losses
    
    
    0.54
    %
    
    
    0.58
    %Nonperforming loans and nonperforming other assets to loans,
before allowance for loan losses
    
    
    0.60
    %
    
    
    0.64
    %
 Allowance for Loan Losses
   26




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##### Table of Contents



As of and for
    
    
    As of and forthe Nine Months
    
    
    the YearEnded September 30,
    
    
    Ended December 31,2006
    
    
    2005Average loans outstanding during period
    
    $
    885,529
    
    
    $
    806,955Allowance for loan losses:Balance at beginning of period
    
    $
    8,082
    
    
    $
    7,115Loans charged-off:Commercial, financial, and agricultural
    
    
    357
    
    
    
    483Real estate  farmland
    
    
    
    
    
    
    80Real estate  construction
    
    
    
    
    
    
    50Real estate  commercial
    
    
    139
    
    
    
    Real estate  residential
    
    
    70
    
    
    
    172Installment loans to individuals
    
    
    847
    
    
    
    956Total charge-offs
    
    
    1,413
    
    
    
    1,741RecoveriesCommercial, financial, and agricultural
    
    
    54
    
    
    
    138Real estate  farmland
    
    
    
    
    
    
    Real estate  construction
    
    
    1
    
    
    
    2Real estate  commercial
    
    
    1
    
    
    
    36Real estate  residential
    
    
    10
    
    
    
    24Installment loans to individuals
    
    
    98
    
    
    
    140Total recoveries
    
    
    164
    
    
    
    340Net charge-offs
    
    
    1,249
    
    
    
    1,401Provision for loan losses
    
    
    2,260
    
    
    
    2,368Adjustments
    
    
    
    
    
    
    Balance at end of period
    
    $
    9,093
    
    
    $
    8,082Allowance for loan losses as a percent of
total loans outstanding at period end
    
    
    1.00
    %
    
    
    0.94
    %Allowance for loan losses as a percent of
total nonperforming loans
    
    
    186.26
    %
    
    
    162.29
    %Ratio of net charge-offs to average total loans
    
    
    0.14
    %
    
    
    0.17
    %
 Securities
 27




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##### Table of Contents



Other.
 Deposits
 Borrowings
   Other.
 28




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##### Table of Contents



Liquidity and Capital Resources
 Liquidity
     Capital Resources
  Effect of Inflation and Changing Prices.
  29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk .
  
 Item 4. Controls and Procedures .
 Evaluation of disclosure controls and procedures.
 Changes in internal controls over financial reporting
 30




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##### Table of Contents



PART II
 OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   Maximum ApproximateDollar Value ofTotal Number of Shares
    
    Shares that May YetTotal Number of
    
    
    
    
    
    Purchased as Part of
    
    Be Purchased UnderThird
Quarter
    
    Shares Purchased
    
    Average Price Paid
    
    Publicly Announced
    
    the Plans or2006 Calendar Month
    
    (1)
    
    per Share (1)
    
    Plans or Programs (2)
    
    Programs (3)July
    
    
    525
    
    
    $
    22.35
    
    
    
    250
    
    
    $
    9,541,420August
    
    
    826
    
    
    $
    21.75
    
    
    
    250
    
    
    $
    9,535,982September
    
    
    3,533
    
    
    $
    21.89
    
    
    
    2000
    
    
    $
    9,491,982Total
    
    
    4,884
    
    
    $
    21.92
    
    
    
    2,500
 
 (1)
    
    The total number of shares purchased and the average price paid per share include, in addition
to other purchases, shares purchased in the open market and through privately negotiated
transactions by the Companys 401(k) Profit Sharing Plan. For the months indicated the number of
shares purchased by the Plan are as follows: 275 in July, 576 in August and 1,533 in September.(2)
    
    Includes only shares subject to publicly announced stock repurchase program, i.e. the $10
million stock repurchase program approved by the Board on August 15, 2005 and announced on August
17, 2005 (the 2005 Repurchase Program). Does not include shares purchased by the Companys
401(k) Profit Sharing Plan.(3)
    
    Dollar amount of repurchase authority remaining at month-end under the 2005 Repurchase
Program, the Companys only publicly announced repurchase program in effect at such dates. The
2005 Repurchase Program is limited to 589,104 shares (10% of the number of outstanding shares on
the date the Board approved the program, adjusted for the three-for-one stock split in June of
2006) but not to exceed $10 million in repurchases. 
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  31




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##### Table of Contents



Item 6. Exhibits
 ExhibitNumber
    
    Identification of Exhibit10.1
    
    Third Amended and Restated Term Loan Agreement
dated November 10, 2006 by and between
Mercantile Bancorp, Inc., Borrower and U.S. Bank
National Association, formerly known as Firstar
Bank, N.A., Lender10.2
    
    Construction Agreement dated August 24, 2006 by
and between Mercantile Trust & Savings Bank,
Owner and Clayco, Inc., Contractor10.3
    
    General Conditions of the Contract for
Construction by and between Mercantile Trust &
Savings Bank, Owner and Clayco, Inc., Contractor31.1
    
    Certification of the Chief Executive
Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.31.2
    
    Certification of the Chief Financial
Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended.32.1
    
    Certification of the Chief Executive
Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial
Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
  Mercantile Bancorp, Inc.Date: November 14, 2006
    By:
    /s/ Dan S. DuganDan S. DuganChairman, President and Chief Executive Officer
(principal executive officer) Date: November 14, 2006
    By:
    /s/ Michael P. McGrathMichael P. McGrathVice President, Treasurer and Chief Financial Officer
(principal financial officer/ principal accounting officer) 32