##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K/A
 (Amendment No. 1)
 (Mark One)
 þ
    
    Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the fiscal year ended December 31, 2008
 OR
 o
    
    Transition report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
 Commission File No.: 001-32434
 MERCANTILE BANCORP, INC.
  Delaware
    
    37-1149138(State or Other Jurisdiction of
    
    (I.R.S. EmployerIncorporation or Organization)
    
    Identification Number)200 N. 33rdStreet, Quincy, Illinois
    
    62301(Address of Principal Executive Offices)
    
    (Zip Code)
 (217) 223-7300
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock (par value $.42 per share)
    
    NYSE Amex
  Not Applicable
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS  PART IIItem 8. Financial Statements and Supplementary DataPART IVItem 15. Exhibits, Financial Statement SchedulesSIGNATURESExhibit IndexEX-31.1EX-31.2EX-32.1EX-32.2    Table of Contents  Explanatory Note:




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



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




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##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Operations
Years Ended December 31, 2008, 2007 and 2006
(in thousands, except share data)
 2008
    
    
    2007
    
    
    2006Interest and Dividend IncomeLoansTaxable
    
    $
    83,175
    
    
    $
    82,912
    
    
    $
    66,152Tax exempt
    
    
    737
    
    
    
    936
    
    
    
    908SecuritiesTaxable
    
    
    7,167
    
    
    
    7,965
    
    
    
    5,774Tax exempt
    
    
    1,958
    
    
    
    1,830
    
    
    
    1,783Federal funds sold
    
    
    391
    
    
    
    1,219
    
    
    
    577Dividends on Federal Home Loan Bank stock
    
    
    113
    
    
    
    182
    
    
    
    189Deposits with financial institutions and other
    
    
    447
    
    
    
    899
    
    
    
    767Total interest and dividend income
    
    
    93,988
    
    
    
    95,943
    
    
    
    76,150Interest ExpenseDeposits
    
    
    41,750
    
    
    
    44,771
    
    
    
    33,071Short-term borrowings
    
    
    1,117
    
    
    
    1,945
    
    
    
    1,389Long-term debt and junior subordinated debentures
    
    
    7,788
    
    
    
    6,745
    
    
    
    3,954Total interest expense
    
    
    50,655
    
    
    
    53,461
    
    
    
    38,414Net Interest Income
    
    
    43,333
    
    
    
    42,482
    
    
    
    37,736Provision for Loan Losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Net Interest Income After Provision for Loan Losses
    
    
    19,488
    
    
    
    39,513
    
    
    
    33,822Noninterest IncomeFiduciary activities
    
    
    2,603
    
    
    
    2,411
    
    
    
    2,191Brokerage fees
    
    
    1,770
    
    
    
    1,468
    
    
    
    1,120Customer service fees
    
    
    4,302
    
    
    
    4,136
    
    
    
    3,610Other service charges and fees
    
    
    1,104
    
    
    
    713
    
    
    
    599Net gains (losses) on sales of assets
    
    
    371
    
    
    
    (23
    )
    
    
    (107
    )Net gains on loan sales
    
    
    1,010
    
    
    
    698
    
    
    
    612Net gains on sale of available-for-sale securities
    
    
    942
    
    
    
    699
    
    
    
    Net gains on sale of equity and cost method
investments
    
    
    100
    
    
    
    2,209
    
    
    
    4,318Loan servicing fees
    
    
    569
    
    
    
    464
    
    
    
    388Net increase in cash surrender value of life
insurance
    
    
    1,039
    
    
    
    926
    
    
    
    653Income (loss) on equity method investments in
common stock
    
    
    
    
    
    
    (6
    )
    
    
    251Other
    
    
    185
    
    
    
    241
    
    
    
    188Total noninterest income
    
    
    13,995
    
    
    
    13,936
    
    
    
    13,823
 See Notes to Consolidated Financial Statements
 8




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Noninterest ExpenseSalaries and employee benefits
    
    $
    27,074
    
    
    $
    23,253
    
    
    $
    18,254Net occupancy expense
    
    
    3,624
    
    
    
    2,695
    
    
    
    2,001Equipment expense
    
    
    3,459
    
    
    
    2,494
    
    
    
    1,777Deposit insurance premium
    
    
    1,054
    
    
    
    223
    
    
    
    122Professional fees
    
    
    2,371
    
    
    
    1,993
    
    
    
    1,782Postage and supplies
    
    
    1,290
    
    
    
    1,085
    
    
    
    941Losses on foreclosed assets, net
    
    
    1,113
    
    
    
    86
    
    
    
    35Other than temporary loss on available
for sale securities and cost method
investments
    
    
    5,270
    
    
    
    
    
    
    
    Amortization of mortgage servicing rights
    
    
    253
    
    
    
    134
    
    
    
    224Other
    
    
    8,666
    
    
    
    7,422
    
    
    
    6,373Total noninterest expense
    
    
    54,174
    
    
    
    39,385
    
    
    
    31,509Income (Loss) Before Minority Interest and
Income Taxes
    
    
    (20,691
    )
    
    
    14,064
    
    
    
