##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the fiscal year ended December 31, 2009
 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
 o o
 þ
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 o þ




---



##### 



PART IItem 1. Business
    
    
    1Item 1A. Risk Factors
    
    
    24Item 1B. Unresolved Staff Comments
    
    
    30Item 2. Properties
    
    
    30Item 3. Legal Proceedings
    
    
    30Item 4. Submission of Matters to a Vote of Security Holders
    
    
    30Item 4A. Executive Officers of Registrant
    
    
    30PART 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
    
    
    79Item 8. Financial Statements and Supplementary Data
    
    
    79Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure
    
    
    80Item 9A. Controls and Procedures
    
    
    80Item 9B. Other Information
    
    
    81PART III.Item 10. Directors and Executive Officers of the Company and Corporate Governance
    
    
    82Item 11. Executive Compensation
    
    
    82Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    82Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    82Item 14. Principal Accounting Fees and Services
    
    
    82PART IV.Item 15. Exhibits, Financial Statement Schedules
    
    
    83SIGNATURES
    
    
    84INDEX TO EXHIBITS
    
    
    158EX-10.37EX-21EX-31.1EX-31.2EX-32.1EX-32.2




---



##### 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; and
    
    Royal Palm Bancorp, Inc. (Royal Palm) the sole shareholder of The Royal Palm Bank
of Florida (Royal Palm Bank), located in Naples, Florida
 1




---



##### 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.
 2009 Events
   2




---



##### Table of Contents



3




---



##### Table of Contents



Discontinued Operations
   Employees
  Business Strategies  Growth and Operations
  Growth Strategy .
  4




---



##### Table of Contents




    
    Reduction of non-performing assets through loan workouts, seeking additional
collateral from borrowers with weakened financial positions, pursuing recovery through
foreclosure and sale of foreclosed properties.
    
    Shift in loan portfolio mix to reduce concentration in commercial real estate,
particularly in purchased loan participations with borrowers outside of the Companys
direct markets.
    
    Less reliance on wholesale and brokered funding sources and corresponding increase
in local core deposits through customer relationship development.
    
    Aggressive expense management to identify opportunities to reduce overhead costs in
light of the sale of three of the Companys subsidiary banks in the fourth quarter 2009
and first quarter 2010.
 Operating Strategy .
    5




---



##### Table of Contents



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




---



##### Table of Contents



Construction Real Estate Loans .
   Mortgage Real Estate Loans .
    7




---



##### Table of Contents



Commercial, Financial and Agricultural Loans .
   8




---



##### 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




---



##### Table of Contents



Markets and Competition
        10




---



##### Table of Contents



Mercantile Bank
     11




---



##### Table of Contents



Marine Bank & Trust
  12




---



##### Table of Contents



Brown County State Bank
  13




---



##### Table of Contents



Mid-America Bancorp, Inc.
      14




---



##### Table of Contents



Royal Palm Bancorp, Inc.
     15




---



##### Table of Contents



HNB Financial Services, Inc.
  16




---



##### Table of Contents



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




---



##### Table of Contents



Regulatory Capital Requirements.
   plus minus
    18




---



##### Table of Contents



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




---



##### Table of Contents



Deposit Insurance and Assessments.
     20




---



##### Table of Contents



Limitations on Interest Rates and Loans to One Borrower.
 Payment of Dividends.
 The USA Patriot Act.
 Community Reinvestment Act.
 Transactions with Affiliates.
 21




---



##### Table of Contents



Other Laws.
 Laws Governing Interstate Banking and Branching
    Regulation of Other Non-Banking Activities
  Sarbanes-Oxley Act of 2002
  22




---



##### Table of Contents



EESA Legislation & TARP Participation
   23




---



##### Table of Contents



Changes in Law and Regulation Affecting the Company Generally
 Future Legislation.
 Fiscal Monetary Policies.
   
 Item 1A   Risk Factors
  The Company and its subsidiaries are subject to Regulatory Agreements and Orders that restrict
the Company and its subsidiaries from taking certain actions.
 Non-performing assets take significant time to resolve and adversely affect the Companys
results of operations and financial condition, and could result in further losses in the future.
 24




---



##### Table of Contents



The Company incurred net losses for 2009 and 2008 and cannot make any assurances that it will
not incur further losses.
 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.
 Real estate construction, land acquisition and development loans are based upon estimates of
costs and values associated with the complete project. These estimates may be inaccurate, and the
Company may be exposed to significant losses on loans for these projects.
 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.
 Recent, ongoing unfavorable economic conditions may continue or worsen.
 25




---



##### Table of Contents



Current levels of market volatility are unprecedented.
 There can be no assurance that recently enacted legislation will stabilize the U.S. financial
markets.
 The Company may be adversely affected by recently enacted or contemplated legislation and
rulemaking.
 The Company may be adversely affected by government regulation.
 26




---



##### Table of Contents



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.
 The Company may not be able to influence the activities of the banking organizations in which
it owns a minority interest.
 Higher FDIC deposit insurance premiums and assessments could adversely affect the Companys
financial condition.
 The Company may continue to suffer increased losses in its loan portfolio and in foreclosed
assets held for sale despite its underwriting practices.
 The Companys declines in the value of securities held in the investment portfolio may
negatively affect earnings.
  27




---



##### Table of Contents



The soundness of other financial institutions could adversely affect the Company.
 The Company has a significant deferred tax asset and cannot assure it will be fully realized.
 The Companys stock price could decline from levels at December 31, 2009.
 The Companys stock price can be volatile.
 There is no assurance the Company will be able to implement successfully its capital plan.
 There is no assurance the Company will be able to operate profitably without the revenue
stream from its discontinued operations.
 28




---



##### Table of Contents



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.
 The Company faces operational risks, including systems failure risks.
 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.
 Changes in accounting standards may materially impact the Companys financial statements.
 29




---



##### Table of Contents



Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
   
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 4A. Executive Officers of Registrant
    30




---



##### Table of Contents



31




---



##### Table of Contents



PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
      Price Range
    
    Cash Dividends2009
    
    High($)
    
    Low($)
    
    Declared Per Share ($)1st Quarter
    
    
    11.98
    
    
    
    5.00
    
    
    
    .002nd Quarter
    
    
    8.75
    
    
    
    4.07
    
    
    
    .003rd Quarter
    
    
    5.05
    
    
    
    2.60
    
    
    
    .004th Quarter
    
    
    4.70
    
    
    
    2.25
    
    
    
    .00
 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




---



##### Table of Contents



Total Number of
    
    Maximum ApproximateShares Purchased as
    
    Dollar Value of SharesTotal Number of
    
    
    
    
    
    Part of Publicly
    
    that May Yet Be PurchasedFourth Quarter 2009
    
    Shares Purchased
    
    Average Price Paid
    
    Announced Plans or
    
    Under the Plans orCalendar Month
    
    (1)
    
    per Share (1)
    
    Programs (2)
    
    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




---



##### Table of Contents



Company / Index
    
    Feb 05
    
    Jun 05
    
    Dec 05
    
    Jun 06
    
    Dec 06
    
    Jun 07
    
    Dec 07
    
    Jun 08
    
    Dec 08
    
    Jun 09
    
    Dec 09Mercantile Bancorp,
Inc.
    
    $
    100.00
    
    
    $
    100.44
    
    
    $
    105.17
    
    
    $
    120.28
    
    
    $
    120.01
    
    
    $
    122.43
    
    
    $
    141.18
    
    
    $
    131.47
    
    
    $
    85.35
    
    
    $
    38.51
    
    
    $
    24.35S&P 500
Regional Banks
Index
    
    $
    100.00
    
    
    $
    100.79
    
    
    $
    101.07
    
    
    $
    105.17
    
    
    $
    112.03
    
    
    $
    107.10
    
    
    $
    76.69
    
    
    $
    45.60
    
    
    $
    40.11
    
    
    $
    28.50
    
    
    $
    35.20Russell 2000
Index
    
    $
    100.00
    
    
    $
    100.88
    
    
    $
    106.18
    
    
    $
    114.29
    
    
    $
    124.22
    
    
    $
    131.49
    
    
    $
    120.81
    
    
    $
    108.77
    
    
    $
    78.77
    
    
    $
    80.16
    
    
    $
    98.63
 34




---



##### Table of Contents



Item 6. Selected Financial Data
  Year Ended December 31,2009
    
    2008
    
    2007
    
    2006
    
    2005(dollars in thousands, except per share data)BALANCE SHEET ITEMSSecurities
    
    $
    130,484
    
    
    $
    194,097
    
    
    $
    205,757
    
    
    $
    188,579
    
    
    $
    165,066Loans held for sale
    
    
    681
    
    
    
    4,366
    
    
    
    3,338
    
    
    
    1,660
    
    
    
    3,635Loans
    
    
    775,989
    
    
    
    1,339,374
    
    
    
    1,212,051
    
    
    
    1,031,656
    
    
    
    857,648Allowance for loan losses
    
    
    18,851
    
    
    
    23,467
    
    
    
    12,794
    
    
    
    10,613
    
    
    
    8,082Discontinued operations, assets held for sale
    
    
    285,992
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ATotal assets
    
    
    1,390,482
    
    
    
    1,774,983
    
    
    
    1,639,145
    
    
    
    1,422,827
    
    
    
    1,137,824Total deposits
    
    
    954,524
    
    
    
    1,462,276
    
    
    
    1,319,459
    
    
    
    1,166,814
    
    
    
    946,129Short-term borrowings
    
    
    30,740
    
    
    
    49,227
    
    
    
    45,589
    
    
    
    26,338
    
    
    
    32,587Long-term debt
    
    
    87,030
    
    
    
    146,519
    
    
    
    143,358
    
    
    
    107,249
    
    
    
    51,720Discontinued operations, liabilities held for sale
    
    
    264,044
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    N/ANoncontrolling interest
    
    
    3,901
    
    
    
    5,735
    
    
    
    9,446
    
    
    
    9,198
    
    
    
    7,561Stockholders equity, net of noncontrolling interest
    
    
    41,302
    
    
    
    98,957
    
    
    
    108,282
    
    
    
    100,658
    
    
    
    91,488RESULTS OF OPERATIONSInterest and dividend income
    
    $
    50,317
    
    
    $
    58,906
    
    
    $
    67,075
    
    
    $
    52,291
    
    
    $
    38,722Interest expense
    
    
    29,101
    
    
    
    37,152
    
    
    
    40,489
    
    
    
    28,470
    
    
    
    17,314Net interest income
    
    
    21,216
    
    
    
    21,754
    
    
    
    26,586
    
    
    
    23,821
    
    
    
    21,408Provision for loan losses
    
    
    22,083
    
    
    
    23,176
    
    
    
    2,724
    
    
    
    3,401
    
    
    
    1,828Noninterest income
    
    
    7,791
    
    
    
    9,157
    
    
    
    10,445
    
    
    
    11,196
    
    
    
    6,195Noninterest expense
    
    
    71,483
    
    
    
    38,574
    
    
    
    27,766
    
    
    
    21,620
    
    
    
    18,450Income tax expense (benefit)
    
    
    (12,137
    )
    
    
    (11,371
    )
    
    
    952
    
    
    
    3,062
    
    
    
    1,578Income (loss) from continuing operations
    
    
    (52,422
    )
    
    
    (19,468
    )
    
    
    5,589
    
    
    
    6,934
    
    
    
    5,747Income (loss) from discontinued operations
    
    
    (7,958
    )
    
    
    7,326
    
    
    
    5,034
    
    
    
    4,177
    
    
    
    4,405Noncontrolling interest
    
    
    (1,833
    )
    
    
    (3,321
    )
    
    
    622
    
    
    
    792
    
    
    
    648Net income (loss)
    
    
    (58,547
    )
    
    
    (8,821
    )
    
    
    10,001
    
    
    
    10,319
    
    
    
    9,504CAPITAL RATIOSTotal capital to risk-weighted assets
    
    
    10.62
    %
    
    
    9.25
    %
    
    
    10.49
    %
    
    
    10.92
    %
    
    
    11.75
    %Tier 1 capital to risk-weighted assets
    
    
    5.31
    %
    
    
    6.10
    %
    
    
    7.86
    %
    
    
    9.70
    %
    
    
    10.88
    %Tier 1 capital to average assets
    
    
    3.31
    %
    
    
    5.08
    %
    
    
    6.72
    %
    
    
    8.09
    %
    
    
    9.00
    %PER SHARE DATABasic earnings (loss) per share  continuing operations (1)
    
    $
    (5.81
    )
    
    $
    (1.85
    )
    
    $
    .57
    
    
    $
    0.72
    
    
    $
    0.61Basic earnings (loss) per share  discontinued operations (1)
    
    $
    (0.91
    )
    
    $
    (0.84
    )
    
    $
    .58
    
    
    $
    0.46
    
    
    $
    0.47Cash dividends
    
    
    N/A
    
    
    
    .24
    
    
    
    .24
    
    
    
    0.21
    
    
    
    0.20Book value
    
    
    4.75
    
    
    
    11.37
    
    
    
    12.43
    
    
    
    11.50
    
    
    
    10.35OTHER INFORMATIONReturn on average assets (2)
    
    
    (4.43
    )%
    
    
    (1.46
    )%
    
    
    0.48
    %
    
    
    0.76
    %
    
    
    0.77
    %Return on average equity (2)
    
    
    (68.42
    )%
    
    
    (15.38
    )%
    
    
    4.77
    %
    
    
    6.59
    %
    
    
    5.95
    %Dividend payout ratio
    
    
    N/A
    
    
    
    (23.68
    )%
    
    
    20.87
    %
    
    
    17.80
    %
    
    
    18.52
    %Net interest margin (2)
    
    
    2.01
    %
    
    
    2.20
    %
    
    
    2.86
    %
    
    
    3.38
    %
    
    
    3.55
    %Average stockholders equity to average assets
    
    
    4.27
    %
    
    
    6.19
    %
    
    
    7.08
    %
    
    
    7.87
    %
    
    
    8.33
    %Allowance for loan losses as a percentage of total loans
    
    
    2.43
    %
    
    
    1.75
    %
    
    
    1.06
    %
    
    
    1.03
    %
    
    
    0.94
    %Full service offices
    
    
    17
    
    
    
    26
    
    
    
    27
    
    
    
    22
    
    
    
    18
 
 (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, 2005.(2)
    
    Information reflected is from continuing operations. 35




---



##### Table of Contents



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;
 36




---



##### Table of Contents




    
    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;
    
    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




---



##### Table of Contents



Results of Operations
     Financial Condition
  38




---



##### Table of Contents



Capital
  2009
    
    
    2008
    
    
    2007Dividend payout ratio (dividends per share divided by net income per share)
    
    
    N/A
    
    
    
    N/A
    
    
    
    20.87
    %Equity to assets ratio (average equity divided by average total assets)
    
    
    4.27
    %
    
    
    6.19
    %
    
    
    7.08
    %
 Return on Equity and Assets
 2009
    
    
    2008
    
    
    2007Return on assets (net income (loss) divided by average total assets)
    
    
    (4.43
    )%
    
    
    (1.46
    )%
    
    
    0.48
    %Return on equity (net income (loss) divided by average equity)
    
    
    (68.42
    )%
    
    
    (15.38
    )%
    
    
    4.77
    %
 
 Summary of Banking Subsidiaries and Cost and Equity Method Investments
  39




---



##### Table of Contents



12/31/09Date
    
    
    Ownership
    
    
    Pre-consolidated Net Income (Loss)Subsidiary
    
    Acquired
    
    
    Percentage
    
    
    2009
    2008
    2007(dollars in thousands)Mercantile Bank
    
    
    4/15/83
    
    
    
    100.00
    %
    
    $
    1,029
    
    
    
    N/A
    
    
    $
    2,930
    
    
    
    N/A
    
    
    $
    5,559
    
    
    
    43.2
    %Marine Bank & Trust
    
    
    4/02/91
    
    
    
    100.00
    %
    
    
    2,139
    
    
    
    N/A
    
    
    
    2,025
    
    
    
    N/A
    
    
    
    1,813
    
    
    
    14.1
    %Perry State Bank
    
    
    10/04/94
    
    
    
    100.00
    %
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    N/A
    
    
    
    1,888
    
    
    
    14.7
    %Brown County State Bank
    
    
    12/07/97
    
    
    
    100.00
    %
    
    
    1,347
    
    
    
    N/A
    
    
    
    1,207
    
    
    
    N/A
    
    
    
    923
    
    
    
    7.2
    %Farmers State Bank of Northern Missouri
    
    
    10/4/99
    
    
    
    100.00
    %
    
    
    
    
    
    
    N/A
    
    
    
    
    
    
    
    N/A
    
    
    
    408
    
    
    
    3.2
    %Mid America Bancorp, Inc.
    
    
    2/28/05
    
    
    
    55.52
    %
    
    
    (4,120
    )
    
    
    N/A
    
    
    
    (7,453
    )
    
    
    N/A
    
    
    
    1,322
    
    
    
    10.3
    %Royal Palm Bancorp, Inc.
    
    
    11/10/06
    
    
    
    100.00
    %
    
    
    (41,386
    )
    
    
    N/A
    
    
    
    (7,107
    )
    
    
    N/A
    
    
    
    444
    
    
    
    3.4
    %HNB Financial Services, Inc.
    
    
    9/07/07
    
    
    
    100.00
    %
    
    
    (9,248
    )
    
    
    N/A
    
    
    
    3,390
    
    
    
    N/A
    
    
    
    497
    
    
    
    3.9
    %Total
    
    
    
    
    
    
    
    
    
    $
    (50,239
    )
    
    
    N/A
    
    
    $
    (5,008
    )
    
    
    N/A
    
    
    $
    12,854
    
    
    
    100.0
    %
   (1)Premier Community Bank of the
    
    
    (2)
    
    

(3)Emerald Coast
    
    
    Integrity Bank
    
    
    Premier Bancshares, Inc.Number of
    
    
    
    
    
    
    Number of
    
    
    
    
    
    
    Number ofDate
    
    Shares
    
    
    Cost
    
    
    Shares
    
    
    Cost
    
    
    Shares
    
    
    Cost(dollars in thousands)12/02/03
    
    
    
    
    
    
    
    
    
    
    69,500
    
    
    $
    69511/29/05
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    $
    1,00006/21/06
    
    
    50,000
    
    
    $
    500Other-than-temporary impairment charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (695
    )
    
    
    
    
    
    $
    (1,000
    )Total as of 12/31/09
    
    
    50,000
    
    
    $
    500
    
    
    
    69,500
    
    
    $
    
    
    
    
    100,000
    
    
    $
    Ownership Percentage as of 12/31/09
    
    
    2.5
    %
    
    
    
    
    
    
    4.3
    %
    
    
    
    
    
    
    .82
    %
 (4)Brookhaven BankNumber ofDate
    
    Shares
    
    
    Cost7/17/07
    
    
    112,275
    
    
    $
    1,1239/17/07
    
    
    4,396
    
    
    
    44Other-than-temporary impairment charges
    
    
    
    
    
    $
    (336
    )Total as of 12/31/09
    
    
    116,671
    
    
    $
    831Ownership Percentage as of 12/31/09
    
    
    4.9
    %
 
 (1)
    
    Premier Community Bank of the Emerald Coast is a privately held bank holding company located
in Crestview, Florida. 40




---



##### Table of Contents



(2)
    
    Integrity Bank is a privately held bank located in Jupiter, Florida.(3)
    
    Premier Bancshares, Inc. is a privately held bank holding company located in Jefferson City,
Missouri.(4)
    
    Brookhaven Bank is a privately held bank located in Atlanta, Georgia. Critical Accounting Policies
  Allowance for Loan Losses.
   Goodwill and Core Deposit and Other Intangibles
  41




---



##### Table of Contents



Discontinued Operations
    Revenue Recognition
   Effect of Inflation
  42




---



##### Table of Contents



Results of Operations
 Summary
  2009 versus 2008.
     43




---



##### Table of Contents



2008 versus 2007.
   44




---



##### Table of Contents



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




---



##### Table of Contents



Selected Statistical Information
  Consolidated Average Balance Sheets
  AtDecember 31
    
    
    Years Ended December 31,2009
    
    
    2009
    
    
    2008
    
    
    2007Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Cost
    
    
    Balance
 
    
    Expense
 
    
    Rate
 
    
    Balance
 
    
    Expense
 
    
    Rate
 
    
    Balance
 
    
    Expense
 
    
    RateAssetsInterest-bearing demand deposits
    
    
    0.40
    %
    
    $
    82,557
    
    
    $
    251
    
    
    
