##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 (Mark One)
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
 Commission File No.: 001-32434
 MERCANTILE BANCORP, INC.
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    37-1149138
(I.R.S. Employer
Identification Number)200 N. 33rdStreet, Quincy, Illinois
(Address of Principal Executive Offices)
    
    62301
(Zip Code)
 (217) 223-7300
  Title of
Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock (par value $.42 per share)
    
    NYSE Alternext US
  Not Applicable
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
Accelerated filer þ
Non-accelerated
filer o(Do not check if a smaller reporting company)
Smaller reporting company o o þ




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##### 



PART IItem 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    25Item 1B.
    
    Unresolved Staff Comments
    
    
    29Item 2.
    
    Properties
    
    
    29Item 3.
    
    Legal Proceedings
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30Item 4A.
    
    Executive Officers of Registrant
    
    
    31PART II.Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    32Item 6.
    
    Selected Financial Data
    
    
    35Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    36Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    82Item 8.
    
    Financial Statements and Supplementary Data
    
    
    82Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    83Item 9A.
    
    Controls and Procedures
    
    
    83Item 9B.
    
    Other Information
    
    
    85PART III.Item 10.
    
    Directors and Executive Officers of the Company and Corporate Governance
    
    
    86Item 11.
    
    Executive Compensation
    
    
    86Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    86Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    86Item 14.
    
    Principal Accounting Fees and Services
    
    
    86PART IV.Item 15.
    
    Exhibits, Financial Statement Schedules
    
    
    87SIGNATURES

    
    
    88INDEX TO EXHIBITS
    
    
    89EX-3.3EX-10.4EX-10.16EX-10.21EX-10.22EX-10.23EX-10.24EX-21EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



DOCUMENTS INCORPORATED BY REFERENCE
  
 PART I
 
 Item 1. Business
 Company and Subsidiaries
 General. www.mercbanx.com
   Wholly-Owned Subsidiaries .
 
    
    Mercantile Bank, located in Quincy, Illinois;
    
    Marine Bank & Trust (Marine Bank), located in Carthage, Illinois;
    
    Brown County State Bank (Brown County), located in Mt. Sterling, Illinois;
    
    Royal Palm Bancorp, Inc. (Royal Palm) (the sole shareholder of Royal Palm Bank of
Florida (Royal Palm Bank), located in Naples, Florida; and
    
    HNB Financial Services, Inc. (HNB Financial) (the sole shareholder of HNB
National Bank (HNB), located in Hannibal, Missouri.
 1




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##### Table of Contents



Majority-Owned Subsidiaries.
 Other Investments in Financial Institutions
  
    
    4.3% of Integrity Bank (Integrity), located in Jupiter, Florida;
    
    0.8% of Premier Bancshares, Inc. (Premier), the sole shareholder of Premier Bank,
located in Jefferson City, Missouri;
    
    2.5% of Premier Community Bank of the Emerald Coast (Premier Community), located
in Crestview, Florida;
    
    4.1% of Paragon National Bank (Paragon), located in Memphis, Tennessee;
    
    1.4% of Enterprise Financial Services Corp. (Enterprise), the sole shareholder of
Enterprise Bank & Trust, based in Clayton, Missouri;
    
    4.1% of Solera National Bancorp, Inc. (Solera), the sole shareholder of Solera
National Bank, located in Lakewood, Colorado;
    
    2.9% of Manhattan Bancorp, Inc. (Manhattan), the sole shareholder of Bank of
Manhattan, located in Los Angeles, California; and
    
    4.9% of Brookhaven Bank (Brookhaven), located in Atlanta, Georgia.
 2008 Events
    2




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Employees
  Business Strategies  Growth and Operations
   3




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Growth Strategy .
     1.
    
    100% acquisitions of existing financial institutions to be consolidated and operated
within the existing structure of the Company;2.
    
    Minority investments in financial institutions with the potential to acquire
controlling or full ownership in the future; and3.
    
    Equity interests in denovo institutions in high-growth markets with proven management,
with the intention of allowing these investments to grow and build value, resulting in
gains to be realized upon future dispositions.
 4




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Operating Strategy .
      5




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Products and Services
 General.
  Lending Activities .
 Real Estate Loans .
 Farmland Real Estate Loans .
   6




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Construction Real Estate Loans .
   Mortgage Real Estate Loans .
    7




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Commercial, Financial and Agricultural Loans .
   8




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##### Table of Contents



Consumer Loans .
  Underwriting Strategy
  
    
    granting loans on a sound and collectible basis;
    
    investing funds properly for the benefit of the Companys shareholders and the
protection of its depositors;
    
    serving the legitimate needs of the communities in the Companys markets while
obtaining a balance between maximum yield and minimum risk;
    
    ensuring that primary and secondary sources of repayment are adequate in relation
to the amount of the loan;
    
    developing and maintaining adequate diversification of the loan portfolio as a
whole and of the loans within each category; and
    
    ensuring that each loan is properly documented and, if appropriate, insurance
coverage is adequate. The Companys loan review personnel and compliance officer
interact on a regular basis with commercial, mortgage and consumer lenders to identify
potential underwriting or technical exception variances.
  9




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Markets and Competition
        10




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Mercantile Bank
      11




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12




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Marine Bank & Trust
      Brown County State Bank
  13




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Mid-America Bancorp, Inc.
      14




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Royal Palm Bancorp, Inc.
       15




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HNB Financial Services, Inc.
       16




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Lending Activities
  Investment Securities Activities
  Sources of Funds
  Laws and Regulations Applicable to Bank Holding Companies
 General.
 Limitation on Acquisitions.
 Limitation on Activities.
 17




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Regulatory Capital Requirements.
   plus minus
    18




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Source of Strength.
 Liability of Commonly Controlled Institutions.
 Laws and Regulations Applicable to the Companys Subsidiary Banks
 General.
  Bank Regulatory Capital Requirements.
     19




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Deposit Insurance and Assessments.
    Limitations on Interest Rates and Loans to One Borrower.
 Payment of Dividends.
 20




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21




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The USA Patriot Act.
 Community Reinvestment Act.
 Transactions with Affiliates.
 Other Laws.
 Laws Governing Interstate Banking and Branching
   22




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Regulation of Other Non-Banking Activities
  Sarbanes-Oxley Act of 2002
   23




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EESA Legislation & TARP Participation
    Changes in Law and Regulation Affecting the Company Generally
 Future Legislation.
 Fiscal Monetary Policies.
 24




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Item 1A  Risk Factors
  Changes in the domestic interest rate environment could negatively affect the Companys net
interest income.
 Liquidity risk may affect the ability of the Company to meet future contractual obligations.
 The financial services industry is highly competitive, and competitive pressures could
intensify and adversely affect the Companys financial results.
 If economic conditions worsen, the Company may suffer from credit risk and the Companys
allowance for loan losses may not be adequate to cover actual losses.
 Changes in accounting standards may materially impact the Companys financial statements.
 25




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The Company relies on other companies to provide key components of the Companys business
infrastructure.
 Significant legal actions could subject the Company to substantial uninsured liabilities.
 The Company faces operational risks, including systems failure risks.
 The Companys stock price can be volatile.
 If the value of real estate in the Companys market area were to decline materially, a
significant portion of the loan portfolio could become under-collateralized, which might have a
material adverse affect on the Company.
 The Company may not be able to influence the activities of the banking organizations in which
it owns a minority interest.
 The Company is subject to the local economies where it operates, and unfavorable economic or
market conditions in these areas could have a material adverse effect on the Companys financial
condition and results of operations.
 26




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The Company may be adversely affected by government regulation.
 Recent, ongoing unfavorable economic conditions may continue or worsen.
 Current levels of market volatility are unprecedented.
 There can be no assurance that recently enacted legislation will stabilize the U.S. financial
markets.
 27




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The Company may be adversely affected by recently enacted or contemplated legislation and
rulemaking.
 The soundness of other financial institutions could adversely affect the Company.
 The Company may continue to suffer increased losses in its loan portfolio despite its
underwriting practices.
 The Companys declines in the value of securities held in the investment portfolio may
negatively affect earnings.
  28




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The Companys stock price could decline from levels at December 31, 2008.
 The Company has been in noncompliance with certain loan covenants with its primary lender.
 There is no assurance the Company will be able to implement successfully its capital raising
and debt restructuring plan.
 
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
 29




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Item 4. Submission of Matters to a Vote of Security Holders
  30




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Item 4A. Executive Officers of Registrant
      31




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
       Price Range
    
    Cash Dividends2008
    
    High($)
    
    Low($)
    
    Declared Per Share ($)1st Quarter
    
    
    18.65
    
    
    
    16.55
    
    
    
    .062nd Quarter
    
    
    18.61
    
    
    
    14.95
    
    
    
    .063rd Quarter
    
    
    18.90
    
    
    
    15.30
    
    
    
    .064th Quarter
    
    
    17.67
    
    
    
    10.36
    
    
    
    .06
 32




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##### Table of Contents



Price Range
    
    Cash Dividends2007
    
    High($)
    
    Low($)
    
    Declared Per Share ($)1st Quarter
    
    
    15.08
    
    
    
    14.40
    
    
    
    .062nd Quarter
    
    
    15.23
    
    
    
    14.80
    
    
    
    .063rd Quarter
    
    
    16.23
    
    
    
    14.13
    
    
    
    .064th Quarter
    
    
    17.77
    
    
    
    15.30
    
    
    
    .06
  Total Number of Shares
    
    Maximum Approximate DollarFourth Quarter
    
    Total Number of
    
    
    
    
    
    Purchased as Part of
    
    Value of Shares that May Yet2008 Calendar
    
    Shares Purchased
    
    Average Price Paid
    
    Publicly Announced Plans
    
    Be Purchased Under the PlansMonth
    
    (1)
    
    per Share (1)
    
    or Programs (2)
    
    or Programs (3)October
    
    
    0
    
    
    
    n/a
    
    
    
    0
    
    
    $
    8,229,424November
    
    
    0
    
    
    
    n/a
    
    
    
    0
    
    
    $
    8,229,424December
    
    
    0
    
    
    
    n/a
    
    
    
    0
    
    
    $
    8,229,424Total
    
    
    0
    
    
    
    n/a
    
    
    
    0
 
 (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, there were no
shares purchased by the Plan.(2)
    
    Includes only those shares that were repurchased under the Companys 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 883,656 shares (10% of the number of outstanding shares on
the date the Board approved the program, adjusted to reflect the three-for-two stock split in
December 2007), subject to adjustment, but not to exceed $10 million in repurchases. Company
Performance
  33




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Company/Index
    
    Feb 05
    
    Mar 06
    
    Jun 06
    
    Sep 06
    
    Dec 06
    
    Mar 07
    
    Jun 07
    
    Sep 07
    
    Dec 07
    
    Mar 08
    
    Jun 08
    
    Sep 08
    
    Dec 08Mercantile Bancorp,
Inc.
    
    $
    100.00
    
    
    $
    121.78
    
    
    $
    118.93
    
    
    $
    116.27
    
    
    $
    118.67
    
    
    $
    118.67
    
    
    $
    121.07
    
    
    $
    122.40
    
    
    $
    139.60
    
    
    $
    145.83
    
    
    $
    131.47
    
    
    $
    123.78
    
    
    $
    85.35S&P 500 Regional
Banks Index
    
    $
    100.00
    
    
    $
    104.39
    
    
    $
    105.17
    
    
    $
    108.73
    
    
    $
    112.03
    
    
    $
    109.56
    
    
    $
    107.10
    
    
    $
    95.85
    
    
    $
    76.69
    
    
    $
    68.60
    
    
    $
    45.60
    
    
    $
    56.70
    
    
    $
    40.11Russell 2000
Index
    
    $
    100.00
    
    
    $
    120.67
    
    
    $
    114.29
    
    
    $
    114.44
    
    
    $
    124.22
    
    
    $
    126.28
    
    
    $
    131.49
    
    
    $
    127.03
    
    
    $
    120.81
    
    
    $
    108.50
    
    
    $
    108.77
    
    
    $
    107.18
    
    
    $
    78.77
 34




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Item 6. Selected Financial Data
  Year Ended December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(dollars in thousands, except per share data)BALANCE SHEET ITEMSSecurities
    
    $
    194,097
    
    
    $
    205,757
    
    
    $
    188,579
    
    
    $
    165,066
    
    
    $
    173,371Loans held for sale
    
    
    4,366
    
    
    
    3,338
    
    
    
    1,660
    
    
    
    3,635
    
    
    
    3,367Loans
    
    
    1,339,374
    
    
    
    1,212,051
    
    
    
    1,031,656
    
    
    
    857,648
    
    
    
    768,722Allowance for loan losses
    
    
    23,467
    
    
    
    12,794
    
    
    
    10,613
    
    
    
    8,082
    
    
    
    7,115Total assets
    
    
    1,774,983
    
    
    
    1,639,145
    
    
    
    1,422,827
    
    
    
    1,137,824
    
    
    
    1,040,553Total deposits
    
    
    1,462,276
    
    
    
    1,319,459
    
    
    
    1,166,814
    
    
    
    946,129
    
    
    
    873,427Short-term borrowings
    
    
    49,227
    
    
    
    45,589
    
    
    
    26,338
    
    
    
    32,587
    
    
    
    21,385Long-term debt
    
    
    146,519
    
    
    
    143,358
    
    
    
    107,249
    
    
    
    51,720
    
    
    
    49,758Minority interest
    
    
    5,735
    
    
    
    9,446
    
    
    
    9,198
    
    
    
    7,561
    
    
    
    3,438Stockholders equity
    
    
    98,957
    
    
    
    108,282
    
    
    
    100,658
    
    
    
    91,488
    
    
    
    85,982RESULTS OF OPERATIONSInterest and dividend income
    
    $
    93,988
    
    
    $
    95,943
    
    
    $
    76,150
    
    
    $
    59,780
    
    
    $
    49,786Interest expense
    
    
    50,655
    
    
    
    53,461
    
    
    
    38,414
    
    
    
    24,338
    
    
    
    17,993Net interest income
    
    
    43,333
    
    
    
    42,482
    
    
    
    37,736
    
    
    
    35,442
    
    
    
    31,793Provision for loan losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914
    
    
    
    2,368
    
    
    
    1,746Noninterest income
    
    
    13,995
    
    
    
    13,936
    
    
    
    13,823
    
    
    
    8,547
    
    
    
    7,857Noninterest expense
    
    
    54,174
    
    
    
    39,385
    
    
    
    31,509
    
    
    
    27,817
    
    
    
    25,878Minority interest
    
    
    (3,321
    )
    
    
    622
    
    
    
    792
    
    
    
    648
    
    
    
    151Income tax expense (benefit)
    
    
    (8,549
    )
    
    
    3,441
    
    
    
    5,025
    
    
    
    3,652
    
    
    
    3,557Net income (loss)
    
    
    (8,821
    )
    
    
    10,001
    
    
    
    10,319
    
    
    
    9,504
    
    
    
    8,318CAPITAL RATIOSTotal capital to risk-weighted assets
    
    
    9.25
    %
    
    
    10.49
    %
    
    
    10.92
    %
    
    
    11.75
    %
    
    
    10.42
    %Tier 1 capital to risk-weighted assets
    
    
    6.10
    %
    
    
    7.86
    %
    
    
    9.70
    %
    
    
    10.88
    %
    
    
    9.55
    %Tier 1 capital to average assets
    
    
    5.08
    %
    
    
    6.72
    %
    
    
    8.09
    %
    
    
    9.00
    %
    
    
    7.49
    %PER SHARE DATABasic earnings (loss) per share (1)
    
    $
    (1.01
    )
    
    $
    1.15
    
    
    $
    1.18
    
    
    $
    1.08
    
    
    $
    .95Cash dividends
    
    
    .24
    
    
    
    .24
    
    
    
    0.21
    
    
    
    0.20
    
    
    
    0.17Book value
    
    
    11.37
    
    
    
    12.43
    
    
    
    11.50
    
    
    
    10.35
    
    
    
    9.80OTHER INFORMATIONReturn on average assets
    
    
    (.52
    )%
    
    
    0.68
    %
    
    
    0.85
    %
    
    
    0.88
    %
    
    
    0.83
    %Return on average equity
    
    
    (8.40
    )%
    
    
    9.60
    %
    
    
    10.84
    %
    
    
    10.59
    %
    
    
    9.98
    %Dividend payout ratio
    
    
    (23.68
    )%
    
    
    20.87
    %
    
    
    17.80
    %
    
    
    18.52
    %
    
    
    17.89
    %Net interest margin
    
    
    2.85
    %
    
    
    3.18
    %
    
    
    3.38
    %
    
    
    3.55
    %
    
    
    3.43
    %Average stockholders equity to
average assets
    
    
    6.17
    %
    
    
    7.08
    %
    
    
    7.87
    %
    
    
    8.33
    %
    
    
    8.34
    %Allowance for loan losses as a
percentage of total loans
    
    
    1.75
    %
    
    
    1.06
    %
    
    
    1.03
    %
    
    
    0.94
    %
    
    
    0.92
    %Full service offices
    
    
    26
    
    
    
    27
    
    
    
    22
    
    
    
    18
    
    
    
    19
 
 (1)
    
    In December 2007, the Companys Board of Directors approved a three-for-two stock split.
Share and per share data in the selected consolidated financial information have been
retroactively restated for the stock split as if it occurred on January 1, 2004. 35




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Forward-Looking Statements
   
    
    projections of revenues, income, earnings per share, capital expenditures, assets,
liabilities, dividends, capital structure, or other financial items;
    
    descriptions of plans or objectives of management for future operations, products, or
services, including pending acquisition transactions;
    
    forecasts of future economic performance; and
    
    descriptions of assumptions underlying or relating to any of the foregoing.
   