    16,136Income Tax Expense (Benefit)
    
    
    (8,549
    )
    
    
    3,441
    
    
    
    5,025Income (Loss) before Minority Interest
    
    
    (12,142
    )
    
    
    10,623
    
    
    
    11,111Minority Interest
    
    
    (3,321
    )
    
    
    622
    
    
    
    792Net Income (Loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Basic Earnings (Loss) Per Share
    
    $
    (1.01
    )
    
    $
    1.15
    
    
    $
    1.18Weighted average shares outstanding
    
    
    8,705,452
    
    
    
    8,727,933
    
    
    
    8,770,475
 9




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##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Stockholders Equity 
Years Ended December 31, 2008, 2007 and 2006
(in thousands, except share data)
 Common Stock
    
    
    Additional Paid-InShares Outstanding
    
    
    Amount
    
    
    CapitalBalance, January 1, 2006
    
    
    8,772,367
    
    
    $
    3,629
    
    
    $
    11,764Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss of equity method
investee
    
    
    
    
    
    
    
    
    
    
    Change in unrealized loss on interest rate swaps, net of
taxes
    
    
    
    
    
    
    
    
    
    
    Total comprehensive incomeIssuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    218Dividends on common stock, $0.21 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (24,750
    )
    
    
    
    
    
    
    Adjustment to initially apply FAS Statement No. 158, net of tax
    
    
    
    
    
    
    
    
    
    
    Balance, December 31, 2006
    
    
    8,747,617
    
    
    
    3,629
    
    
    
    11,982Comprehensive incomeNet income
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Accumulated other comprehensive loss of equity method
investee
    
    
    
    
    
    
    
    
    
    
    Defined benefit postretirement plan  transition obligation
    
    
    
    
    
    
    
    
    
    
    Total comprehensive incomeIssuance of stock to minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    7Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (37,962
    )
    
    
    
    
    
    
    Balance, December 31, 2007
    
    
    8,709,655
    
    
    
    3,629
    
    
    
    11,989Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    Change in unrealized appreciation on available-for-sale
securities, net of taxes and reclassification adjustment
    
    
    
    
    
    
    
    
    
    
    Defined benefit postretirement plan  transition obligation
    
    
    
    
    
    
    
    
    
    
    Total comprehensive lossPurchase of stock from minority shareholders of Mid-America
    
    
    
    
    
    
    
    
    
    
    (70
    )Dividends on common stock, $0.24 per share
    
    
    
    
    
    
    
    
    
    
    Purchase of treasury stock
    
    
    (6,325
    )
    
    
    
    
    
    
    Balance, December 31, 2008
    
    
    8,703,330
    
    
    $
    3,629
    
    
    $
    11,919
 See Notes to Consolidated Financial Statements
 10




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##### Table of Contents



AccumulatedOtherRetained
    
    
    ComprehensiveEarnings
    
    
    Income (Loss)
    
    
    Treasury Stock
    
    
    Total$
    78,200
    
    
    $
    (848
    )
    
    $
    (1,257
    )
    
    $
    91,48810,319
    
    
    
    
    
    
    
    
    
    
    
    10,319
    
    
    
    892
    
    
    
    
    
    
    
    892
    
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    
    147
    
    
    
    
    
    
    
    14711,353
    
    
    
    
    
    
    
    
    
    
    
    218(1,871
    )
    
    
    
    
    
    
    
    
    
    
    (1,871
    )
    
    
    
    
    
    
    
    (367
    )
    
    
    (367
    )
    
    
    
    (163
    )
    
    
    
    
    
    
    (163
    )86,648
    
    
    
    23
    
    
    
    (1,624
    )
    
    
    100,65810,001
    
    
    
    
    
    
    
    
    
    
    
    10,001
    
    
    
    240
    
    
    
    
    
    
    
    240
    
    
    
    28
    
    
    
    
    
    
    
    28
    
    
    
    14
    
    
    
    
    
    
    
    1410,283
    
    
    
    
    
    
    
    
    
    
    
    7(2,097
    )
    
    
    
    
    
    
    
    
    
    
    (2,097
    )
    
    
    
    
    
    
    
    (569
    )
    
    
    (569
    )94,552
    
    
    
    305
    
    
    
    (2,193
    )
    
    
    108,282(8,821
    )
    
    
    
    
    
    
    
    
    
    
    (8,821
    )
    
    
    
    1,737
    
    
    
    
    
    
    
    1,737
    
    
    
    20
    
    
    
    
    
    
    
    20(7,064
    )
    
    
    
    
    
    
    
    
    
    
    
    (70
    )(2,089
    )
    
    
    
    
    
    
    
    
    
    
    (2,089
    )
    
    
    
    
    
    
    
    (102
    )
    
    
    (102
    )$
    83,642
    
    
    $
    2,062
    
    
    $
    (2,295
    )
    
    $
    98,957
 11




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##### Table of Contents



Mercantile Bancorp, Inc.
Consolidated Statements of Cash Flows
December 31, 2008 and 2007
(in thousands, except share data)
 2008
    
    
    2007
    
    
    2006Operating ActivitiesNet income (loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Items not requiring (providing) cashDepreciation
    