    0.30
    %
    
    $
    20,647
    
    
    $
    442
    
    
    
    2.14
    %
    
    $
    17,397
    
    
    $
    966
    
    
    
    5.55
    %Federal funds sold
    
    
    0.10
    %
    
    
    11,842
    
    
    
    18
    
    
    
    0.15
    %
    
    
    19,915
    
    
    
    343
    
    
    
    1.72
    %
    
    
    20,093
    
    
    
    1,060
    
    
    
    5.28
    %SecuritiesTaxableU.S. treasuries and government
agencies
    
    
    N/A
    
    
    
    1,287
    
    
    
    27
    
    
    
    2.10
    %
    
    
    4,796
    
    
    
    162
    
    
    
    3.38
    %
    
    
    22,118
    
    
    
    1,148
    
    
    
    5.19
    %Mortgage-backed securities
    
    
    3.79
    %
    
    
    25,210
    
    
    
    1,057
    
    
    
    4.19
    %
    
    
    23,475
    
    
    
    1,118
    
    
    
    4.76
    %
    
    
    16,600
    
    
    
    853
    
    
    
    5.14
    %Other securities
    
    
    4.55
    %
    
    
    70,978
    
    
    
    3,262
    
    
    
    4.60
    %
    
    
    70,273
    
    
    
    3,271
    
    
    
    4.65
    %
    
    
    64,760
    
    
    
    3,561
    
    
    
    5.50
    %Total taxable
    
    
    
    
    
    
    97,475
    
    
    
    4,346
    
    
    
    4.46
    %
    
    
    98,544
    
    
    
    4,551
    
    
    
    4.62
    %
    
    
    103,478
    
    
    
    5,562
    
    
    
    5.38
    %Non-taxable  State and political
subdivision (3)
    
    
    5.28
    %
    
    
    27,974
    
    
    
    944
    
    
    
    3.37
    %
    
    
    31,596
    
    
    
    1,149
    
    
    
    3.64
    %
    
    
    36,939
    
    
    
    1,314
    
    
    
    3.56
    %Loans (net of unearned discount) (1)(2)
    
    
    6.03
    %
    
    
    830,740
    
    
    
    44,744
    
    
    
    5.39
    %
    
    
    814,613
    
    
    
    52,357
    
    
    
    6.43
    %
    
    
    746,944
    
    
    
    58,049
    
    
    
    7.77
    %Federal Home Loan Bank stock
    
    
    0.34
    %
    
    
    3,222
    
    
    
    14
    
    
    
    0.43
    %
    
    
    3,787
    
    
    
    64
    
    
    
    1.69
    %
    
    
    3,820
    
    
    
    124
    
    
    
    3.25
    %Total interest-earning assets (1)
    
    
    
    
    
    $
    1,053,810
    
    
    $
    50,317
    
    
    
    4.77
    %
    
    $
    989,102
    
    
    $
    58,906
    
    
    
    5.96
    %
    
    $
    928,671
    
    
    $
    67,075
    
    
    
    7.22
    %Cash & due from banks
    
    
    
    
    
    $
    12,042
    
    
    
    
    
    
    
    
    
    
    $
    25,803
    
    
    
    
    
    
    
    
    
    
    $
    20,460Premises and equipment
    
    
    
    
    
    
    26,455
    
    
    
    
    
    
    
    
    
    
    
    27,930
    
    
    
    
    
    
    
    
    
    
    
    21,362Foreclosed assets held for sale, net
    
    
    
    
    
    
    11,298
    
    
    
    
    
    
    
    
    
    
    
    4,011
    
    
    
    
    
    
    
    
    
    
    
    859Equity method investment in common
stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,765Cost method investment in common stock
    
    
    
    
    
    
    2,573
    
    
    
    
    
    
    
    
    
    
    
    4,369
    
    
    
    
    
    
    
    
    
    
    
    5,481Interest receivable
    
    
    
    
    
    
    4,349
    
    
    
    
    
    
    
    
    
    
    
    5,222
    
    
    
    
    
    
    
    
    
    
    
    5,865Cash surrender value of life insurance
    
    
    
    
    
    
    14,381
    
    
    
    
    
    
    
    
    
    
    
    13,165
    
    
    
    
    
    
    
    
    
    
    
    10,743Allowance for loan loss
    
    
    
    
    
    
    (20,640
    )
    
    
    
    
    
    
    
    
    
    
    (11,471
    )
    
    
    
    
    
    
    
    
    
    
    (8,359
    )Goodwill
    
    
    
    
    
    
    15,410
    
    
    
    
    
    
    
    
    
    
    
    36,237
    
    
    
    
    
    
    
    
    
    
    
    29,077Intangible assets
    
    
    
    
    
    
    2,298
    
    
    
    
    
    
    
    
    
    
    
    3,806
    
    
    
    
    
    
    
    
    
    
    
    4,221Other
    
    
    
    
    
    
    19,845
    
    
    
    
    
    
    
    
    
    
    
    5,286
    
    
    
    
    
    
    
    
    
    
    
    9,426Discontinued operations, held for sale
(4)
    
    
    
    
    
    
    588,065
    
    
    
    
    
    
    
    
    
    
    
    593,310
    
    
    
    
    
    
    
    
    
    
    
    440,585Total assets
    
    
    
    
    
    $
    1,729,886
    
    
    
    
    
    
    
    
    
    
    $
    1,696,770
    
    
    
    
    
    
    
    
    
    
    $
    1,471,156LiabilitiesInterest-bearing transaction deposits
    
    
    0.20
    %
    
    $
    64,587
    
    
    $
    203
    
    
    
    0.31
    %
    
    $
    58,849
    
    
    $
    535
    
    
    
    .91
    %
    
    $
    61,028
    
    
    $
    1,054
    
    
    
    1.73
    %Savings deposits
    
    
    0.15
    %
    
    
    46,801
    
    
    
    278
    
    
    
    0.59
    %
    
    
    47,728
    
    
    
    818
    
    
    
    1.71
    %
    
    
    47,423
    
    
    
    1,526
    
    
    
    3.22
    %Money-market deposits
    
    
    0.22
    %
    
    
    148,053
    
    
    
    1,316
    
    
    
    0.89
    %
    
    
    155,839
    
    
    
    3,561
    
    
    
    2.29
    %
    
    
    143,292
    
    
    
    5,966
    
    
    
    4.16
    %Time and brokered time deposits
    
    
    1.86
    %
    
    
    606,967
    
    
    
    19,969
    
    
    
    3.29
    %
    
    
    579,315
    
    
    
    25,125
    
    
    
    4.34
    %
    
    
    500,161
    
    
    
    24,595
    
    
    
    4.92
    %Short-term borrowings
    
    
    6.53
    %
    
    
    44,912
    
    
    
    2,475
    
    
    
    5.50
    %
    
    
    23,500
    
    
    
    797
    
    
    
    3.39
    %
    
    
    28,072
    
    
    
    1,546
    
    
    
    5.51
    %Long-term debt
    
    
    5.02
    %
    
    
    34,522
    
    
    
    1,516
    
    
    
    4.39
    %
    
    
    49,701
    
    
    
    2,435
    
    
    
    4.90
    %
    
    
    49,718
    
    
    
    2,494
    
    
    
    5.02
    %Junior subordinated debentures
    
    
    5.12
    %
    
    
    61,858
    
    
    
    3,344
    
    
    
    5.41
    %
    
    
    61,858
    
    
    
    3,881
    
    
    
    6.27
    %
    
    
    48,112
    
    
    
    3,308
    
    
    
    6.88
    %Total interest-bearing liabilities
    
    
    
    
    
    $
    1,007,700
    
    
    $
    29,101
    
    
    
    2.89
    %
    
    $
    976,790
    
    
    $
    37,152
    
    
    
    3.80
    %
    
    $
    877,806
    
    
    $
    40,489
    
    
    
    4.61
    %Demand deposits
    
    
    
    
    
    $
    86,185
    
    
    
    
    
    
    
    
    
    
    $
    65,415
    
    
    
    
    
    
    
    
    
    
    $
    69,103Interest payable
    
    
    
    
    
    
    3,547
    
    
    
    
    
    
    
    
    
    
    
    3,796
    
    
    
    
    
    
    
    
    
    
    
    4,417Other liabilities
    
    
    
    
    
    
    4,502
    
    
    
    
    
    
    
    
    
    
    
    3,418
    
    
    
    
    
    
    
    
    
    
    
    3,793Discontinued operations, held for sale
(4)
    
    
    
    
    
    
    549,042
    
    
    
    
    
    
    
    
    
    
    
    533,899
    
    
    
    
    
    
    
    
    
    
    
    402,356Minority interest
    
    
    
    
    
    
    4,973
    
    
    
    
    
    
    
    
    
    
    
    8,446
    
    
    
    
    
    
    
    
    
    
    
    9,480Stockholders equity
    
    
    
    
    
    
    73,937
    
    
    
    
    
    
    
    
    
    
    
    105,006
    
    
    
    
    
    
    
    
    
    
    
    104,201Total Liabilities and Stockholders
Equity
    
    
    
    
    
    $
    1,729,886
    
    
    
    
    
    
    
    
    
    
    $
    1,696,770
    
    
    
    
    
    
    
    
    
    
    $
    1,471,156Interest spread
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1.88
    %
    
    
    
    
    
    
    
    
    
    
    2.16
    %
    
    
    
    
    
    
    
    
    
    
    2.61
    %Net interest income
    
    
    
    
    
    
    
    
    
    
    21,216
    
    
    
    
    
    
    
    
    
    
    
    21,754
    
    
    
    
    
    
    
    
    
    
    
    26,586Net interest margin
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2.01
    %
    
    
    
    
    
    
    
    
    
    
    2.20
    %
    
    
    
    
    
    
    
    
    
    
    2.86
    %Interest-earning assets to
interest-bearing liabilities
    
    
    
    
    
    
    104.58
    %
    
    
    
    
    
    
    
    
    
    
    101.26
    %
    
    
    
    
    
    
    
    
    
    
    105.79
    %
 
 (1)
    
    Non-accrual loans have been included in average loans, net of unearned discount(2)
    
    Includes loans held for sale(3)
    
    The tax exempt income for state and political subdivisions is not recorded on a tax
equivalent basis.(4)
    
    Due to the exchange of HNB in 2009, HNB is no longer included in the balance sheet as of
December 31, 2009, however year-to-date average balances up through the date of the exchange
have been included in the average balance sheet. 46




---



##### Table of Contents



Changes in Net Interest Income
 Rate/Volume Analysis
 Years Ended December 31, 2009, 2008 and 2007Year 2009 vs. 2008 Change
    
    
    Year 2008 vs. 2007 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
    
    $
    440
    
    
    $
    (630
    )
    
    $
    (190
    )
    
    $
    155
    
    
    $
    (680
    )
    
    $
    (525
    )Federal funds sold
    
    
    (100
    )
    
    
    (225
    )
    
    
    (325
    )
    
    
    (9
    )
    
    
    (708
    )
    
    
    (717
    )Investment securities:U.S. treasuries and agencies
    
    
    (89
    )
    
    
    (46
    )
    
    
    (135
    )
    
    
    (682
    )
    
    
    (304
    )
    
    
    (986
    )Mortgage-backed securities
    
    
    79
    
    
    
    (140
    )
    
    
    (61
    )
    
    
    331
    
    
    
    (66
    )
    
    
    265States and political subdivision (1)
    
    
    (126
    )
    
    
    (79
    )
    
    
    (205
    )
    
    
    (194
    )
    
    
    29
    
    
    
    (165
    )Other securities
    
    
    33
    
    
    
    (42
    )
    
    
    (9
    )
    
    
    287
    
    
    
    (577
    )
    
    
    (290
    )Loans (net of unearned discounts)
    
    
    1,018
    
    
    
    (8,632
    )
    
    
    (7,614
    )
    
    
    4,946
    
    
    
    (10,637
    )
    
    
    (5,691
    )Federal Home Loan Bank stock
    
    
    (8
    )
    
    
    (42
    )
    
    
    (50
    )
    
    
    (1
    )
    
    
    (59
    )
    
    
    (60
    )Change in interest income (1)
    
    
    1,247
    
    
    
    (9,836
    )
    
    
    (8,589
    )
    
    
    4,833
    
    
    
    (13,002
    )
    
    
    (8,169
    )Increase (decrease) in interest expense:Interest-bearing transaction deposits
    
    
    48
    
    
    
    (380
    )
    
    
    (332
    )
    
    
    (36
    )
    
    
    (483
    )
    
    
    (519
    )Savings deposit
    
    
    (16
    )
    
    
    (524
    )
    
    
    (540
    )
    
    
    10
    
    
    
    (718
    )
    
    
    (708
    )Money-market deposits
    
    
    (170
    )
    
    
    (2,075
    )
    
    
    (2,245
    )
    
    
    484
    
    
    
    (2,889
    )
    
    
    (2,405
    )Time and brokered time deposits
    
    
    1,151
    
    
    
    (6,307
    )
    
    
    (5,156
    )
    
    
    3,629
    
    
    
    (3,099
    )
    
    
    530Short-term borrowings
    
    
    995
    
    
    
    683
    
    
    
    1,678
    
    
    
    (223
    )
    
    
    (526
    )
    
    
    (749
    )Long-term debt
    
    
    (807
    )
    
    
    (649
    )
    
    
    (1,456
    )
    
    
    786
    
    
    
    (272
    )
    
    
    514Change in interest expense
    
    
    1,201
    
    
    
    (9,252
    )
    
    
    (8,051
    )
    
    
    4,650
    
    
    
    (7,987
    )
    
    
    (3,337
    )Increase (decrease) in net interest
income (1)
    
    $
    46
    
    
    $
    (584
    )
    
    $
    (538
    )
    
    $
    183
    
    
    $
    (5,015
    )
    
    $
    (4,832
    )
 
 (1)
    
    The tax exempt income for state and political subdivision is not recorded on a tax equivalent
basis. 2009 versus 2008.
  47




---



##### Table of Contents



2008 versus 2007.
  48




---



##### Table of Contents



Provision for Loan Losses
 2009 versus 2008.
   49




---



##### Table of Contents



2008 versus 2007.
   Noninterest Income
 2009 versus 2008.
   50




---



##### Table of Contents



2008 versus 2007.
      Noninterest Expense
 2009 versus 2008.
 51




---



##### Table of Contents



2008 versus 2007.
 52




---



##### Table of Contents



Provision for Income Taxes
  53




---



##### Table of Contents



2009 versus 2008.
 2008 versus 2007.
 Financial Condition
 Summary
      Earning Assets
  54




---



##### Table of Contents



Investment Securities
     December 31,2009*
    
    
    2008
    
    
    2007Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(dollars in thousands)U.S. Treasury
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    993
    
    
    $
    999U.S. government agencies
    
    
    
    
    
    
    
    
    
    
    4,697
    
    
    
    4,787
    
    
    
    16,517
    
    
    
    16,726Mortgage-backed securities: GSE residential
    
    
    92,710
    
    
    
    95,354
    
    
    
    125,691
    
    
    
    128,445
    
    
    
    108,129
    
    
    
    108,799State and political subdivision
    
    
    28,525
    
    
    
    29,539
    
    
    
    44,892
    
    
    
    45,666
    
    
    
    53,708
    
    
    
    53,798Equity securities
    
    
    3,603
    
    
    
    3,257
    
    
    
    6,500
    
    
    
    6,294
    
    
    
    12,232
    
    
    
    11,917Total
    
    $
    124,838
    
    
    $
    128,150
    
    
    $
    181,780
    
    
    $
    185,192
    
    
    $
    191,579
    
    
    $
    192,239
 
 *
    
    Amounts represented are from continuing operations.  Due in 1 year
    
    
    Due after 1 year
    
    
    Due after 5 years
    
    
    Due afteror less
    
    
    through 5 years
    
    
    through 10 years
    
    
    10 years
    
    
    Equity SecuritiesWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedFair
    
    
    Average
    
    
    Fair
    
    
    Average
    
    
    Fair
    
    
    Average
    
    
    Fair
    
    
    Average
    
    
    Fair
    
    
    AverageValue
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Value
    
    
    Yield
    
    
    Total(dollars in thousands)Mortgage-backed securities: GSE
residential (1)
    
    $
    17,765
    
    
    
    4.75
    %
    
    $
    77,425
    
    
    
    4.08
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    164
    
    
    
    3.32
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    95,354States and political subdivisions
    
    
    4,520
    
    
    
    5.13
    %
    
    
    19,316
    
    
    
    5.18
    %
    
    
    2,057
    
    
    
    5.89
    %
    
    
    3,646
    
    
    
    3.55
    %
    
    
    
    
    
    
    0.00
    %
    
    
    29,53922,285
    
    
    
    
    
    
    
    96,741
    
    
    
    
    
    
    
    2,057
    
    
    
    
    
    
    
    3,810
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    124,893Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,257
    
    
    
    
    
    
    
    3,257Total
    
    $
    22,285
    
    
    
    
    
    
    $
    96,741
    
    
    
    
    
    
    $
    2,057
    
    
    
    
    
    
    $
    3,810
    
    
    
    
    
    
    $
    3,257
    
    
    
    
    
    
    $
    128,150
 
 (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.  55




---



##### Table of Contents



December 31,2009
    
    
    2008
    
    
    2007Amortized
    
    
    Fair
    
    
    Amortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    Value
    
    
    Cost
    
    
    Value(dollars in thousands)Mortgage-backed securities: GSE residential
    
    $
    2,334
    
    
    $
    2,411
    
    
    $
    5,992
    
    
    $
    6,140
    
    
    $
    8,329
    
    
    $
    8,401State and political subdivision
    
    
    
    
    
    
    
    
    
    
    2,913
    
    
    
    2,961
    
    
    
    5,189
    
    
    
    5,223Total
    
    $
    2,334
    
    
    $
    2,411
    
    
    $
    8,905
    
    
    $
    9,101
    
    
    $
    13,518
    
    
    $
    13,624
 
 *
    
    Amounts represented are from continuing operations.  Due in 1 year
    
    
    Due after 1 year
    
    
    Due after 5 years
    
    
    Due afteror less
    
    
    through 5 years
    
    
    through 10 years
    
    
    10 yearsWeighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    Weighted
    
    
    
    
    
    
    WeightedAmortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    Average
    
    
    Amortized
    
    
    AverageCost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Cost
    
    
    Yield
    
    
    Total(dollars in thousands)Mortgage-backed securities: GSE residential (1)
    
    $
    
    
    
    
    0.00
    %
    
    $
    2,334
    
    
    
    4.87
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    
    
    
    
    0.00
    %
    
    $
    2,334Total
    
    $
    
    
    
    
    
    
    
    $
    2,334
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    2,334
 
 (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.  Loan Portfolio
    56




---



##### Table of Contents



2009 versus 2008.
 2008 versus 2007.
 57




---



##### Table of Contents



December 31,2009Continuing
    
    
    Discontinued
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    Percent
    
    
    Amount
    
    
    PercentCommercial and financial
    
    $
    161,702
    
    
    
    20.74
    %
    
    $
    31,269
    
    
    
    14.75
    %
    
    $
    235,438
    
    
    
    17.52
    %
    
    $
    184,317
    
    
    
    15.17
    %
    
    $
    167,687
    
    
    
    16.24
    %
    
    $
    180,906
    
    
    
    21.00
    %Agricultural
    
    
    9,832
    
    
    
    1.26
    %
    
    
    33,088
    
    
    
    15.61
    %
    
    
    68,192
    
    
    
    5.07
    %
    
    
    64,399
    
    
    
    5.30
    %
    
    
    57,393
    
    
    
    5.55
    %
    
    
    59,325
    
    
    
    6.89
    %Real estate
 farmland
    
    
    19,655
    
    
    
    2.52
    %
    
    
    41,213
    
    
    
    19.44
    %
    
    
    111,244
    
    
    
    8.28
    %
    
    
    91,488
    
    
    
    7.53
    %
    
    
    72,999
    
    
    
    7.06
    %
    
    
    66,172
    
    
    
    7.68
    %Real estate  construction
    
    
    153,578
    
    
    
    19.92
    %
    
    
    7,851
    
    
    
    3.70
    %
    
    
    238,922
    
    
    
    17.78
    %
    
    
    215,850
    
    
    