    
    general business and economic conditions on both a regional and national level;
    
    worldwide political and social unrest, including acts of war and terrorism;
    
    increased competition in the products and services we offer and the markets in which we
conduct our business;
    
    the interest rate environment;
    
    fluctuations in the capital markets, which may directly or indirectly affect our asset
portfolio;
    
    legislative or regulatory developments, including changes in laws concerning taxes,
banking, securities, insurance and other aspects of the financial services industry;
    
    technological changes, including the impact of the Internet;
    
    monetary and fiscal policies of the U.S. Government, including policies of the U.S.
Treasury and the Federal Reserve Board;
    
    accounting principles, policies, practices or guidelines.
 36




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##### Table of Contents




    
    deposit attrition, operating costs, customer loss and business disruption greater than
the Company expects;
    
    impairment of the goodwill and core deposit intangibles the Company has recorded with
acquisitions and the resulting adverse impact on the Companys profitability; and
    
    the occurrence of any event, change or other circumstance that could result in the
Companys failure to develop and implement successfully capital raising and debt
restructuring plans.
  Overview
 General
       37




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Strategy
    Results of Operations
  38




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Financial Condition
   Capital
  2008
    
    2007
    
    2006Dividend payout ratio (dividends per share
divided by net income per share)
    
    
    N/A
    
    
    
    20.87
    %
    
    
    17.80
    %Equity to assets ratio (average equity
divided by average total assets)
    
    
    6.17
    %
    
    
    7.08
    %
    
    
    7.87
    %
 Return on Equity and Assets
 2008
    
    2007
    
    2006Return on assets
(net income (loss) divided
by average
total
assets)
    
    
    (.52
    )%
    
    
    0.68
    %
    
    
    0.85
    %Return on
equity (net
income
(loss)
divided by
average
equity)
    
    
    (8.40
    )%
    
    
    9.60
    %
    
    
    10.84
    %
 39




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Summary of Banking Subsidiaries and Cost and Equity Method Investments
  12/31/08Date
    
    Ownership
    
    Pre-consolidated Net Income (Loss)Subsidiary
    
    Acquired
    
    Percentage
    
    2008
    
    2007
    
    2006(dollars in thousands)Mercantile Bank
    
    
    4/15/83
    
    
    
    100.00
    %
    
    $
    2,930
    
    
    
    N/A
    
    
    $
    5,559
    
    
    
    43.2
    %
    
    $
    5,571
    
    
    
    49.9
    %Marine Bank & Trust
    
    
    4/02/91
    
    
    
    100.00
    %
    
    
    2,025
    
    
    
    N/A
    
    
    
    1,813
    
    
    
    14.1
    %
    
    
    1,563
    
    
    
    14.0
    %Perry State Bank
    
    
    10/04/94
    
    
    
    100.00
    %
    
    
    
    
    
    
    N/A
    
    
    
    1,888
    
    
    
    14.7
    %
    
    
    1,601
    
    
    
    14.3
    %Brown County State Bank
    
    
    12/07/97
    
    
    
    100.00
    %
    
    
    1,207
    
    
    
    N/A
    
    
    
    923
    
    
    
    7.2
    %
    
    
    882
    
    
    
    7.9
    %Farmers State Bank ofNorthern Missouri
    
    
    10/4/99
    
    
    
    100.00
    %
    
    
    
    
    
    
    N/A
    
    
    
    408
    
    
    
    3.2
    %
    
    
    (246
    )
    
    
    (2.2
    )%Mid America Bancorp, Inc.
    
    
    2/28/05
    
    
    
    55.52
    %
    
    
    (7,453
    )
    
    
    N/A
    
    
    
    1,322
    
    
    
    10.3
    %
    
    
    1,655
    
    
    
    14.8
    %Royal Palm Bancorp, Inc.
    
    
    11/10/06
    
    
    
    100.00
    %
    
    
    (7,107
    )
    
    
    N/A
    
    
    
    444
    
    
    
    3.4
    %
    
    
    148
    
    
    
    1.3
    %HNB Financial Services, Inc.
    
    
    9/07/07
    
    
    
    100.00
    %
    
    
    3,390
    
    
    
    N/A
    
    
    
    497
    
    
    
    3.9
    %
    
    
    
    
    
    
    0.0
    %Total
    
    
    
    
    
    
    
    
    
    $
    (5,008
    )
    
    
    N/A
    
    
    $
    12,854
    
    
    
    100.0
    %
    
    $
    11,174
    
    
    
    100.0
    %
   (1)Premier Community Bank of the
    
    (2)
    
    (3)Emerald Coast
    
    Integrity Bank
    
    Premier Bancshares, Inc.Date
    
    Number of Shares
    
    Cost
    
    Number ofShares
    
    Cost
    
    Number of Shares
    
    Cost(dollars in thousands)12/02/03
    
    
    
    
    
    
    
    
    
    
    69,500
    
    
    $
    69511/29/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    $
    1,00006/21/06
    
    
    50,000
    
    
    $
    50003/09/07Total as of 12/31/08
    
    
    50,000
    
    
    $
    500
    
    
    
    69,500
    
    
    $
    695
    
    
    
    100,000
    
    
    $
    1,000Ownership
Percentage as of
12/31/08
    
    
    2.5
    %
    
    
    
    
    
    
    4.3
    %
    
    
    
    
    
    
    .82
    %
 40




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##### Table of Contents



(4)Brookhaven BankDate
    

Number
of Shares
    
    Cost6/20/077/17/07
    
    
    112,275
    
    
    $
    1,1239/17/07
    
    
    4,396
    
    
    
    44Total as of 12/31/08
    
    
    116,671
    
    
    $
    1,167Ownership Percentage as of 12/31/08
    
    
    4.9
    %
 
 (1)
    
    Premier Community Bank of the Emerald Coast is a privately held bank holding company located
in Crestview, Florida, with total assets of $124 million as of December 31, 2008.(2)
    
    Integrity Bank is a privately held bank located in Jupiter, Florida with total assets of $129
million as of December 31, 2008.(3)
    
    Premier Bancshares, Inc. is a privately held bank holding company located in Jefferson City,
Missouri, with total assets of $1.5 billion as of December 31, 2008.(4)
    
    Brookhaven Bank is a privately held bank located in Atlanta, Georgia with total assets of $73
million as of December 31, 2008.
 Critical Accounting Policies
  Allowance for Loan Losses.
 41




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##### Table of Contents



Goodwill and Core Deposit and Other Intangibles
   Revenue Recognition
   42




---



##### Table of Contents



Effect of Inflation
  Results of Operations
 Summary
 2008 versus 2007.
    43




---



##### Table of Contents



2007 versus 2006.
   44




---



##### Table of Contents



Earning Assets, Sources of Funds, And Net Interest Margin
  45




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##### Table of Contents



Selected Statistical Information
  Consolidated Average Balance Sheets
  AtDecember 31
    
    
    Years Ended December 31,2008
    
    
    2008
    
    
    2007
    
    
    2006Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Cost
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    Rate
    
    
    Balance
    
    
    Expense
    
    
    RateAssetsInterest-bearing demand deposits
    
    
    1.51
    %
    
    $
    21,952
    
    
    $
    447
    
    
    
    2.04
    %
    
    $
    16,887
    
    
    $
    899
    
    
    
    5.32
    %
    
    $
    21,703
    
    
    $
    767
    
    
    
    3.53
    %Federal funds sold
    
    
    .10
    %
    
    
    21,465
    
    
    
    391
    
    
    
    1.82
    %
    
    
    23,157
    
    
    
    1,219
    
    
    
    5.26
    %
    
    
    11,117
    
    
    
    577
    
    
    
    5.19
    %SecuritiesTaxableU.S. treasuries and government
agencies
    
    
    4.0
    %
    
    
    10,080
    
    
    
    446
    
    
    
    4.42
    %
    
    
    26,359
    
    
    
    1,379
    
    
    
    5.23
    %
    
    
    16,572
    
    
    
    776
    
    
    
    4.69
    %Mortgage-backed securities
    
    
    4.53
    %
    
    
    50,117
    
    
    
    2,402
    
    
    
    4.79
    %
    
    
    41,610
    
    
    
    2,505
    
    
    
    6.02
    %
    
    
    42,906
    
    
    
    2,062
    
    
    
    8.81
    %Other securities
    
    
    4.93
    %
    
    
    81,838
    
    
    
    4,319
    
    
    
    5.28
    %
    
    
    71,642
    
    
    
    4,081
    
    
    
    5.70
    %
    
    
    62,952
    
    
    
    2,936
    
    
    
    4.66
    %Total taxable
    
    
    
    
    
    
    142,035
    
    
    
    7,167
    
    
    
    5.05
    %
    
    
    139,611
    
    
    
    7,965
    
    
    
    5.71
    %
    
    
    122,430
    
    
    
    5,774
    
    
    
    4.72
    %Non-taxable  State and political
subdivision (3)
    
    
    3.64
    %
    
    
    54,286
    
    
    
    1,958
    
    
    
    3.57
    %
    
    
    50,298
    
    
    
    1,830
    
    
    
    3.64
    %
    
    
    48,991
    
    
    
    1,783
    
    
    
    3.64
    %Loans (net of unearned discount) (1)(2)
    
    
    5.90
    %
    
    
    1,274,660
    
    
    
    83,912
    
    
    
    6.58
    %
    
    
    1,097,481
    
    
    
    83,848
    
    
    
    7.64
    %
    
    
    907,671
    
    
    
    67,060
    
    
    
    7.39
    %Federal Home Loan Bank stock
    
    
    1.29
    %
    
    
    8,371
    
    
    
    113
    
    
    
    1.35
    %
    
    
    6,399
    
    
    
    182
    
    
    
    2.84
    %
    
    
    5,654
    
    
    
    189
    
    
    
    3.34
    %Total interest-earning assets (1)
    
    
    
    
    
    $
    1,522,769
    
    
    $
    93,988
    
    
    
    6.17
    %
    
    $
    1,333,833
    
    
    $
    95,943
    
    
    
    7.19
    %
    
    $
    1,117,566
    
    
    $
    76,150
    
    
    
    6.81
    %Cash & due from banks
    
    
    
    
    
    $
    34,518
    
    
    
    
    
    
    
    
    
    
    $
    26,511
    
    
    
    
    
    
    
    
    
    
    $
    25,153Premises and equipment
    
    
    
    
    
    
    41,407
    
    
    
    
    
    
    
    
    
    
    
    30,881
    
    
    
    
    
    
    
    
    
    
    
    19,313Foreclosed assets held for sale, net
    
    
    
    
    
    
    4,441
    
    
    
    
    
    
    
    
    
    
    
    1,187
    
    
    
    
    
    
    
    
    
    
    
    411Equity method investment in common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,765
    
    
    
    
    
    
    
    
    
    
    
    5,641Cost method investment in common stock
    
    
    
    
    
    
    5,861
    
    
    
    
    
    
    
    
    
    
    
    5,481
    
    
    
    
    
    
    
    
    
    
    
    3,715Interest receivable
    
    
    
    
    
    
    10,639
    
    
    
    
    
    
    
    
    
    
    
    10,506
    
    
    
    
    
    
    
    
    
    
    
    8,758Cash surrender value of life insurance
    
    
    
    
    
    
    24,817
    
    
    
    
    
    
    
    
    
    
    
    19,677
    
    
    
    
    
    
    
    
    
    
    
    16,450Allowance for loan loss
    
    
    
    
    
    
    (15,768
    )
    
    
    
    
    
    
    
    
    
    
    (11,713
    )
    
    
    
    
    
    
    
    
    
    
    (8,812
    )Goodwill
    
    
    
    
    
    
    43,947
    
    
    
    
    
    
    
    
    
    
    
    36,237
    
    
    
    
    
    
    
    
    
    
    
    2,005Intangible assets
    
    
    
    
    
    
    4,721
    
    
    
    
    
    
    
    
    
    
    
    3,806
    
    
    
    
    
    
    
    
    
    
    
    7,839Other
    
    
    
    
    
    
    23,220
    
    
    
    
    
    
    
    
    
    
    
    13,566
    
    
    
    
    
    
    
    
    
    
    
    12,461Total assets
    
    
    
    
    
    $
    1,700,572
    
    
    
    
    
    
    
    
    
    
    $
    1,472,737
    
    
    
    
    
    
    
    
    
    
    $
    1,210,500LiabilitiesInterest-bearing transaction deposits
    
    
    .62
    %
    
    $
    135,406
    
    
    $
    1,335
    
    
    
    .99
    %
    
    $
    116,908
    
    
    $
    1,892
    
    
    
    1.62
    %
    
    $
    107,126
    
    
    $
    1,499
    
    
    
    1.40
    %Savings deposits
    
    
    .73
    %
    
    
    84,702
    
    
    
    1,166
    
    
    
    1.38
    %
    
    
    74,353
    
    
    
    1,847
    
    
    
    2.48
    %
    
    
    54,572
    
    
    
    876
    
    
    
    1.61
    %Money-market deposits
    
    
    .63
    %
    
    
    224,646
    
    
    
    4,886
    
    
    
    2.17
    %
    
    
    191,934
    
    
    
    7,402
    
    
    
    3.86
    %
    
    
    124,484
    
    
    
    4,165
    
    
    
    3.35
    %Time and brokered time deposits
    
    
    3.80
    %
    
    
    820,908
    
    
    
    34,363
    
    
    
    4.19
    %
    
    
    696,542
    
    
    
    33,630
    
    
    
    4.83
    %
    
    
    610,202
    
    
    
    26,531
    
    
    
    4.35
    %Short-term borrowings
    
    
    3.56
    %
    
    
    37,585
    
    
    
    1,117
    
    
    
    2.97
    %
    
    
    38,772
    
    
    
    1,945
    
    
    
    5.02
    %
    
    
    28,738
    
    
    
    1,389
    
    
    
    4.83
    %Long-term debt
    
    
    4.50
    %
    
    
    83,225
    
    
    
    3,907
    
    
    
    4.69
    %
    
    
    68,239
    
    
    
    3,437
    
    
    
    5.04
    %
    
    
    44,022
    
    
    
    2,293
    
    
    
    5.66
    %Junior subordinated debentures
    
    
    4.51
    %
    
    
    61,858
    
    
    
    3,881
    
    
    
    6.27
    %
    
    
    48,112
    
    
    
    3,308
    
    
    
    6.88
    %
    
    
    25,775
    
    
    
    1,661
    
    
    
    6.44
    %Total interest-bearing liabilities
    
    
    
    
    
    $
    1,448,330
    
    
    $
    50,655
    
    
    
    3.50
    %
    
    $
    1,234,860
    
    
    $
    53,461
    
    
    
    4.33
    %
    
    $
    994,919
    
    
    $
    38,414
    
    
    
    3.86
    %Demand deposits
    
    
    
    
    
    $
    127,694
    
    
    
    
    
    
    
    
    
    
    $
    112,091
    
    
    
    
    
    
    
    
    
    
    $
    101,302Interest payable
    
    
    
    
    
    
    4,964
    
    
    
    
    
    
    
    
    
    
    
    6,110
    
    
    
    
    
    
    
    
    
    
    
    4,698Other liabilities
    
    
    
    
    
    
    6,662
    
    
    
    
    
    
    
    
    
    
    
    5,995
    
    
    
    
    
    
    
    
    
    
    
    6,064Minority interest
    
    
    
    
    
    
    7,916
    
    
    
    
    
    
    
    
    
    
    
    9,480
    
    
    
    
    
    
    
    
    
    
    
    8,301Stockholders equity
    
    
    
    
    
    
    105,006
    
    
    
    
    
    
    
    
    
    
    
    104,201
    
    
    
    
    
    
    
    
    
    
    
    95,216Total Liabilities and Stockholders
Equity
    
    
    
    
    
    $
    1,700,572
    
    
    
    
    
    
    
    
    
    
    $
    1,472,737
    
    
    
    
    
    
    
    
    
    
    $
    1,210,500Interest spread
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.67
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %
    
    
    
    
    
    
    
    
    
    
    2.95
    %Net interest income
    
    
    
    
    
    
    
    
    
    
    43,333
    
    
    
    
    
    
    
    
    
    
    
    42,482
    
    
    
    
    
    
    
    
    
    
    
    37,736Net interest margin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.85
    %
    
    
    
    
    
    
    
    
    
    
    3.18
    %
    
    
    
    
    
    
    
    
    
    
    3.38
    %Interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    105.14
    %
    
    
    
    
    
    
    
    
    
    
    108.01
    %
    
    
    
    
    
    
    
    
    
    
    112.33
    %
 
 (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 is not recorded on a tax
equivalent basis. 46




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##### Table of Contents



Changes in Net Interest Income
 Rate/Volume Analysis
 Years Ended December 31, 2008, 2007 and 2006Year 2008 vs. 2007 Change
    
    
    Year 2007 vs. 2006 ChangeAverage
    
    
    Average
    
    
    Total
    
    
    Average
    
    
    Average
    
    
    TotalVolume
    
    
    Yield/Rate
    
    
    Change
    
    
    Volume
    
    
    Yield/Rate
    
    
    Change(dollars in thousands)Increase (decrease) in interest income:Interest-bearing bank deposits
    
    $
    215
    
    
    $
    (667
    )
    
    $
    (452
    )
    
    $
    (196
    )
    
    $
    328
    
    
    $
    132Federal funds sold
    
    
    (83
    )
    
    
    (745
    )
    
    
    (828
    )
    
    
    634
    
    
    
    8
    
    
    
    642Investment securities:U.S. treasuries and agencies
    
    
    (747
    )
    
    
    (186
    )
    
    
    (933
    )
    
    
    503
    
    
    
    100
    
    
    
    603Mortgage-backed securities
    
    
    414
    
    
    
    (132
    )
    
    
    282
    
    
    
    (64
    )
    
    
    122
    
    
    
    58States and political subdivision (1)
    
    
    145
    
    
    
    
    
    
    
    145
    
    
    
    48
    
    
    
    (1
    )
    
    
    47Other securities
    
    
    529
    
    
    
    192
    
    
    
    721
    
    
    
    1,056
    
    
    
    474
    
    
    
    1,530Loans (net of unearned discounts)
    
    
    12,626
    
    
    
    (13,447
    )
    
    
    (821
    )
    
    
    13,631
    
    
    
    3,157
    
    
    
    16,788Federal Home Loan Bank stock
    
    
    45
    
    
    
    (114
    )
    
    
    (69
    )
    
    
    23
    
    
    
    (30
    )
    
    
    (7
    )Change in interest income (1)
    
    
    13,144
    
    
    
    (15,099
    )
    
    
    (1,955
    )
    
    
    15,635
    
    
    
    4,158
    
    
    