    
    2,845
    
    
    
    1,898
    
    
    
    1,535Provision for loan losses
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Amortization (depreciation) of premiums and discounts
on securities
    
    
    (2
    )
    
    
    (28
    )
    
    
    1,062Amortization (depreciation) of core deposit
intangibles and other purchase accounting adjustments
    
    
    80
    
    
    
    (970
    )
    
    
    247Mortgage servicing rights impairment
    
    
    404
    
    
    
    
    
    
    
    Deferred income taxes
    
    
    (7,752
    )
    
    
    (482
    )
    
    
    2,091Net realized gains on sales of available-for-sale
securities
    
    
    (942
    )
    
    
    (699
    )
    
    
    Other than temporary losses on available-for-sale and
cost method investments
    
    
    5,270
    
    
    
    
    
    
    
    Losses on sales of foreclosed assets
    
    
    1,113
    
    
    
    86
    
    
    
    35Net gains on loan sales
    
    
    (1,010
    )
    
    
    (698
    )
    
    
    (612
    )Amortization of mortgage servicing rights
    
    
    253
    
    
    
    134
    
    
    
    224Net (gains) losses on sale of premises and equipment
    
    
    (371
    )
    
    
    23
    
    
    
    107Gain on sale of equity and cost method investments
    
    
    (100
    )
    
    
    (2,209
    )
    
    
    (4,318
    )(Income) loss on equity method investments in common
stock
    
    
    
    
    
    
    6
    
    
    
    (251
    )Federal Home Loan Bank stock dividends
    
    
    (32
    )
    
    
    (56
    )
    
    
    (58
    )Net increase in cash surrender value of life insurance
    
    
    (1,039
    )
    
    
    (926
    )
    
    
    (653
    )Minority interest in earnings (loss) of subsidiary
    
    
    (3,321
    )
    
    
    622
    
    
    
    792Changes inLoan originated for sale
    
    
    (92,921
    )
    
    
    (48,113
    )
    
    
    (38,755
    )Proceeds from sales of loans
    
    
    92,483
    
    
    
    46,842
    
    
    
    41,142Interest receivable
    
    
    1,103
    
    
    
    (188
    )
    
    
    (1,736
    )Other assets
    
    
    (7,004
    )
    
    
    (1,068
    )
    
    
    (1,662
    )Interest payable
    
    
    (1,760
    )
    
    
    (607
    )
    
    
    2,256Other liabilities
    
    
    1,500
    
    
    
    61
    
    
    
    373Net cash provided by operating activities
    
    
    3,821
    
    
    
    6,598
    
    
    
    16,052Investing ActivitiesCash paid in acquisition of HNB Financial, net of cash
received
    
    
    (719
    )
    
    
    (24,790
    )
    
    
    Cash paid in acquisition of Royal Palm, net of cash
received
    
    
    
    
    
    
    
    
    
    
    (21,804
    )Purchases of available-for-sale securities
    
    
    (54,326
    )
    
    
    (44,091
    )
    
    
    (113,362
    )Proceeds from maturities of available-for-sale securities
    
    
    57,300
    
    
    
    47,015
    
    
    
    104,625Proceeds from the sales of available-for-sale securities
    
    
    4,954
    
    
    
    
    
    
    
    Purchases of held-to-maturity securities
    
    
    
    
    
    
    (1,000
    )
    
    
    Proceeds from maturities of held-to-maturity securities
    
    
    4,606
    
    
    
    3,368
    
    
    
    3,375Net change in loans
    
    
    (151,478
    )
    
    
    (58,888
    )
    
    
    (54,535
    )Purchases of premises and equipment
    
    
    (1,901
    )
    
    
    (11,504
    )
    
    
    (5,313
    )
 See
Notes to Consolidated Financial Statements
 12




---



##### Table of Contents



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




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 1: Nature of Operations and Summary of Significant Accounting Policies
 Nature of Operations
  Investment Subsidiary
  Principles of Consolidation
  14




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Use of Estimates
   Cash Equivalents
    Securities
  15




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Equity Method Investments
  Cost Method Investments
  Derivative Financial Instruments and Hedging Transactions
  16




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Accounting for Derivative Instruments and Hedging Activities
 Loans Held for Sale
  Loans
   Allowance for Loan Losses
   17




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Premises and Equipment
  Federal Home Loan Bank Stock
  18




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Foreclosed Assets Held for Sale
  Goodwill
  Core Deposit Intangibles
  Mortgage Servicing Rights
  19




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Loan Servicing Income
  Treasury Stock
  Income Taxes
  Self Insurance
  Earnings Per Share
  Trust Assets
  20




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Reclassifications
  Note 2: Securities
  Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale
Securities:December 31, 2008:U.S. government
agencies
    
    $
    4,697
    
    
    $
    90
    
    
    $
    
    
    
    $
    4,787Mortgage-backed
securities
    
    
    125,691
    
    
    
    2,783
    
    
    
    (29
    )
    
    
    128,445State and
political
subdivisions
    
    
    44,892
    
    
    
    808
    
    
    
    (34
    )
    