    17.76
    %
    
    
    152,553
    
    
    
    14.76
    %
    
    
    66,812
    
    
    
    7.76
    %Real estate  commercial
    
    
    163,292
    
    
    
    21.00
    %
    
    
    12,792
    
    
    
    6.04
    %
    
    
    214,317
    
    
    
    15.95
    %
    
    
    204,338
    
    
    
    16.81
    %
    
    
    190,724
    
    
    
    18.46
    %
    
    
    154,132
    
    
    
    17.90
    %Real estate  residential (1)
    
    
    193,818
    
    
    
    24.97
    %
    
    
    53,588
    
    
    
    25.29
    %
    
    
    343,627
    
    
    
    25.58
    %
    
    
    323,936
    
    
    
    26.65
    %
    
    
    267,237
    
    
    
    25.86
    %
    
    
    219,644
    
    
    
    25.50
    %Installment loans to individuals
    
    
    74,793
    
    
    
    9.59
    %
    
    
    32,157
    
    
    
    15.17
    %
    
    
    132,000
    
    
    
    9.82
    %
    
    
    131,061
    
    
    
    10.78
    %
    
    
    124,723
    
    
    
    12.07
    %
    
    
    114,292
    
    
    
    13.27
    %Total loans (1)
    
    
    776,670
    
    
    
    100.00
    %
    
    
    211,958
    
    
    
    100.00
    %
    
    
    1,343,740
    
    
    
    100.00
    %
    
    
    1,215,389
    
    
    
    100.00
    %
    
    
    1,033,316
    
    
    
    100.00
    %
    
    
    861,283
    
    
    
    100.00
    %Allowance for loan loss
    
    
    18,851
    
    
    
    
    
    
    
    1,820
    
    
    
    
    
    
    
    23,467
    
    
    
    
    
    
    
    12,794
    
    
    
    
    
    
    
    10,613
    
    
    
    
    
    
    
    8,082Total loans, including loans
held for sale, net of allowance
for loan loss
    
    $
    757,819
    
    
    
    
    
    
    $
    210,138
    
    
    
    
    
    
    $
    1,320,273
    
    
    
    
    
    
    $
    1,202,595
    
    
    
    
    
    
    $
    1,022,703
    
    
    
    
    
    
    $
    853,201
 
 (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
    
    $
    82,026
    
    
    $
    52,768
    
    
    $
    36,741
    
    
    $
    171,534Real estate - construction
    
    
    19,655
    
    
    
    
    
    
    
    
    
    
    
    19,655Total
    
    $
    101,681
    
    
    $
    52,768
    
    
    $
    36,741
    
    
    $
    191,189Interest rate sensitivity of selected loansFixed rate
    
    $
    30,609
    
    
    $
    24,737
    
    
    $
    1,480
    
    
    $
    56,826Adjustable rate
    
    
    71,072
    
    
    
    28,031
    
    
    
    35,260
    
    
    
    134,363Total
    
    $
    101,681
    
    
    $
    52,768
    
    
    $
    36,741
    
    
    $
    191,189
 Allowance for Loan Losses
  58




---



##### Table of Contents



59




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)
    
    Continuing
    
    
    DiscontinuedAverage loans outstanding during year
    
    $
    830,740
    
    
    $
    462,977
    
    
    $
    1,274,660
    
    
    $
    1,097,481
    
    
    $
    907,671
    
    
    $
    806,955Allowance for loan losses:Balance at beginning of year
    
    $
    19,038
    
    
    $
    4,429
    
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082
    
    
    $
    7,115Loans charged-off:Commercial and financial
    
    
    927
    
    
    
    200
    
    
    
    5,447
    
    
    
    493
    
    
    
    1,833
    
    
    
    429Agricultural
    
    
    438
    
    
    
    6
    
    
    
    147
    
    
    
    75
    
    
    
    85
    
    
    
    54Real estate  farmland
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    80Real estate  construction
    
    
    10,938
    
    
    
    
    
    
    
    4,082
    
    
    
    284
    
    
    
    
    
    
    
    Real estate  commercial
    
    
    2,055
    
    
    
    
    
    
    
    2,276
    
    
    
    18
    
    
    
    139
    
    
    
    50Real estate  residential
    
    
    7,218
    
    
    
    273
    
    
    
    823
    
    
    
    399
    
    
    
    139
    
    
    
    172Installment loans to individuals
    
    
    899
    
    
    
    521
    
    
    
    901
    
    
    
    906
    
    
    
    1,129
    
    
    
    956Total charge-offs
    
    
    22,475
    
    
    
    1,000
    
    
    
    13,676
    
    
    
    2,175
    
    
    
    3,325
    
    
    
    1,741Recoveries:Commercial and financial
    
    
    
    
    
    
    26
    
    
    
    296
    
    
    
    55
    
    
    
    47
    
    
    
    112Agricultural
    
    
    13
    
    
    
    36
    
    
    
    15
    
    
    
    15
    
    
    
    20
    
    
    
    26Real estate  farmland
    
    
    
    
    
    
    80
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Real estate  construction
    
    
    34
    
    
    
    
    
    
    
    1
    
    
    
    2
    
    
    
    1
    
    
    
    2Real estate  commercial
    
    
    7
    
    
    
    4
    
    
    
    43
    
    
    
    1
    
    
    
    1
    
    
    
    36Real estate  residential
    
    
    8
    
    
    
    22
    
    
    
    46
    
    
    
    38
    
    
    
    12
    
    
    
    24
 60




---



##### Table of Contents



Year Ended December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)
    
    Continuing
    
    
    DiscontinuedInstallment loans to individuals
    
    
    143
    
    
    
    78
    
    
    
    103
    
    
    
    150
    
    
    
    136
    
    
    
    140Total recoveries
    
    
    205
    
    
    
    246
    
    
    
    504
    
    
    
    261
    
    
    
    217
    
    
    
    340Net charge-offs
    
    
    22,270
    
    
    
    754
    
    
    
    13,172
    
    
    
    1,914
    
    
    
    3,108
    
    
    
    1,401Provision for loan losses
    
    
    22,083
    
    
    
    1,261
    
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914
    
    
    
    2,368Purchased allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,126
    
    
    
    1,725
    
    
    
    Exchange of HNB
    
    
    
    
    
    
    3,116
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance at end of year
    
    $
    18,851
    
    
    $
    1,820
    
    
    $
    23,467
    
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082Allowance for loan losses as a percent of
total loans outstanding at year end (1)
    
    
    2.43
    %
    
    
    
    
    
    
    1.75
    %
    
    
    1.06
    %
    
    
    1.03
    %
    
    
    0.94
    %Allowance for loan losses as a percent of
total nonperforming loans
    
    
    37.09
    %
    
    
    
    
    
    
    61.74
    %
    
    
    55.6
    %
    
    
    165.98
    %
    
    
    162.29
    %Ratio of net charge-offs to average total loans
    
    
    2.68
    %
    
    
    
    
    
    
    1.03
    %
    
    
    0.18
    %
    
    
    0.34
    %
    
    
    0.17
    %
 
 (1)
    
    Includes loans held for sale  2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Continuing
    
    
    % to Total
    
    
    Discontinued
    
    
    % to Total
    
    
    
    
    
    
    % to Total
    
    
    
    
    
    
    % to Total
    
    
    
    
    
    
    % to Total
    
    
    
    
    
    
    % to Totaloperations amount
    
    
    Allowance
    
    
    operations amount
    
    
    Allowance
    
    
    Amount
    
    
    Allowance
    
    
    Amount
    
    
    Allowance
    
    
    Amount
    
    
    Allowance
    
    
    Amount
    
    
    AllowanceCommercial and financial
    
    $
    3,023,18
    
    
    
    16.04
    %
    
    $
    279,227
    
    
    
    15.34
    %
    
    $
    3,218,644
    
    
    
    13.72
    %
    
    $
    2,848,584
    
    
    
    22.26
    %
    
    $
    2,767,535
    
    
    
    26.07
    %
    
    $
    2,721,029
    
    
    
    33.67
    %Agricultural
    
    
    200,118
    
    
    
    1.06
    %
    
    
    372,267
    
    
    
    20.45
    %
    
    
    619,069
    
    
    
    2.64
    %
    
    
    149,926
    
    
    
    1.17
    %
    
    
    164,176
    
    
    
    1.55
    %
    
    
    161,417
    
    
    
    2.00
    %Real estate  farmland
    
    
    300,177
    
    
    
    1.59
    %
    
    
    243,424
    
    
    
    13.38
    %
    
    
    663,180
    
    
    
    2.83
    %
    
    
    795,329
    
    
    
    6.22
    %
    
    
    649,073
    
    
    
    6.12
    %
    
    
    673,040
    
    
    
    8.33
    %Real estate  construction
    
    
    5,839,652
    
    
    
    30.97
    %
    
    
    193,216
    
    
    
    10.62
    %
    
    
    10,859,399
    
    
    
    46.27
    %
    
    
    2,413,365
    
    
    
    18.86
    %
    
    
    1,910,323
    
    
    
    18.00
    %
    
    
    460,234
    
    
    
    5.69
    %Real estate  commercial
    
    
    2,974,083
    
    
    
    15.78
    %
    
    
    104,994
    
    
    
    5.77
    %
    
    
    2,388,605
    
    
    
    10.18
    %
    
    
    3,937,425
    
    
    
    30.78
    %
    
    
    2,182,023
    
    
    
    20.56
    %
    
    
    1,517,846
    
    
    
    18.78
    %Real estate  residential
    
    
    4,955,809
    
    
    
    26.29
    %
    
    
    491,289
    
    
    
    26.99
    %
    
    
    4,025,323
    
    
    
    17.15
    %
    
    
    1,312,475
    
    
    
    10.26
    %
    
    
    1,174,936
    
    
    
    11.07
    %
    
    
    817,301
    
    
    
    10.11
    %Installment loans  consumer
    
    
    1,558,397
    
    
    
    8.27
    %
    
    
    135,575
    
    
    
    7.45
    %
    
    
    1,245,898
    
    
    
    5.31
    %
    
    
    1,146,659
    
    
    
    8.96
    %
    
    
    1,306,972
    
    
    
    12.31
    %
    
    
    1,335,151
    
    
    
    16.52
    %Unallocated
    
    
    
    
    
    
    0.00
    %
    
    
    
    
    
    
    0.00
    %
    
    
    446,629
    
    
    
    1.90
    %
    
    
    190,237
    
    
    
    1.49
    %
    
    
    457,962
    
    
    
    4.32
    %
    
    
    395,982
    
    
    
    4.90
    %Total
    
    $
    18,851,417
    
    
    
    100.00
    %
    
    $
    1,819,992
    
    
    
    100.00
    %
    
    $
    23,466,747
    
    
    
    100.00
    %
    
    $
    12,794,000
    
    
    
    100.00
    %
    
    $
    10,613,000
    
    
    
    100.00
    %
    
    $
    8,082,000
    
    
    
    100.00
    %
 Non-Performing Assets
   At December 31,2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005(dollars in thousands)
    
    Continuing
    
    
    DiscontinuedNon-accrual loans (1)Commercial and financial
    
    $
    1,439
    
    
    $
    19
    
    
    $
    762
    
    
    $
    581
    
    
    $
    429
    
    
    $
    1,504Agricultural
    
    
    248
    
    
    
    60
    
    
    
    234
    
    
    
    308
    
    
    
    473
    
    
    
    223Real estate  farmland
    
    
    62
    
    
    
    123
    
    
    
    
    
    
    
    296
    
    
    
    12
    
    
    
    105Real estate  construction
    
    
    33,946
    
    
    
    
    
    
    
    25,948
    
    
    
    6,716
    
    
    
    1,147
    
    
    
    Real estate  commercial
    
    
    7,378
    
    
    
    
    
    
    
    1,361
    
    
    
    3,152
    
    
    
    2,083
    
    
    
    417Real estate  residential
    
    
    6,803
    
    
    
    680
    
    
    
    5,455
    
    
    
    8,571
    
    
    
    1,040
    
    
    
    839Installment loans to individuals
    
    
    154
    
    
    
    37
    
    
    
    337
    
    
    
    195
    
    
    
    213
    
    
    
    544Total non-accrual loans (1)
    
    
    50,030
    
    
    
    919
    
    
    
    34,097
    
    
    
    19,819
    
    
    
    5,397
    
    
    
    3,632Loans 90 days past due and still accruing
    
    
    393
    
    
    
    597
    
    
    
    3,856
    
    
    
    3,184
    
    
    
    993
    
    
    
    1,342Restructured loans
    
    
    397
    
    
    
    
    
    
    
    58
    
    
    
    
    
    
    
    4
    
    
    
    6Total nonperforming loans
    
    
    50,820
    
    
    
    1,516
    
    
    
    38,011
    
    
    
    23,003
    
    
    
    6,394
    
    
    
    4,980Repossessed assets
    
    
    16,409
    
    
    
    535
    
    
    
    10,015
    
    
    
    3,273
    
    
    
    361
    
    
    
    494Other assets acquired in satisfaction of
debts previously contracted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total nonperforming other assets
    
    
    16,409
    
    
    
    535
    
    
    
    10,015
    
    
    
    3,273
    
    
    
    361
    
    
    
    494Total nonperforming loans and
nonperforming other assets
    
    $
    67,229
    
    
    $
    2,051
    
    
    $
    48,026
    
    
    $
    26,276
    
    
    $
    6,755
    
    
    $
    5,474Nonperforming loans to loans, before
allowance for loan losses
    
    
    6.54
    %
    
    
    
    
    
    
    2.83
    %
    
    
    1.91
    %
    
    
    0.62
    %
    
    
    0.58
    %Nonperforming loans and nonperforming
other assets to loans, before allowance
for loan losses
    
    
    8.66
    %
    
    
    
    
    
    
    3.57
    %
    
    
    2.18
    %
    
    
    0.65
    %
    
    
    0.64
    %
 
 (1)
    
    Interest income that would have been recorded in 2009 related to nonaccrual loans was $2.3
million, none of which is included in interest income or net income for 2009. 61




---



##### Table of Contents



62




---



##### Table of Contents



Potential Problem Loans
  Other Interest-Bearing Assets
  Other Assets
   63




---



##### Table of Contents



64




---



##### Table of Contents



Deposits
    December 31,2009*
    
    
    2008
    
    
    2007Average
    
    
    
    
    
    
    
    
    
    
    Average
    
    
    
    
    
    
    
    
    
    
    AverageAverage Balance
    
    
    % Total
    
    
    Rate
    
    
    Average Balance
    
    
    % Total
    
    
    Rate
    
    
    Average Balance
    
    
    % Total
    
    
    Rate(dollars in thousands)Non-interest bearing demand
deposits
    
    $
    86,185
    
    
    
    9.0
    %
    
    
    0.00
    %
    
    $
    127,694
    
    
    
    9.1
    %
    
    
    0.00
    %
    
    $
    112,091
    
    
    
    9.4
    %
    
    
    0.00
    %Interest bearing demand deposit
    
    
    64,587
    
    
    
    6.8
    %
    
    
    0.31
    %
    
    
    135,406
    
    
    
    9.7
    %
    
    
    0.99
    %
    
    
    116,908
    
    
    
    9.8
    %
    
    
    1.62
    %Savings/Money market
    
    
    194,854
    
    
    
    20.5
    %
    
    
    0.82
    %
    
    
    309,348
    
    
    
    22.3
    %
    
    
    1.95
    %
    
    
    266,287
    
    
    
    22.3
    %
    
    
    3.47
    %Time deposits
    
    
    606,967
    
    
    
    63.7
    %
    
    
    3.29
    %
    
    
    820,908
    
    
    
    58.9
    %
    
    
    4.19
    %
    
    
    696,542
    
    
    
    58.5
    %
    
    
    4.83
    %Total
    
    $
    952,593
    
    
    
    100.0
    %
    
    
    2.29
    %
    
    $
    1,393,356
    
    
    
    100.00
    %
    
    
    3.30
    %
    
    $
    1,191,828
    
    
    
    100.00
    %
    
    
    4.15
    %
 
 *
    
    Amounts represent balances from continuing operations. December 31,2009*
    
    2008
    
    2007
    
    2006(dollars in thousands)High month-end balance of total deposits
    
    $
    983,224
    
    
    $
    1,477,141
    
    
    $
    1,319,459
    
    
    $
    1,166,814Low month-end balance of total deposits
    
    
    904,628
    
    
    
    1,320,853
    
    
    
    1,120,863
    
    
    
    973,258
 
 *
    
    Amounts represent balances from continuing operations.  December 31, 2009(dollars in thousands)Under 3 months
    
    $
    64,3623 months to 6 months
    
    
    96,6296 months to 12 months
    
    
    88,826Over 12 months
    
    
    14,589$
    264,406
 65




---



##### Table of Contents



Short-term Borrowings
  Federal fundpurchased andsecurities sold
    
    
    
    
    
    Short-term Federalunder agreements to
    
    Other short-term
    
    Home Loan Bankrepurchase
    
    borrowings
    
    borrowings(dollars in thousands)2009Balance, December 31, 2009, from continuing
operations
    
    $
    17,258
    
    
    $
    13,482
    
    
    $
    Weighted average interest rate at end of year
    
    
    1.67
    %
    
    
    6.53
    %
    
    
    0.00
    %Maximum amount outstanding at any month end
    
    $
    15,568
    
    
    $
    65,917
    
    
    $
    Average daily balance
    
    $
    29,738
    
    
    $
    28,406
    
    
    $
    59Weighted average interest rate during year (1)
    
    
    0.85
    %
    
    
    7.82
    %
    
    
    0.59
    %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
    %
 
 (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. (Great
River), owned by R. Dean Phillips (Phillips), a significant shareholder of
the Company, with a principal balance of approximately $7,.6 million and
interest payable monthly at an annual interest rate of 7.5%. The principal
balance, together with accrued interest, was payable immediately upon Great
 66




---



##### Table of Contents



Rivers written demand. The note was secured by 100% of the outstanding shares
of the subsidiary banks. During 2009, the Company borrowed an additional $4
million from Great River with terms consistent with the first note. Principal
and interest on both notes were paid in full in December 2009 as part of the
Exchange Agreement with Phillips, wherein Phillips acquired HNB National Bank
(HNB) in exchange for the repayment of $28 million of the Great River debt.2.
    
    A note payable by Mid-America Bancorp, Inc. to First Community
Bank of Lees Summit, Missouri. The note had a principal balance of $4 million
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 by issuance of an inter-company convertible
debenture to Mid-America. The debentures are eliminated on a consolidated basis
and therefore excluded in the Companys financial statements.3.
    