    19,793Increase (decrease) in interest expense:Interest-bearing transaction deposits
    
    
    266
    
    
    
    (823
    )
    
    
    (557
    )
    
    
    145
    
    
    
    248
    
    
    
    393Savings deposit
    
    
    230
    
    
    
    (911
    )
    
    
    (681
    )
    
    
    387
    
    
    
    584
    
    
    
    971Money-market deposits
    
    
    1,107
    
    
    
    (3,623
    )
    
    
    (2,516
    )
    
    
    2,526
    
    
    
    711
    
    
    
    3,237Time and brokered time deposits
    
    
    5,547
    
    
    
    (4,814
    )
    
    
    733
    
    
    
    3,987
    
    
    
    3,112
    
    
    
    7,099Short-term borrowings
    
    
    (58
    )
    
    
    (770
    )
    
    
    (828
    )
    
    
    502
    
    
    
    54
    
    
    
    556Long-term debt
    
    
    1,571
    
    
    
    (528
    )
    
    
    1,043
    
    
    
    2,697
    
    
    
    94
    
    
    
    2,791Change in interest expense
    
    
    8,663
    
    
    
    (11,469
    )
    
    
    (2,806
    )
    
    
    10,244
    
    
    
    4,803
    
    
    
    15,047Increase (decrease) in net interest
income (1)
    
    $
    4,481
    
    
    $
    (3,630
    )
    
    $
    851
    
    
    $
    5,391
    
    
    $
    (645
    )
    
    $
    4,746
 
 (1)
    
    The tax exempt income for state and political subdivision is not recorded on a tax equivalent
basis. 2008 versus 2007.
 47




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48




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2007 versus 2006.
      49




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##### Table of Contents



Provision for Loan Losses
 2008 versus 2007.
   2007 versus 2006.
 50




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##### Table of Contents



Noninterest Income
 2008 versus 2007.
        51




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##### Table of Contents



2007 versus 2006.
      Noninterest Expense
 2008 versus 2007.
 52




---



##### Table of Contents



53




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##### Table of Contents



54




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##### Table of Contents



2007 versus 2006.
      55




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##### Table of Contents



Provision for Income Taxes
  2008 versus 2007.
 2007 versus 2006.
 Financial Condition
 Summary
    56




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##### Table of Contents



Earning Assets
  Investment Securities
     December 31,2008
    
    
    2007
    
    
    2006Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(dollars in thousands)U.S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    993
    
    
    $
    999
    
    
    $
    500
    
    
    $
    497U.S. government agencies
    
    
    4,697
    
    
    
    4,787
    
    
    
    16,517
    
    
    
    16,726
    
    
    
    7,992
    
    
    
    7,943Mortgage-backed securities
    
    
    125,691
    
    
    
    128,445
    
    
    
    108,129
    
    
    
    108,799
    
    
    
    96,140
    
    
    
    96,030State and political subdivision
    
    
    44,892
    
    
    
    45,666
    
    
    
    53,708
    
    
    
    53,798
    
    
    
    49,781
    
    
    
    49,362Equity securities
    
    
    6,500
    
    
    
    6,294
    
    
    
    12,232
    
    
    
    11,917
    
    
    
    10,419
    
    
    
    11,347Total
    
    $
    181,780
    
    
    $
    185,192
    
    
    $
    191,579
    
    
    $
    192,239
    
    
    $
    164,832
    
    
    $
    165,179
 57




---



##### Table of Contents



Due in 1 year
    
    
    Due after 1 year
    
    
    Due after 5 years
    
    
    Due afteror less
    
    
    through 5 years
    
    
    through 10 years
    
    
    10 years
    
    
    Equity SecuritiesFair
    
    
    WeightedAverage
    
    
    Fair
    
    
    WeightedAverage
    
    
    Fair
    
    
    WeightedAverage
    
    
    Fair
    
    
    WeightedAverage
    
    
    Fair
    
    
    WeightedAverageValue
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Total(dollars in thousands)U.S. government agencies
    
    $
    2,019
    
    
    
    4.56
    %
    
    $
    2,318
    
    
    
    4.31
    %
    
    $
    450
    
    
    
    5.50
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    4,787Mortgage-backed securities (1)
    
    
    15,786
    
    
    
    4.63
    %
    
    
    104,446
    
    
    
    4.86
    %
    
    
    6,334
    
    
    
    5.09
    %
    
    
    1,879
    
    
    
    5.44
    %
    
    
    
    
    
    
    0.00
    %
    
    
    128,445States and political subdivisions
    
    
    5,311
    
    
    
    5.28
    %
    
    
    27,337
    
    
    
    5.30
    %
    
    
    11,530
    
    
    
    5.53
    %
    
    
    1,488
    
    
    
    6.21
    %
    
    
    
    
    
    
    0.00
    %
    
    
    45,66623,116
    
    
    
    
    
    
    
    134,101
    
    
    
    
    
    
    
    18,314
    
    
    
    
    
    
    
    3,367
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    178,898Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,294
    
    
    
    
    
    
    
    6,294Total
    
    $
    23,116
    
    
    
    4.77
    %
    
    $
    134,101
    
    
    
    4.94
    %
    
    $
    18,314
    
    
    
    5.38
    %
    
    $
    3,367
    
    
    
    5.78
    %
    
    $
    6,294
    
    
    
    0.00
    %
    
    $
    185,192
 
 (1)
    
    The maturities for mortgage-backed securities are based on prepayment speed assumptions and
the constant prepayment rate estimated by management based on the current interest rate
environment. The assumption rates vary by the individual security.  December 31,2008
    
    
    2007
    
    
    2006Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(dollars in thousands)Mortgage-backed securities
    
    $
    5,992
    
    
    $
    6,140
    
    
    $
    8,329
    
    
    $
    8,401
    
    
    $
    11,181
    
    
    $
    11,066State and political subdivision
    
    
    2,913
    
    
    
    2,961
    
    
    
    5,189
    
    
    
    5,223
    
    
    
    219
    
    
    
    218Total
    
    $
    8,905
    
    
    $
    9,101
    
    
    $
    13,518
    
    
    $
    13,624
    
    
    $
    11,400
    
    
    $
    11,284
  Due in 1 year
    
    
    Due after 1 year
    
    
    Due after 5 years
    
    
    Due afteror less
    
    
    through 5 years
    
    
    through 10 years
    
    
    10 yearsAmortized

    
    
    WeightedAverage
    
    
    Amortized
    
    

    WeightedAverage
    
    
    Amortized

    
    
    WeightedAverage
    
    
    Amortized

    
    
    WeightedAverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Total(dollars in thousands)Mortgage-backed securities (1)
    
    $
    1
    
    
    
    9.50
    %
    
    $
    5,984
    
    
    
    4.89
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    7
    
    
    
    8.00
    %
    
    $
    5,992State and political subdivisions
    
    
    210
    
    
    
    6.03
    %
    
    
    2,023
    
    
    
    5.95
    %
    
    
    680
    
    
    
    6.56
    %
    
    
    
    
    
    
    0.00
    %
    
    
    2,913Total
    
    $
    211
    
    
    
    6.05
    %
    
    $
    8,007
    
    
    
    5.15
    %
    
    $
    680
    
    
    
    6.56
    %
    
    $
    7
    
    
    
    8.00
    %
    
    $
    8,905
 
 (1)
    
    The maturities for mortgage-backed securities are based on prepayment speed assumptions and
the constant prepayment rate estimated by management based on the current interest rate
environment. The assumption rates vary by the individual security. 58




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##### Table of Contents



Loan Portfolio
     
 1)
    
    Limit potential concentrations to any one borrower or industry.2)
    
    Expand the geographic region of the Company. If the areas in which the Company
operates are broadened, then the negative impact of an economic downturn in one area will
be lessened. The Companys acquisitions of Mid-America, Royal Palm and other equity
interests in banks located in higher growth urban areas were done with the intent of
reducing geographic risk and reliance on areas heavily dependent on agriculture.3)
    
    Establish relationships with banks outside of the Companys geographic region in order
to purchase commercial, residential real estate and commercial real estate loan
participations which will help to diversify the Companys geographic concentration in its
loan portfolio. 59




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##### Table of Contents



2008 versus 2007.
 2007 versus 2006.
 60




---



##### Table of Contents



December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial and financial
    
    $
    235,438
    
    
    
    17.52
    %
    
    $
    184,317
    
    
    
    15.17
    %
    
    $
    167,687
    
    
    
    16.24
    %
    
    $
    180,906
    
    
    
    21.00
    %
    
    $
    179,380
    
    
    
    23.23
    %Agricultural
    
    
    68,192
    
    
    
    5.07
    %
    
    
    64,399
    
    
    
    5.30
    %
    
    
    57,393
    
    
    
    5.55
    %
    
    
    59,325
    
    
    
    6.89
    %
    
    
    54,181
    
    
    
    7.02
    %Real estate  farmland
    
    
    111,244
    
    
    
    8.28
    %
    
    
    91,488
    
    
    
    7.53
    %
    
    
    72,999
    
    
    
    7.06
    %
    
    
    66,172
    
    
    
    7.68
    %
    
    
    64,891
    
    
    
    8.40
    %Real estate  construction
    
    
    238,922
    
    
    
    17.78
    %
    
    
    215,850
    
    
    
    17.76
    %
    
    
    152,553
    
    
    
    14.76
    %
    
    
    66,812
    
    
    
    7.76
    %
    
    
    28,105
    
    
    
    3.64
    %Real estate  commercial
    
    
    214,317
    
    
    
    15.95
    %
    
    
    204,338
    
    
    
    16.81
    %
    
    
    190,724
    
    
    
    18.46
    %
    
    
    154,132
    
    
    
    17.90
    %
    
    
    153,766
    
    
    
    19.92
    %Real estate  residential (1)
    
    
    343,627
    
    
    
    25.58
    %
    
    
    323,936
    
    
    
    26.65
    %
    
    
    267,237
    
    
    
    25.86
    %
    
    
    219,644
    
    
    
    25.50
    %
    
    
    197,582
    
    
    
    25.59
    %Installment loans to individuals
    
    
    132,000
    
    
    
    9.82
    %
    
    
    131,061
    
    
    
    10.78
    %
    
    
    124,723
    
    
    
    12.07
    %
    
    
    114,292
    
    
    
    13.27
    %
    
    
    94,184
    
    
    
    12.20
    %Total loans (1)
    
    
    1,343,740
    
    
    
    100.00
    %
    
    
    1,215,389
    
    
    
    100.00
    %
    
    
    1,033,316
    
    
    
    100.00
    %
    
    
    861,283
    
    
    
    100.00
    %
    
    
    772,089
    
    
    
    100.00
    %Allowance for loan loss
    
    
    23,467
    
    
    
    
    
    
    
    12,794
    
    
    
    
    
    
    
    10,613
    
    
    
    
    
    
    
    8,082
    
    
    
    
    
    
    
    7,115Total loans, including loans
held for sale, net of allowance
for loan loss
    
    $
    1,320,273
    
    
    
    
    
    
    $
    1,202,595
    
    
    
    
    
    
    $
    1,022,703
    
    
    
    
    
    
    $
    853,201
    
    
    
    
    
    
    $
    764,974
 
 (1)
    
    Includes loans held for sale  1 Year or Less
    
    
    1 to 5 Years
    
    
    Over 5 Years
    
    
    Total(dollars in thousands)Commercial, financial, and agricultural
    
    $
    180,223
    
    
    $
    86,264
    
    
    $
    37,143
    
    
    $
    303,630Real estate  construction
    
    
    238,922
    
    
    
    
    
    
    
    
    
    
    
    238,922Total
    
    $
    419,145
    
    
    $
    86,264
    
    
    $
    37,143
    
    
    $
    542,552Interest rate sensitivity of selected loansFixed rate
    
    $
    164,291
    
    
    $
    44,055
    
    
    $
    12,495
    
    
    $
    220,841Adjustable rate
    
    
    254,854
    
    
    
    42,209
    
    
    
    24,648
    
    
    
    321,711Total
    
    $
    419,145
    
    
    $
    86,264
    
    
    $
    37,143
    
    
    $
    542,552
 61




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##### Table of Contents



Allowance for Loan Losses
       62




---



##### Table of Contents



63




---



##### Table of Contents



Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Average loans outstanding during year
    
    $
    1,274,660
    
    
    $
    1,,097,481
    
    
    $
    907,671
    
    
    $
    806,955
    
    
    $
    728,388Allowance for loan losses:Balance at beginning of year
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082
    
    
    $
    7,115
    
    
    $
    5,830Loans charged-off:Commercial and financial
    
    
    5,447
    
    
    
    493
    
    
    
    1,833
    
    
    
    429
    
    
    
    275Agricultural
    
    
    147
    
    
    
    75
    
    
    
    85
    
    
    
    54
    
    
    
    101Real estate  farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80
    
    
    
    Real estate  construction
    
    
    4,082
    
    
    
    284
    
    
    
    
    
    
    
    
    
    
    
    Real estate  commercial
    
    
    2,276
    
    
    
    18
    
    
    
    139
    
    
    
    50
    
    
    
    Real estate  residential
    
    
    823
    
    
    
    399
    
    
    
    139
    
    
    
    172
    
    
    
    169Installment loans to individuals
    
    
    901
    
    
    
    906
    
    
    
    1,129
    
    
    
    956
    
    
    
    790Total charge-offs
    
    
    13,676
    
    
    
    2,175
    
    
    
    3,325
    
    
    
    1,741
    
    
    
    1,335Recoveries:Commercial and financial
    
    
    296
    
    
    
    55
    
    
    
    47
    
    
    
    112
    
    
    
    129Agricultural
    
    
    15
    
    
    
    15
    
    
    
    20
    
    
    
    26
    
    
    
    13Real estate  farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34Real estate  construction
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    2
    
    
    
    5Real estate  commercial
    
    
    43
    
    
    
    1
    
    
    
    1
    
    
    
    36
    
    
    
    7Real estate  residential
    
    
    46
    
    
    
    38
    
    
    
    12
    
    
    
    24
    
    
    
    63Installment loans to individuals
    
    
    103
    
    
    
    150
    
    
    
    136
    
    
    
    140
    
    
    
    147Total recoveries
    
    
    504
    
    
    
    261
    
    
    
    217
    
    
    
    340
    
    
    
    398Net charge-offs
    
    
    13,172
    
    
    
    1,914
    
    
    
    3,108
    
    
    
    1,401
    
    
    
    937Provision for loan losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914
    
    
    
    2,368
    
    
    
    1,746Purchased allowance
    
    
    
    
    
    
    1,126
    
    
    
    1,725
    
    
    
    
    
    
    
    476Balance at end of year
    
    $
    23,467
    
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082
    
    
    $
    7,115Allowance for loan losses as a
percent of total loans outstanding
at year end (1)
    
    
    1.75
    %
    
    
    1.06
    %
    
    
    1.03
    %
    
    
    0.94
    %
    
    
    0.92
    %Allowance for loan losses as a
percent of total nonperforming loans
    
    
    61.74
    %
    
    
    55.6
    %
    
    
    165.98
    %
    
    
    162.29
    %
    
    
    157.87
    %Ratio of net charge-offs to average
total loans
    
    
    1.03
    %
    
    
    0.18
    %
    
    
    0.34
    %
    
    
    0.17
    %
    
    
    0.13
    %
 
 (1)
    
    Includes loans held for sale  2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004% of Loans to
    
    
    
    
    
    
    % of Loans to
    
    
    
    
    
    
    % of Loans to
    
    
    
    
    
    
    % of Loans to
    
    
    
    
    
    
    % of Loans toAmount
    
    
    Total Loans*
    
    
    Amount
    
    
    Total Loans*
    
    
    Amount
    
    
    Total Loans*
    
    
    Amount
    
    
    Total Loans*
    
    
    Amount
    
    
    Total Loans*Commercial and financial
    
    $
    3,218,644
    
    
    
    13.72
    %
    
    $
    2,848,584
    
    
    
    22.26
    %
    
    $
    2,767,535
    
    
    
    26.07
    %
    
    $
    2,721,029
    
    
    
    33.67
    %
    
    $
    2,651,722
    
    
    
    37.27
    %Agricultural
    
    
    619,069
    
    
    
    2.64
    %
    
    
    149,926
    
    
    
    1.17
    %
    
    
    164,176
    
    
    
    1.55
    %
    
    
    161,417
    
    
    
    2.00
    %
    
    
    157,306
    
    
    
    2.21
    %Real estate  farmland
    
    
    663,180
    
    
    
    2.83
    %
    
    
    795,329
    
    
    
    6.22
    %
    
    
    649,073
    
    
    
    6.12
    %
    
    
    673,040
    
    
    
    8.33
    %
    
    
    559,708
    
    
    
    7.87
    %Real estate  construction
    
    
    10,859,399
    
    
    
    46.27
    %
    
    
    2,413,365
    
    
    
    18.86
    %
    
    
    1,910,323
    
    
    
    18.00
    %
    
    
    460,234
    
    
    
    5.69
    %
    
    
    282,651
    
    
    
    3.97
    %Real estate  commercial
    
    
    2,388,605
    
    
    
    10.18
    %
    
    
    3,937,425
    
    
    
    30.78
    %
    
    
    2,182,023
    
    
    
    20.56
    %
    
    
    1,517,846
    
    
    
    18.78
    %
    
    
    1,420,770
    
    
    
    19.97
    %Real estate  residential
    
    
    4,025,323
    
    
    
    17.15
    %
    
    
    1,312,475
    
    
    
    10.26
    %
    
    
    1,174,936
    
    
    
    11.07
    %
    
    
    817,301
    
    
    
    10.11
    %
    
    
    765,030
    
    
    
    10.75
    %Installment loans  consumer
    
    
    1,245,898
    
    
    
    5.31
    %
    
    
    1,146,659
    
    
    
    8.96
    %
    
    
    1,306,972
    
    
    
    12.31
    %
    
    
    1,335,151
    
    
    
    16.52
    %
    
    
    1,084,141
    
    
    
    15.24
    %Unallocated
    
    
    446,629
    
    
    
    1.90
    %
    
    
    190,237
    
    
    
    1.49
    %
    
    
    457,962
    
    
    
    4.32
    %
    
    
    395,982
    
    
    