    
    45,666Equity securities
    
    
    6,500
    
    
    
    
    
    
    
    (206
    )
    
    
    6,294$
    181,780
    
    
    $
    3,681
    
    
    $
    (269
    )
    
    $
    185,192
 21




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueAvailable-for-sale
Securities:December 31, 2007:U.S. Treasury
    
    $
    993
    
    
    $
    6
    
    
    $
    
    
    
    $
    999U.S. government
agencies
    
    
    16,517
    
    
    
    222
    
    
    
    (13
    )
    
    
    16,726Mortgage-backed
securities
    
    
    108,129
    
    
    
    902
    
    
    
    (232
    )
    
    
    108,799State and
political
subdivisions
    
    
    53,708
    
    
    
    337
    
    
    
    (247
    )
    
    
    53,798Equity securities
    
    
    12,232
    
    
    
    961
    
    
    
    (1,276
    )
    
    
    11,917$
    191,579
    
    
    $
    2,428
    
    
    $
    (1,768
    )
    
    $
    192,239
 Gross
    
    
    GrossAmortized
    
    
    Unrealized
    
    
    Unrealized
    
    
    ApproximateCost
    
    
    Gains
    
    
    Losses
    
    
    Fair ValueHeld-to-maturity
Securities:December 31, 2008:Mortgage-backed
securities
    
    $
    5,992
    
    
    $
    149
    
    
    $
    (1
    )
    
    $
    6,140State and
political
subdivisions
    
    
    2,913
    
    
    
    48
    
    
    
    
    
    
    
    2,961$
    8,905
    
    
    $
    197
    
    
    $
    (1
    )
    
    $
    9,101December 31, 2007:Mortgage-backed
securities
    
    $
    8,329
    
    
    $
    73
    
    
    $
    (1
    )
    
    $
    8,401State and
political
subdivisions
    
    
    5,189
    
    
    
    36
    
    
    
    (2
    )
    
    
    5,223$
    13,518
    
    
    $
    109
    
    
    $
    (3
    )
    
    $
    13,624
 22




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Available-for-sale
    
    
    Held-to-maturityAmortized
    
    
    Fair
    
    
    Amortized
    
    
    FairCost
    
    
    Value
    
    
    Cost
    
    
    ValueWithin one year
    
    $
    7,292
    
    
    $
    7,330
    
    
    $
    210
    
    
    $
    210One to five years
    
    
    29,033
    
    
    
    29,655
    
    
    
    2,023
    
    
    
    2,052Five to ten years
    
    
    11,778
    
    
    
    11,980
    
    
    
    680
    
    
    
    699After ten years
    
    
    1,486
    
    
    
    1,488
    
    
    
    
    
    
    
    49,589
    
    
    
    50,453
    
    
    
    2,913
    
    
    
    2,961Mortgage-backed securities
    
    
    125,691
    
    
    
    128,445
    
    
    
    5,992
    
    
    
    6,140Equity securities
    
    
    6,500
    
    
    
    6,294
    
    
    
    
    
    
    
    Totals
    
    $
    181,780
    
    
    $
    185,192
    
    
    $
    8,905
    
    
    $
    9,101
   23




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
     24




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
    Less Than 12 Months
    
    
    12 Months or More
    
    
    TotalDescription of
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    Unrealized
    
    
    
    
    
    
    UnrealizedSecurities
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    Losses
    
    
    Fair Value
    
    
    LossesDecember 31, 2008Mortgage-backed
securities
    
    $
    7,594
    
    
    $
    (28
    )
    
    $
    106
    
    
    $
    (2
    )
    
    $
    7,700
    
    
    $
    (30
    )State and political
subdivisions
    
    
    3,406
    
    
    
    (30
    )
    
    
    1,021
    
    
    
    (4
    )
    
    
    4,427
    
    
    
    (34
    )Equity securities
    
    
    840
    
    
    
    (206
    )
    
    
    
    
    
    
    
    
    
    
    840
    
    
    
    (206
    )Total
temporarily
impaired
securities
    
    $
    11,840
    
    
    $
    (264
    )
    
    $
    1,127
    
    
    $
    (6
    )
    
    $
    12,967
    
    
    $
    (270
    )December 31, 2007U.S. Government
agencies
    
    $
    2,566
    
    
    $
    (1
    )
    
    $
    2,687
    
    
    $
    (12
    )
    
    $
    5,253
    
    
    $
    (13
    )Mortgage-backed
securities
    
    
    13,018
    
    
    
    (154
    )
    
    
    15,210
    
    
    
    (79
    )
    
    
    28,228
    
    
    
    (233
    )State and political
subdivisions
    
    
    4,726
    
    
    
    (23
    )
    
    
    28,190
    
    
    
    (226
    )
    
    
    32,916
    
    
    
    (249
    )Equity securities
    
    
    7,051
    
    
    
    (1,276
    )
    
    
    
    
    
    
    
    
    
    
    7,051
    
    
    
    (1,276
    )Total
temporarily
impaired
securities
    
    $
    27,361
    
    
    $
    (1,454
    )
    
    $
    46,087
    
    
    $
    (317
    )
    