    A note payable resulting from HNB foreclosing on a loan where
HNB was the secondary lien-holder on the property. As of December 31, 2008,
HNB owed the primary lien-holder $345 thousand, which was paid during January
2009.
  Long-Term Debt and Junior Subordinated Debentures
  2009
    
    
    2008Continuing
    
    
    DiscontinuedFederal Home Loan Bank advances, fixed rates from 3.15% to 5.30%
from continuing operations due at various dates through 2013, and
fixed rates from 4.52% to 5.30% from discontinued operations due
at various dates through 2016
    
    $
    18,000
    
    
    $
    13,500
    
    
    $
    60,500Note payable, fixed rate of 7.50%, due August 31, 2010
    
    
    5,037
    
    
    
    
    
    
    
    5,037Note payable, fixed rate of 7.50%, due August 31, 2010
    
    
    135
    
    
    
    
    
    
    
    2,015Note payable, fixed rate of 7.50%, due November 10, 2009
    
    
    
    
    
    
    
    
    
    
    15,109Junior 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
    
    $
    87,030
    
    
    $
    13,500
    
    
    $
    146,519
    67




---



##### Table of Contents



68




---



##### Table of Contents



69




---



##### Table of Contents



Liquidity
   Parent Company Liquidity
  70




---



##### Table of Contents



Subsidiary Bank Liquidity
  Years Ended December 31,2009*
    
    
    2008
    
    
    2007(dollars in thousands)Cash and due from banks
    
    $
    12,042
    
    
    $
    34,518
    
    
    $
    26,511Interest-bearing demand deposits
    
    
    82,557
    
    
    
    21,952
    
    
    
    16,887Federal funds sold
    
    
    11,842
    
    
    
    21,465
    
    
    
    23,157Total
    
    $
    106,441
    
    
    $
    77,935
    
    
    $
    66,555Percent of average total assets
    
    
    6.15
    %
    
    
    4.58
    %
    
    
    4.52
    %
 
 *
    
    Amounts represented are from continuing operations.  December 31,2009*
    
    
    2008
    
    
    2007(dollars in thousands)Cash and due from banks
    
    $
    8,606
    
    
    $
    67,595
    
    
    $
    38,172Interest-bearing demand deposits
    
    
    94,623
    
    
    
    16,812
    
    
    
    18,259Federal funds sold
    
    
    18,038
    
    
    
    5,414
    
    
    
    19,628Total
    
    $
    121,267
    
    
    $
    89,821
    
    
    $
    76,059Percent of total assets
    
    
    8.79
    %
    
    
    5.06
    %
    
    
    4.64
    %
 
 *
    
    Amounts represented are from continuing operations.    71




---



##### Table of Contents



Next 12
    
    
    13-36
    
    
    37-60
    
    
    More thanMonths
    
    
    Months
    
    
    Months
    
    
    60 Months
    
    
    Totals(dollars in thousands)Contractual obligations:Certificates of deposit
    
    $
    279,744
    
    
    $
    213,425
    
    
    $
    70,669
    
    
    $
    31,338
    
    
    $
    595,176Short-term borrowings
    
    
    30,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,740Long-term borrowing (1)
    
    
    10,172
    
    
    
    10,000
    
    
    
    5,000
    
    
    
    61,858
    
    
    
    87,030Interest payments on
long-term borrowings
    
    
    4,059
    
    
    
    5,774
    
    
    
    2,912
    
    
    
    5,406
    
    
    
    18,151Minimum operating
lease commitments
    
    
    363
    
    
    
    653
    
    
    
    498
    
    
    
    312
    
    
    
    1,826Totals
    
    $
    325,078
    
    
    $
    229,852
    
    
    $
    79,079
    
    
    $
    98,914
    
    
    $
    732,923
 
 (1)
    
    The long-term borrowings from continuing operations include: Federal Home Loan Bank advances
totaling $18.0 million at fixed rates ranging from 3.15% to 5.3%; bank notes payable totaling
$5.2 million at a fixed rate of interest of 7.50% at December 31, 2009; junior subordinated
debentures totaling $2.0 million at a variable rate of interest due June 2013; 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 1.90% at
December 31,2009; and junior subordinated debentures totaling $20.6 million at a fixed rate of
6.84% until October 2017. 72




---



##### Table of Contents



Next 12
    
    
    13-36
    
    
    37-60
    
    
    More thanMonths
    
    
    Months
    
    
    Months
    
    
    60 Months
    
    
    Totals(dollars in thousands)Unfunded commitments:Letters of credit
    
    $
    12,762
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    12,762Lines of credit
    
    
    37,843
    
    
    
    78,328
    
    
    
    16,630
    
    
    
    10,430
    
    
    
    143,231Totals
    
    $
    50,605
    
    
    $
    78,328
    
    
    $
    16,630
    
    
    $
    10,430
    
    
    $
    155,993
   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
    
    $
    94,623
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    94,623
    
    
    $
    94,623Federal funds sold
    
    
    18,038
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,038
    
    
    
    18,038SecuritiesMortgage-backed securities: GSE residential
    
    
    17,765
    
    
    
    31,676
    
    
    
    27,520
    
    
    
    13,284
    
    
    
    7,279
    
    
    
    164
    
    
    
    97,688
    
    
    
    97,765State and political subdivisions
    
    
    4,520
    
    
    
    5,172
    
    
    
    5,577
    
    
    
    4,888
    
    
    
    3,679
    
    
    
    5,703
    
    
    
    29,539
    
    
    
    29,539Equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,257
    
    
    
    3,257
    
    
    
    3,257Loans and loans held for sale
    
    
    287,385
    
    
    
    72,934
    
    
    
    80,015
    
    
    
    75,311
    
    
    
    69,854
    
    
    
    191,171
    
    
    
    776,670
    
    
    
    777,253Total rate-sensitive assets
    
    $
    422,331
    
    
    $
    109,782
    
    
    $
    113,112
    
    
    $
    93,483
    
    
    $
    80,812
    
    
    $
    200,295
    
    
    $
    1,019,815
    
    
    $
    1,000,943Interest bearing transaction deposits
    
    $
    332
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    72,120
    
    
    $
    72,452
    
    
    $
    72,452Savings deposits
    
    
    377
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,639
    
    
    
    48,016
    
    
    
    48,016Money market deposits
    
    
    130,562
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130,562
    
    
    
    130,562Time and brokered time deposits
    
    
    279,744
    
    
    
    154,863
    
    
    
    58,562
    
    
    
    56,034
    
    
    
    14,635
    
    
    
    31,338
    
    
    
    595,176
    
    
    
    593,262Short-term borrowings
    
    
    30,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,740
    
    
    
    30,740Long-term debt and junior subordinated debentures
    
    
    10,172
    
    
    
    8,000
    
    
    
    2,000
    
    
    
    5,000
    
    
    
    
    
    
    
    61,858
    
    
    
    87,030
    
    
    
    56,368Total rate-sensitive liabilities
    
    $
    451,927
    
    
    $
    162,863
    
    
    $
    60,562
    
    
    $
    61,034
    
    
    $
    14,635
    
    
    $
    212,955
    
    
    $
    963,976
    
    
    $
    931,399Rate sensitive assets  rate sensitive liabilities
    
    $
    (29,596
    )
    
    $
    (53,081
    )
    
    $
    52,550
    
    
    $
    32,449
    
    
    $
    66,177
    
    
    $
    (12,660
    )
    
    $
    55,839
    
    
    $
    69,544
 73




---



##### Table of Contents



Rate Sensitive WithinFair1 year
    
    
    1-2 years
    
    
    2-3 years
    
    
    3-4 years
    
    
    4-5 years
    
    
    Thereafter
    
    
    Total
    
    
    Value(dollars in thousands)Cumulative Gap
    
    $
    (29,596
    )
    
    $
    (82,677
    )
    
    $
    (30,127
    )
    
    $
    2,322
    
    
    $
    68,499
    
    
    $
    55,839Cumulative amounts as % of total rate-sensitive
assets
    
    
    -2.90
    %
    
    
    -8.11
    %
    
    
    -2.95
    %
    
    
    0.23
    %
    
    
    6.72
    %
    
    
    5.48
    %Cumulative Ratio
    
    
    
    
    
    
    .87
    
    
    
    .96
    
    
    
    1.00
    
    
    
    1.09
    
    
    
    1.06
   Capital Resources
    74




---



##### Table of Contents



75




---



##### Table of Contents



Regulatory Matters
     The Company.
  Mercantile Bank.
 Royal Palm Bank.
 76




---



##### Table of Contents



Royal Palm Bancorp.
 Heartland Bank.
 77




---



##### Table of Contents



Mid-America Bancorp.
   Accounting Pronouncements
      78




---



##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 8. Financial Statements and Supplementary Data
  Consolidated Quarterly Financial Data
 2009December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31(dollars in thousands, except per share data)Interest income
    
    $
    12,169
    
    
    $
    12,471
    
    
    $
    12,765
    
    
    $
    12,912Interest expense
    
    
    6,710
    
    
    
    6,767
    
    
    
    7,542
    
    
    
    8,082Net interest income
    
    
    5,459
    
    
    
    5,704
    
    
    
    5,223
    
    
    
    4,830Provision for loan losses
    
    
    4,439
    
    
    
    5,341
    
    
    
    9,518
    
    
    
    2,785Noninterest income
    
    
    3,876
    
    
    
    1,400
    
    
    
    636
    
    
    
    1,879Noninterest expense
    
    
    11,942
    
    
    
    8,903
    
    
    
    42,491
    
    
    
    8,147Income (loss) before income taxes
    
    
    (7,046
    )
    
    
    (7,140
    )
    
    
    (46,150
    )
    
    
    (4,223
    )Income tax benefit
    
    
    2,165
    
    
    
    2,865
    
    
    
    5,546
    
    
    
    1,561Net income (loss) from continuing operations
    
    
    (4,881
    )
    
    
    (4,275
    )
    
    
    (40,604
    )
    
    
    (2,662
    )Discontinued operations
    
    
    197
    
    
    
    2,428
    
    
    
    (12,369
    )
    
    
    1,786Noncontrolling interest
    
    
    (418
    )
    
    
    (488
    )
    
    
    (506
    )
    
    
    (421
    )Net income (loss)
    
    $
    (4,266
    )
    
    $
    (1,359
    )
    
    $
    (52,467
    )
    
    $
    (455
    )Basic earnings (loss) per share  continuing operations
    
    $
    (0.51
    )
    
    $
    (0.43
    )
    
    $
    (4.61
    )
    
    $
    (0.26
    )Basic earnings (loss) per share  discontinued
operations
    
    $
    0.02
    
    
    $
    0.28
    
    
    $
    (1.42
    )
    
    $
    0.21
 79




---



##### Table of Contents



2008December 31
    
    
    September 30
    
    
    June 30
    
    
    March 31(dollars in thousands, except per share data)Interest income
    
    $
    13,839
    
    
    $
    14,832
    
    
    $
    14,615
    
    
    $
    15,620Interest expense
    
    
    8,974
    
    
    
    8,723
    
    
    
    9,029
    
    
    
    10,426Net interest income
    
    
    4,865
    
    
    
    6,109
    
    
    
    5,586
    
    
    
    5,194Provision for loan losses
    
    
    12,626
    
    
    
    4,220
    
    
    
    1,702
    
    
    
    4,628Noninterest income
    
    
    1,910
    
    
    
    2,427
    
    
    
    2,759
    
    
    
    2,061Noninterest expense
    
    
    8,240
    
    
    
    14,217
    
    
    
    8,277
    
    
    
    7,840Income (loss) before income taxes
    
    
    (14,091
    )
    
    
    (9,901
    )
    
    
    (1,634
    )
    
    
    (5,213
    )Income tax benefit
    
    
    4,471
    
    
    
    4,476
    
    
    
    827
    
    
    
    1,597Net income (loss) from continuing operations
    
    
    (9,620
    )
    
    
    (5,425
    )
    
    
    (807
    )
    
    
    (3,616
    )Discontinued operations
    
    
    1,640
    
    
    
    2,069
    
    
    
    1,967
    
    
    
    1,650Noncontrolling interest
    
    
    (1,267
    )
    
    
    (1,662
    )
    
    
    (103
    )
    
    
    (289
    )Net income (loss)
    
    $
    (6,713
    )
    
    $
    (1,694
    )
    
    $
    1,263
    
    
    $
    (1,677
    )Basic earnings (loss) per share  continuing operations
    
    $
    (0.96
    )
    
    $
    (0.43
    )
    
    $
    (0.08
    )
    
    $
    (0.38
    )Basic earnings (loss) per share  discontinued
operations
    
    $
    0.19
    
    
    $
    0.23
    
    
    $
    .23
    
    
    $
    0.19
 
 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
  80




---



##### Table of Contents



/s/ Ted T. AwerkampTed T. Awerkamp
President and Chief Executive Officer /s/ Michael P. McGrathMichael P. McGrath
Executive Vice President, Treasurer, Secretary and Chief Financial Officer Changes in Internal Control Over Financial Reporting
  
 Item 9B. Other Information
  81




---



##### 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
  82




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
   Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets at December 31, 2009 and 2008Consolidated Statements of Operations for the Years Ended December 31, 2009, 2008, and 2007Consolidated Statement of Stockholders Equity for the Years Ended December 31, 2009, 2008,
and 2007Consolidated Statements of Cash Flows for the Years Ended December 31, 2009, 2008, and 2007Notes to Consolidated Financial Statements
   83




---



##### Table of Contents



SIGNATURES
  MERCANTILE BANCORP, INC.
(Registrant)By:
    /s/       Ted T. AwerkampName:
    Ted T. AwerkampTitle:
    President and Chief Executive
OfficerDated: April 7, 2010  Signature
    
    Title
    
    Date/s/ Ted T. Awerkamp

Ted T. Awerkamp
    
    President and Chief Executive Officer
(principal executive officer)
    
    April 7, 2010/s/ Michael P. McGrath

Michael P. McGrath
    
    Executive Vice President, Treasurer,
Secretary and Chief Financial
Officer
(principal financial
officer/principal accounting
officer)
    
    April 7, 2010/s/ Ted T. Awerkamp

Ted T. Awerkamp
    
    Director
    
    April 7, 2010/s/ Lee R. Keith

Lee R. Keith
    
    Director
    
    April 7, 2010/s/ Michael J. Foster

Michael J. Foster
    
    Chairman/Director
    
    April 7, 2010/s/ William G. Keller

William G. Keller, Jr.
    
    Director
    
    April 7, 2010/s/ John R. Spake

John R. Spake
    
    Director
    
    April 7, 2010/s/ Dennis M. Prock

Dennis M. Prock
    
    Director
    
    April 7, 2010/s/ Alexander J. House

Alexander J. House
    
    Director
    
    April 7, 2010/s/ James W. Tracy

James W. Tracy
    
    Director
    
    April 7, 2010/s/ Julie A. Brink

Julie A. Brink
    
    Director
    
    April 7, 2010
 84




---



##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
    Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51.
 BKD, LLP
 
 85




---



##### Table of Contents



Mercantile Bancorp, Inc.
 
 Consolidated Balance Sheets
December 31, 2009 and 2008
(in thousands, except share data)
 2009
    
    
    2008AssetsCash and due from banks
    
    $
    8,606
    
    
    $
    67,595Interest-bearing demand deposits
    
    
    94,623
    
    
    
    16,812Federal funds sold
    
    
    18,038
    
    
    
    5,414Cash and cash equivalents
    
    
    121,267
    
    
    
    89,821Available-for-sale securities
    
    
    128,150
    
    
    
    185,192Held-to-maturity securities (fair value of $2,411 and $9,101)
    
    
    2,334
    
    
    
    8,905Loans held for sale
    
    
    681
    
    
    
    4,366Loans, net of allowance for loan losses of $18,851 and
$23,467 at December 31, 2009 and 2008
    
    
    757,138
    
    
    
    1,315,907Interest receivable
    
    
    3,962
    
    
    
    10,240Foreclosed assets held for sale, net
    
    
    16,409
    
    
    
    9,959Federal Home Loan Bank stock
    
    
    2,900
    
    
    
    8,213Cost method investments in common stock
    
    
    1,392
    
    
    
    3,314Deferred income taxes
    
    
    10,212
    
    
    
    9,181Mortgage servicing rights
    
    
    885
    
    
    
    959Cash surrender value of life insurance
    
    
    15,011
    
    
    
    25,278Premises and equipment
    
    
    25,670
    
    
    
    40,616Goodwill
    
    
    
    
    
    
    44,653Core deposit and other intangibles
    
    
    1,066
    
    
    
    4,002Other
    
    
    17,413
    
    
    
    14,377Discontinued operations, assets held for sale
    
    
    285,992
    
    
    
    Total assets
    
    $
    1,390,482
    
    
    $
    1,774,983
 See Notes to Consolidated Financial Statements
 86




---



##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Balance Sheets
December 31, 2009 and 2008
(in thousands, except share data)
 Liabilities and Stockholders Equity
 2009
    
    
    2008LiabilitiesDepositsDemand
    
    $
    108,318
    
    
    $
    139,486Savings, NOW and money market
    
    
    251,030
    
    
    
    431,596Time
    
    
    421,412
    
    
    
    672,763Brokered time
    
    
    173,764
    
    
    
    218,431Total deposits
    
    
    954,524
    
    
    
    1,462,276Short-term borrowings
    
    
    30,740
    
    
    
    49,227Long-term debt
    
    
    25,172
    
    
    
    84,661Junior subordinated debentures
    
    
    61,858
    
    
    
    61,858Interest payable
    
    
    4,114
    
    
    
    4,280Other
    
    
    4,827
    
    
    
    7,989Discontinued operations, liabilities held for sale
    
    
    264,044
    
    
    
    Total liabilities
    
    
    1,345,279
    
    
    
    1,670,291Commitments and Contingent LiabilitiesStockholders EquityMercantile Bancorp, Inc. stockholders equity
Common stock, $0.42 par value; authorized 14,000,000 shares;Issued  8,887,113 shares
Outstanding  8,703,330 shares at December 31, 2009 and
2008
    
    
    3,629
    
    
    
    3,629Additional paid-in capital
    
    
    11,919
    
    
    
    11,919Retained earnings
    
    
    25,095
    
    
    
    83,642Accumulated other comprehensive income
    
    
    2,954
    
    
    
    2,06243,597
    
    
    
    101,252Treasury stock, at cost
Common; 183,783 shares at December 31, 2009 and 2008
    
    
    (2,295
    )
    
    
    (2,295
    )Total Mercantile Bancorp, Inc. stockholders equity
    
    
    41,302
    
    
    
    98,957Noncontrolling interest
    
    
    3,901
    
    
    
    5,735Total stockholders equity
    
    
    45,203
    
    
    
    104,692Total liabilities and stockholders equity
    
    $
    1,390,482
    
    
    $
    1,774,983
 87




---



##### Table of Contents



Mercantile Bancorp, Inc.
 
 Consolidated Statements of Operations
Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share data)
 2009
    
    
    2008
    
    
    2007Interest and Dividend IncomeLoans, including feesTaxable
    
    $
    44,066
    
    
    $
    51,725
    
    
    $
    57,251Tax exempt
    
    
    678
    
    
    
    632
    
    
    
    798SecuritiesTaxable
    
    
    4,346
    
    
    
    4,551
    
    
    
    5,562Tax exempt
    
    
    944
    
    
    
    1,149
    
    
    
    1,314Federal funds sold
    
    
    18
    
    
    
    343
    
    
    
    1,060Dividends on Federal Home Loan Bank stock
    
    
    14
    
    
    
    64
    
    
    
    124Deposits with financial institutions and other
    
    
    251
    
    
    
    442
    
    
    
    966Total interest and dividend income
    
    
    50,317
    
    
    
    58,906
    
    
    
    67,075Interest ExpenseDeposits
    
    
    21,766
    
    
    
    30,039
    
    
    
    33,141Short-term borrowings
    
    
    2,475
    
    
    
    797
    
    
    
    1,546Long-term debt and junior subordinated debentures
    
    
    4,860
    
    
    
    6,316
    
    
    
    5,802Total interest expense
    
    
    29,101
    
    
    
    37,152
    
    
    
    40,489Net Interest Income
    
    
    21,216
    
    
    
    21,754
    
    
    
    26,586Provision for Loan Losses
    
    
    22,083
    
    
    
    23,176
    
    
    
    2,724Net Interest Income After Provision for Loan Losses
    
    
    (867
    )
    
    
    (1,422
    )
    
    
    23,862Noninterest IncomeFiduciary activities
    
    
    2,224
    
    
    
    2,238
    
    
    
    2,230Brokerage fees
    
    
    1,082
    
    
    
    1,412
    
    
    
    1,198Customer service fees
    
    
    1,636
    
    
    
    1,882
    
    
    
    2,186Other service charges and fees
    
    
    494
    
    
    
    501
    
    
    
    399Net gains (losses) on sales of assets
    
    
    (60
    )
    
    
    373
    
    
    
    47Net gains on loan sales
    
    
    1,211
    
    
    
    694
    
    
    
    528Net gains on sale of available-for-sale securities
    
    
    
    
    
    
    942
    
    
    
    699Net gains on equity and cost method investments
    
    
    
    
    
    
    100
    
    
    
    2,203Loan servicing fees
    
    
    475
    
    
    
    432
    
    
    
    403Net increase in cash surrender value of life
insurance
    
    
    577
    
    
    
    541
    
    
    
    491Other
    
    
    152
    
    
    
    42
    
    
    
    61Total noninterest income
    
    
    7,791
    
    
    
    9,157
    
    
    
    10,445
 See Notes to Consolidated Financial Statements
 88




---



##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share data)
 2009
    
    
    2008
    
    
    2007Noninterest ExpenseSalaries and employee benefits
    
    $
    17,561
    
    
    $
    18,020
    
    
    $
    16,463Net occupancy expense
    
    
    2,374
    
    
    
    2,491
    
    
    
    1,796Equipment expense
    
    
    2,371
    
    
    
    2,608
    
    
    
    1,977Deposit insurance premium
    
    
    2,834
    
    
    
    818
    
    
    
    174Professional fees
    
    
    3,593
    
    
    
    2,077
    
    
    
    1,751Postage and supplies
    
    
    600
    
    
    
    698
    
    
    
    693Losses on foreclosed assets, net
    
    
    2,867
    
    
    
    1,040
    
    
    
    86Other than temporary loss on
available-for-sale securities and cost
method investments
    
    
    3,426
    
    
    
    5,270
    
    
    
    Goodwill impairment loss
    
    
    30,388
    
    
    
    
    
    
    
    Amortization of mortgage servicing rights
    
    
    433
    
    
    
    226
    
    
    
    134Other
    
    
    5,036
    
    
    
    5,326
    
    
    
    4,692Total noninterest expense
    
    
    71,483
    
    
    
    38,574
    
    
    
    27,766Income (Loss) from Continuing Operations
Before Income Taxes
    
    
    (64,559
    )
    
    
    (30,839
    )
    
    
    6,541Income Tax Expense (Benefit)
    
    
    (12,137
    )
    
    
    (11,371
    )
    
    
    952Income (Loss) from Continuing Operations
    
    
    (52,422
    )
    
    
    (19,468
    )
    
    
    5,589Discontinued OperationsIncome (loss) from discontinued
operations (including loss on exchange in
2009 of $2,367), net of income tax
expense of $2,233, $2,822, and $2,483,
respectively
    
    
    (7,958
    )
    
    
    7,326
    
    
    
    5,034Net Income (Loss)
    
    
    (60,380
    )
    
    
    (12,142
    )
    
    
    10,623Less: Net income (loss) attributable to
noncontrolling interest
    
    
    (1,833
    )
    
    
    (3,321
    )
    
    
    622Net Income (Loss) attributable to Mercantile
Bancorp, Inc.
    