    4.90
    %
    
    
    193,672
    
    
    
    2.72
    %Total
    
    $
    23,466,747
    
    
    
    100.00
    %
    
    $
    12,794,000
    
    
    
    100.00
    %
    
    $
    10,613,000
    
    
    
    100.00
    %
    
    $
    8,082,000
    
    
    
    100.00
    %
    
    $
    7,115,000
    
    
    
    100.00
    %*Total loans
    
    
    1,343,740,000
    
    
    
    
    
    
    
    1,215,389,000
    
    
    
    
    
    
    
    1,033,316,000
    
    
    
    
    
    
    
    857,648,000
    
    
    
    
    
    
    
    768,722,000
 64




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##### Table of Contents



Non-Performing Assets
   At December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(dollars in thousands)Non-accrual loans (1)Commercial and financial
    
    $
    762
    
    
    $
    581
    
    
    $
    429
    
    
    $
    1,504
    
    
    $
    1,471Agricultural
    
    
    234
    
    
    
    308
    
    
    
    473
    
    
    
    223
    
    
    
    6Real estate  farmland
    
    
    
    
    
    
    296
    
    
    
    12
    
    
    
    105
    
    
    
    357Real estate  construction
    
    
    25,948
    
    
    
    6,716
    
    
    
    1,147
    
    
    
    
    
    
    
    66Real estate  commercial
    
    
    1,361
    
    
    
    3,152
    
    
    
    2,083
    
    
    
    417
    
    
    
    208Real estate  residential
    
    
    5,455
    
    
    
    8,571
    
    
    
    1,040
    
    
    
    839
    
    
    
    596Installment loans to individuals
    
    
    337
    
    
    
    195
    
    
    
    213
    
    
    
    544
    
    
    
    353Total non-accrual loans (1)
    
    
    34,097
    
    
    
    19,819
    
    
    
    5,397
    
    
    
    3,632
    
    
    
    3,057Loans 90 days past due and still
accruing
    
    
    3,856
    
    
    
    3,184
    
    
    
    993
    
    
    
    1,342
    
    
    
    1,009Restructured loans
    
    
    58
    
    
    
    
    
    
    
    4
    
    
    
    6
    
    
    
    441Total nonperforming loans
    
    
    38,011
    
    
    
    23,003
    
    
    
    6,394
    
    
    
    4,980
    
    
    
    4,507Repossessed assets
    
    
    10,015
    
    
    
    3,273
    
    
    
    361
    
    
    
    494
    
    
    
    577Other assets acquired in
satisfaction of debts previously
contracted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming other assets
    
    
    10,015
    
    
    
    3,273
    
    
    
    361
    
    
    
    494
    
    
    
    577Total nonperforming loans and
nonperforming other assets
    
    $
    48,026
    
    
    $
    26,276
    
    
    $
    6,755
    
    
    $
    5,474
    
    
    $
    5,084Nonperforming loans to loans,
before allowance for loan losses
    
    
    2.83
    %
    
    
    1.91
    %
    
    
    0.62
    %
    
    
    0.58
    %
    
    
    0.58
    %Nonperforming loans and
nonperforming other assets to
loans, before allowance for loan
losses
    
    
    3.57
    %
    
    
    2.18
    %
    
    
    0.65
    %
    
    
    0.64
    %
    
    
    0.66
    %
 
 (1)
    
    Interest income that would have been recorded in 2008 related to nonaccrual loans was $2.7
million, none of which is included in interest income or net income for 2008. 65




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Potential Problem Loans
  Other Interest-Bearing Assets
  Other Assets
  67




---



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Deposits
   68




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December 31,2008
    
    
    2007
    
    
    2006Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    AverageBalance
    
    
    % Total
    
    
    Rate
    
    
    Balance
    
    
    % Total
    
    
    Rate
    
    
    Balance
    
    
    % Total
    
    
    Rate(dollars in thousands)Non-interest bearing demand
deposits
    
    $
    127,694
    
    
    
    9.1
    %
    
    
    0.00
    %
    
    $
    112,091
    
    
    
    9.4
    %
    
    
    0.00
    %
    
    $
    101,302
    
    
    
    10.2
    %
    
    
    0.00
    %Interest bearing demand deposit
    
    
    135,406
    
    
    
    9.7
    %
    
    
    0.99
    %
    
    
    116,908
    
    
    
    9.8
    %
    
    
    1.62
    %
    
    
    107,126
    
    
    
    10.7
    %
    
    
    1.40
    %Savings/Money market
    
    
    309,348
    
    
    
    22.3
    %
    
    
    1.95
    %
    
    
    266,287
    
    
    
    22.3
    %
    
    
    3.47
    %
    
    
    179,056
    
    
    
    17.9
    %
    
    
    2.82
    %Time deposits
    
    
    820,908
    
    
    
    58.9
    %
    
    
    4.19
    %
    
    
    696,542
    
    
    
    58.5
    %
    
    
    4.83
    %
    
    
    610,202
    
    
    
    61.2
    %
    
    
    4.35
    %Total
    
    $
    1,393,356
    
    
    
    100.00
    %
    
    
    3.30
    %
    
    $
    1,191,828
    
    
    
    100.00
    %
    
    
    4.15
    %
    
    $
    997,686
    
    
    
    100.0
    %
    
    
    3.69
    %
 December 31,2008
    
    2007
    
    2006
    
    2005(dollars in thousands)High month-end balance of total deposits
    
    $
    1,477,141
    
    
    $
    1,319,459
    
    
    $
    1,166,814
    
    
    $
    944,672Low month-end balance of total deposits
    
    
    1,320,853
    
    
    
    1,120,863
    
    
    
    973,258
    
    
    
    869,226
  December 31, 2008(dollars in thousands)Under 3 months
    
    $
    6843 months to 6 months
    
    
    10,3226 months to 12 months
    
    
    63,988Over 12 months
    
    
    179,962$
    254,956
   69




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Short-term Borrowings
  Federal fundpurchased and
    
    
    
    
    
    Short-termsecurities sold under
    
    
    
    
    
    Federal Homeagreements to
    
    Other short-term
    
    Loan Bankrepurchase
    
    borrowings
    
    borrowings(dollars in thousands)2008Balance, December 31, 2008
    
    $
    18,523
    
    
    $
    28,704
    
    
    $
    2,000Weighted average interest rate at end of year
    
    
    2.71
    %
    
    
    3.77
    %
    
    
    .95
    %Maximum amount outstanding at any month end
    
    $
    28,002
    
    
    $
    24,397
    
    
    $
    15,440Average daily balance
    
    $
    26,196
    
    
    $
    9,961
    
    
    $
    7,490Weighted average interest rate during year (1)
    
    
    3.01
    %
    
    
    2.29
    %
    
    
    1.66
    %2007Balance, December 31, 2007
    
    $
    29,936
    
    
    $
    2,763
    
    
    $
    12,890Weighted average interest rate at end of year
    
    
    4.48
    %
    
    
    4.00
    %
    
    
    4.43
    %Maximum amount outstanding at any month end
    
    $
    29,936
    
    
    $
    4,006
    
    
    $
    34,581Average daily balance
    
    $
    25,093
    
    
    $
    1,162
    
    
    $
    23,291Weighted average interest rate during year (1)
    
    
    4.24
    %
    
    
    4.80
    %
    
    
    3.54
    %2006Balance, December 31, 2006
    
    $
    24,553
    
    
    $
    1,785
    
    
    $
    Weighted average interest rate at end of year
    
    
    4.82
    %
    
    
    5.04
    %
    
    
    0.00
    %Maximum amount outstanding at any month end
    
    $
    24,553
    
    
    $
    2,513
    
    
    $
    34,060Average daily balance
    
    $
    22,481
    
    
    $
    995
    
    
    $
    9,418Weighted average interest rate during year (1)
    
    
    3.71
    %
    
    
    6.00
    %
    
    
    5.27
    %
 
 (1)
    
    The weighted average interest rate is computed by dividing total interest for the year by the
average daily balance outstanding.  1.
    
    A demand note with Great River Bancshares, Inc., owned by a
significant shareholder of the Company, with a principal balance of $7,552,000 and
interest payable monthly at an annual rate of 7.5%. The principal balance,
together with accrued interest, is payable immediately upon Great Rivers written
demand. The note is secured by 100% of the outstanding shares of the subsidiary
banks.2.
    
    A note payable by Mid-America to First Community Bank of Lees
Summit, Missouri. The note had a principal balance of $4,000,000 and an annual
interest rate of 7.0%. Both the principal balance and accrued interest were
payable on demand. As of February 5, 2009, the Company assumed this note from
First Community Bank.3.
    
    A note payable by HNB Bank due to foreclosing on a loan where HNB
Bank was the secondary lien-holder on the property. As of December 31, 2008, HNB
Bank owed $345,000 to the primary lien-holder. This obligation was paid during
January 2009.
 70




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Long-Term Debt and Junior Subordinated Debentures
  2008
    
    
    2007Federal Home Loan Bank advances, fixed rates from .65% to
5.30%, due at various dates through 2017
    
    $
    60,500
    
    
    $
    57,500Note payable, fixed rate of 6.13%, due August 31, 2010
    
    
    5,037
    
    
    
    5,000Note payable, fixed rate of 6.27%, due August 31, 2010
    
    
    2,015
    
    
    
    2,000Note payable, fixed rate of 6.09%, due November 10, 2009
    
    
    15,109
    
    
    
    15,000Junior subordinated debenture, variable rate, due June 30, 2013
    
    
    2,000
    
    
    
    2,000Junior subordinated debentures owed to unconsolidated
subsidiaries
    
    
    61,858
    
    
    
    61,858Total long-term debt
    
    $
    146,519
    
    
    $
    143,358
      71




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72




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73




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Liquidity
     
    
    Non-performing assets of all subsidiary banks on a combined basis cannot exceed
thirty-five percent of the then primary capital of all subsidiary banks;
    
    The consolidated fixed charge ratio is required to be at least .50 to 1.00 for
each quarter ending after December 31, 2008; and
    
    Stockholders equity is required to be at least
$90 million less the amount of any goodwill impairment charges, as of the
last day of each calendar month.
   
    
    the occurrence of an event of default under any of the loan agreements;
    
    the Company should fail to perform any additional covenant;
    
    any changes in regulatory agreements;
    
    the Company, any subsidiary holding company or any subsidiary bank being placed
in receivership or being taken over by any regulatory agency;
    
    the note holder determines in its sole discretion that there has been any
change in the business operations or condition, financial or otherwise, of the Company,
any subsidiary holding company, any subsidiary bank or any consolidated subsidiary that
could have a material adverse effect;
    
    April 30, 2009, if the note holder and the Company have not executed an
amendment to, and restatement of, the current loan agreements between the Company and
the note holder satisfactory to the note holder in its sole discretion; or
    
    September 30, 2009
 74




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##### Table of Contents



Years Ended December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Cash and due from banks
    
    $
    34,518
    
    
    $
    26,511
    
    
    $
    25,153Interest-bearing demand deposits
    
    
    21,952
    
    
    
    16,887
    
    
    
    21,703Federal funds sold
    
    
    21,465
    
    
    
    23,157
    
    
    
    11,117Total
    
    $
    77,935
    
    
    $
    66,555
    
    
    $
    57,973Percent of average total assets
    
    
    4.58
    %
    
    
    4.52
    %
    
    
    4.79
    %
  December 31,2008
    
    
    2007
    
    
    2006(dollars in thousands)Cash and due from banks
    
    $
    67,595
    
    
    $
    38,172
    
    
    $
    28,854Interest-bearing demand deposits
    
    
    16,812
    
    
    
    18,259
    
    
    
    29,188Federal funds sold
    
    
    5,414
    
    
    
    19,628
    
    
    
    41,105Total
    
    $
    89,821
    
    
    $
    76,059
    
    
    $
    99,147Percent of total assets
    
    
    5.06
    %
    
    
    4.64
    %
    
    
    6.96
    %
 75




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76




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##### Table of Contents



Next 12
    
    
    13-36
    
    
    37-60
    
    
    More thanMonths
    
    
    Months
    
    
    Months
    
    
    60 Months
    
    
    Totals(dollars in thousands)Contractual obligations:Certificates of deposit
    
    $
    572,231
    
    
    $
    230,415
    
    
    $
    68,322
    
    
    $
    20,226
    
    
    $
    891,194Short-term borrowings
    
    
    49,227
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,227Long-term borrowing (1)
    
    
    31,109
    
    
    
    31,052
    
    
    
    10,000
    
    
    
    74,358
    
    
    
    146,519Interest payments on
long-term borrowings
    
    
    5,895
    
    
    
    10,977
    
    
    
    5,187
    
    
    
    8,385
    
    
    
    30,444Minimum operating
lease commitments
    
    
    409
    
    
    
    666
    
    
    
    498
    
    
    
    504
    
    
    
    2,077Totals
    
    $
    658,871
    
    
    $
    273,110
    
    
    $
    84,007
    
    
    $
    103,473
    
    
    $
    1,119,461
 
 (1)
    
    The long-term borrowings include: Federal Home Loan Bank advances totaling $60.5 million at
fixed rates ranging from .65% to 5.3%; bank notes payable totaling $19.6 million at variable
rates of interest ranging from 3.25% to 6.27% at December 31, 2008; junior subordinated
debentures totaling $10.3 million at a fixed rate of 6.10% until November 2015; junior
subordinated debentures totaling $10.3 million at a fixed rate of 7.17% until July 2011;
junior subordinated debentures totaling $20.6 million at a variable rate of 3.12% at December
31,2008; and junior subordinated debentures totaling $20.6 million at a fixed rate of 6.84%
until October 2017.  Next 12
    
    
    13-36
    
    
    37-60
    
    
    More thanMonths
    
    
    Months
    
    
    Months
    
    
    60 Months
    
    
    Totals(dollars in thousands)Unfunded commitments:Letters of credit
    
    $
    18,150
    
    
    $
    368
    
    
    $
    25
    
    
    $
    2,169
    
    
    $
    20,712Lines of credit
    
    
    61,862
    
    
    
    151,286
    
    
    
    17,804
    
    
    
    12,523
    
    
    
    243,475Totals
    
    $
    80,012
    
    
    $
    151,654
    
    
    $
    17,829
    
    
    $
    14,692
    
    
    $
    264,187
   77




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Rate Sensitive Assets and Liabilities
   Rate Sensitive WithinFair1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-4 years
    
    
    4-5 years
    
    
    Thereafter
    
    
    Total
    
    
    Value(dollars in thousands)Interest bearing deposits
    
    $
    16,812
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    16,812
    
    
    $
    16,812Federal funds sold
    
    
    5,414
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,414
    
    
    
    5,414SecuritiesU.S. government agencies
    
    
    2,019
    
    
    
    761
    
    
    
    773
    
    
    
    436
    
    
    
    348
    
    
    
    450
    
    
    
    4,787
    
    
    
    4,787Mortgage-backed securities
    
    
    15,787
    
    
    
    44,709
    
    
    
    27,930
    
    
    
    28,704
    
    
    
    8,598
    
    
    
    8,710
    
    
    
    134,438
    
    
    
    134,585State and political subdivisions
    
    
    5,522
    
    
    
    6,509
    
    
    
    9,328
    
    
    
    9,555
    
    
    
    3,965
    
    
    
    13,699
    
    
    
    48,578
    
    
    
    48,627Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,294
    
    
    
    6,294
    
    
    
    6,294Loans and loans held for sale
    
    
    483,228
    
    
    
    224,995
    
    
    
    133,983
    
    
    
    80,081
    
    
    
    77,779
    
    
    
    343,674
    
    
    
    1,343,740
    
    
    
    1,325,196Total rate-sensitive assets
    
    $
    528,782
    
    
    $
    276,974
    
    
    $
    172,014
    
    
    $
    118,776
    
    
    $
    90,690
    
    
    $
    372,827
    
    
    $
    1,560,063
    
    
    $
    1,541,715Interest bearing transaction deposits
    
    $
    4,024
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    138,389
    
    
    $
    142,413
    
    
    $
    142,413Savings deposits
    
    
    5,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    81,892
    
    
    
    87,463
    
    
    
    87,463Money market deposits
    
    
    201,720
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201,720
    
    
    
    201,720Time and brokered time deposits
    
    
    572,231
    
    
    
    151,438
    
    
    
    78,977
    
    
    
    23,469
    
    
    
    44,853
    
    
    
    20,226
    
    
    
    891,194
    
    
    
    889,572Short-term borrowings
    
    
    49,227
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,227
    
    
    
    49,227Long-term debt and junior
subordinated debentures
    
    
    31,109
    
    
    
    17,052
    
    
    
    14,000
    
    
    
    5,000
    
    
    
    5,000
    
    
    
    74,358
    
    
    
    146,519
    
    
    
    141,317Total rate-sensitive liabilities
    
    $
    863,882
    
    
    $
    168,490
    
    
    $
    92,977
    
    
    $
    28,469
    
    
    $
    49,853
    
    
    $
    314,865
    
    
    $
    1,518,536
    
    
    $
    1,511,712Rate sensitive assets  rate
sensitive liabilities
    
    $
    (335,100
    )
    
    $
    108,484
    
    
    $
    79,037
    
    
    $
    90,307
    
    
    $
    40,837
    
    
    $
    57,962
    
    
    $
    41,527
    
    
    $
    30,003Cumulative Gap
    
    $
    (335,100
    )
    
    $
    (226,616
    )
    
    $
    (147,579
    )
    
    $
    (57,272
    )
    
    $
    (16,435
    )
    
    $
    41,527Cumulative amounts as % of total
rate-sensitive assets
    
    
    (21.48
    )%
    
    
    (14.53
    )%
    
    
    (9.46
    )%
    
    
    (3.67
    )%
    
    
    (1.05
    )%
    
    
    2.66
    %Cumulative Ratio
    
    
    0.61
    
    
    
    0.78
    
    
    
    0.87
    
    
    
    0.95
    
    
    
    0.99
    
    
    
    1.03
   78




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Capital Resources
    Regulatory Considerations
   79




---



##### Table of Contents



Accounting Pronouncements
    80




---



##### Table of Contents



81




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  Consolidated Quarterly Financial Data
 2008December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31(dollars in thousands, except per share data)Interest income
    