    $
    73,448
    
    
    $
    (1,771
    )
 25




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 3: Equity and Cost Method Investments in Common Stock
      26




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 4: Loans and Allowance for Loan Losses
  2008
    
    
    2007Commercial and agricultural
    
    $
    296,265
    
    
    $
    242,114Commercial real estate
    
    
    564,483
    
    
    
    511,676Residential real estate
    
    
    339,261
    
    
    
    320,598Consumer
    
    
    132,000
    
    
    
    131,061Floor plan loans
    
    
    7,365
    
    
    
    6,602Total loans
    
    
    1,339,374
    
    
    
    1,212,051LessAllowance for loan losses
    
    
    23,467
    
    
    
    12,794Net loans
    
    $
    1,315,907
    
    
    $
    1,199,257
  2008
    
    
    2007
    
    
    2006Balance, beginning of year
    
    $
    12,794
    
    
    $
    10,613
    
    
    $
    8,082Purchased allowance
    
    
    
    
    
    
    1,126
    
    
    
    1,725Provision charged to expense
    
    
    23,845
    
    
    
    2,969
    
    
    
    3,914Losses charged off, net of
recoveries of $504 for
2008, $261 for 2007, and
$217 for 2006
    
    
    (13,172
    )
    
    
    (1,914
    )
    
    
    (3,108
    )Balance, end of year
    
    $
    23,467
    
    
    $
    12,794
    
    
    $
    10,613
  27




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Note 5: Premises and Equipment
  2008
    
    
    2007Land
    
    $
    6,730
    
    
    $
    6,612Buildings and improvements
    
    
    35,258
    
    
    
    23,517Leasehold improvements
    
    
    1,952
    
    
    
    2,173Equipment
    
    
    19,603
    
    
    
    16,383Construction in progress
    
    
    30
    
    
    
    13,89263,573
    
    
    
    62,577Less accumulated depreciation
    
    
    22,957
    
    
    
    20,574Net premises and equipment
    
    $
    40,616
    
    
    $
    42,003
   Note 6: Derivative Financial Instruments
   28




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 7: Goodwill
  2008
    
    
    2007Balance as of January 1
    
    $
    43,934
    
    
    $
    32,120Goodwill acquired in Royal Palm acquisition
    
    
    
    
    
    
    (36
    )Goodwill acquired in HNB acquisition
    
    
    719
    
    
    
    11,850Balance as of December 31
    
    $
    44,653
    
    
    $
    43,934
   Note 8: Core Deposit and Other Intangible Assets
  2008
    
    
    2007Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationCore deposits
    
    $
    4,681
    
    
    $
    1,093
    
    
    $
    4,681
    
    
    $
    581Intangible
asset with
indefinite
life
    
    
    414
    
    
    
    
    
    
    
    414
    
    
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
 29




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##### Table of Contents



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

2007Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedValues
    
    
    Amortization
    
    
    Values
    
    
    AmortizationBalance as of January 1
    
    $
    5,095
    
    
    $
    581
    
    
    $
    2,558
    
    
    $
    448Acquisition of HNB
    
    
    
    
    
    
    
    
    
    
    3,183
    
    
    
    Purchase of additional
Mid-America stock
    
    
    
    
    
    
    
    
    
    
    99
    
    
    
    Disposal of New Frontier
    
    
    
    
    
    
    
    
    
    
    (762
    )
    
    
    (227
    )Amortization of core
deposit intangibles
    
    
    
    
    
    
    512
    
    
    
    
    
    
    
    360Acquisition of
intangible with
indefinite life
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    Balance as of December 31
    
    $
    5,095
    
    
    $
    1,093
    
    
    $
    5,095
    
    
    $
    581
  2009
    
    $
    496,0002010
    
    
    478,0002011
    
    
    449,0002012
    
    
    440,0002013
    
    
    425,000
 Note 9: Loan Servicing
   30




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##### Table of Contents



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




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 10: Interest-Bearing Deposits
   2009
    
    $
    572,2312010
    
    
    151,4382011
    
    
    78,9772012
    
    
    23,4692013
    
    
    44,853Thereafter
    
    
    20,226$
    891,194
 Note 11: Short-Term Borrowings
  2008
    
    
    2007Federal funds purchased
    
    $
    1,158
    
    
    $
    4,874Securities sold under agreements to repurchase
    
    
    17,365
    
    
    
    25,062U.S. Treasury demand notes
    
    
    4,307
    
    
    
    2,763Short-term Federal Home Loan Bank borrowings
    
    
    2,000
    
    
    
    12,890Short-term Federal Reserve Bank borrowings
    
    
    12,500
    
    
    
    Other short-term borrowings
    
    
    11,897
    
    
    
    Total short-term borrowings
    
    $
    49,227
    
    
    $
    45,589
  32




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
      33




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 12: Long-Term Debt and Junior Subordinated Debentures
  2008
    
    
    2007Federal Home Loan Bank advances, fixed rates from
..65% to 5.30%, due at various dates through 2017
    
    $
    60,500
    
    
    $
    57,500Note payable, fixed rate of 6.13%, due August 31, 2010
    
    
    5,037
    
    
    