    $
    (58,547
    )
    
    $
    (8,821
    )
    
    $
    10,001Weighted average shares outstanding
    
    
    8,703,330
    
    
    
    8,705,452
    
    
    
    8,727,933Basic Earnings (Loss) Per ShareContinuing operations
    
    $
    (5.81
    )
    
    $
    (1.85
    )
    
    $
    .57Discontinued operations
    
    
    (.91
    )
    
    
    .84
    
    
    
    .58$
    (6.72
    )
    
    $
    (1.01
    )
    
    $
    1.15
 89




---



##### Table of Contents



Mercantile Bancorp, Inc.
 
 Consolidated Statements of Stockholders Equity
Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share data)
 Mercantile Bancorp, Inc.Common Stock

    
    
    Additional Paid-InShares Outstanding
    
    
    Amount
    
    
    CapitalBalance, January 1, 2007
    
    
    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 income ($10,283 and $624
attributable to Mercantile Bancorp, Inc. and
noncontrolling interest, respectively)Issuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    76Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (37,962
    )
    
    
    
    
    
    
    (69
    )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 loss (($7,064) and ($3,320)
attributable to Mercantile Bancorp, Inc. and
noncontrolling interest, respectively)Issuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    39Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (6,325
    )
    
    
    
    
    
    
    (109
    )Balance, December 31, 2008
    
    
    8,703,330
    
    
    
    3,629
    
    
    
    11,919Comprehensive 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 loss (($57,655) and ($1,834)
attributable to Mercantile Bancorp, Inc. and
non-controlling interest, respectively.)Balance, December 31, 2009
    
    
    8,703,330
    
    
    $
    3,629
    
    
    $
    11,919
 See Notes to Consolidated Financial Statements
 90




---



##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Stockholders Equity
Years Ended December 31, 2009, 2008 and 2007
 (in thousands, except share data)
 StockholdersAccumulatedOtherRetained
    
    
    Comprehensive
    
    
    
    
    
    
    NoncontrollingEarnings
    
    
    Income
    
    
    Treasury Stock
    
    
    Interest
    
    
    TotalBalance, January 1, 2007
    
    $
    86,648
    
    
    $
    23
    
    
    $
    (1,624
    )
    
    $
    9,198
    
    
    $
    109,856Comprehensive incomeNet income
    
    
    10,001
    
    
    
    
    
    
    
    
    
    
    
    622
    
    
    
    10,623Change in unrealized appreciation on
available-for-sale securities, net of taxes and
reclassification adjustment
    
    
    
    
    
    
    240
    
    
    
    
    
    
    
    2
    
    
    
    242Accumulated other comprehensive loss of equity
method investee
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    28Defined benefit postretirement plan  transition
obligation
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    14Total comprehensive income ($10,283 and $624
attributable to Mercantile Bancorp, Inc. and
noncontrolling interest, respectively)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,907Issuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    170
    
    
    
    246Dividends on common stock, $0.24 per share
    
    
    (2,097
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,097
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (569
    )
    
    
    (546
    )
    
    
    (1,184
    )Balance, December 31, 2007
    
    
    94,552
    
    
    
    305
    
    
    
    (2,193
    )
    
    
    9,446
    
    
    
    117,728Comprehensive lossNet loss
    
    
    (8,821
    )
    
    
    
    
    
    
    
    
    
    
    (3,321
    )
    
    
    (12,142
    )Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    1,737
    
    
    
    
    
    
    
    1
    
    
    
    1,738Defined benefit postretirement plan  transition obligation
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Total comprehensive loss (($7,064) and ($3,320) attributable to
Mercantile Bancorp, Inc. and noncontrolling interest,
respectively)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,384
    )Issuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32
    
    
    
    71Dividends on common stock, $0.24 per share
    
    
    (2,089
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,089
    )Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    (102
    )
    
    
    (423
    )
    
    
    (634
    )Balance, December 31, 2008
    
    
    83,642
    
    
    
    2,062
    
    
    
    (2,295
    )
    
    
    5,735
    
    
    
    104,692Comprehensive lossNet loss
    
    
    (58,547
    )
    
    
    
    
    
    
    
    
    
    
    (1,833
    )
    
    
    (60,380
    )Change in unrealized appreciation on
available-for-sale securities, net of taxes and
reclassification adjustment
    
    
    
    
    
    
    872
    
    
    
    
    
    
    
    (1
    )
    
    
    871Defined benefit postretirement plan  transition
obligation
    
    
    
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    20Total comprehensive loss (($57,655) and ($1,834) attributable to
Mercantile Bancorp, Inc. and non-controlling interest,
respectively.)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (59,489
    )Balance, December 31, 2009
    
    $
    25,095
    
    
    $
    2,954
    
    
    $
    (2,295
    )
    
    $
    3,901
    
    
    $
    45,203
 91




---



##### Table of Contents



Mercantile Bancorp, Inc.
 
 Consolidated Statements of Cash Flows
 Years Ended December 31, 2009, 2008 and 2007
 (in thousands, except share data)
 2009
    
    
    2008
    
    
    2007Operating ActivitiesNet income (loss) before attribution of noncontrolling
interest
    
    $
    (60,380
    )
    
    $
    (12,142
    )
    
    $
    10,623Net income (loss) attributable to noncontrolling interest
    
    
    (1,833
    )
    
    
    (3,221
    )
    
    
    622Net income (loss) attributable to Mercantile Bancorp, Inc.
    
    
    (58,547
    )
    
    
    (8,921
    )
    
    
    10,001Items not requiring (providing) cashDepreciation
    
    
    2,626
    
    
    
    2,845
    
    
    
    1,898Provision for loan losses
    
    
    23,363
    
    
    
    23,845
    
    
    
    2,969Amortization (accretion) of premiums and discounts on
securities
    
    
    (15
    )
    
    
    (2
    )
    
    
    (28
    )Amortization (accretion) of core deposit intangibles
and other purchase accounting adjustments
    
    
    441
    
    
    
    80
    
    
    
    (970
    )Mortgage servicing rights impairment
    
    
    
    
    
    
    404
    
    
    
    Deferred income taxes
    
    
    (2,305
    )
    
    
    (7,752
    )
    
    
    (482
    )Net realized gains on sales of available-for-sale
securities
    
    
    
    
    
    
    (942
    )
    
    
    (699
    )Other than temporary losses on available-for-sale and
cost method investments
    
    
    3,426
    
    
    
    5,270
    
    
    
    Losses on sales of foreclosed assets
    
    
    2,988
    
    
    
    1,113
    
    
    
    86Net gains on loan sales
    
    
    (2,027
    )
    
    
    (1,010
    )
    
    
    (698
    )Recovery of mortgage servicing rights
    
    
    (244
    )
    
    
    
    
    
    
    Amortization of mortgage servicing rights
    
    
    458
    
    
    
    253
    
    
    
    134Net (gains) losses on sale of premises and equipment
    
    
    65
    
    
    
    (371
    )
    
    
    23Gain on sale of equity and cost method investments
    
    
    
    
    
    
    (100
    )
    
    
    (2,209
    )(Income) loss on equity method investments in common
stock
    
    
    
    
    
    
    
    
    
    
    6Federal Home Loan Bank stock dividends
    
    
    (11
    )
    
    
    (32
    )
    
    
    (56
    )Net increase in cash surrender value of life insurance
    
    
    (1,093
    )
    
    
    (1,039
    )
    
    
    (926
    )Goodwill
impairment:
    
    
    44,650
    
    
    
    
    
    
    
    Changes inLoan originated for sale
    
    
    (104,568
    )
    
    
    (92,921
    )
    
    
    (48,113
    )Proceeds from sales of loans
    
    
    108,530
    
    
    
    92,483
    
    
    
    46,842Interest receivable
    
    
    1,780
    
    
    
    1,103
    
    
    
    (188
    )Other assets
    
    
    (7,909
    )
    
    
    (7,004
    )
    
    
    (1,068
    )Interest payable
    
    
    1,124
    
    
    
    (1,760
    )
    
    
    (607
    )Other liabilities
    
    
    (1,391
    )
    
    
    1,500
    
    
    
    61Noncontrolling interest in subsidiary
    
    
    (1,833
    )
    
    
    (3,221
    )
    
    
    622Net cash provided by operating activities
    
    
    9,508
    
    
    
    3,821
    
    
    
    6,598Investing ActivitiesCash (paid) received in acquisition of HNB Financial, net of
cash received
    
    
    3
    
    
    
    (719
    )
    
    
    (24,790
    )Cash paid on exchange of HNB Bank
    
    
    (11,692
    )
    
    
    
    
    
    
    Purchases of available-for-sale securities
    
    
    (66,043
    )
    
    
    (54,326
    )
    
    
    (44,091
    )Proceeds from maturities of available-for-sale securities
    
    
    56,735
    
    
    
    57,300
    
    
    
    47,015Proceeds 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
    
    
    3,607
    
    
    
    4,606
    
    
    
    3,368Net change in loans
    
    
    51,041
    
    
    
    (151,478
    )
    
    
    (58,888
    )Purchases of premises and equipment
    
    
    (769
    )
    
    
    (1,901
    )
    
    
    (11,504
    )Proceeds from sales of premises and equipment
    
    
    
    
    
    
    799
    
    
    
    25Purchases of Federal Home Loan Bank stock
    
    
    (80
    )
    
    
    (1,228
    )
    
    
    (710
    )Proceeds from sales of Federal Home Loan Bank stock
    
    
    718
    
    
    
    838
    
    
    
    449Proceeds from the sales of foreclosed assets
    
    
    2,660
    
    
    
    3,557
    
    
    
    275Purchase of cost method investment in common stock
    
    
    
    
    
    
    
    
    
    
    (3,234
    )Proceeds from sale of cost method investments
    
    
    
    
    
    
    495
    
    
    
    513Proceeds from sales of equity method investments
    
    
    
    
    
    
    
    
    
    
    6,791Purchase of bank-owned life insurance
    
    
    (1,000
    )
    
    
    
    
    
    
    (1,887
    )Net cash provided by (used in) investing activities
    
    
    35,180
    
    
    
    (137,103
    )
    
    
    (87,668
    )
 See Notes to Consolidated Financial Statements
 92




---



##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, 2009, 2008 and 2007
(in thousands, except share data)
 2009
    
    
    2008
    
    
    2007Financing ActivitiesNet increase in demand deposits, money market, NOW and
savings accounts
    
    $
    63,970
    
    
    $
    16,798
    
    
    $
    22,064Net increase (decrease) in time and brokered time deposits
    
    
    (46,559
    )
    
    
    126,099
    
    
    
    1,641Net increase (decrease) in short-term borrowings
    
    
    (9,528
    )
    
    
    3,638
    
    
    
    18,361Proceeds from long-term debt
    
    
    500
    
    
    
    49,161
    
    
    
    27,650Repayment of long-term debt
    
    
    (19,500
    )
    
    
    (46,000
    )
    
    
    (29,160
    )Proceeds from issuance of junior subordinated debentures
    
    
    
    
    
    
    
    
    
    
    20,619Purchase of stock from minority interest of Mid America
    
    
    
    
    
    
    (555
    )
    
    
    (612
    )Proceeds from issuance of stock to minority interest of
Mid-America
    
    
    
    
    
    
    94
    
    
    
    103Purchase of intangible assets
    
    
    
    
    
    
    
    
    
    
    (18
    )Purchase of treasury stock
    
    
    
    
    
    
    (102
    )
    
    
    (569
    )Dividends paid
    
    
    
    
    
    
    (2,089
    )
    
    
    (2,097
    )Net cash provided by (used in) financing activities
    
    
    (11,117
    )
    
    
    147,044
    
    
    
    57,982Increase (Decrease) in Cash and Cash Equivalents
    
    
    33,571
    
    
    
    13,762
    
    
    
    (23,088
    )Cash and Cash Equivalents, Beginning of Year
    
    
    89,821
    
    
    
    76,059
    
    
    
    99,147Cash and Cash Equivalents, End of Year, including $2,125
of cash and cash equivalents held for sale in 2009
    
    $
    123,392
    
    
    $
    89,821
    
    
    $
    76,059Supplemental Cash Flows InformationInterest paid
    
    $
    38,679
    
    
    $
    52,415
    
    
    $
    54,398Income taxes paid (net of refunds)
    
    $
    (4,573
    )
    
    $
    2,087
    
    
    $
    2,164Real estate acquired in settlement of loans
    
    $
    13,579
    
    
    $
    11,456
    
    
    $
    3,082Increase (decrease) in additional paid-in-capital due to
issuance (purchase) of stock to minority interest of
Mid-America at a price over book
    
    $
    
    
    
    $
    (70
    )
    
    $
    7Assets transferred to held for sale, plus related allowance
for loan losses of $1,820
    
    $
    287,812
    
    
    $
    
    
    
    $
    Liabilities transferred to held for sale
    
    $
    264,044
    
    
    $
    
    
    
    $
    Short-term and long-term debt exchanged for Hannibal National
Bank
    
    $
    28,000
    
    
    $
    
    
    
    $
    Increase in core deposit intangibles due to purchase of
Mid-America at a price over book
    
    $
    
    
    
    $
    
    
    
    $
    99Available-for-sale securities received in sale of equity and
cost method investments
    
    $
    
    
    
    $
    
    
    
    $
    700Capitalized interest
    
    $
    
    
    
    $
    
    
    
    $
    330
 93




---



##### Table of Contents



Mercantile Bancorp, Inc.
 
 Notes to Consolidated Financial Statements
 December 31, 2009 and 2008
 (Table dollar amounts in thousands)
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Investment Subsidiary
  Principles of Consolidation
  94




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51
 Use of Estimates
    Cash Equivalents
  95




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Securities
    96




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Equity Method Investments
  Cost Method Investments
  Loans Held for Sale
  Loans
    97




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Allowance for Loan Losses
     98




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Premises and Equipment
   Buildings and improvements
    
    35-40 yearsLeasehold improvements
    
    5-10 yearsEquipment
    
    3-5 years
 Federal Home Loan Bank Stock
   99




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Foreclosed Assets Held for Sale
  Goodwill
  Core Deposit Intangibles
  Mortgage Servicing Rights
   100




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Treasury Stock
  Assets and Liabilities Held for Sale
  Income Taxes
 Income Taxes
 101




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Deferred income tax expense results from changes in deferred tax assets and liabilities
between periods. Deferred tax assets are recognized if it is more likely than not, based on
the technical merits, that the tax position will be realized or sustained upon examination.
The term more likely than not means a likelihood of more than 50 percent; the terms examined
and upon examination also include resolution of the related appeals or litigation processes,
if any. A tax position that meets the more-likely-than-not recognition threshold is
initially and subsequently measured as the largest amount of tax benefit that has a greater
than 50 percent likelihood of being realized upon settlement with a taxing authority that has
full knowledge of all relevant information. The determination of whether or not a tax
position has met the more-likely-than-not recognition threshold considers the facts,
circumstances and information available at the reporting date and is subject to managements
judgment. Deferred tax assets are reduced by a valuation allowance if, based on the weight
of evidence available, it is more likely than not that some portion or all of a deferred tax
asset will not be realized.
 The Company recognizes interest and penalties on income taxes as a component of income tax
expense.
 The Company files consolidated income tax returns in the U.S. federal jurisdiction and
various states with its subsidiaries, with the exception of Mid-America Bancorp, Inc. The
Companys ownership of Mid-America Bancorp, Inc. was 55.5% at December 31, 2009, which does
not meet the requirements to be included in the Companys consolidated tax returns. The
Company is no longer subject to the U.S. federal or state income tax examinations by tax
authorities for years before 2006.
 Self Insurance
 The Company has elected to self-insure certain costs related to employee health benefit
programs. Costs resulting from uninsured losses are charged to income when incurred. The
Company has purchased insurance that limits its exposure to individual and aggregate amounts
in any given year.
 Earnings Per Share
 Earnings per share have been computed for continuing and discontinued operations based upon
the weighted-average common shares outstanding during each year.
 Comprehensive Income (Loss)
 Comprehensive income (loss) consists of net income (loss) and other comprehensive income
(loss), net of applicable income taxes. Other comprehensive income (loss) includes
unrealized appreciation (depreciation) on available-for-sale securities, and changes in the
funded status of defined benefit pension plans.
 102




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Trust Assets
 Assets held in fiduciary or agency capacities are not included in the consolidated balance
sheets since such items are not assets of the Company. Fees from trust activities are
recorded on an accrual basis over the period in which the service is provided. Fees are a
function of the market value of assets managed and administered, the volume of transactions,
and fees for other services rendered, as set forth in the underlying client agreement with
the Companys Trust Department. This revenue recognition involves the use of estimates and
assumptions, including components that are calculated based on estimated asset valuations and
transaction volumes. Generally, the actual trust fee is charged to each account on a monthly
prorated basis. Any out of pocket expenses or services not typically covered by the fee
schedule for trust activities are charged directly to the trust account on a gross basis as
trust revenue is incurred. The Company manages or administers 601 trust accounts with assets
totaling approximately $597,344,000 and $605,928,000 at December 31, 2009 and 2008,
respectively.
 Reclassifications
 Certain reclassifications have been made to the 2008 and 2007 financial statements to conform
to the 2009 financial statement presentation. These reclassifications had no effect on net
income (loss).
 Note 2: Securities
 The amortized cost and approximate fair values, together with gross unrealized gains and
losses of securities are as follows:
 Continuing OperationsGross
    
    
    Gross
    
    
    
    
    
    
    DiscontinuedAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    
    
    
    
    OperationsCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    Fair ValueAvailable-for-sale Securities:December 31, 2009:Mortgage-backed
securities: GSE
residential
    
    $
    92,710
    
    
    $
    2,789
    
    
    $
    (145
    )
    
    $
    95,354
    
    
    $
    38,460State and
political
subdivisions
    
    
    28,525
    
    
    
    1,019
    
    
    
    (5
    )
    
    
    29,539
    
    
    
    2,889Equity securities
    
    
    3,603
    
    
    
    162
    
    
    
    (508
    )
    
    
    3,257
    
    
    
    105$
    124,838
    
    
    $
    3,970
    
    
    $
    (658
    )
    
    $
    128,150
    
    
    $
    41,454
 103




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    UnrealizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale Securities:December 31, 2008:U.S. Government
and federal
agencies
    
    $
    4,697
    
    
    $
    90
    
    
    $
    
    
    
    $
    4,787Mortgage-backed
securities: GSE
residential
    
    
    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
 Continuing OperationsDiscontinuedGross
    
    
    Gross
    
    
    
    
    
    
    OperationsAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    
    
    
    
    AmortizedCost
    
    
    Gains
    
    
    Losses
    
    
    Fair Value
    
    
    CostHeld-to-maturity Securities:December 31, 2009:Mortgage-backed
securities:GSE
residential
    