    $
    22,677
    
    
    $
    23,525
    
    
    $
    23,222
    
    
    $
    24,564Interest expense
    
    
    12,123
    
    
    
    11,845
    
    
    
    12,322
    
    
    
    14,365Net interest income
    
    
    10,554
    
    
    
    11,680
    
    
    
    10,900
    
    
    
    10,199Provision for loan losses
    
    
    12,762
    
    
    
    4,480
    
    
    
    1,834
    
    
    
    4,769Noninterest income
    
    
    4,427
    
    
    
    1,847
    
    
    
    4,473
    
    
    
    3,248Noninterest expense
    
    
    13,738
    
    
    
    16,339
    
    
    
    12,511
    
    
    
    11,586Minority interest
    
    
    (1,267
    )
    
    
    (1,662
    )
    
    
    (105
    )
    
    
    (287
    )Income (loss) before income taxes
    
    
    (10,252
    )
    
    
    (5,630
    )
    
    
    1,133
    
    
    
    (2,621
    )Income tax benefit
    
    
    (3,538
    )
    
    
    (3,937
    )
    
    
    (130
    )
    
    
    (944
    )Net income (loss)
    
    $
    (6,714
    )
    
    $
    (1,693
    )
    
    $
    1,263
    
    
    $
    (1,677
    )Basic earnings (loss) per share
    
    
    (0.77
    )
    
    
    (0.19
    )
    
    
    0.14
    
    
    
    (0.19
    )
 82




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##### Table of Contents



2007December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31(dollars in thousands, except per share data)Interest income
    
    $
    25,782
    
    
    $
    24,193
    
    
    $
    23,060
    
    
    $
    22,908Interest expense
    
    
    14,649
    
    
    
    13,657
    
    
    
    12,648
    
    
    
    12,507Net interest income
    
    
    11,133
    
    
    
    10,536
    
    
    
    10,412
    
    
    
    10,401Provision for loan losses
    
    
    1,111
    
    
    
    677
    
    
    
    426
    
    
    
    755Noninterest income
    
    
    3,814
    
    
    
    5,029
    
    
    
    2,774
    
    
    
    2,342Noninterest expense
    
    
    10,843
    
    
    
    9,948
    
    
    
    9,424
    
    
    
    9,193Minority interest
    
    
    91
    
    
    
    197
    
    
    
    159
    
    
    
    175Income before income taxes
    
    
    2,902
    
    
    
    4,743
    
    
    
    3,177
    
    
    
    2,620Income taxes
    
    
    414
    
    
    
    1,450
    
    
    
    801
    
    
    
    776Net income
    
    $
    2,488
    
    
    $
    3,293
    
    
    $
    2,376
    
    
    $
    1,844Basic earnings per share
    
    
    .29
    
    
    
    .38
    
    
    
    .27
    
    
    
    .21
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Disclosure Controls and Procedures
  Management Report on Internal Control Over Financial Reporting
   83




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##### Table of Contents



/s/ Ted T. AwerkampTed T. AwerkampPresident and Chief Executive Officer /s/ Michael P. McGrathMichael P. McGrathExecutive Vice President,
Treasurer, Secretary and Chief Financial Officer Report
of Independent Registered Public Accounting Firm
 
 Internal Control  Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO)
    Internal
Control  Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO)
  BKD llp
 84




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##### Table of Contents



Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  85




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##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Company and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  86




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
           87




---



##### Table of Contents



SIGNATURES
  MERCANTILE BANCORP, INC.
(Registrant)By:
    /s/  Ted T. AwerkampName:
    Ted T. AwerkampDated:  March 17, 2009
    
    Title:
    President and Chief Executive Officer  Signature
    
    Title
    
    Date/s/ Ted T. Awerkamp

Ted T. Awerkamp
    
    President and Chief Executive Officer
(principal executive officer)
    
    March 17, 2009/s/ Michael P. McGrath

Michael P. McGrath
    
    Executive Vice President, Treasurer,
Secretary and Chief Financial
Officer
(principal financial
officer/principal accounting
officer)
    
    March 17, 2009/s/ Ted T. Awerkamp

Ted T. Awerkamp
    
    Director
    
    March 17, 2009/s/ Dan S. Dugan

Dan S. Dugan
    
    Chairman, Director
    
    March 17, 2009/s/ Michael J. Foster

Michael J. Foster
    
    Director
    
    March 17, 2009/s/ William G. Keller

William G. Keller, Jr.
    
    Director
    
    March 17, 2009/s/ Frank H. Musholt

Frank H. Musholt
    
    Director
    
    March 17, 2009/s/ Dennis M. Prock

Dennis M. Prock
    
    Director
    
    March 17, 2009/s/ Walter D. Stevenson, III

Walter D. Stevenson, III
    
    Director
    
    March 17, 2009/s/ James W. Tracy

James W. Tracy
    
    Director
    
    March 17, 2009
 88




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Certificate of Incorporation of Mercantile Bancorp, Inc., as amended, filed with the Registration
Statement on Form 10 dated May 12, 2004 (File No. 000-50757) (the Registration Statement), under the
same exhibit number.3.2
    
    Bylaws of Mercantile Bancorp, Inc., as amended, filed as Exhibit 99.1 to a Current Report on Form 8-K
filed November 21, 2007.3.3
    
    Certificate of Amendment to the Certificate of Incorporation of Mercantile Bancorp, Inc., filed
herewith.4.1
    
    Shareholder Rights Agreement dated July 9, 1999 between the Company and Mercantile Trust & Savings
Bank, filed under same exhibit number with the Registration Statement.4.2
    
    Amendment to Shareholder Rights Agreement dated May 15, 2000 between the Company and
Mercantile Trust & Savings Bank, filed under same exhibit number with the
Registration Statement.10.1
    
    Executive Employee Salary Continuation Agreement dated December 8, 1994 between
Mercantile Trust & Savings Bank and Dan S. Dugan, filed as Exhibit 10.3 with the
Registration Statement.10.2
    
    Amendment to Dugan Executive Employee Salary Continuation Agreement dated April 26,
2004, filed as Exhibit 10.4 with the Registration Statement.10.3
    
    Second Amendment to Dugan Executive Employee Salary Continuation Agreement dated
December 29, 2006, filed as Exhibit 10.1 to a Current Report on Form 8-K filed
January 5, 2007.10.4
    
    Executive Employee Salary Continuation Agreement, as amended and restated effective
January 1, 2009 between Mercantile Bank and Ted T. Awerkamp, filed herewith.10.5
    
    Employment Agreement dated January 1, 2008, between the Company and Ted T. Awerkamp,
filed as Exhibit 10.8 to the Annual Report on Form 10-K for the year ended December
31, 2007 (the 2007 Form 10-K).10.6
    
    Amendment to Employment Agreement dated July 15, 2008, between the Company and Ted T.
Awerkamp, filed as Exhibit 10.1 to the Periodic Report on Form 10-Q for the quarter
ended September 30, 2008 (the 2008 Third Quarter Form 10-Q).10.7
    
    Employment Agreement dated January 1, 2008, between the Company and Michael P.
McGrath, filed as Exhibit 10.9 to the 2007 Form 10-K.10.8
    
    Amendment to Employment Agreement dated July 15, 2008, between the Company and
Michael P. McGrath, filed as Exhibit 10.2 to the 2008 Third Quarter Form 10-Q.10.9
    
    Employment Agreement dated January 1, 2008, between the Company and Daniel J. Cook,
filed as Exhibit 10.10 to the 2007 Form 10-K.10.10
    
    Amendment to Employment Agreement dated July 15, 2008, between the Company and Daniel
J. Cook, filed as Exhibit 10.3 to the 2008 Third Quarter Form 10-Q.10.11
    
    Mercantile Bancorp, Inc. Profit Sharing Plan and Trust, filed as Exhibit 10.7 with
the Registration Statement.10.12
    
    401(k) Plan Adoption Agreement, filed as Exhibit 10.8 with the Registration Statement.
 89




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit10.13
    
    Amendment to the Profit Sharing Plan and Trust, filed as Exhibit 10.9 with the
Registration Statement.10.14
    
    Consulting Agreement dated March 2, 2007 between Mercantile Bancorp, Inc. and Dan S.
Dugan, filed as Exhibit 10.1 to a Current Report on Form 8-K filed March 7, 2007.10.15
    
    Consulting Agreement dated January 15, 2008 between Mercantile Bancorp, Inc. and Dan
S. Dugan, filed as Exhibit 10.16 to the 2007 Form 10-K.10.16
    
    Consulting Agreement dated March 1, 2009 between Mercantile Bancorp, Inc. and Dan S.
Dugan, filed herewith.10.17
    
    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., Lender, filed as Exhibit 10.1 with the Periodic Report
on Form 10-Q for the quarter ended September 30, 2006 (the 2006 Third Quarter Form
10-Q).10.18
    
    First Amendment to Third Amended and Restated Loan Agreement between Mercantile
Bancorp, Inc. and U.S. Bank National Association, dated March 20, 2007, filed as
Exhibit 10.1 to a Current Report on Form 8-K filed March 24, 2007.10.19
    
    Second Amendment to Third Amended and Restated Loan Agreement between Mercantile
Bancorp, Inc. and U.S. Bank National Association, dated as of June 30, 2007, filed as
Exhibit 10.1 to a Current Report on Form 8-K filed July 19, 2007.10.20
    
    Third Amendment to Third Amended and Restated Loan Agreement between Mercantile
Bancorp, Inc. and U.S. Bank National Association, dated September 7, 2007, filed as
Exhibit 10.1 to a Current Report on Form 8-K filed September 12, 2007.10.21
    
    Assignment Agreement among U.S. Bank National Association, Great River Bancshares,
Inc. and Mercantile Bancorp, Inc., dated December 23, 2008, filed herewith.10.22
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River
Bancshares, Inc., dated December 31, 2008, filed herewith.10.23
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River
Bancshares, Inc., dated February 5, 2009, filed herewith.10.24
    
    Waiver and Agreement by and between
Merchantile Bancorp, Inc., and Great River Bancshares, Inc., dated
March 13, 2009, regarding certain loan
covenants of the Company, filed herewith.10.25
    
    Construction Agreement dated August 24, 2006 by and between Mercantile Trust &
Savings Bank, Owner, and Clayco, Inc., Contractor, filed as Exhibit 10.2 with the
2006 Third Quarter Form 10-Q.10.26
    
    General Conditions of the Contract for Construction by and between Mercantile Trust &
Savings Bank, Owner, and Clayco, Inc., Contractor, filed as Exhibit 10.3 with the
2006 Third Quarter Form 10-Q.14.1
    
    Code of Ethics, filed under same exhibit number with Annual Report on Form 10-K for
fiscal year ended December 31, 2004.21
    
    Subsidiaries of registrant, filed herewith.31.1
    
    Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended, filed herewith.31.2
    
    Certification of the Chief Financial Officer pursuant to Rule 13a-14(a) of the
Securities Exchange Act of 1934, as amended, filed herewith.
 90




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ExhibitNumber
    
    Description of Exhibit32.1
    
    Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, filed herewith.32.2
    
    Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350,
adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, filed herewith.
 
 
    
    Management contract or compensatory plan or arrangement. 91




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##### Table of Contents



Mercantile Bancorp, Inc.
 December 31, 2008 and 2007
 Contents
 Report of Independent Registered Public Accounting Firm
    
    
    93Consolidated Financial StatementsBalance Sheets
    
    
    94Statements of Operations
    
    
    96Statements of Stockholders Equity
    
    
    98Statements of Cash Flows
    
    
    100Notes to Financial Statements
    
    
    102
 92




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Internal Control-Integrated Framework
  BKD llp
 93




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##### Table of Contents



Mercantile Bancorp, Inc.
 Consolidated Balance Sheets
December 31, 2008 and 2007
(in thousands, except share data)
 Assets
 2008
    
    
    2007Cash and due from banks
    
    $
    67,595
    
    
    $
    38,172Interest-bearing demand deposits
    
    
    16,812
    
    
    
    18,259Federal funds sold
    
    
    5,414
    
    
    
    19,628Cash and cash equivalents
    
    
    89,821
    
    
    
    76,059Available-for-sale securities
    
    
    185,192
    
    
    
    192,239Held-to-maturity securities (fair value of $9,101 and $13,624)
    
    
    8,905
    
    
    
    13,518Loans held for sale
    
    
    4,366
    
    
    
    3,338Loans, net of allowance for loan losses of $23,467 and
$12,794 at December 31, 2008 and 2007
    
    
    1,315,907
    
    
    
    1,199,257Interest receivable
    
    
    10,240
    
    
    
    11,343Foreclosed assets held for sale, net
    
    
    9,959
    
    
    
    3,172Federal Home Loan Bank stock
    
    
    8,213
    
    
    
    7,790Cost method investments in common stock
    
    
    3,314
    
    
    
    6,105Deferred income taxes
    
    
    9,181
    
    
    
    2,457Mortgage servicing rights
    
    
    959
    
    
    
    1,307Cash surrender value of life insurance
    
    
    25,278
    
    
    
    24,248Premises and equipment
    
    
    40,616
    
    
    
    42,003Goodwill
    
    
    44,653
    
    
    
    43,934Core deposit and other intangibles
    
    
    4,002
    
    
    
    4,514Other
    
    
    14,377
    
    
    
    7,861Total assets
    
    $
    1,774,983
    
    
    $
    1,639,145
 See Notes to Consolidated Financial Statements
 94




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##### Table of Contents



Liabilities and Stockholders Equity
 2008
    
    
    2007LiabilitiesDeposits 
Demand
    
    $
    139,486
    
    
    $
    133,890Savings, NOW and money market
    
    
    431,596
    
    
    
    420,394Time
    
    
    672,763
    
    
    
    611,676Brokered time
    
    
    218,431
    
    
    
    153,499Total deposits
    
    
    1,462,276
    
    
    
    1,319,459Short-term borrowings
    
    
    49,227
    
    
    
    45,589Long-term debt
    
    
    84,661
    
    
    
    81,500Junior subordinated debentures
    
    
    61,858
    
    
    
    61,858Interest payable
    
    
    4,280
    
    
    
    6,040Other
    
    
    7,989
    
    
    
    6,971Total liabilities
    
    
    1,670,291
    
    
    
    1,521,417Commitments and Contingent LiabilitiesMinority Interest
    
    
    5,735
    
    
    
    9,446Stockholders EquityCommon stock, $0.42 par value; authorized 12,000,000 shares;Issued  8,887,113 sharesOutstanding  8,703,330 and 8,709,655 shares at
December 31, 2008 and 2007
    
    
    3,629
    
    
    
    3,629Additional paid-in capital
    
    
    11,919
    
    
    
    11,989Retained earnings
    
    
    83,642
    
    
    
    94,552Accumulated other comprehensive income
    
    
    2,062
    
    
    
    305101,252
    
    
    
    110,475Treasury stock, at cost
Common; 183,783 shares and 177,458 shares December 31,
2008 and 2007
    
    
    (2,295
    )
    
    
    (2,193
    )Total stockholders equity
    
    
    98,957
    
    
    
    108,282Total liabilities and stockholders equity
    
    $
    1,774,983
    
    
    $
    1,639,145
 95




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##### Table of Contents



Mercantile Bancorp, Inc.  Consolidated Statements of Operations
Years Ended December 31, 2008, 2007 and 2006
(in thousands, except share data)
 2008
    
    
    2007
    
    
    2006Interest and Dividend IncomeLoansTaxable
    
    $
    83,175
    
    
    $
    82,912
    
    
    $
    66,152Tax exempt
    
    
    737
    
    
    
    936
    
    
    
    908SecuritiesTaxable
    
    
    7,167
    
    
    
    7,965
    
    
    
    5,774Tax exempt
    
    
    1,958
    
    
    
    1,830
    
    
    
    1,783Federal funds sold
    
    
    391
    
    
    
    1,219
    
    
    
    577Dividends on Federal Home Loan Bank stock
    
    
    113
    
    
    
    182
    
    
    
    189Deposits with financial institutions and other
    
    
    447
    
    
    
    899
    
    
    
    767Total interest and dividend income
    
    
    93,988
    
    
    
    95,943
    
    
    
    76,150Interest ExpenseDeposits
    
    
    41,750
    
    
    
    44,771
    
    
    
    33,071Short-term borrowings
    
    
    1,117
    
    
    
    1,945
    
    
    
    1,389Long-term debt and junior subordinated debentures
    
    
    7,788
    
    
    
    6,745
    
    
    
    3,954Total interest expense
    
    
    50,655
    
    
    
    53,461
    
    
    
    38,414Net Interest Income
    
    
    43,333
    
    
    
    42,482
    
    
    
    37,736Provision for Loan Losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Net Interest Income After Provision for Loan Losses
    
    
    19,488
    
    
    
    39,513
    
    
    
    33,822Noninterest IncomeFiduciary activities
    
    
    2,603
    
    
    
    2,411
    
    
    
    2,191Brokerage fees
    
    
    1,770
    
    
    
    1,468
    
    
    
    1,120Customer service fees
    
    
    4,302
    
    
    
    4,136
    
    
    
    3,610Other service charges and fees
    
    
    1,104
    
    
    
    713
    
    
    
    599Net gains (losses) on sales of assets
    
    
    371
    
    
    
    (23
    )
    
    
    (107
    )Net gains on loan sales
    
    
    1,010
    
    
    
    698
    
    
    
    612Net gains on sale of available-for-sale securities
    
    
    942
    
    
    
    699
    
    
    
    Net gains on sale of equity and cost method
investments
    
    
    100
    
    
    
    2,209
    
    
    
    4,318Loan servicing fees
    
    
    569
    
    
    
    464
    
    
    
    388Net increase in cash surrender value of life
insurance
    
    
    1,039
    
    
    
    926
    
    
    
    653Income (loss) on equity method investments in
common stock
    
    
    
    
    
    
    (6
    )
    
    
    251Other
    
    
    185
    
    
    
    241
    
    
    
    188Total noninterest income
    
    
    13,995
    
    
    
    13,936
    
    
    
    13,823
 See Notes to Consolidated Financial Statements
 96




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Noninterest ExpenseSalaries and employee benefits
    