    5,000Note payable, fixed rate of 6.27%, due August 31, 2010
    
    
    2,015
    
    
    
    2,000Note payable, fixed rate of 6.09%, due November 10,
2009
    
    
    15,109
    
    
    
    15,000Junior subordinated debenture, variable rate, due
June 30, 2013
    
    
    2,000
    
    
    
    2,000Junior subordinated debentures owed to unconsolidated
subsidiaries
    
    
    61,858
    
    
    
    61,858Total long-term debt
    
    $
    146,519
    
    
    $
    143,358
     34




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
    35




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   36




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
      2009
    
    $
    31,3592010
    
    
    16,8022011
    
    
    14,0002012
    
    
    5,0002013
    
    
    5,000Thereafter
    
    
    74,358$
    146,519
 37




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 13: Income Taxes
  2008
    
    
    2007
    
    
    2006Taxes currently payableFederal
    
    $
    (770
    )
    
    $
    3,373
    
    
    $
    2,696State
    
    
    (27
    )
    
    
    550
    
    
    
    238Deferred income taxesFederal
    
    
    (6,900
    )
    
    
    (376
    )
    
    
    1,714State
    
    
    (852
    )
    
    
    (106
    )
    
    
    377Income tax expense (benefit)
    
    $
    (8,549
    )
    
    $
    3,441
    
    
    $
    5,025
  2008
    
    
    2007
    
    
    2006Computed at the statutory rate (35%)
    
    $
    (7,242
    )
    
    $
    4,923
    
    
    $
    5,647Increase (decrease) resulting fromGraduated tax rates
    
    
    207
    
    
    
    (141
    )
    
    
    (161
    )Tax exempt income
    
    
    (857
    )
    
    
    (940
    )
    
    
    (836
    )State income taxes
    
    
    (580
    )
    
    
    293
    
    
    
    406Increase in cash surrender value
of life insurance
    
    
    (353
    )
    
    
    (340
    )
    
    
    (219
    )Nondeductible capital loss
    
    
    247
    
    
    
    
    
    
    
    Other
    
    
    29
    
    
    
    (354
    )
    
    
    188Actual tax expense (benefit)
    
    $
    (8,549
    )
    
    $
    3,441
    
    
    $
    5,025
 38




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##### Table of Contents



Mercantile Bancorp, Inc.
 Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007Deferred tax assetsAllowance for loan losses
    
    $
    8,467
    
    
    $
    4,652Accrued compensated absences
    
    
    236
    
    
    
    214Deferred compensation
    
    
    1,349
    
    
    
    1,376Accrued postretirement benefits
    
    
    156
    
    
    
    241Deferred loss on investments
    
    
    825
    
    
    
    Net operating loss carryforward of Mid-America
Bancorp, Inc.
    
    
    962
    
    
    
    454Stock options
    
    
    111
    
    
    
    87Deferred loan fees
    
    
    79
    
    
    
    145Alternative minimum tax credits
    
    
    441
    
    
    
    Other
    
    
    468
    
    
    
    13,094
    
    
    
    7,169Deferred tax liabilitiesFederal Home Loan Bank stock dividends
    
    
    416
    
    
    
    366Depreciation
    
    
    413
    
    
    
    312State taxes
    
    
    382
    
    
    
    91Mortgage servicing rights
    
    
    183
    
    
    
    488Deferred gain on investments
    
    
    
    
    
    
    1,746Unrealized gains on available-for-sale securities
    
    
    1,205
    
    
    
    192Core deposit intangible for Mid-America Bancorp, Inc.
    
    
    
    
    
    
    226Purchase accounting adjustments
    
    
    1,151
    
    
    
    991Other
    
    
    163
    
    
    
    3003,913
    
    
    
    4,712Net deferred tax asset
    
    $
    9,181
    
    
    $
    2,457
   39




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 14: Other Comprehensive Income (Loss)
  2008
    
    
    2007
    
    
    2006Unrealized appreciation (depreciation) on available-for-sale securities:Unrealized appreciation (depreciation) on available-for-sale securities, net of tax expense (benefit)
of $(354) for 2008, $73 for 2007, and $580 for 2006
    
    $
    (497
    )
    
    $
    240
    
    
    $
    892Less reclassification adjustment for realized gains (losses) included in income net of tax expense
(benefit) of $358 for 2008 and $0 for 2007 and 2006
    
    
    584
    
    
    
    
    
    
    
    Less reclassification adjustment for other-than-temporary gains (losses) included in income net of tax
expense (benefit) of $(1,727) for 2008 and $0 for 2007 and 2006
    
    
    (2,818
    )
    
    
    
    
    
    
    Total unrealized appreciation (depreciation) on available-for-sale securities, net of tax expense
of $1,015 for 2008, $73 for 2007, and $580 for 2006
    
    $
    1,737
    
    
    $
    240
    
    
    $
    892Accumulated other comprehensive loss of equity method investee
    
    $
    
    
    
    $
    28
    
    
    $
    (5
    )Defined benefit post-retirement liability, net of tax expense of $13 for 2008, $0 for 2007, and $100 for 2006
    