    $
    2,334
    
    
    $
    77
    
    
    $
    
    
    
    $
    2,411
    
    
    $
    1,120December 31, 2008:Mortgage-backed
securities:GSE
residential
    
    $
    5,992
    
    
    $
    149
    
    
    $
    (1
    )
    
    $
    6,140State and
political
subdivisions
    
    
    2,913
    
    
    
    48
    
    
    
    
    
    
    
    2,961$
    8,905
    
    
    $
    197
    
    
    $
    (1
    )
    
    $
    9,101
 104




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 The amortized cost and fair value of available-for-sale securities and held-to-maturity
securities held in continuing operations at December 31, 2009, by contractual maturity, are
shown below. Expected maturities will differ from contractual maturities because issuers may
have the right to call or prepay obligations with or without call or prepayment penalties.
 Available-for-sale
    
    
    Held-to-maturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin one year
    
    $
    4,473
    
    
    $
    4,520
    
    
    $
    
    
    
    $
    One to five years
    
    
    18,451
    
    
    
    19,316
    
    
    
    
    
    
    
    Five to ten years
    
    
    1,955
    
    
    
    2,057
    
    
    
    
    
    
    
    After ten years
    
    
    3,646
    
    
    
    3,646
    
    
    
    
    
    
    
    28,525
    
    
    
    29,539
    
    
    
    
    
    
    
    Mortgage-backed
securities: GSE
residential
    
    
    92,710
    
    
    
    95,354
    
    
    
    2,334
    
    
    
    2,411Equity securities
    
    
    3,603
    
    
    
    3,257
    
    
    
    
    
    
    
    Totals
    
    $
    124,838
    
    
    $
    128,150
    
    
    $
    2,334
    
    
    $
    2,411
 The available-for-sale and held-to-maturity securities included in discontinued operations
had a majority of its maturities within one to five years.
 The carrying value of securities pledged as collateral, to secure public deposits, Federal
Home Loan Bank advances, repurchase agreements and for other purposes, amounted to
$47,427,000 for continuing operations and $26,373,000 for discontinued operations at December
31, 2009 and $103,797,000 at December 31, 2008.
 In May 2008, the Company sold its investment in the common stock of First Charter
Corporation, an available-for-sale security, recognizing a gain of $942,000. Income tax
expense of $358,000 was recognized on the sale of available-for-sale securities during 2008.
There were no sales of available-for-sale securities during 2009 or 2007.
 The Company also owned shares of NorthStar Bancshares, Inc. (NorthStar), as an equity
method investment in prior years. On July 5, 2006, Enterprise Financial Services Corp.
(Enterprise) acquired the outstanding common stock of NorthStar, (including the Companys
19.6% equity interest in NorthStar) in a stock and cash transaction. The Company was
entitled to receive for
each of its 228,392 shares of NorthStar, $5.895 in cash and .918 share of Enterprise common
stock, less .231 share of Enterprise placed in escrow as a reserve against potential losses
incurred by Enterprise resulting from certain NorthStar loans as well as breach of contract
by NorthStar (the contingency). The balance of the Companys equity method investment of
$3,208,000 and related unamortized core deposit intangible of $702,000 totaled $3,910,000 as
of the date of the sale. The Company received $1,347,000 in cash and 156,964 shares of
Enterprise, valued at $4,032,000 in 2006. In addition, 52,670 shares of Enterprise were
placed in escrow and allocated to the Company
 105




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 in 2006. The amount of the cash and value of Enterprise stock received in the
transaction, excluding the stock placed in escrow, in excess of the unamortized cost totaled
approximately $1,469,000 and was recorded as a gain in 2006. In 2007, the contingency was
resolved, and the Enterprise shares held in escrow, less the shares liquidated to satisfy
losses incurred on certain NorthStar loans, were distributed to the former NorthStar
shareholders. As part of the distribution, the Company received 28,122 shares of Enterprise,
valued at $699,000, which was recorded as a gain in 2007. During 2008, the Company sold 362
shares of Enterprise, recording a loss on the sale of $1,000. As of December 31, 2009 and
2008, the Company owned 184,724 shares of Enterprise, representing approximately 1.8% of the
outstanding common stock of Enterprise, and was recorded as an available-for-sale investment
of the Company.
 With the exception of U.S. governmental agencies and corporations, the Company did not hold
any securities of a single issuer, payable from and secured by the same source of revenue or
taxing authority, the book value of which exceeded 10% of stockholders equity at December
31, 2009.
 During 2009, the Company recognized other-than-temporary impairment charges of $1,504,000 on
two of its investments in stock of other financial institutions, which are carried as
available-for-sale securities. During 2008, the Company recognized other-than-temporary
impairment charges of $4,024,000 on four of its investments in stock of other financial
institutions, which are carried as available-for-sale securities. These impairments were
determined based on the difference between the Companys carrying value and quoted market
prices for the stocks as of December 31, 2009 and 2008, respectively. In making the
determination of impairment for each of these investments, the Company considered the
duration of the loss, prospects for recovery in a reasonable period of time and the
significance of the loss compared to carrying value.
 Certain investments in debt and marketable equity securities are reported in the consolidated
financial statements at an amount less than their historical cost. Total fair value of these
investments held in continuing operations at December 31, 2009 and 2008, was $17,462,000 and
$12,967,000, which is approximately 13% and 7% of the Companys available-for-sale and held-
to-maturity investment portfolios. These declines primarily resulted from recent changes in
market interest rates and recent volatility in the stock market for equities.
 Based on evaluation of available evidence, including recent changes in market interest rates,
stock market performance, credit rating information and information obtained from regulatory
filings, management believes the declines in fair value for these securities are temporary.
 Should the impairment of any of these securities become other-than-temporary, the cost basis
of the investment will be reduced and the resulting loss recognized in net income in the
period the other-than-temporary impairment is identified.
 106




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 The following table shows the Companys gross unrealized losses and fair value,
aggregated by investment category and length of time that individual securities have been in
a continuous unrealized loss position at December 31, 2009 and 2008:
 Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalDescription of
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedSecurities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesDecember 31, 2009Mortgage-backed
securities
    
    $
    12,518
    
    
    $
    (145
    )
    
    $
    92
    
    
    $
    
    
    
    $
    12,610
    
    
    $
    (145
    )State and political
subdivisions
    
    
    1,831
    
    
    
    (5
    )
    
    
    182
    
    
    
    
    
    
    
    2,013
    
    
    
    (5
    )Equity securities
    
    
    2,839
    
    
    
    (508
    )
    
    
    
    
    
    
    
    
    
    
    2,839
    
    
    
    (508
    )Total
temporarily
impaired
securities
    
    $
    17,188
    
    
    $
    (658
    )
    
    $
    274
    
    
    $
    
    
    
    $
    17,462
    
    
    $
    (658
    )December 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
    )
 The debt securities included in discontinued operations did not have any significant
unrealized losses exceeding twelve (12) months or more as of December 31, 2009.
 Note 3: Equity and Cost Method Investments in Common Stock
 The Company has no equity method investments in common stock as of December 31, 2009 and
2008. The Company owned shares of New Frontier Bancshares, Inc. (New Frontier) as an
equity method investment in prior years. On September 27, 2007, the Company completed the
sale of its 36.4% equity position in New Frontier for $6,790,576. New Frontier repurchased
32,647 shares of its common stock, valued at $208 per share, and paid the Company in cash.
The Company had made incremental investments in New Frontier since 2000 totaling $4,716,032,
net of amortization
of core deposit intangibles, at an average cost of approximately $144 per share. The Company
recorded a gain on the sale of $2,074,544.
 The Company has minority investments in the common stock of other community banks which are
not publicly traded that are recorded under the cost method of accounting. The Company had
investments in three community banks at December 31, 2009 totaling $1,392,000 and in five
community banks at December 31, 2008 totaling $3,314,000.
 107




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Note 4: Loans and Allowance for Loan Losses
  2009Continuing Operations
    
    
    Discontinued Operations
    
    
    2008Commercial and agricultural
    
    $
    167,390
    
    
    $
    64,357
    
    
    $
    296,265Commercial real estate
    
    
    336,525
    
    
    
    61,856
    
    
    
    564,483Residential real estate
    
    
    193,136
    
    
    
    53,588
    
    
    
    339,261Consumer
    
    
    74,793
    
    
    
    32,157
    
    
    
    132,000Floor plan loans
    
    
    4,145
    
    
    
    
    
    
    
    7,365Total loans
    
    
    775,989
    
    
    
    211,958
    
    
    
    1,339,374LessAllowance for loan losses
    
    
    18,851
    
    
    
    1,820
    
    
    
    23,467Net loans
    
    $
    757,138
    
    
    $
    210,138
    
    
    $
    1,315,907
 108




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  2009DiscontinuedContinuing Operations
    
    
    Operations
    
    
    2008
    
    
    2007Balance, beginning of year
    
    $
    19,038
    
    
    $
    4,429
    
    
    $
    12,794
    
    
    $
    10,613Purchased allowance
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,126Provision charged to expense
    
    
    22,083
    
    
    
    1,261
    
    
    
    23,845
    
    
    
    2,969Losses charged off, net of
recoveries of $205
(continuing operations) and
$33 (discontinued
operations) for 2009, $504
for 2008, and $261 for 2007
    
    
    (22,270
    )
    
    
    (754
    )
    
    
    (13,172
    )
    
    
    (1,914
    )Disposal of HNB
    
    
    
    
    
    
    (3,116
    )
    
    
    
    
    
    
    Balance, end of year
    
    $
    18,851
    
    
    $
    1,820
    
    
    $
    23,467
    
    
    $
    12,794
    109




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
     110




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 5: Premises and Equipment
  2009Continuing Operations
    
    
    Discontinued Operations
    
    
    2008Land
    
    $
    3,554
    
    
    $
    476
    
    
    $
    6,730Buildings and improvements
    
    
    23,163
    
    
    
    3,913
    
    
    
    35,258Leasehold improvements
    
    
    1,758
    
    
    
    
    
    
    
    1,952Equipment
    
    
    13,109
    
    
    
    2,532
    
    
    
    19,603Construction in progress
    
    
    
    
    
    
    
    
    
    
    3041,584
    
    
    
    6,921
    
    
    
    63,573Less accumulated depreciation
    
    
    15,914
    
    
    
    3,232
    
    
    
    22,957Net premises and equipment
    
    $
    25,670
    
    
    $
    3,689
    
    
    $
    40,616
  Note 6: Goodwill
  2009
    
    
    2008Balance as of January 1
    
    $
    44,653
    
    
    $
    43,934Goodwill acquired in Royal Palm acquisition
    
    
    
    
    
    
    Goodwill acquired in HNB acquisition
    
    
    
    
    
    
    719Goodwill impairment
    
    
    (44,653
    )
    
    
    Balance as of December 31
    
    $
    
    
    
    $
    44,653
  111




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   112




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 7: Core Deposit and Other Intangible Assets
  2009
    
    
    2008Gross Carrying Amount
    
    
    Accumulated Amortization
    
    
    Gross Carrying Amount
    
    
    Accumulated AmortizationCore deposits
    
    $
    1,498
    
    
    $
    846
    
    
    $
    4,681
    
    
    $
    1,093Intangible
asset with
indefinite
life
    
    
    414
    
    
    
    
    
    
    
    414
    
    
    
    $
    1,912
    
    
    $
    846
    
    
    $
    5,095
    
    
    $
    1,093
  2009
    
    
    2008
    
    
    2007Accumulated
    
    
    
    
    
    
    Accumulated
    
    
    
    
    
    
    AccumulatedCarrying Values
    
    
    Amortization
    
    
    Carrying Values
    
    
    Amortization
    
    
    Carrying Values
    
    
    AmortizationBalance as of January 1
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
    
    
    $
    2,558
    
    
    $
    448Acquisition of HNB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,183
    
    
    
    Purchase of additional Mid America stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    Disposal of New Frontier
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    (227
    )Acquisition with intangible with indefinite life
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Amortization of core deposit intangibles
    
    
    
    
    
    
    496
    
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    360Disposal of HNB
    
    
    (3,183
    )
    
    
    (743
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of
December 31
    
    $
    1,912
    
    
    $
    846
    
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
 113




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  2010
    
    $
    160,0002011
    
    
    131,0002012
    
    
    122,0002013
    
    
    107,0002014
    
    
    77,000
  Note 8: Loan Servicing
    2009
    
    
    2008
    
    
    2007Mortgage servicing rightsBalance, beginning of year
    
    $
    959
    
    
    $
    1,307
    
    
    $
    994Servicing rights capitalized
    
    
    935
    
    
    
    309
    
    
    
    171Servicing rights from HNB acquisition
    
    
    
    
    
    
    
    
    
    
    276Recovery of MSR income
    
    
    244
    
    
    
    
    
    
    
    Amortization of servicing rights
    
    
    (458
    )
    
    
    (253
    )
    
    
    (134
    )1,680
    
    
    
    1,363
    
    
    
    1,307Valuation allowance
    
    
    (366
    )
    
    
    (404
    )
    
    
    Disposal of HNB
    
    
    (429
    )
    
    
    
    
    
    
    $
    885
    
    
    $
    959
    
    
    $
    1,307
 114




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  2009
    
    
    2008
    
    
    2007Balance, beginning of year
    
    $
    404
    
    
    $
    
    
    
    $
    Additions
    
    
    
    
    
    
    404
    
    
    
    Reductions
    
    
    (244
    )
    
    
    
    
    
    
    Direct write-downs
    
    
    
    
    
    
    
    
    
    
    Disposal of HNB
    
    
    206
    
    
    
    
    
    
    
    Balance, end of year
    
    $
    366
    
    
    $
    404
    
    
    $
    
 Note 9: Interest-Bearing Deposits
   Continuing
    
    
    DiscontinuedOperations
    
    
    Operations2010
    
    $
    279,744
    
    
    $
    71,8102011
    
    
    154,863
    
    
    
    14,9102012
    
    
    58,562
    
    
    
    8,2632013
    
    
    56,034
    
    
    
    10,7932014
    
    
    14,635
    
    
    
    6,494Thereafter
    
    
    31,338
    
    
    
    $
    595,176
    
    
    $
    112,270
 115




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 10: Short-Term Borrowings
  2009Continuing Operations
    
    
    Discontinued Operations
    
    
    2008Federal funds purchased
    
    $
    6,999
    
    
    $
    
    
    
    $
    1,158Securities sold under agreements to repurchase
    
    
    10,259
    
    
    
    5,062
    
    
    
    17,365U.S. Treasury demand notes
    
    
    1,482
    
    
    
    
    
    
    
    4,307Short-term Federal Home Loan Bank borrowings
    
    
    
    
    
    
    
    
    
    
    2,000Short-term Federal Reserve Bank borrowings
    
    
    
    
    
    
    
    
    
    
    12,500Short-term note payable
    
    
    1,000
    
    
    
    
    
    
    
    Other short-term borrowings
    
    
    11,000
    
    
    
    
    
    
    
    11,897Total short-term borrowings
    
    $
    30,740
    
    
    $
    5,062
    
    
    $
    49,227
    1.
    
    A demand note with Great River Bancshares, Inc. (Great River), owned by
R. Dean Phillips (Phillips), a significant shareholder of the Company, with a
principal balance of $7,552,000 and an annual interest rate of 7.5%. The principal
balance, together with accrued interest, was payable immediately upon Great Rivers
written demand. The note was secured by 100% of the outstanding shares of the
Banks. During 2009, the Company borrowed an additional $4,000,000 from Great River
with terms consistent with the first note. Principal and interest on both notes
were paid in full in December 2009 as part of the Exchange Agreement with Phillips,
wherein Phillips acquired HNB National Bank (HNB) in exchange for the repayment of
$28 million of the Great River debt.
 116




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 2.
    
    A note payable by Mid-America Bancorp, Inc. 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 by issuance of an inter-company convertible debenture to Mid-America.
The debentures are eliminated on a consolidated basis and therefore excluded in the
Companys financial statements.3.
    
    A note payable resulting from HNB foreclosing on a loan where HNB was the
secondary lien-holder on the property. As of December 31, 2008, HNB owed the
primary lien-holder $345,000, which was paid during January 2009.
  Note 11: Long-Term Debt and Junior Subordinated Debentures
  2009Continuing
    
    
    DiscontinuedOperations
    
    
    Operations
    
    
    2008Federal Home Loan Bank
advances, fixed rates from
3.15% to 5.30% (continuing
operations) and 4.52% to
5.30% (discontinued
operations), due at various
dates through 2013
(continuing operations) and
2016 (discontinued
operations)
    
    $
    18,000
    
    
    $
    13,500
    
    
    $
    60,500Note payable, fixed rate of
7.50%, due August 31, 2010
    
    
    5,037
    
    
    
    
    
    
    
    5,037Note payable, fixed rate of
7.50%, due August 31, 2010
    
    
    135
    
    
    
    
    
    
    
    2,015Note payable, fixed rate of
7.50%, due November 10, 2009
    
    
    
    
    
    
    
    
    
    
    15,109Junior 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
    
    $
    87,030
    
    
    $
    13,500
    
    
    $
    146,519
 117




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
       118




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
    119




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
    120




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
       Continuing
    
    
    DiscontinuedOperations
    
    
    Operations2010
    
    $
    10,172
    
    
    $
    2011
    
    
    8,000
    
    
    
    3,0002012
    
    
    2,000
    
    
    
    3,0002013
    
    
    5,000
    
    
    
    2014
    
    
    
    
    
    
    Thereafter
    
    
    61,858
    
    
    
    7,500$
    87,030
    
    
    $
    13,500
 121




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 12: Income Taxes
  2009
    
    
    2008
    
    
    2007Continuing Operations:Taxes currently payableFederal
    
    $
    (10,094
    )
    
    $
    (4,246
    )
    
    $
    801State
    
    
    
    
    
    
    161
    
    
    
    78Deferred income taxesFederal
    
    
    (261
    )
    
    
    (6,446
    )
    
    
    68State
    
    
    (1,782
    )
    
    
    (840
    )
    
    
    5Income tax expense (benefit) on continuing operations
    
    $
    (12,137
    )
    
    $
    (11,371
    )
    
    $
    952Discontinued Operations:Taxes currently payableFederal
    
    $
    2,495
    
    
    $
    3,476
    
    
    $
    2,466State
    
    
    
    
    
    
    (188
    )
    
    
    472Deferred income taxesFederal
    
    
    159
    
    
    
    (454
    )
    
    
    (444
    )State
    
    
    (421
    )
    
    
    (12
    )
    
    
    (11
    )Income tax expense on discontinued operations
    
    $
    2,233
    
    
    $
    2,822
    
    
    $
    2,483
 122




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  2009
    
    
    2008
    
    
    2007Computed at the statutory rate (35%)
    
    $
    (22,594
    )
    
    $
    (10,794
    )
    
    $
    2,057Increase (decrease) resulting fromGraduated tax rates
    
    
    646
    
    
    
    308
    
    
    
    (59
    )Tax exempt income
    
    
    (529
    )
    
    
    (577
    )
    
    
    (718
    )State income taxes
    
    
    (1,176
    )
    
    
    (448
    )
    
    
    55Increase in cash surrender value of life insurance
    
    
    (196
    )
    
    
    (184
    )
    
    
    (184
    )Goodwill impairment
    
    
    10,332
    
    
    
    
    
    
    
    Gain on sale of BOLI policies
    
    
    694
    
    
    
    
    
    
    
    Changes in the deferred tax asset valuation allowance
    
    
    5,590
    
    
    
    
    
    
    
    Tax basis difference on exchange of HNB
    
    
    (5,009
    )
    
    
    246
    
    
    
    Other
    
    
    105
    
    
    
    77
    
    
    
    (199
    )Actual tax expense (benefit)
    
    $
    (12,137
    )
    
    $
    (11,371
    )
    
    $
    952
 123




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  2009
    
    
    2008Deferred tax assetsAllowance for loan losses
    
    $
    6,885
    
    
    $
    8,467Accrued compensated absences
    
    
    115
    
    
    
    236Deferred compensation
    
    
    759
    
    
    
    1,349Accrued postretirement benefits
    
    
    125
    
    
    
    156Deferred loss on investments
    
    
    2,050
    
    
    
    825Capital loss carryforward on disposal of HNB
    
    
    5,773
    
    
    
    Net operating loss carryforward of Mid-America Bancorp, Inc.
    