    $
    27,074
    
    
    $
    23,253
    
    
    $
    18,254Net occupancy expense
    
    
    3,624
    
    
    
    2,695
    
    
    
    2,001Equipment expense
    
    
    3,459
    
    
    
    2,494
    
    
    
    1,777Deposit insurance premium
    
    
    1,054
    
    
    
    223
    
    
    
    122Professional fees
    
    
    2,371
    
    
    
    1,993
    
    
    
    1,782Postage and supplies
    
    
    1,290
    
    
    
    1,085
    
    
    
    941Losses on foreclosed assets, net
    
    
    1,113
    
    
    
    86
    
    
    
    35Other than temporary loss on available
for sale securities and cost method
investments
    
    
    5,270
    
    
    
    
    
    
    
    Amortization of mortgage servicing rights
    
    
    253
    
    
    
    134
    
    
    
    224Other
    
    
    8,666
    
    
    
    7,422
    
    
    
    6,373Total noninterest expense
    
    
    54,174
    
    
    
    39,385
    
    
    
    31,509Income (Loss) Before Minority Interest and
Income Taxes
    
    
    (20,691
    )
    
    
    14,064
    
    
    
    16,136Income Tax Expense (Benefit)
    
    
    (8,549
    )
    
    
    3,441
    
    
    
    5,025Income (Loss) before Minority Interest
    
    
    (12,142
    )
    
    
    10,623
    
    
    
    11,111Minority Interest
    
    
    (3,321
    )
    
    
    622
    
    
    
    792Net Income (Loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Basic Earnings (Loss) Per Share
    
    $
    (1.01
    )
    
    $
    1.15
    
    
    $
    1.18Weighted average shares outstanding
    
    
    8,705,452
    
    
    
    8,727,933
    
    
    
    8,770,475
 97




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##### Table of Contents



Mercantile Bancorp, Inc.  Consolidated Statements of Stockholders Equity
Years Ended December 31, 2008, 2007 and 2006
(in thousands, except share data)
 Common Stock
    
    
    Additional Paid-InShares Outstanding
    
    
    Amount
    
    
    CapitalBalance, January 1, 2006
    
    
    8,772,367
    
    
    $
    3,629
    
    
    $
    11,764Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss of equity method
investee
    
    
    
    
    
    
    
    
    
    
    Change in unrealized loss on interest rate swaps, net of
taxes
    
    
    
    
    
    
    
    
    
    
    Total comprehensive incomeIssuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    218Dividends on common stock, $0.21 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (24,750
    )
    
    
    
    
    
    
    Adjustment to initially apply FAS Statement No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2006
    
    
    8,747,617
    
    
    
    3,629
    
    
    
    11,982Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss of equity method
investee
    
    
    
    
    
    
    
    
    
    
    Defined benefit postretirement plan  transition obligation
    
    
    
    
    
    
    
    
    
    
    Total comprehensive incomeIssuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    7Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (37,962
    )
    
    
    
    
    
    
    Balance, December 31, 2007
    
    
    8,709,655
    
    
    
    3,629
    
    
    
    11,989Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Defined benefit postretirement plan  transition obligation
    
    
    
    
    
    
    
    
    
    
    Total comprehensive lossPurchase of stock from minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    (70
    )Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (6,325
    )
    
    
    
    
    
    
    Balance, December 31, 2008
    
    
    8,703,330
    
    
    $
    3,629
    
    
    $
    11,919
 See Notes to Consolidated Financial Statements
 98




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##### Table of Contents



AccumulatedOtherRetained
    
    
    ComprehensiveEarnings
    
    
    Income (Loss)
    
    
    Treasury Stock
    
    
    Total$
    78,200
    
    
    $
    (848
    )
    
    $
    (1,257
    )
    
    $
    91,48810,319
    
    
    
    
    
    
    
    
    
    
    
    10,319
    
    
    
    892
    
    
    
    
    
    
    
    892
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    147
    
    
    
    
    
    
    
    14711,353
    
    
    
    
    
    
    
    
    
    
    
    218(1,871
    )
    
    
    
    
    
    
    
    
    
    
    (1,871
    )
    
    
    
    
    
    
    
    (367
    )
    
    
    (367
    )
    
    
    
    (163
    )
    
    
    
    
    
    
    (163
    )86,648
    
    
    
    23
    
    
    
    (1,624
    )
    
    
    100,65810,001
    
    
    
    
    
    
    
    
    
    
    
    10,001
    
    
    
    240
    
    
    
    
    
    
    
    240
    
    
    
    28
    
    
    
    
    
    
    
    28
    
    
    
    14
    
    
    
    
    
    
    
    1410,283
    
    
    
    
    
    
    
    
    
    
    
    7(2,097
    )
    
    
    
    
    
    
    
    
    
    
    (2,097
    )
    
    
    
    
    
    
    
    (569
    )
    
    
    (569
    )94,552
    
    
    
    305
    
    
    
    (2,193
    )
    
    
    108,282(8,821
    )
    
    
    
    
    
    
    
    
    
    
    (8,821
    )
    
    
    
    1,737
    
    
    
    
    
    
    
    1,737
    
    
    
    20
    
    
    
    
    
    
    
    20(7,064
    )
    
    
    
    
    
    
    
    
    
    
    
    (70
    )(2,089
    )
    
    
    
    
    
    
    
    
    
    
    (2,089
    )
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )$
    83,642
    
    
    $
    2,062
    
    
    $
    (2,295
    )
    
    $
    98,957
 99




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##### Table of Contents



Mercantile Bancorp, Inc.  Consolidated Statements of Cash Flows
December 31, 2008, 2007 and 2006
(in thousands, except share data)
 2008
    
    
    2007
    
    
    2006Operating ActivitiesNet income (loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Items not requiring (providing) cashDepreciation
    
    
    2,845
    
    
    
    1,898
    
    
    
    1,535Provision for loan losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Amortization (depreciation) of premiums and discounts
on securities
    
    
    (2
    )
    
    
    (28
    )
    
    
    1,062Amortization (depreciation) of core deposit
intangibles and other purchase accounting adjustments
    
    
    80
    
    
    
    (970
    )
    
    
    247Mortgage servicing rights impairment
    
    
    404
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (7,752
    )
    
    
    (482
    )
    
    
    2,091Net realized gains on sales of available-for-sale
securities
    
    
    (942
    )
    
    
    (699
    )
    
    
    Other than temporary losses on available-for-sale and
cost method investments
    
    
    5,270
    
    
    
    
    
    
    
    Losses on sales of foreclosed assets
    
    
    1,113
    
    
    
    86
    
    
    
    35Net gains on loan sales
    
    
    (1,010
    )
    
    
    (698
    )
    
    
    (612
    )Amortization of mortgage servicing rights
    
    
    253
    
    
    
    134
    
    
    
    224Net (gains) losses on sale of premises and equipment
    
    
    (371
    )
    
    
    23
    
    
    
    107Gain on sale of equity and cost method investments
    
    
    (100
    )
    
    
    (2,209
    )
    
    
    (4,318
    )(Income) loss on equity method investments in common
stock
    
    
    
    
    
    
    6
    
    
    
    (251
    )Federal Home Loan Bank stock dividends
    
    
    (32
    )
    
    
    (56
    )
    
    
    (58
    )Net increase in cash surrender value of life insurance
    
    
    (1,039
    )
    
    
    (926
    )
    
    
    (653
    )Minority interest in earnings (loss) of subsidiary
    
    
    (3,321
    )
    
    
    622
    
    
    
    792Changes inLoan originated for sale
    
    
    (92,921
    )
    
    
    (48,113
    )
    
    
    (38,755
    )Proceeds from sales of loans
    
    
    92,483
    
    
    
    46,842
    
    
    
    41,142Interest receivable
    
    
    1,103
    
    
    
    (188
    )
    
    
    (1,736
    )Other assets
    
    
    (7,004
    )
    
    
    (1,068
    )
    
    
    (1,662
    )Interest payable
    
    
    (1,760
    )
    
    
    (607
    )
    
    
    2,256Other liabilities
    
    
    1,500
    
    
    
    61
    
    
    
    373Net cash provided by operating activities
    
    
    3,821
    
    
    
    6,598
    
    
    
    16,052Investing ActivitiesCash paid in acquisition of HNB Financial, net of cash
received
    
    
    (719
    )
    
    
    (24,790
    )
    
    
    Cash paid in acquisition of Royal Palm, net of cash
received
    
    
    
    
    
    
    
    
    
    
    (21,804
    )Purchases of available-for-sale securities
    
    
    (54,326
    )
    
    
    (44,091
    )
    
    
    (113,362
    )Proceeds from maturities of available-for-sale securities
    
    
    57,300
    
    
    
    47,015
    
    
    
    104,625Proceeds from the sales of available-for-sale securities
    
    
    4,954
    
    
    
    
    
    
    
    Purchases of held-to-maturity securities
    
    
    
    
    
    
    (1,000
    )
    
    
    Proceeds from maturities of held-to-maturity securities
    
    
    4,606
    
    
    
    3,368
    
    
    
    3,375Net change in loans
    
    
    (151,478
    )
    
    
    (58,888
    )
    
    
    (54,535
    )Purchases of premises and equipment
    
    
    (1,901
    )
    
    
    (11,504
    )
    
    
    (5,313
    )
 See Notes to Consolidated Financial Statements
 100




---



##### Table of Contents



2008
    
    
    2007
    
    
    2006Investing Activities (Continued)Proceeds from sales of premises and equipment
    
    $
    799
    
    
    $
    25
    
    
    $
    20Purchases of Federal Home Loan Bank stock
    
    
    (1,228
    )
    
    
    (710
    )
    
    
    (841
    )Proceeds from sales of Federal Home Loan Bank stock
    
    
    838
    
    
    
    449
    
    
    
    1,152Proceeds from the sales of foreclosed assets
    
    
    3,557
    
    
    
    275
    
    
    
    469Purchase of cost method investment in common stock
    
    
    
    
    
    
    (3,234
    )
    
    
    (995
    )Proceeds from sale of cost method investments
    
    
    495
    
    
    
    513
    
    
    
    Proceeds from sales of equity method investments
    
    
    
    
    
    
    6,791
    
    
    
    1,347Purchase of bank-owned life insurance
    
    
    
    
    
    
    (1,887
    )
    
    
    Net cash used in investing activities
    
    
    (137,103
    )
    
    
    (87,668
    )
    
    
    (85,862
    )Financing ActivitiesNet increase in demand deposits, money market, NOW and
savings accounts
    
    
    16,798
    
    
    
    22,064
    
    
    
    59,617Net increase in time and brokered time deposits
    
    
    126,099
    
    
    
    1,641
    
    
    
    22,145Net increase (decrease) in short-term borrowings
    
    
    3,638
    
    
    
    18,361
    
    
    
    (6,249
    )Proceeds from long-term debt
    
    
    49,161
    
    
    
    27,650
    
    
    
    28,750Repayment of long-term debt
    
    
    (46,000
    )
    
    
    (29,160
    )
    
    
    (9,150
    )Proceeds from issuance of junior subordinated
debentures
    
    
    
    
    
    
    20,619
    
    
    
    30,929Purchase of stock from minority interest of Mid America
    
    
    (555
    )
    
    
    (612
    )
    
    
    Proceeds from issuance of stock to minority interest
of Mid-America
    
    
    94
    
    
    
    103
    
    
    
    1,395Purchase of intangible assets
    
    
    
    
    
    
    (18
    )
    
    
    (396
    )Purchase of treasury stock
    
    
    (102
    )
    
    
    (569
    )
    
    
    (367
    )Dividends paid
    
    
    (2,089
    )
    
    
    (2,097
    )
    
    
    (1,871
    )Net cash provided by financing activities
    
    
    147,044
    
    
    
    57,982
    
    
    
    124,803Increase (Decrease) in Cash and Cash Equivalents
    
    
    13,762
    
    
    
    (23,088
    )
    
    
    54,993Cash and Cash Equivalents, Beginning of Year
    
    
    76,059
    
    
    
    99,147
    
    
    
    44,154Cash and Cash Equivalents, End of Year
    
    $
    89,821
    
    
    $
    76,059
    
    
    $
    99,147Supplemental Cash Flows InformationInterest paid
    
    $
    52,415
    
    
    $
    54,398
    
    
    $
    36,158Income taxes paid (net of refunds)
    
    $
    2,087
    
    
    $
    2,164
    
    
    $
    4,917Real estate acquired in settlement of loans
    
    $
    11,456
    
    
    $
    3,082
    
    
    $
    454Increase (decrease) in additional paid-in-capital due
to issuance (purchase) of stock to minority interest
of Mid-America at a price over book
    
    $
    (70
    )
    
    $
    7
    
    
    $
    218Increase in core deposit intangibles due to purchase
of Mid-America at a price over book
    
    $
    
    
    
    $
    99
    
    
    $
    Available-for-sale securities received in sale of
equity and cost method investments
    
    $
    
    
    
    $
    700
    
    
    $
    8,035Purchase of minority interest shares including
goodwill in Security State Bank of Hamilton recognized
as other liabilities
    
    $
    
    
    
    $
    
    
    
    $
    580Capitalized interest
    
    $
    
    
    
    $
    330
    
    
    $
    23
 101




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Investment Subsidiary
  Principles of Consolidation
  102




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Use of Estimates
   Cash Equivalents
    Securities
  103




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Equity Method Investments
  Cost Method Investments
  Derivative Financial Instruments and Hedging Transactions
  104




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Accounting for Derivative Instruments and Hedging Activities
 Loans Held for Sale
  Loans
   Allowance for Loan Losses
   105




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Premises and Equipment
  Federal Home Loan Bank Stock
  106




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Foreclosed Assets Held for Sale
  Goodwill
  Core Deposit Intangibles
  Mortgage Servicing Rights
  107




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Loan Servicing Income
  Treasury Stock
  Income Taxes
  Self Insurance
  Earnings Per Share
  108




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Trust Assets
  Reclassifications
  Note 2: Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale
Securities:December 31, 2008:U.S. government
agencies
    
    $
    4,697
    
    
    $
    90
    
    
    $
    
    
    
    $
    4,787Mortgage-backed
securities
    
    
    125,691
    
    
    
    2,783
    
    
    
    (29
    )
    
    
    128,445State and
political
subdivisions
    
    
    44,892
    
    
    
    808
    
    
    
    (34
    )
    
    
    45,666Equity securities
    
    
    6,500
    
    
    
    
    
    
    
    (206
    )
    
    
    6,294$
    181,780
    
    
    $
    3,681
    
    
    $
    (269
    )
    
    $
    185,192
 109




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale
Securities:December 31, 2007:U.S. Treasury
    
    $
    993
    
    
    $
    6
    
    
    $
    
    
    
    $
    999U.S. government
agencies
    
    
    16,517
    
    
    
    222
    
    
    
    (13
    )
    
    
    16,726Mortgage-backed
securities
    
    
    108,129
    
    
    
    902
    
    
    
    (232
    )
    
    
    108,799State and
political
subdivisions
    
    
    53,708
    
    
    
    337
    
    
    
    (247
    )
    
    
    53,798Equity securities
    
    
    12,232
    
    
    
    961
    
    
    
    (1,276
    )
    
    
    11,917$
    191,579
    
    
    $
    2,428
    
    
    $
    (1,768
    )
    
    $
    192,239
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueHeld-to-maturity
Securities:December 31, 2008:Mortgage-backed
securities
    
    $
    5,992
    
    
    $
    149
    
    
    $
    (1
    )
    
    $
    6,140State and
political
subdivisions
    
    
    2,913
    
    
    
    48
    
    
    
    
    
    
    
    2,961$
    8,905
    
    
    $
    197
    
    
    $
    (1
    )
    
    $
    9,101December 31, 2007:Mortgage-backed
securities
    
    $
    8,329
    
    
    $
    73
    
    
    $
    (1
    )
    
    $
    8,401State and
political
subdivisions
    
    
    5,189
    
    
    
    36
    
    
    
    (2
    )
    
    
    5,223$
    13,518
    
    
    $
    109
    
    
    $
    (3
    )
    
    $
    13,624
 110




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Available-for-sale
    
    
    Held-to-maturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin one year
    
    $
    7,292
    
    
    $
    7,330
    
    
    $
    210
    
    
    $
    210One to five years
    
    
    29,033
    
    
    
    29,655
    
    
    
    2,023
    
    
    
    2,052Five to ten years
    
    
    11,778
    
    
    
    11,980
    
    
    
    680
    
    
    
    699After ten years
    
    
    1,486
    
    
    
    1,488
    
    
    
    
    
    
    
    49,589
    
    
    
    50,453
    
    
    
    2,913
    
    
    
    2,961Mortgage-backed securities
    
    
    125,691
    
    
    
    128,445
    
    
    
    5,992
    
    
    
    6,140Equity securities
    
    
    6,500
    
    
    
    6,294
    
    
    
    
    
    
    
    Totals
    
    $
    181,780
    
    
    $
    185,192
    
    
    $
    8,905
    
    
    $
    9,101
   111




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
     112




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
    Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalDescription of Securities
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized Losses
    
    
    Fair Value
    
    
    Unrealized LossesDecember 31, 2008Mortgage-backed
securities
    
    $
    7,594
    
    
    $
    (28
    )
    
    $
    106
    
    
    $
    (2
    )
    
    $
    7,700
    
    
    $
    (30
    )State and political
subdivisions
    
    
    3,406
    
    
    
    (30
    )
    
    
    1,021
    
    
    
    (4
    )
    
    
    4,427
    
    
    
    (34
    )Equity securities
    
    
    840
    
    
    
    (206
    )
    
    
    
    
    
    
    
    
    
    
    840
    
    
    
    (206
    )Total
temporarily
impaired
securities
    
    $
    11,840
    
    
    $
    (264
    )
    
    $
    1,127
    
    
    $
    (6
    )
    
    $
    12,967
    
    
    $
    (270
    )December 31, 2007U.S. Government
agencies
    
    $
    2,566
    
    
    $
    (1
    )
    
    $
    2,687
    
    
    $
    (12
    )
    
    $
    5,253
    
    
    $
    (13
    )Mortgage-backed
securities
    
    
    13,018
    
    
    
    (154
    )
    