    $
    20
    
    
    $
    14
    
    
    $
    (163
    )Unrealized loss on interest rate swaps:Unrealized holding gains (losses), net of tax expense (benefit) of $0 for 2008, $0 for 2007, and $(19)
for 2006
    
    $
    
    
    
    $
    
    
    
    $
    (28
    )Less reclassification adjustment to interest income, net of tax expense (benefit) of $0 for 2008, $0
for 2007, and $(104) for 2006
    
    
    
    
    
    
    
    
    
    
    (175
    )Net change in unrealized loss on interest rate swaps, net of tax expense (benefit) of $0 for 2008,
$0 for 2007, and $91 for 2006
    
    $
    
    
    
    $
    
    
    
    $
    147
 40




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  2008
    
    
    2007Net unrealized gain on securities available-for-sale
    
    $
    3,412
    
    
    $
    660Net unrealized loss on defined benefit post-retirement liability
    
    
    (230
    )
    
    
    (263
    )3,182
    
    
    
    397Tax effect
    
    
    (1,120
    )
    
    
    (92
    )Net-of-tax amount
    
    $
    2,062
    
    
    $
    305
 Note 15: Regulatory Matters
     41




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  To Be Well 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
    %
 42




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 To Be Well CapitalizedFor Capital Adequacy
    
    Under Prompt CorrectiveActual
    
    Purposes
    
    Action ProvisionsAmount
    
    Ratio
    
    Amount
    
    Ratio
    
    Amount
    
    RatioAs of December 31, 2007Total capital(to risk-weighted assets)Consolidated
    
    $
    141,156
    
    
    
    10.5
    %
    
    $
    107,643
    
    
    
    8.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    53,017
    
    
    
    10.2
    %
    
    
    41,478
    
    
    
    8.0
    %
    
    $
    51,848
    
    
    
    10.0
    %Perry State Bank
    
    
    13,968
    
    
    
    10.3
    %
    
    
    10,846
    
    
    
    8.0
    %
    
    
    13,558
    
    
    
    10.0
    %Farmers State Bank of Northern Missouri
    
    
    7,501
    
    
    
    10.7
    %
    
    
    5,634
    
    
    
    8.0
    %
    
    
    7,043
    
    
    
    10.0
    %Marine Bank and Trust
    
    
    13,441
    
    
    
    10.7
    %
    
    
    10,053
    
    
    
    8.0
    %
    
    
    12,566
    
    
    
    10.0
    %Brown County State Bank
    
    
    6,321
    
    
    
    10.2
    %
    
    
    4,980
    
    
    
    8.0
    %
    
    
    6,225
    
    
    
    10.0
    %Heartland Bank
    
    
    20,907
    
    
    
    11.3
    %
    
    
    14,790
    
    
    
    8.0
    %
    
    
    18,488
    
    
    
    10.0
    %Royal Palm Bank of Florida
    
    
    16,554
    
    
    
    13.8
    %
    
    
    9,592
    
    
    
    8.0
    %
    
    
    11,990
    
    
    
    10.0
    %HNB Bank
    
    
    13,127
    
    
    
    10.9
    %
    
    
    9,608
    
    
    
    8.0
    %
    
    
    12,010
    
    
    
    10.0
    %Tier I capital(to risk-weighted assets)Consolidated
    
    
    105,788
    
    
    
    7.9
    %
    
    
    53,821
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    49,162
    
    
    
    9.5
    %
    
    
    20,739
    
    
    
    4.0
    %
    
    
    31,109
    
    
    
    6.0
    %Perry State Bank
    
    
    12,414
    
    
    
    9.2
    %
    
    
    5,423
    
    
    
    4.0
    %
    
    
    8,135
    
    
    
    6.0
    %Farmers State Bank of Northern Missouri
    
    
    6,617
    
    
    
    9.4
    %
    
    
    2,817
    
    
    
    4.0
    %
    
    
    4,226
    
    
    
    6.0
    %Marine Bank and Trust
    
    
    12,369
    
    
    
    9.8
    %
    
    
    5,026
    
    
    
    4.0
    %
    
    
    7,540
    
    
    
    6.0
    %Brown County State Bank
    
    
    5,882
    
    
    
    9.5
    %
    
    
    2,490
    
    
    
    4.0
    %
    
    
    3,735
    
    
    
    6.0
    %Heartland Bank
    
    
    16,754
    
    
    
    9.1
    %
    
    
    7,395
    
    
    
    4.0
    %
    
    
    11,093
    
    
    
    6.0
    %Royal Palm Bank of Florida
    
    
    15,099
    
    
    
    12.6
    %
    
    
    4,796
    
    
    
    4.0
    %
    
    
    7,194
    
    
    
    6.0
    %HNB Bank
    
    
    12,069
    
    
    
    10.0
    %
    
    
    4,804
    
    
    
    4.0
    %
    
    
    7,206
    
    
    
    6.0
    %Tier I capital(to average assets)Consolidated
    
    
    105,788
    
    
    
    6.7
    %
    
    
    62,933
    
    
    
    4.0
    %
    
    
    N/A
    
    
    
    N/AMercantile Bank
    
    
    49,162
    
    
    