    
    2,395
    
    
    
    962Stock options
    
    
    111
    
    
    
    111Deferred loan fees
    
    
    80
    
    
    
    79Alternative minimum tax credits
    
    
    149
    
    
    
    441Other
    
    
    1,029
    
    
    
    46819,471
    
    
    
    13,094Deferred tax liabilitiesFederal Home Loan Bank stock dividends
    
    
    277
    
    
    
    416Depreciation
    
    
    522
    
    
    
    413State taxes
    
    
    452
    
    
    
    382Mortgage servicing rights
    
    
    334
    
    
    
    183Deferred gain on sale of BOLI policies
    
    
    770
    
    
    
    Unrealized gains on available-for-sale securities
    
    
    1,161
    
    
    
    1,205Purchase accounting adjustments
    
    
    35
    
    
    
    1,151Other
    
    
    118
    
    
    
    1633,669
    
    
    
    3,913Net deferred tax asset before valuation allowance
    
    $
    15,802
    
    
    $
    9,181Valuation allowanceBeginning balance
    
    $
    
    
    
    $
    (Increase) decrease during the period
    
    
    (5,590
    )
    
    
    Ending balance
    
    
    (5,590
    )
    
    
    Net deferred tax asset
    
    $
    10,212
    
    
    $
    9,181
   124




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 13: Other Comprehensive Income (Loss)
 Other comprehensive income (loss) components and related taxes were as follows:
 2009
    
    
    2008
    
    
    2007Unrealized appreciation
(depreciation) on
available-for-sale
securities:Unrealized appreciation
(depreciation) on
available-for-sale
securities, net of tax
expense (benefit) of
$(115) (Continuing
operations) and $412
(Discontinued
operations) for 2009,
$(354) for 2008, and $73
for 2007
    
    $
    449
    
    
    $
    (497
    )
    
    $
    240Less reclassification
adjustment for the
disposal of HNB, net of
tax expense of $106 for
2009, $0 for 2008 and $0
for 2009
    
    
    509
    
    
    
    
    
    
    
    Less reclassification
adjustment for realized
gains (losses) included
in income net of tax
expense (benefit) of $0
for 2009, $358 for 2008
and $0 for 2007
    
    
    
    
    
    
    584
    
    
    
    Less reclassification
adjustment for
other-than-temporary
gains (losses) included
in income net of tax
expense (benefit) of
$(571) (Continuing
operations) for 2009,
$(1,727) for 2008 and $0
for 2007
    
    
    (932
    )
    
    
    (2,818
    )
    
    
    Total unrealized
appreciation on
available-for-sale
securities, net of
tax expense of $456
(Continuing
operations) and
$306 (Discontinued
operations) for
2009, $1,015 for
2008, and $73 for
2007
    
    $
    872
    
    
    $
    1,737
    
    
    $
    240Accumulated other
comprehensive loss of equity
method investee
    
    $
    
    
    
    $
    
    
    
    $
    28Defined benefit
post-retirement liability,
net of tax expense (benefit)
of ($10) (Continuing
operations) and ($2)
(Discontinued operations) for
2009, ($12) for 2008, and $0
for 2007
    
    $
    20
    
    
    $
    20
    
    
    $
    14Total other comprehensive
income (loss), net of tax
    
    $
    892
    
    
    $
    1,757
    
    
    $
    282
 125




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 The components of accumulated other comprehensive income, included in stockholders
equity, are as follows:
 2009Continuing
    
    
    DiscontinuedOperations
    
    
    Operations
    
    
    2008Net unrealized gain on
securities
available-for-sale
    
    $
    3,401
    
    
    $
    1,645
    
    
    $
    3,412Net unrealized loss on
defined benefit
post-retirement
liability
    
    
    (168
    )
    
    
    (29
    )
    
    
    (230
    )3,233
    
    
    
    1,616
    
    
    
    3,182Tax effect
    
    
    (1,097
    )
    
    
    (798
    )
    
    
    (1,120
    )Net-of-tax amount
    
    $
    2,136
    
    
    $
    818
    
    
    $
    2,062
 Note 14: Regulatory Matters
 On February 26, 2009, the Companys shareholders voted to authorize the Companys Board
of Directors to create and issue up to 100,000 shares in one or more classes of preferred
stock, and to add 2,000,000 shares to its then base of 12,000,000 shares of common stock.
 The Company and Banks are subject to various regulatory capital requirements administered by
the federal banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory and possibly additional discretionary actions by regulators that, if
undertaken, could have a direct material effect on the Companys financial statements. Under
capital adequacy guidelines and the regulatory framework for prompt corrective action, the
Company and Banks must meet specific capital guidelines that involve quantitative measures of
assets, liabilities and certain off-balance-sheet items as calculated under regulatory
accounting practices. The capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings and other factors.
 Quantitative measures established by regulation to ensure capital adequacy require the
Company and Banks to maintain minimum amounts and ratios (set forth in the table below) of
total and Tier I capital (as defined in the regulations) to risk-weighted assets (as
defined), and of Tier I capital (as defined) to average assets (as defined). As discussed
below, the Company and Banks are operating under various regulatory agreements that require
certain minimum capital requirements as specified in the table below.
 126




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Per regulation, 25% of Tier I capital can be comprised of the junior subordinated debt
owed to the Trusts (see Note 12).
 The Company and Banks actual capital amounts and ratios are presented in the following
table.
 Minimum CapitalRequirement Per
    
    
    Minimum To Be ConsideredRegulation For Capital
    
    
    Adequately Capitalized PerActual
    
    
    Adequacy Purposes
    
    
    Formal AgreementAmount
    
    
    Ratio
    
    
    Amount
    
    
    Ratio
    
    
    Amount
    
    
    RatioAs of December 31, 2009Total capital
(to risk-weighted assets)Consolidated
    
    $
    110,356
    
    
    
    10.6
    %
    
    $
    83,111
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    66,682
    
    
    
    11.2
    %
    
    
    47,719
    
    
    
    8.0
    %
    
    $
    59,649
    
    
    
    N/AMarine Bank and Trust
    
    
    15,548
    
    
    
    10.8
    %
    
    
    11,474
    
    
    
    8.0
    %
    
    
    14,342
    
    
    
    N/ABrown County State Bank
    
    
    7,486
    
    
    
    11.3
    %
    
    
    5,322
    
    
    
    8.0
    %
    
    
    6,653
    
    
    
    N/AHeartland Bank
    
    
    17,504
    
    
    
    12.9
    %
    
    
    10,873
    
    
    
    8.0
    %
    
    
    13,591
    
    
    
    12.0
    %Royal Palm Bank of Florida
    
    
    14,456
    
    
    
    15.1
    %
    
    
    7,652
    
    
    
    8.0
    %
    
    
    9,565
    
    
    
    12.0
    %Tier I capital
(to risk-weighted assets)Consolidated
    
    
    55,178
    
    
    
    5.3
    %
    
    
    41,556
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    59,216
    
    
    
    9.9
    %
    
    
    23,860
    
    
    
    4.0
    %
    
    
    35,790
    
    
    
    N/AMarine Bank and Trust
    
    
    14,279
    
    
    
    10.0
    %
    
    
    5,737
    
    
    
    4.0
    %
    
    
    8,605
    
    
    
    N/ABrown County State Bank
    
    
    6,935
    
    
    
    10.4
    %
    
    
    2,661
    
    
    
    4.0
    %
    
    
    3,992
    
    
    
    N/AHeartland Bank
    
    
    14,579
    
    
    
    10.7
    %
    
    
    5,437
    
    
    
    4.0
    %
    
    
    8,155
    
    
    
    N/ARoyal Palm Bank of Florida
    
    
    13,192
    
    
    
    13.8
    %
    
    
    3,826
    
    
    
    4.0
    %
    
    
    5,739
    
    
    
    10.0
    %Tier I capital
(to average assets)Consolidated
    
    
    55,178
    
    
    
    3.3
    %
    
    
    66,611
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    5.0
    %Mercantile Bank
    
    
    59,216
    
    
    
    7.4
    %
    
    
    32,033
    
    
    
    4.0
    %
    
    
    40,042
    
    
    
    N/AMarine Bank and Trust
    
    
    14,279
    
    
    
    7.3
    %
    
    
    7,855
    
    
    
    4.0
    %
    
    
    9,819
    
    
    
    N/ABrown County State Bank
    
    
    6,935
    
    
    
    8.3
    %
    
    
    3,362
    
    
    
    4.0
    %
    
    
    4,203
    
    
    
    N/AHeartland Bank
    
    
    14,579
    
    
    
    8.1
    %
    
    
    7,217
    
    
    
    4.0
    %
    
    
    9,022
    
    
    
    8.0
    %Royal Palm Bank of Florida
    
    
    13,192
    
    
    
    8.9
    %
    
    
    5,932
    
    
    
    4.0
    %
    
    
    7,415
    
    
    
    8.0
    %
 127




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Brown County State Bank and Marine Bank and Trust were not operating under any formal
agreements as of December 31, 2009. As of December 31, 2009, the most recent notification
from Brown County State Bank and Marine Bank and Trusts regulatory authorities categorized
the Banks as well capitalized under the regulatory framework for prompt corrective action.
Additionally, as of December 31, 2009, Mercantile Bank was considered to be well capitalized
under the regulatory framework for prompt corrective action; however, as noted below,
subsequent to December 31, 2009, Mercantile Bank received a Memorandum of Understanding
requiring the Bank to maintain its Tier I leverage capital ratio at no less than 8.0% and
total risk-based capital ratio of no less than 12.0% by April 7, 2010. To be categorized as
well capitalized, the Banks must maintain capital ratios as follows: Total capital to
risk-weighted assets 10.0%, Tier I capital to risk-weighted assets 6.0% and Tier I capital to
average assets of 5.0%. There are no conditions or events since that notification that
management believes have changed the Banks category.
 To Be Well CapitalizedFor Capital Adequacy
    
    
    Under Prompt CorrectiveActual
    
    
    Purposes
    
    
    Action 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
    %
 128




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Without prior approval, the subsidiary banks are restricted as to the amount of
dividends that they may declare to the balance of the retained earnings account, adjusted for
defined bad debts. In addition, the FDIC has authority to prohibit or to limit the payment
of dividends by a bank if, in the banking regulators opinion, payment of a dividend would
constitute an unsafe or unsound practice in light of the financial condition of the banking
organization. The Company, Mercantile Bank, Royal Palm Bank and Heartland Bank are each
prohibited from paying any dividends without regulatory consent, pursuant to various
regulatory enforcement actions taken at each bank. For further discussion, see Note 22
Operating and Liquidity Matters.
 In connection with regular examinations of the Company, Mercantile Bank, Royal Palm Bank,
Royal Palm Bancorp, Heartland Bank and Mid-America Bancorp by the Federal Reserve Bank of St.
Louis (FRB), the FDIC, the Illinois Department of Financial and Professional Regulation
(IDFPR) and Florida Office of Financial Regulation (FOFR), various actions were taken by
the regulatory agencies.
 A cease and desist order (CDO) is a formal action by the FDIC requiring a bank to take
corrective measures to address deficiencies identified by the FDIC. The bank can continue to
serve its customers in all areas including making loans, establishing lines of credit,
accepting deposits and processing banking transactions. All customer deposits remain fully
insured to the maximum limits set by the FDIC.
 A Memorandum of Understanding (MOU) agreement is characterized by regulatory authorities as
an informal action that is neither published nor made publicly available by the agencies and
is used when circumstances warrant a milder form of action than a formal supervisory action,
such as a cease and desist order.
 A Written Agreement (WA) is a formal enforcement action by the FRB, similar in nature to an
MOU, but is legally binding and will be published and made public.
 On March 10, 2009, the Company received a notice from the FRB of its intent to issue an MOU,
which was signed by the Companys Board of Directors on March 17, 2009. Under the terms of
the MOU, the Company is expected to, among other things, provide its subsidiary banks with
financial and managerial resources as needed, submit capital and cash flow plans to the FRB
and provide periodic performance updates to the FRB. In addition, the Company is prohibited
from paying any special salaries or bonuses to insiders, paying dividends, paying interest
related to trust preferred securities, or incur any additional debt, without the prior
written approval of the FRB. On July 31, 2009, the Company submitted to the FRB a three-year
strategic and capital plan designed to strengthen the Companys and its subsidiaries
operations and capital position going forward. The plan reflects the current challenges with
respect to capital and the difficulties in projecting the impact of the economic weakness in
the Companys markets on its loan portfolio, as well as strategies to maintain the financial
strength of the Company and its subsidiaries. A significant part of the plan was the
initiative by the Company to sell one or more subsidiary banks in order to generate liquidity
to reduce debt, improve capital ratios and provide necessary capital contributions to its
remaining subsidiary banks. The result of this initiative was the exchange for debt of HNB
in December 2009 and the sale of Marine Bank and Brown County in February 2010.
 129




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 On February 16, 2010, the Company executed a WA with the FRB. The terms of the WA are
generally consistent with the MOU, with a requirement that an updated capital and cash flow
plan be submitted to the FRB within sixty days. The Company is working with its legal
advisors to submit the revised plan. As of December 31, 2009, the Company was required to
have 4.0% Tier I capital to average assets to be considered adequately capitalized. The
Company was below the 4% requirement at December 31, 2009. The Company expects to be in
compliance by June 30, 2010 of this requirement as a result of the sale of Brown County State
Bank and Marine Bank in addition to further reduction of the Companys total assets.
 On March 8, 2010, Mercantile Bank entered into a MOU with the FDIC and the IDFPR. Under the
terms of the MOU, Mercantile Bank agreed, among other things, to provide certain information
to each supervisory authority including, but not limited to, financial performance updates,
loan performance updates, written plan for reducing classified assets and concentrations of
credit, written plan to improve liquidity and reduce dependency on volatile liabilities,
written capital plan, and written reports of progress. In addition, the bank agreed not to
declare any dividends or make any distributions of capital without the prior approval of the
supervisory authorities, and within 30 days of the date of the MOU, to maintain its Tier I
leverage capital ratio at no less than 8.0% and total risk based capital ratio at no less
than 12.0% by April 7, 2010. The MOU did not list a requirement for Tier I capital to
risk-weighted assets. The Company is expected to inject capital by April 7, 2010 to
Mercantile Bank to exceed the required ratios.
 On October 3, 2008, Royal Palm Bank entered into a MOU with the FDIC and FOFR. Under the
terms of the MOU, Royal Palm Bank agreed, among other things, to provide certain information
to each supervisory authority including, but not limited to, financial performance updates,
loan performance updates, written plan for improved earnings, written capital plan, review
and assessment of all officers who head departments of the bank, and written reports of
progress. In addition, Royal Palm Bank agreed not to declare any dividends or make any
distributions of capital without the prior approval of the supervisory authorities, and to
maintain its Tier I leverage capital ratio at no less than 8.0%, the Tier I risk based
capital ratio at no less than 10.0%, and total risk based capital ratio at no less than
12.0%.
 In May 2009, Royal Palm Bank entered into a stipulation and consent to the issuance of a CDO
with the FDIC and FOFR. The CDO was issued and became effective May 30, 2009. Under the
CDO, Royal Palm agreed, among other things, to provide certain information to each
supervisory authority including, but not limited to, notification of plans to add any
individual to the board of directors or employ any individual as a senior executive officer,
financial performance updates, loan performance updates, written plan for improved earnings,
written capital plan, written contingency funding plan, written strategic plan, and written
reports of progress. In addition, Royal Palm agreed not to declare any dividends or make any
distributions of capital without the prior approval of the supervisory authorities, and to
maintain its Tier I leverage capital ratio at no less than 8.0%, the Tier I risk based
capital ratio at no less than 10.0%, and total risk based capital ratio at no less than
12.0%.
 130




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 At September 30, 2009, Royal Palm Banks Tier I leverage ratio was 1.5% and total risk
based capital ratio was 3.6%. As specified in the CDO, Royal Palm Bank notified the
supervisory authorities within 10 days of the determination of the ratios. As a result of
these capital ratios, Royal Palm Bank was not in compliance with the CDO requirements for
capital ratios on September 30, 2009. On October 7, 2009, Royal Palm Bank received a letter
from the FDIC informing it that the FDIC has preliminarily determined that Royal Palm Bank
was critically undercapitalized and was subject to certain mandatory requirements under the
Federal Deposit Insurance Act (FDIA). The letter also required Royal Palm Bank to submit a
capital restoration plan to the FDIC by October 30, 2009, along with certain other
disclosures related to the mandatory requirements under FDIA for critically undercapitalized
banks. On October 9, 2009, the Company injected $2 million of additional capital into Royal
Palm Bank and as a result, as of that date, Royal Palm Bank had a Tier I leverage capital
ratio of 2.7%, a Tier I risk based capital ratio of 4.2% and a total risk based capital ratio
of 5.6%.
 On October 23, 2009, Royal Palm Bank received a letter from the FOFR demanding that Royal
Palm Bank inject sufficient capital into Royal Palm Bank by November 30, 2009, such that as
of November 30, 2009, Royal Palm Bank has a Tier I leverage capital ratio of at least 6%. In
addition, Royal Palm Bank was required by this FOFR letter to submit a plan to the FOFR
demonstrating how Royal Palm Bank will have a Tier I leverage capital ratio of at least 8%
and a total risk based capital ratio of at least 12% as of December 31, 2009.
 The Company injected $11.0 million of capital into Royal Palm Bank on December 1, 2009, with
the proceeds from a short term debt from Great River pursuant to the Second Waiver (for
further discussion at Note 10). As of December 31, 2009, Royal Palm Bank had a Tier I
leverage capital ratio of 8.9%, Tier I risk based capital ratio of 13.8% and a total risk
based capital ratio of 15.1%, and was in compliance with all requirements of the CDO.
 In September 2009, Royal Palm Bancorp entered into a MOU with the FRB. As a one-bank holding
company, this MOU primarily reflected regulatory concerns related to Royal Palm Bancorps
subsidiary (Royal Palm Bank). Under the terms of the MOU, Royal Palm Bancorp agreed, among
other things, to provide certain information to the FRB including, but not limited to,
financial performance updates and written reports of progress. In addition, Royal Palm
Bancorp agreed to assist Royal Palm Bank in addressing weaknesses identified in the bank
examination, and not to pay any salaries or bonuses to insiders, incur any debt, declare any
dividends or make any distributions of capital without the prior approval of the supervisory
authorities,
 On March 9, 2009, Heartland Bank signed a CDO with the FDIC. Under the terms of the CDO,
Heartland Bank agreed to, among other things, prepare and submit plans and reports to the
FDIC regarding certain matters including, but not limited to, progress reports detailing
actions taken to secure compliance with all provisions of the order, loan performance updates
as well as a written plan for the reduction of adversely classified assets, a revised
comprehensive strategic plan, and a written profit plan and comprehensive budget. In
addition, Heartland Bank agreed not to declare any dividends without the prior consent of the
FDIC and to maintain its Tier I leverage capital ratio at no less than 8.0% and maintain its
total risk based capital at no less than 12.0%. The CDO did not list a requirement for Tier
I capital to risk-weighted assets. As of December 31, 2009,
 131




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
 (Table dollar amounts in thousands)
     Note 15: Related Party Transactions
   Balances, January 1, 2009
    
    $
    14,907,525Change in composition of related parties
    
    
    (8,423,697
    )New loans, including renewals
    
    
    1,447,639Payments, including renewals
    
    
    (2,110,376
    )Balances, December 31, 2009
    
    $
    5,821,901
   132




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
 (Table dollar amounts in thousands)
   Note 16: Leases
   OperatingLeases2010
    
    $
    363,4312011
    
    
    325,9462012
    
    
    326,6382013
    
    
    261,1242014
    
    
    236,708Thereafter
    
    
    312,390Total minimum lease payments
    
    $
    1,826,237
 133




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 17: 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




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
 (Table dollar amounts in thousands)
   Year EndedDecember 31,2007Net interest income
    
    $
    44,739Net income
    
    
    9,664Basic earnings per share
    
    
    1.11
 Note 18: Employee Benefits
  Postretirement Benefits
   135




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
 (Table dollar amounts in thousands)
  Note 19: Disclosures about Fair Value of Financial Instruments
   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
  136




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Available-for-Sale Securities
   Fair Value Measurements UsingQuoted Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsDecember 31, 2009
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)(Continuing Operations)Mortgage-backed securities: GSE residential
    