    
    15,210
    
    
    
    (79
    )
    
    
    28,228
    
    
    
    (233
    )State and political
subdivisions
    
    
    4,726
    
    
    
    (23
    )
    
    
    28,190
    
    
    
    (226
    )
    
    
    32,916
    
    
    
    (249
    )Equity securities
    
    
    7,051
    
    
    
    (1,276
    )
    
    
    
    
    
    
    
    
    
    
    7,051
    
    
    
    (1,276
    )Total
temporarily
impaired
securities
    
    $
    27,361
    
    
    $
    (1,454
    )
    
    $
    46,087
    
    
    $
    (317
    )
    
    $
    73,448
    
    
    $
    (1,771
    )
 113




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 3: Equity and Cost Method Investments in Common Stock
      114




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 4: Loans and Allowance for Loan Losses
  2008
    
    
    2007Commercial and agricultural
    
    $
    296,265
    
    
    $
    242,114Commercial real estate
    
    
    564,483
    
    
    
    511,676Residential real estate
    
    
    339,261
    
    
    
    320,598Consumer
    
    
    132,000
    
    
    
    131,061Floor plan loans
    
    
    7,365
    
    
    
    6,602Total loans
    
    
    1,339,374
    
    
    
    1,212,051LessAllowance for loan losses
    
    
    23,467
    
    
    
    12,794Net loans
    
    $
    1,315,907
    
    
    $
    1,199,257
  2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082Purchased allowance
    
    
    
    
    
    
    1,126
    
    
    
    1,725Provision charged to expense
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Losses charged off, net of
recoveries of $504 for
2008, $261 for 2007, and
$217 for 2006
    
    
    (13,172
    )
    
    
    (1,914
    )
    
    
    (3,108
    )Balance, end of year
    
    $
    23,467
    
    
    $
    12,794
    
    
    $
    10,613
  115




---



##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Note 5: Premises and Equipment
  2008
    
    
    2007Land
    
    $
    6,730
    
    
    $
    6,612Buildings and improvements
    
    
    35,258
    
    
    
    23,517Leasehold improvements
    
    
    1,952
    
    
    
    2,173Equipment
    
    
    19,603
    
    
    
    16,383Construction in progress
    
    
    30
    
    
    
    13,89263,573
    
    
    
    62,577Less accumulated depreciation
    
    
    22,957
    
    
    
    20,574Net premises and equipment
    
    $
    40,616
    
    
    $
    42,003
   Note 6: Derivative Financial Instruments
   116




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 7: Goodwill
  2008
    
    
    2007Balance as of January 1
    
    $
    43,934
    
    
    $
    32,120Goodwill acquired in Royal Palm acquisition
    
    
    
    
    
    
    (36
    )Goodwill acquired in HNB acquisition
    
    
    719
    
    
    
    11,850Balance as of December 31
    
    $
    44,653
    
    
    $
    43,934
   Note 8: Core Deposit and Other Intangible Assets
  2008
    
    
    2007Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCore deposits
    
    $
    4,681
    
    
    $
    1,093
    
    
    $
    4,681
    
    
    $
    581Intangible
asset with
indefinite
life
    
    
    414
    
    
    
    
    
    
    
    414
    
    
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
 117




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedValues
    
    
    Amortization
    
    
    Values
    
    
    AmortizationBalance as of January 1
    
    $
    5,095
    
    
    $
    581
    
    
    $
    2,558
    
    
    $
    448Acquisition of HNB
    
    
    
    
    
    
    
    
    
    
    3,183
    
    
    
    Purchase of additional
Mid-America stock
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    Disposal of New Frontier
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    (227
    )Amortization of core
deposit intangibles
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    360Acquisition of
intangible with
indefinite life
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Balance as of December 31
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
  2009
    
    $
    496,0002010
    
    
    478,0002011
    
    
    449,0002012
    
    
    440,0002013
    
    
    425,000
 Note 9: Loan Servicing
   118




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007
    
    
    2006Mortgage servicing rightsBalance, beginning of year
    
    $
    1,307
    
    
    $
    994
    
    
    $
    1,018Servicing rights capitalized
    
    
    309
    
    
    
    171
    
    
    
    200Servicing rights from HNB
acquisition
    
    
    
    
    
    
    276
    
    
    
    Amortization of servicing rights
    
    
    (253
    )
    
    
    (134
    )
    
    
    (224
    )1,363
    
    
    
    1,307
    
    
    
    994Valuation allowance
    
    
    (404
    )
    
    
    
    
    
    
    $
    959
    
    
    $
    1,307
    
    
    $
    994
  2008
    
    
    2007
    
    
    2006Balance, Beginning of year
    
    $
    
    
    
    $
    
    
    
    $
    Additions
    
    
    404
    
    
    
    
    
    
    
    Reductions
    
    
    
    
    
    
    
    
    
    
    Direct write-downs
    
    
    
    
    
    
    
    
    
    
    Balance, end of year
    
    $
    404
    
    
    $
    
    
    
    $
    
 119




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 10: Interest-Bearing Deposits
   2009
    
    $
    572,2312010
    
    
    151,4382011
    
    
    78,9772012
    
    
    23,4692013
    
    
    44,853Thereafter
    
    
    20,226$
    891,194
 Note 11: Short-Term Borrowings
  2008
    
    
    2007Federal funds purchased
    
    $
    1,158
    
    
    $
    4,874Securities sold under agreements to repurchase
    
    
    17,365
    
    
    
    25,062U.S. Treasury demand notes
    
    
    4,307
    
    
    
    2,763Short-term Federal Home Loan Bank borrowings
    
    
    2,000
    
    
    
    12,890Short-term Federal Reserve Bank borrowings
    
    
    12,500
    
    
    
    Other short-term borrowings
    
    
    11,897
    
    
    
    Total short-term borrowings
    
    $
    49,227
    
    
    $
    45,589
  120




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
      121




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 12: Long-Term Debt and Junior Subordinated Debentures
  2008
    
    
    2007Federal Home Loan Bank advances, fixed rates from
..65% to 5.30%, due at various dates through 2017
    
    $
    60,500
    
    
    $
    57,500Note payable, fixed rate of 6.13%, due August 31, 2010
    
    
    5,037
    
    
    
    5,000Note payable, fixed rate of 6.27%, due August 31, 2010
    
    
    2,015
    
    
    
    2,000Note payable, fixed rate of 6.09%, due November 10,
2009
    
    
    15,109
    
    
    
    15,000Junior subordinated debenture, variable rate, due
June 30, 2013
    
    
    2,000
    
    
    
    2,000Junior subordinated debentures owed to unconsolidated
subsidiaries
    
    
    61,858
    
    
    
    61,858Total long-term debt
    
    $
    146,519
    
    
    $
    143,358
     122




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
    123




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   124




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
      2009
    
    $
    31,3592010
    
    
    16,8022011
    
    
    14,0002012
    
    
    5,0002013
    
    
    5,000Thereafter
    
    
    74,358$
    146,519
 125




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 13: Income Taxes
  2008
    
    
    2007
    
    
    2006Taxes currently payableFederal
    
    $
    (770
    )
    
    $
    3,373
    
    
    $
    2,696State
    
    
    (27
    )
    
    
    550
    
    
    
    238Deferred income taxesFederal
    
    
    (6,900
    )
    
    
    (376
    )
    
    
    1,714State
    
    
    (852
    )
    
    
    (106
    )
    
    
    377Income tax expense (benefit)
    
    $
    (8,549
    )
    
    $
    3,441
    
    
    $
    5,025
  2008
    
    
    2007
    
    
    2006Computed at the statutory rate (35%)
    
    $
    (7,242
    )
    
    $
    4,923
    
    
    $
    5,647Increase (decrease) resulting fromGraduated tax rates
    
    
    207
    
    
    
    (141
    )
    
    
    (161
    )Tax exempt income
    
    
    (857
    )
    
    
    (940
    )
    
    
    (836
    )State income taxes
    
    
    (580
    )
    
    
    293
    
    
    
    406Increase in cash surrender value
of life insurance
    
    
    (353
    )
    
    
    (340
    )
    
    
    (219
    )Nondeductible capital loss
    
    
    247
    
    
    
    
    
    
    
    Other
    
    
    29
    
    
    
    (354
    )
    
    
    188Actual tax expense (benefit)
    
    $
    (8,549
    )
    
    $
    3,441
    
    
    $
    5,025
 126




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##### Table of Contents



Mercantile
Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007Deferred tax assetsAllowance for loan losses
    
    $
    8,467
    
    
    $
    4,652Accrued compensated absences
    
    
    236
    
    
    
    214Deferred compensation
    
    
    1,349
    
    
    
    1,376Accrued postretirement benefits
    
    
    156
    
    
    
    241Deferred loss on investments
    
    
    825
    
    
    
    Net operating loss carryforward of Mid-America
Bancorp, Inc.
    
    
    962
    
    
    
    454Stock options
    
    
    111
    
    
    
    87Deferred loan fees
    
    
    79
    
    
    
    145Alternative minimum tax credits
    
    
    441
    
    
    
    Other
    
    
    468
    
    
    
    13,094
    
    
    
    7,169Deferred tax liabilitiesFederal Home Loan Bank stock dividends
    
    
    416
    
    
    
    366Depreciation
    
    
    413
    
    
    
    312State taxes
    
    
    382
    
    
    
    91Mortgage servicing rights
    
    
    183
    
    
    
    488Deferred gain on investments
    
    
    
    
    
    
    1,746Unrealized gains on available-for-sale securities
    
    
    1,205
    
    
    
    192Core deposit intangible for Mid-America Bancorp, Inc.
    
    
    
    
    
    
    226Purchase accounting adjustments
    
    
    1,151
    
    
    
    991Other
    
    
    163
    
    
    
    3003,913
    
    
    
    4,712Net deferred tax asset
    
    $
    9,181
    
    
    $
    2,457
   127




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 14: Other Comprehensive Income (Loss)
  2008
    
    
    2007
    
    
    2006Unrealized appreciation (depreciation)
on available-for-sale securities:Unrealized appreciation
(depreciation) on
available-for-sale securities,
net of tax expense (benefit) of
$(354) for 2008, $73 for 2007,
and $580 for 2006
    
    $
    (497
    )
    
    $
    240
    
    
    $
    892Less reclassification adjustment
for realized gains (losses)
included in income net of tax
expense (benefit) of $358 for
2008 and $0 for 2007 and 2006
    
    
    584
    
    
    
    
    
    
    
    Less reclassification adjustment
for other-than-temporary gains
(losses) included in income net
of tax expense (benefit) of
$(1,727) for 2008 and $0 for 2007
and 2006
    
    
    (2,818
    )
    
    
    
    
    
    
    Total unrealized
appreciation (depreciation)
on available-for-sale
securities, net of tax
expense of $1,015 for 2008,
$73 for 2007, and $580 for
2006
    
    $
    1,737
    
    
    $
    240
    
    
    $
    892Accumulated other comprehensive loss
of equity method investee
    
    $
    
    
    
    $
    28
    
    
    $
    (5
    )Defined benefit post-retirement
liability, net of tax expense of $13
for 2008, $0 for 2007, and $100 for
2006
    
    $
    20
    
    
    $
    14
    
    
    $
    (163
    )Unrealized loss on interest rate swaps:Unrealized holding gains
(losses), net of tax expense
(benefit) of $0 for 2008, $0 for
2007, and $(19) for 2006
    
    $
    
    
    
    $
    
    
    
    $
    (28
    )Less reclassification adjustment
to interest income, net of tax
expense (benefit) of $0 for 2008,
$0 for 2007, and $(104) for 2006
    
    
    
    
    
    
    
    
    
    
    (175
    )Net change in unrealized
loss on interest rate swaps,
net of tax expense (benefit)
of $0 for 2008, $0 for 2007,
and $91 for 2006
    
    $
    
    
    
    $
    
    
    
    $
    147
 128




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007Net unrealized gain on securities available-for-sale
    
    $
    3,412
    
    
    $
    660Net unrealized loss on defined benefit
post-retirement liability
    
    
    (230
    )
    
    
    (263
    )3,182
    
    
    
    397Tax effect
    
    
    (1,120
    )
    
    
    (92
    )Net-of-tax amount
    
    $
    2,062
    
    
    $
    305
 Note 15: Regulatory Matters
     129




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  To Be Well Capitalized UnderFor Capital Adequacy
    
    Prompt Corrective ActionActual
    
    Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2008Total capital
(to risk-weighted assets)Consolidated
    
    $
    133,489
    
    
    
    9.3
    %
    
    $
    115,431
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    65,654
    
    
    
    10.1
    %
    
    
    51,753
    
    
    
    8.0
    %
    
    $
    64,691
    
    
    
    10.0
    %Marine Bank and Trust
    
    
    14,967
    
    
    
    10.1
    %
    
    
    11,834
    
    
    
    8.0
    %
    
    
    14,792
    
    
    
    10.0
    %Brown County State Bank
    
    
    7,078
    
    
    
    10.0
    %
    
    
    5,664
    
    
    
    8.0
    %
    
    
    7,080
    
    
    
    10.0
    %Heartland Bank
    
    
    16,812
    
    
    
    10.3
    %
    
    
    13,111
    
    
    
    8.0
    %
    
    
    16,388
    
    
    
    10.0
    %Royal Palm Bank of Florida
    
    
    15,043
    
    
    
    12.0
    %
    
    
    10,063
    
    
    
    8.0
    %
    
    
    12,579
    
    
    
    10.0
    %HNB Bank
    
    
    28,701
    
    
    
    10.4
    %
    
    
    22,147
    
    
    
    8.0
    %
    
    
    27,684
    
    
    
    10.0
    %Tier I capital
(to risk-weighted assets)Consolidated
    
    
    87,954
    
    
    
    6.1
    %
    
    
    57,716
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    59,916
    
    
    
    9.3
    %
    
    
    25,876
    
    
    
    4.0
    %
    
    
    38,815
    
    
    
    6.0
    %Marine Bank and Trust
    
    
    13,845
    
    
    
    9.4
    %
    
    
    5,917
    
    
    
    4.0
    %
    
    
    8,875
    
    
    
    6.0
    %Brown County State Bank
    
    
    6,587
    
    
    
    9.3
    %
    
    
    2,832
    
    
    
    4.0
    %
    
    
    4,248
    
    
    
    6.0
    %Heartland Bank
    
    
    13,101
    
    
    
    8.0
    %
    
    
    6,555
    
    
    
    4.0
    %
    
    
    9,833
    
    
    
    6.0
    %Royal Palm Bank of Florida
    
    
    13,414
    
    
    
    10.7
    %
    
    
    5,031
    
    
    
    4.0
    %
    
    
    7,547
    
    
    
    6.0
    %HNB Bank
    
    
    25,883
    
    
    
    9.4
    %
    
    
    11,074
    
    
    
    4.0
    %
    
    
    16,610
    
    
    
    6.0
    %Tier I capital
(to average assets)Consolidated
    
    
    87,954
    
    
    
    5.1
    %
    
    
    69,216
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    59,916
    
    
    
    7.7
    %
    
    
    31,110
    
    
    
    4.0
    %
    
    
    38,887
    
    
    
    5.0
    %Marine Bank and Trust
    
    
    13,845
    
    
    
    7.6
    %
    
    
    7,259
    
    
    
    4.0
    %
    
    
    9,074
    
    
    
    5.0
    %Brown County State Bank
    
    
    6,589
    
    
    
    7.6
    %
    
    
    3,473
    
    
    
    4.0
    %
    
    
    4,341
    
    
    
    5.0
    %Heartland Bank
    
    
    13,101
    
    
    
    7.0
    %
    
    
    7,480
    
    
    
    4.0
    %
    
    
    9,350
    
    
    
    5.0
    %Royal Palm Bank of Florida
    
    
    13,414
    
    
    
    8.9
    %
    
    
    6,033
    
    
    
    4.0
    %
    
    
    7,542
    
    
    
    5.0
    %HNB Bank
    
    
    25,883
    
    
    
    7.7
    %
    
    
    13,513
    
    
    
    4.0
    %
    
    
    16,891
    
    
    
    5.0
    %
 130




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 To Be Well Capitalized UnderFor Capital Adequacy
    
    Prompt Corrective ActionActual
    
    Purposes
    
    ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2007Total capital
(to risk-weighted assets)Consolidated
    
    $
    141,156
    
    
    
    10.5
    %
    
    $
    107,643
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    53,017
    
    
    
    10.2
    %
    
    
    41,478
    
    
    
    8.0
    %
    
    $
    51,848
    
    
    
    10.0
    %Perry State Bank
    
    
    13,968
    
    
    
    10.3
    %
    
    
    10,846
    
    
    
    8.0
    %
    
    
    13,558
    
    
    
    10.0
    %Farmers State Bank of
Northern Missouri
    
    
    7,501
    
    
    
    10.7
    %
    
    
    5,634
    
    
    
    8.0
    %
    
    
    7,043
    
    
    
    10.0
    %Marine Bank and Trust
    
    
    13,441
    
    
    
    10.7
    %
    
    
    10,053
    
    
    
    8.0
    %
    
    
    12,566
    
    
    
    10.0
    %Brown County State Bank
    
    
    6,321
    
    
    
    10.2
    %
    
    
    4,980
    
    
    
    8.0
    %
    
    
    6,225
    
    
    
    10.0
    %Heartland Bank
    
    
    20,907
    
    
    
    11.3
    %
    
    
    14,790
    
    
    
    8.0
    %
    
    
    18,488
    
    
    
    10.0
    %Royal Palm Bank of Florida
    
    
    16,554
    
    
    
    13.8
    %
    
    
    9,592
    
    
    
    8.0
    %
    
    
    11,990
    
    
    
    10.0
    %HNB Bank
    
    
    13,127
    
    
    
    10.9
    %
    
    
    9,608
    
    
    
    8.0
    %
    
    
    12,010
    
    
    
    10.0
    %Tier I capital
(to risk-weighted assets)Consolidated
    
    
    105,788
    
    
    
    7.9
    %
    
    
    53,821
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    49,162
    
    
    
    9.5
    %
    
    
    20,739
    
    
    
    4.0
    %
    
    
    31,109
    
    
    
    6.0
    %Perry State Bank
    
    
    12,414
    
    
    