    $
    95,354
    
    
    $
    
    
    
    $
    95,354
    
    
    $
    State and political subdivisions
    
    
    29,539
    
    
    
    
    
    
    
    29,500
    
    
    
    39Equity securities
    
    
    3,257
    
    
    
    3,161
    
    
    
    
    
    
    
    96$
    128,150
    
    
    $
    3,161
    
    
    $
    124,854
    
    
    $
    135
 (Discontinued Operations)Mortgage-backed securities: GSE residential
    
    $
    38,460
    
    
    $
    
    
    
    $
    38,460
    
    
    $
    State and political subdivisions
    
    
    2,889
    
    
    
    
    
    
    
    2,405
    
    
    
    484Equity securities
    
    
    105
    
    
    
    
    
    
    
    
    
    
    
    105$
    41,454
    
    
    $
    
    
    
    $
    40,865
    
    
    $
    589
 137




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Fair Value Measurements UsingQuotes Pricesin Active
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    InputsDecember 31, 2008
    
    Fair Value
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)U.S. government agencies
    
    $
    4,787
    
    
    $
    
    
    
    $
    4,787
    
    
    $
    Mortgage-backed securities: GSE
residential
    
    
    128,445
    
    
    
    
    
    
    
    128,445
    
    
    
    State and political subdivisions
    
    
    45,666
    
    
    
    
    
    
    
    45,143
    
    
    
    523Equity securities
    
    
    6,294
    
    
    
    4,811
    
    
    
    
    
    
    
    1,483$
    185,192
    
    
    $
    4,811
    
    
    $
    178,375
    
    
    $
    2,006
  Available-for-Sale Securities2009
    
    
    2008Balance, January 1
    
    $
    2,006
    
    
    $
    1,900Total realized and unrealized gains and lossesIncluded in net income
    
    
    
    
    
    
    Included in other comprehensive income
    
    
    
    
    
    
    Discontinued operations
    
    
    (1,756
    )
    
    
    Settlements
    
    
    (115
    )
    
    
    Issuances
    
    
    
    
    
    
    2,738Transfers out of Level 3
    
    
    
    
    
    
    (2,632
    )Balance, December 31
    
    $
    135
    
    
    $
    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
    
    $
    
    
    
    $
    
 138




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  Mortgage Servicing Rights
  Impaired Loans (Collateral Dependent)
    Cost Method Investments
  Foreclosed Assets Held For Sale
  139




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Goodwill
  The following table presents the fair value measurement of assets measured at fair value on a
nonrecurring basis during the period and the level within the ASC 820 fair value hierarchy in
which the fair value measurements fall at December 31, 2009 and 2008:
 Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)December 31, 2009:Impaired loans
    
    $
    44,142
    
    
    $
    
    
    
    $
    
    
    
    $
    44,142Mortgage servicing rights
    
    
    885
    
    
    
    
    
    
    
    
    
    
    
    885Cost method investments
    
    
    1,331
    
    
    
    
    
    
    
    
    
    
    
    1,331Foreclosed assets held for sale
    
    
    5,409
    
    
    
    
    
    
    
    
    
    
    
    5,409Goodwill
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
 140




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)December 31, 2008:Impaired loans
    
    $
    30,966
    
    
    $
    
    
    
    $
    
    
    
    $
    30,966Mortgage servicing rights
    
    
    959
    
    
    
    
    
    
    
    
    
    
    
    959Cost method investments
    
    
    3,314
    
    
    
    
    
    
    
    
    
    
    
    3,314Foreclosed assets held for sale
    
    
    1,108
    
    
    
    
    
    
    
    
    
    
    
    1,108
 141




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  December 31, 2009
    
    December 31, 2008Carrying
    
    
    
    
    
    Carrying
    
    
    
    
    
    CarryingAmount
    
    Fair Value
    
    Amount
    
    Fair Value
    
    Amount
    
    Fair Value(Continuing Operations)
    
    (Discontinued Operations)Financial assetsCash and cash equivalents
    
    $
    121,267
    
    
    $
    121,267
    
    
    $
    5,197
    
    
    $
    5,197
    
    
    $
    89,821
    
    
    $
    89,821Held-to-maturity securities
    
    
    2,334
    
    
    
    2,411
    
    
    
    1,120
    
    
    
    1,120
    
    
    
    8,905
    
    
    
    9,101Loans held for sale
    
    
    681
    
    
    
    681
    
    
    
    
    
    
    
    
    
    
    
    4,366
    
    
    
    4,366Loans, net of allowance for loan losses
    
    
    757,138
    
    
    
    757,721
    
    
    
    210,138
    
    
    
    208,620
    
    
    
    1,315,907
    
    
    
    1,325,196Federal Home Loan Bank stock
    
    
    2,900
    
    
    
    2,900
    
    
    
    1,574
    
    
    
    1,574
    
    
    
    8,213
    
    
    
    8,213Cost method investments in common stock
    
    
    1,392
    
    
    
    1,392
    
    
    
    
    
    
    
    
    
    
    
    3,314
    
    
    
    3,314Interest receivable
    
    
    3,962
    
    
    
    3,962
    
    
    
    2,321
    
    
    
    2,321
    
    
    
    10,240
    
    
    
    10,240Financial liabilitiesDeposits
    
    
    954,524
    
    
    
    952,611
    
    
    
    242,363
    
    
    
    242,355
    
    
    
    1,462,276
    
    
    
    1,460,654Short-term borrowings
    
    
    30,740
    
    
    
    30,740
    
    
    
    5,062
    
    
    
    5,062
    
    
    
    49,227
    
    
    
    49,227Long-term debt and junior subordinated debentures
    
    
    87,030
    
    
    
    56,368
    
    
    
    13,500
    
    
    
    14,349
    
    
    
    146,519
    
    
    
    141,317Interest payable
    
    
    4,114
    
    
    
    4,114
    
    
    
    564
    
    
    
    564
    
    
    
    4,280
    
    
    
    4,280Unrecognized financial instruments (net of
contract amount)Commitments to originate loans
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Letters of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Lines of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 142




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  Cash and Cash Equivalents, Federal Home Loan Bank Stock, and Cost Method Investments in Common
Stock
  Held-to-Maturity Securities
  Loans Held for Sale
  Loans
  Deposits
  Short-Term Borrowings and Interest Payable
  Long-Term Debt and Junior Subordinated Debentures
  143




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Commitments to Originate Loans, Letters of Credit, and Lines of Credit
  Note 20: Significant Estimates and Concentrations
  Concentration of Credit Risk
   144




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
   Foreclosed Assets Held for Sale, Net
  Investments
  Current Economic Conditions
  145




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  Note 21: Commitments and Credit Risk
  Commitments to Originate Loans
   146




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008  (Table dollar amounts in thousands)
 Standby Letters of Credit
   Lines of Credit
   General Litigation
  147




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 22: Operating and Liquidity Matters
      148




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
    Note 23: Stock Split
  Note 24: Discontinued Operations and Assets Held for Sale
  149




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  Cash and cash equivalents
    
    $
    9,646Available-for-sale securities
    
    
    25,072Held-to-maturity securities
    
    
    1,840Loans, net of allowance for loan losses of $1,126
    
    
    262,288Interest receivable
    
    
    2,177Federal Home Loan Bank stock
    
    
    3,113Premises and equipment
    
    
    9,301Core deposit intangibles
    
    
    2,440Goodwill
    
    
    Other assets
    
    
    11,082Total assets disposed
    
    
    326,959Deposits
    
    
    285,847Short-term borrowings
    
    
    Deferred income taxes
    
    
    Long-term debt
    
    
    10,000Interest payable
    
    
    518Other liabilities
    
    
    615Total liabilities released
    
    
    296,980Net assets disposed
    
    $
    29,979
  150




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
  Cash and cash equivalents
    
    $
    5,197Investments, including FHLB stock
    
    
    44,151Federal funds sold and reverse repurchase agreements
    
    
    7,936Loans, net of allowance for loan losses
    
    
    210,138Premises and equipment
    
    
    3,689Cash surrender value  life insurance
    
    
    6,398Other assets
    
    
    8,483Total assets held for sale
    
    $
    285,992Deposits
    
    $
    242,363Repurchase agreements
    
    
    5,062FHLB advances
    
    
    13,500Other liabilities
    
    
    3,119Total liabilities held for sale
    
    $
    264,044
  2009
    
    
    2008
    
    
    2007Interest and dividend income
    
    $
    32,519
    
    
    
    35,225
    
    
    
    29,333Interest expense
    
    
    9,978
    
    
    
    13,625
    
    
    
    13,132Net interest margin
    
    
    22,541
    
    
    
    21,600
    
    
    
    16,201Provision for loan loss
    
    
    1,280
    
    
    
    669
    
    
    
    245Noninterest income
    
    
    5,292
    
    
    
    5,062
    
    
    
    3,494Noninterest expense
    
    
    32,278
    
    
    
    15,845
    
    
    
    11,933Net income (loss) before taxes
    
    
    (5,725
    )
    
    
    10,148
    
    
    
    7,517Income tax expense
    
    
    2,233
    
    
    
    2,822
    
    
    
    2,483Net income (loss)
    
    $
    (7,958
    )
    
    $
    7,326
    
    
    $
    5,034
 151




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 25: Recent and Future Accounting Requirements
 The FASB Accounting Standards Codification
TM and the Hierarchy of Generally Accepted Accounting Principles  a replacement of FASB
Statement No. 162.
 Determining Fair Value When the Volume and
Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly, Fair Value
Measurements,
 Recognition and Presentation
of Other-Than-Temporary Impairments,
 152




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies Business
Combinations,
 Newly Issued But Not Yet Effective Accounting Standards
 Accounting for Transfers of Financial
Assets  an amendment of FASB Statement No. 140 Accounting for Transfers and Servicing of Financial Assets and
Extinguishments of Liabilities,
 Amendments to FASB Interpretation No. 46(R), Consolidation of Variable
Interest Entities,
 153




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 26: Subsequent Events
    154




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Note 27: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 December 31,2009
    
    
    2008AssetsCash
    
    $
    3,612
    
    
    $
    2,172Investment in common stock of subsidiaries
    
    
    108,308
    
    
    
    175,701Available-for-sale securities
    
    
    3,128
    
    
    
    4,740Note receivable
    
    
    9,325
    
    
    
    1,325Cost method investments in common stock
    
    
    1,331
    
    
    
    2,841Core deposit intangibles
    
    
    594
    
    
    
    712Other
    
    
    2,167
    
    
    
    5,313Total assets
    
    $
    128,465
    
    
    $
    192,804LiabilitiesOther short-term borrowings
    
    $
    11,000
    
    
    $
    7,552Long-term debt
    
    
    5,172
    
    
    
    22,161Junior subordinated debentures
    
    
    61,858
    
    
    
    61,858Deferred income taxes
    
    
    680
    
    
    
    1,579Accrued tax payable
    
    
    5,154
    
    
    
    Other
    
    
    3,299
    
    
    
    697Total liabilities
    
    
    87,163
    
    
    
    93,847Stockholders Equity
    
    
    41,302
    
    
    
    98,957Total liabilities and stockholders equity
    
    $
    128,465
    
    
    $
    192,804
 155




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Condensed Statements of Operations
 Years Ended December 31,2009
    
    
    2008
    
    
    2007IncomeDividends from subsidiaries
    
    $
    9,220
    
    
    $
    5,000
    
    
    $
    15,679Income (loss) on equity
method investments
    
    
    
    
    
    
    
    
    
    
    (6
    )Other-than-temporary loss
on available-for-sale
securities and cost method
investments
    
    
    (3,014
    )
    
    
    (4,545
    )
    
    
    Net gains on sale of
equity and cost method
investments
    
    
    
    
    
    
    942
    
    
    
    2,775Other income
    
    
    3,760
    
    
    
    2,515
    
    
    
    449Total income
    
    
    9,966
    
    
    
    3,912
    
    
    
    18,897ExpensesOther expenses
    
    
    15,001
    
    
    
    9,984
    
    
    
    6,957Total expenses
    
    
    15,001
    
    
    
    9,984
    
    
    
    6,957Income (Loss) Before Income Tax
and Equity in Undistributed
Income of Subsidiaries
    
    
    (5,035
    )
    
    
    (6,072
    )
    
    
    11,940Income Tax Expense (Benefit)
    
    
    (2,211
    )
    
    
    (3,980
    )
    
    
    (1,510
    )Income (Loss) Before Equity in
Undistributed Income of
Subsidiaries
    
    
    (2,824
    )
    
    
    (2,092
    )
    
    
    13,450Equity in Undistributed Income
(Loss) of Subsidiaries
    
    
    (55,723
    )
    
    
    (6,729
    )
    
    
    (3,449
    )Net Income (Loss)
    
    $
    (58,547
    )
    
    $
    (8,821
    )
    
    $
    10,001
 156




---



##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2009 and 2008
(Table dollar amounts in thousands)
 Condensed Statements of Cash Flows
 Years Ended December 31,2009
    
    
    2008
    
    
    2007Operating ActivitiesNet income (loss)
    
    $
    (58,547
    )
    
    $
    (8,821
    )
    
    $
    10,001Items not requiring (providing) cash(Income) loss on equity method investment
    
    
    
    
    
    
    
    
    
    
    6Amortization of core deposit intangibles
    
    
    118
    
    
    
    118
    
    
    
    161Depreciation expense
    
    
    17
    
    
    
    6
    
    
    
    Equity in undistributed (income) loss of
subsidiaries
    
    
    55,723
    
    
    
    6,729
    
    
    
    3,449Deferred income taxes
    
    
    2,127
    
    
    
    (2,989
    )
    
    
    (250
    )Other-than-temporary loss on
available-for-sale and cost method
investments
    
    
    3,014
    
    
    
    4,545
    
    
    
    Gain on sale of equity and cost method
investments
    
    
    
    
    
    
    (942
    )
    
    
    (2,775
    )Goodwill impairment
    
    
    1,539
    
    
    
    
    
    
    
    Net change inOther assets
    
    
    (4,221
    )
    
    
    (261
    )
    
    
    (354
    )Other liabilities
    
    
    2,362
    
    
    
    142
    
    
    
    1,358Net cash provided by (used in) operating
activities
    
    
    2,132
    
    
    
    (1,473
    )
    
    
    11,596Investing ActivitiesCash paid for additional shares of Mid-America
    
    
    
    
    
    
    
    
    
    
    (611
    )Purchase of property and equipment
    
    
    (52
    )
    
    
    (38
    )
    
    
    Proceeds from sales of equity method investments
    
    
    
    
    
    
    
    
    
    
    6,791Proceeds from sales of available-for-sale securities
    
    
    
    
    
    
    4,954
    
    
    
    Purchase of cost method investments in common stock
    
    
    
    
    
    
    
    
    
    
    (2,217
    )Payments for investments and advances to
subsidiaries
    
    
    (14,888
    )
    
    
    (7,070
    )
    
    
    (1,750
    )Purchase of available-for-sale securities
    
    
    
    
    
    
    
    
    
    
    (1,240
    )Cash paid in acquisition of HNB
    
    
    
    
    
    
    
    
    
    
    (31,301
    )Net cash used in investing activities
    
    
    (14,940
    )
    
    
    (2,154
    )
    
    
    (30,328
    )Financing ActivitiesNet increase in demand deposits
    
    
    (2
    )
    
    
    27
    
    
    
    Net increase in short-term borrowings
    
    
    14,250
    
    
    
    7,552
    
    
    
    Proceeds from long-term debt
    
    
    
    
    
    
    22,161
    
    
    
    15,650Repayment of long-term debt
    
    
    
    
    
    
    (22,000
    )
    
    
    (14,835
    )Proceeds from issuance of junior subordinated
debentures
    
    
    
    
    
    
    
    
    
    
    20,619Purchase of treasury stock
    
    
    
    
    
    
    (102
    )
    
    
    (569
    )Dividends received
    
    
    
    
    
    
    
    
    
    
    Dividends paid
    
    
    
    
    
    
    (2,089
    )
    
    
    (2,097
    )Net cash provided by financing activities
    
    
    14,248
    
    
    
    5,549
    
    
    
    18,768Net Change in Cash
    
    
    1,440
    
    
    
    1,922
    
    
    
    36Cash at Beginning of Year
    
    
    2,172
    
    
    
    250
    
    
    
    214Cash at End of Year
    
    $
    3,612
    
    
    $
    2,172
    
    
    $
    250
 157




---



##### Table of Contents



Exhibit Index
 Exhibit Number
    
    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
    
    Certificate of Amendment to the Certificate of Incorporation of Mercantile Bancorp, Inc., filed as
Exhibit 3.3 to the Annual Report on Form 10-K for the year ended December 31, 2008 (the 2008 Form
10-K).3.3
    
    Bylaws of Mercantile Bancorp, inc. restated and adopted June 16, 2009, filed as Exhibit 3.1 to the
Periodic Report on Form 10-Q for the quarter ended June 30, 2009 (the 2009 Second Quarter 10-Q).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 as
Exhibit 10.4 to the 2008 Form 10-K.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.
 158




---



##### Table of Contents



Exhibit Number
    
    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 as Exhibit 10.16 to the 2008 Form 10-K.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 as Exhibit 10.21 to
the 2008 Form 10-K.10.22
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River
Bancshares, Inc., dated December 31, 2008, filed as Exhibit 10.22 to the 2008 10-K.10.23
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River
Bancshares, Inc., dated February 5, 2009, filed as Exhibit 10.23 to the 2008 10-K.10.24
    
    Waiver and Agreement by and between Mercantile Bancorp, Inc., and Great River
Bancshares, Inc., dated March 13, 2009, regarding certain loan covenants of the
Company, filed as Exhibit 10.24 to the 2008 10-K.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.10.27
    
    Indenture dated August 25, 2005 between Mercantile Bancorp, Inc. and Wilmington Trust
Company, as trustee, filed as Exhibit 10.1 to the 2009 Second Quarter 10-Q.10.28
    
    Junior Subordinated Indenture dated July 13, 2006 between Mercantile Bancorp, Inc.
and Wilmington Trust Company, as trustee, filed as Exhibit10.2 to the 2009 Second
Quarter 10-Q.10.29
    
    Indenture dated July 13, 2006 (Fixed/Floating Rate Junior Subordinated Debt
Securities Due 2036) between Mercantile Bancorp, Inc. and Wilmington Trust Company,
as trustee, filed as Exhibit10.3 to the 2009 Second Quarter 10-Q.
 159




---



##### Table of Contents



Exhibit Number
    
    Description of Exhibit10.30
    
    Junior Subordinated Indenture dated August 30, 2007 between Mercantile Bancorp, Inc.
and Wilmington Trust Company, as trustee, filed as Exhibit10.4 to the 2009 Second
Quarter 10-Q.10.31
    
    Fourth Amended and Restated Loan Agreement dated April 30, 2009 between Mercantile
Bancorp, Inc. and Great River Bancshares, Inc. as assignee of U.S. Bank National
Association, filed as Exhibit 99.1 to a Current Report on Form 8-K filed on May 6,
2009.10.32
    
    First Amendment to Waiver and Agreement dated April 20, 2009 between Mercantile
Bancorp, Inc. and Great River Bancshares, Inc., filed as Exhibit 99.2 to a Current
Report on Form 8-K filed on May 6, 2009.10.33
    
    Fourth Amended and Restated Loan Agreement Waiver and Amendment dated August 10,
2009, filed as Exhibit10.5 to the 2009 Second Quarter 10-Q.10.34
    
    Stock Purchase Agreement dated as of November 22, 2009 by and between Mercantile
Bancorp, Inc. and United Community Bancorp, Inc., filed as Exhibit 10.1 to a Current
Report on Form 8-K filed on November 25, 2009 (the November 2009 Form 8-K).10.35
    
    Exchange Agreement dated as of November 21, 2009 by and between Mercantile Bancorp,
Inc. and R. Dean Phillips, filed as Exhibit 10.2 to the November 2009 Form 8-K.10.36
    
    Second Waiver and Amendment dated November 21, 2009 by and between Mercantile
Bancorp, Inc. and Great River Bancshares, Inc., filed as Exhibit 10.3 on the November
2009 Form 8-K.10.37
    
    Mercantile Bancorp, Inc. Company and Bank Executive and Senior Officer Incentive
Compensation Plan December 2006, amended and restated as of January 1, 2010, filed
herewith.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.32.1
    
    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. 160