    9.2
    %
    
    
    5,423
    
    
    
    4.0
    %
    
    
    8,135
    
    
    
    6.0
    %Farmers State Bank of
Northern Missouri
    
    
    6,617
    
    
    
    9.4
    %
    
    
    2,817
    
    
    
    4.0
    %
    
    
    4,226
    
    
    
    6.0
    %Marine Bank and Trust
    
    
    12,369
    
    
    
    9.8
    %
    
    
    5,026
    
    
    
    4.0
    %
    
    
    7,540
    
    
    
    6.0
    %Brown County State Bank
    
    
    5,882
    
    
    
    9.5
    %
    
    
    2,490
    
    
    
    4.0
    %
    
    
    3,735
    
    
    
    6.0
    %Heartland Bank
    
    
    16,754
    
    
    
    9.1
    %
    
    
    7,395
    
    
    
    4.0
    %
    
    
    11,093
    
    
    
    6.0
    %Royal Palm Bank of Florida
    
    
    15,099
    
    
    
    12.6
    %
    
    
    4,796
    
    
    
    4.0
    %
    
    
    7,194
    
    
    
    6.0
    %HNB Bank
    
    
    12,069
    
    
    
    10.0
    %
    
    
    4,804
    
    
    
    4.0
    %
    
    
    7,206
    
    
    
    6.0
    %Tier I capital
(to average assets)Consolidated
    
    
    105,788
    
    
    
    6.7
    %
    
    
    62,933
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    49,162
    
    
    
    8.4
    %
    
    
    23,490
    
    
    
    4.0
    %
    
    
    29,363
    
    
    
    5.0
    %Perry State Bank
    
    
    12,414
    
    
    
    8.2
    %
    
    
    6,087
    
    
    
    4.0
    %
    
    
    7,609
    
    
    
    5.0
    %Farmers State Bank of
Northern Missouri
    
    
    6,617
    
    
    
    6.8
    %
    
    
    3,874
    
    
    
    4.0
    %
    
    
    4,842
    
    
    
    5.0
    %Marine Bank and Trust
    
    
    12,369
    
    
    
    7.4
    %
    
    
    6,687
    
    
    
    4.0
    %
    
    
    8,359
    
    
    
    5.0
    %Brown County State Bank
    
    
    5,882
    
    
    
    7.5
    %
    
    
    3,132
    
    
    
    4.0
    %
    
    
    3,915
    
    
    
    5.0
    %Heartland Bank
    
    
    16,754
    
    
    
    8.6
    %
    
    
    7,804
    
    
    
    4.0
    %
    
    
    9,754
    
    
    
    5.0
    %Royal Palm Bank of Florida
    
    
    15,099
    
    
    
    10.6
    %
    
    
    5,681
    
    
    
    4.0
    %
    
    
    7,101
    
    
    
    5.0
    %HNB Bank
    
    
    12,069
    
    
    
    7.4
    %
    
    
    6,565
    
    
    
    4.0
    %
    
    
    8,207
    
    
    
    5.0
    %
 131




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Note 16: Related Party Transactions
   Balances, January 1, 2008
    
    $
    20,773,000Change in composition of related parties
    
    
    288,457New loans, including renewals
    
    
    2,974,638Payments, including renewals
    
    
    (9,128,570
    )Balances, December 31, 2008
    
    $
    14,907,525
  132




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Note 17: Leases
   OperatingLeases2009
    
    $
    409,3902010
    
    
    353,9192011
    
    
    312,5242012
    
    
    286,3522013
    
    
    211,882Thereafter
    
    
    503,663Total minimum lease payments
    
    $
    2,077,730
 133




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 18: Acquisitions
   Cash and cash equivalents
    
    $
    6,511Available-for-sale securities
    
    
    27,392Held-to-maturity securities
    
    
    4,500Loans, net of allowance for loan losses of $1,126
    
    
    114,095Interest receivable
    
    
    878Federal Home Loan Bank stock
    
    
    1,775Premises and equipment
    
    
    6,785Core deposit intangibles
    
    
    3,183Goodwill
    
    
    12,569Other assets
    
    
    4,034Total assets acquired
    
    
    181,722Deposits
    
    
    129,603Short-term borrowings
    
    
    889Deferred income taxes
    
    
    748Long-term debt
    
    
    17,000Interest payable
    
    
    608Other liabilities
    
    
    854Total liabilities assumed
    
    
    149,702Net assets acquired
    
    $
    32,020
  134




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Year Ended December 31,2007
    
    2006Net interest income
    
    $
    44,739
    
    
    $
    42,302Net income
    
    
    9,664
    
    
    
    10,547Basic earnings per share
    
    
    1.11
    
    
    
    1.21
 135




---



##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Cash and cash equivalents
    
    $
    21,012Available-for-sale securities
    
    
    8,706Held-to-maturity securities
    
    
    1,000Loans, net of allowance for loan losses of $1,725
    
    
    121,310Interest receivable
    
    
    645Federal Home Loan Bank stock
    
    
    520Deferred income taxes
    
    
    1,515Premises and equipment
    
    
    3,800Core deposit intangibles
    
    
    303Goodwill
    
    
    26,604Other assets
    
    
    2,321Total assets acquired
    
    
    187,736Deposits
    
    
    138,923Long-term debt
    
    
    5,000Interest payable
    
    
    649Other liabilities
    
    
    348Total liabilities assumed
    
    
    144,920Net assets acquired
    
    $
    42,816
  136




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Year Ended December 31,2006Net interest income
    
    $
    42,332Net income
    
    
    10,639Basic earnings per share
    
    
    1.82
 Note 19: Employee Benefits
  Postretirement Benefits
  Employees Accounting
for Deferred Benefit Pension and Other Postretirement Plans
 137




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Note 20: Disclosures about Fair Value of Financial Instruments
 Fair Value Measurements
  Level 1
    
    Quoted prices in active markets for identical assets or liabilitiesLevel 2
    
    Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilitiesLevel 3
    
    Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities
  Available-for-Sale Securities
  138




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Fair Value Measurements UsingQuoted Prices inActive Markets for
    
    Significant Other
    
    SignificantIdentical Assets
    
    Observable Inputs
    
    Unobservable InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available-for-sale
securities
    
    $
    185,192
    
    
    $
    4,811
    
    
    $
    178,375
    
    
    $
    2,006
  Available-for-SaleSecuritiesBalance, January 1, 2008
    
    $
    1,900Total realized and unrealized gains and lossesIncluded in net income
    
    
    Included in other comprehensive income
    
    
    Purchases, issuances and settlements
    
    
    2,738Transfers in and/or out of Level 3
    
    
    (2,632
    )Balance, December 31, 2008
    
    $
    2,006Total gains or losses for the period included
in net income (loss) attributable to the
change in unrealized gains or losses related
to assets and liabilities still held at the
reporting date
    
    $
    
 139




---



##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Noninterest IncomeTotal gains and losses
    
    $
    0Change in unrealized gains or
losses relating to assets still
held at the balance sheet date
    
    $
    0
  Mortgage Servicing Rights
  Impaired Loans
 Accounting by Creditors for
Impairment of a Loan
    140




---



##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Cost Method Investments
   Fair Value Measurements UsingQuoted Prices in ActiveMarkets for Identical
    
    Significant Other
    
    SignificantAssets
    
    Observable Inputs
    
    Unobservable InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Impaired loans
    
    $
    30,966
    
    
    $
    
    
    
    $
    
    
    
    $
    30,966Mortgage
servicing
rights
    
    
    959
    
    
    
    
    
    
    
    
    
    
    
    959Cost method
investments
    
    
    3,314
    
    
    
    
    
    
    
    
    
    
    
    3,314
 141




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  December 31, 2008
    
    December 31, 2007Carrying Amount
    
    Fair Value
    
    Carrying Amount
    
    Fair ValueFinancial assetsCash and cash equivalents
    
    $
    89,821
    
    
    $
    89,821
    
    
    $
    76,059
    
    
    $
    76,059Available-for-sale securities
    
    
    185,192
    
    
    
    185,192
    
    
    
    192,239
    
    
    
    192,239Held-to-maturity securities
    
    
    8,905
    
    
    
    9,101
    
    
    
    13,518
    
    
    
    13,624Loans held for sale
    
    
    4,366
    
    
    
    4,366
    
    
    
    3,338
    
    
    
    3,338Loans, net of allowance for
loan losses
    
    
    1,315,907
    
    
    
    1,325,196
    
    
    
    1,199,257
    
    
    
    1,197,681Federal Home Loan Bank stock
    
    
    8,213
    
    
    
    8,213
    
    
    
    7,790
    
    
    
    7,790Cost method investments in
common stock
    
    
    3,314
    
    
    
    3,314
    
    
    
    6,105
    
    
    
    6,105Interest receivable
    
    
    10,240
    
    
    
    10,240
    
    
    
    11,343
    
    
    
    11,343Financial liabilitiesDeposits
    
    
    1,462,276
    
    
    
    1,460,654
    
    
    
    1,319,459
    
    
    
    1,313,483Short-term borrowings
    
    
    49,227
    
    
    
    49,227
    
    
    
    45,589
    
    
    
    45,589Long-term debt and junior
subordinated debentures
    
    
    146,519
    
    
    
    141,317
    
    
    
    143,358
    
    
    
    144,217Interest payable
    
    
    4,280
    
    
    
    4,280
    
    
    
    6,040
    
    
    
    6,040Unrecognized financial instruments
(net of contract amount)Commitments to originate loans
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Letters of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Lines of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 142




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Cash and Cash Equivalents, Federal Home Loan Bank Stock, and Cost Method Investments in Common
Stock
  Securities
  Loans Held for Sale
  Loans
  Deposits
  Short-Term Borrowings and Interest Payable
  Long-Term Debt and Junior Subordinated Debentures
  143




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Commitments to Originate Loans, Letters of Credit, and Lines of Credit
  Note 21: Significant Estimates and Concentrations
  Concentration on Credit Risk
   144




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Foreclosed Assets Held for Sale, Net
  Investments
  Current Economic Conditions
   145




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 22: Operating and Liquidity Matters
    
    
    Non-performing assets of all subsidiary banks on a combined basis cannot exceed
thirty-five percent of the then primary capital of all subsidiary banks;
    
    The consolidated fixed charge ratio is required to be at least .50 to 1.00 for
each quarter ending after December 31, 2008; and
    
    Stockholders equity is required to be at least
$90 million, less the amount of any goodwill impairment charges, as of the
last day of each calendar month.
  The waiver will be terminated upon the earliest to occur of the following:
 
    
    the occurrence of an event of default under any of the loan agreements;
    
    the Company should fail to perform any additional covenant;
    
    any changes in regulatory agreements;
    
    the Company, any subsidiary holding company or any subsidiary bank being
placed in receivership or being taken over by any regulatory agency;
 146




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 
    
    the note holder determines in its sole discretion that there has been
any change in the business operations or condition, financial or otherwise, of
the Company, any subsidiary holding company, any subsidiary bank or any
consolidated subsidiary that could have a material adverse effect;
    
    April 30, 2009, if the note holder and the Company have not executed an
amendment to, and restatement of, the current loan agreements between the Company
and the note holder satisfactory to the note holder in its sole discretion; or
    
    September 30, 2009
   147




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 23: Commitments and Credit Risk
  Commitments to Originate Loans
   Standby Letters of Credit
  148




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Lines of Credit
   General Litigation
  Note 24: Stock Split
  149




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 25: Accounting Pronouncements
 Fair Value Measurements
 Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement Under Statement 13 Effective Date of FASB Statement No. 157
 Determining the Fair Value of a Financial Asset
When the Market for That Asset is Not Active Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including Amendment of FASB Statement No. 115
 150




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Non-controlling Interest in
Consolidated Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative
Instruments and Hedging Activities  an Amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted
Accounting Principles
 Disclosures by Public
Entities (Enterprises) About Transfers of Financial Assets and Interests in Variable Interest
Entities
 151




---



##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Amendments to the Impairment and Interest
Income Measurement Guidance of EITF Issue No. 99-20 Accounting for Certain Investments in Debt and Equity Securities
 Business
Combinations
 Note 26: Subsequent Events
   152




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Note 27: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 December 31,2008
    
    
    2007AssetsCash
    
    $
    2,172
    
    
    $
    250Investment in common stock of subsidiaries
    
    
    175,701
    
    
    
    173,696Available-for-sale securities
    
    
    4,740
    
    
    
    11,521Note receivable
    
    
    1,325
    
    
    
    Cost method investments in common stock
    
    
    2,841
    
    
    
    4,412Core deposit intangibles
    
    
    712
    
    
    
    831Other
    
    
    5,313
    
    
    
    4,069Total assets
    
    $
    192,804
    
    
    $
    194,779LiabilitiesOther short-term borrowings
    
    $
    7,552
    
    
    $
    Long-term debt
    
    
    22,161
    
    
    
    22,000Junior subordinated debentures
    
    
    61,858
    
    
    
    61,858Deferred income taxes
    
    
    1,579
    
    
    
    1,944Other
    
    
    697
    
    
    
    695Total liabilities
    
    
    93,847
    
    
    
    86,497Stockholders Equity
    
    
    98,957
    
    
    
    108,282Total liabilities and stockholders equity
    
    $
    192,804
    
    
    $
    194,779
 153




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Condensed Statements of Operations
 Years Ended December 31,2008
    
    
    2007
    
    
    2006IncomeDividends from subsidiaries
    
    $
    5,000
    
    
    $
    15,679
    
    
    $
    4,840Income (loss) on equity
method investments
    
    
    
    
    
    
    (6
    )
    
    
    251Other-than-temporary loss
on available-for-sale
securities and cost method
investments
    
    
    (4,545
    )
    
    
    
    
    
    
    Net gains on sale of
equity and cost method
investments
    
    
    942
    
    
    
    2,775
    
    
    
    4,318Other income
    
    
    2,515
    
    
    
    449
    
    
    
    17Total income
    
    
    3,912
    
    
    
    18,897
    
    
    
    9,426ExpensesOther expenses
    
    
    9,984
    
    
    
    6,957
    
    
    
    4,331Total expenses
    
    
    9,984
    
    
    
    6,957
    
    
    
    4,331Income (Loss) Before Income Tax
and Equity in Undistributed
Income of Subsidiaries
    
    
    (6,072
    )
    
    
    11,940
    
    
    
    5,095Income Tax Expense (Benefit)
    
    
    (3,980
    )
    
    
    (1,510
    )
    
    
    316Income (Loss) Before Equity in
Undistributed Income of
Subsidiaries
    
    
    (2,092
    )
    
    
    13,450
    
    
    
    4,779Equity in Undistributed Income
(Loss) of Subsidiaries
    
    
    (6,729
    )
    
    
    (3,449
    )
    
    
    5,540Net Income (Loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319
 154




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Condensed Statements of Cash Flows
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Operating ActivitiesNet income (loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Items not requiring (providing) cash
(Income) loss on equity method investment
    
    
    
    
    
    
    6
    
    
    
    (251
    )Amortization of core deposit intangibles
    
    
    118
    
    
    
    161
    
    
    
    230Depreciation expense
    
    
    6
    
    
    
    
    
    
    
    Equity in undistributed (income) loss of
subsidiaries
    
    
    6,729
    
    
    
    3,449
    
    
    
    (5,540
    )Deferred income taxes
    
    
    (2,989
    )
    
    
    (250
    )
    
    
    1,530Other-than-temporary loss on
available-for-sale and cost method
investments
    
    
    4,545
    
    
    
    
    
    
    
    Gain on sale of equity and cost method
investments
    
    
    (942
    )
    
    
    (2,775
    )
    
    
    (4,319
    )Net change inOther assets
    
    
    (261
    )
    
    
    (354
    )
    
    
    (1,407
    )Other liabilities
    
    
    142
    
    
    
    1,358
    
    
    
    (48
    )Net cash provided by (used in) operating
activities
    
    
    (1,473
    )
    
    
    11,596
    
    
    
    514Investing ActivitiesCash paid for additional shares of Mid-America
    
    
    
    
    
    
    (611
    )
    
    
    Purchase of property and equipment
    
    
    (38
    )
    
    
    
    
    
    
    Proceeds from sales of equity method
investments
    
    
    
    
    
    
    6,791
    
    
    
    1,347Proceeds from sales of available-for-sale
securities
    
    
    4,954
    
    
    
    
    
    
    
    Purchase of cost method investments in common
stock
    
    
    
    
    
    
    (2,217
    )
    
    
    (500
    )Payments for investments and advances to
subsidiaries
    
    
    (7,070
    )
    
    
    (1,750
    )
    
    
    (2,800
    )Purchase of available-for-sale securities
    
    
    
    
    
    
    (1,240
    )
    
    
    (1,959
    )Cash paid in acquisition of HNB
    
    
    
    
    
    
    (31,301
    )
    
    
    Cash paid in acquisition of Royal Palm
    
    
    
    
    
    
    
    
    
    
    (42,816
    )Net cash used in investing activities
    
    
    (2,154
    )
    
    
    (30,328
    )
    
    
    (46,728
    )Financing ActivitiesNet increase in demand deposits
    
    
    27
    
    
    
    
    
    
    
    Net increase in short-term borrowings
    
    
    7,552
    
    
    
    
    
    
    
    Proceeds from long-term debt
    
    
    22,161
    
    
    
    15,650
    
    
    
    17,250Repayment of long-term debt
    
    
    (22,000
    )
    
    
    (14,835
    )
    
    
    Proceeds from issuance of junior subordinated
debentures
    
    
    
    
    
    
    20,619
    
    
    
    30,929Purchase of treasury stock
    
    
    (102
    )
    
    
    (569
    )
    
    
    (367
    )Dividends paid
    
    
    (2,089
    )
    
    
    (2,097
    )
    
    
    (1,871
    )Net cash provided by financing activities
    
    
    5,549
    
    
    
    18,768
    
    
    
    45,941Net Change in Cash
    
    
    1,922
    
    
    
    36
    
    
    
    (273
    )Cash at Beginning of Year
    
    
    250
    
    
    
    214
    
    
    
    487Cash at End of Year
    
    $
    2,172
    
    
    $
    250
    
    
    $
    214
 155