    8.4
    %
    
    
    23,490
    
    
    
    4.0
    %
    
    
    29,363
    
    
    
    5.0
    %Perry State Bank
    
    
    12,414
    
    
    
    8.2
    %
    
    
    6,087
    
    
    
    4.0
    %
    
    
    7,609
    
    
    
    5.0
    %Farmers State Bank of Northern Missouri
    
    
    6,617
    
    
    
    6.8
    %
    
    
    3,874
    
    
    
    4.0
    %
    
    
    4,842
    
    
    
    5.0
    %Marine Bank and Trust
    
    
    12,369
    
    
    
    7.4
    %
    
    
    6,687
    
    
    
    4.0
    %
    
    
    8,359
    
    
    
    5.0
    %Brown County State Bank
    
    
    5,882
    
    
    
    7.5
    %
    
    
    3,132
    
    
    
    4.0
    %
    
    
    3,915
    
    
    
    5.0
    %Heartland Bank
    
    
    16,754
    
    
    
    8.6
    %
    
    
    7,804
    
    
    
    4.0
    %
    
    
    9,754
    
    
    
    5.0
    %Royal Palm Bank of Florida
    
    
    15,099
    
    
    
    10.6
    %
    
    
    5,681
    
    
    
    4.0
    %
    
    
    7,101
    
    
    
    5.0
    %HNB Bank
    
    
    12,069
    
    
    
    7.4
    %
    
    
    6,565
    
    
    
    4.0
    %
    
    
    8,207
    
    
    
    5.0
    %
 43




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Note 16: Related Party Transactions
   Balances, January 1, 2008
    
    $
    20,773,000Change in composition of related parties
    
    
    288,457New loans, including renewals
    
    
    2,974,638Payments, including renewals
    
    
    (9,128,570
    )Balances, December 31, 2008
    
    $
    14,907,525
  44




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Note 17: Leases
   OperatingLeases2009
    
    $
    409,3902010
    
    
    353,9192011
    
    
    312,5242012
    
    
    286,3522013
    
    
    211,882Thereafter
    
    
    503,663Total minimum lease payments
    
    $
    2,077,730
 45




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Note 18: Acquisitions
   Cash and cash equivalents
    
    $
    6,511Available-for-sale securities
    
    
    27,392Held-to-maturity securities
    
    
    4,500Loans, net of allowance for loan losses of $1,126
    
    
    114,095Interest receivable
    
    
    878Federal Home Loan Bank stock
    
    
    1,775Premises and equipment
    
    
    6,785Core deposit intangibles
    
    
    3,183Goodwill
    
    
    12,569Other assets
    
    
    4,034Total assets acquired
    
    
    181,722Deposits
    
    
    129,603Short-term borrowings
    
    
    889Deferred income taxes
    
    
    748Long-term debt
    
    
    17,000Interest payable
    
    
    608Other liabilities
    
    
    854Total liabilities assumed
    
    
    149,702Net assets acquired
    
    $
    32,020
  46




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Year Ended December 31,2007
    
    2006Net interest income
    
    $
    44,739
    
    
    $
    42,302Net income
    
    
    9,664
    
    
    
    10,547Basic earnings per share
    
    
    1.11
    
    
    
    1.21
 47




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
   Cash and cash equivalents
    
    $
    21,012Available-for-sale securities
    
    
    8,706Held-to-maturity securities
    
    
    1,000Loans, net of allowance for loan losses of $1,725
    
    
    121,310Interest receivable
    
    
    645Federal Home Loan Bank stock
    
    
    520Deferred income taxes
    
    
    1,515Premises and equipment
    
    
    3,800Core deposit intangibles
    
    
    303Goodwill
    
    
    26,604Other assets
    
    
    2,321Total assets acquired
    
    
    187,736Deposits
    
    
    138,923Long-term debt
    
    
    5,000Interest payable
    
    
    649Other liabilities
    
    
    348Total liabilities assumed
    
    
    144,920Net assets acquired
    
    $
    42,816
  48




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Year EndedDecember 31,2006Net interest income
    
    $
    42,332Net income
    
    
    10,639Basic earnings per share
    
    
    1.82
 Note 19: Employee Benefits
  Postretirement Benefits
  Employees Accounting
for Deferred Benefit Pension and Other Postretirement Plans
 49




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Note 20: Disclosures about Fair Value of Financial Instruments
 Fair Value Measurements
  Level 1
    
    Quoted prices in active markets for identical assets or liabilitiesLevel 2
    
    Observable inputs other than Level 1 prices, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other
inputs that are observable or can be corroborated by observable market data for
substantially the full term of the assets or liabilitiesLevel 3
    
    Unobservable inputs that are supported by little or no market activity
and that are significant to the fair value of the assets or liabilities
  Available-for-Sale Securities
  50




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Available-for-sale securities
    
    $
    185,192
    
    
    $
    4,811
    
    
    $
    178,375
    
    
    $
    2,006
  Available-for-Sale SecuritiesBalance, January 1, 2008
    
    $
    1,900Total realized and unrealized gains and lossesIncluded in net income
    
    
    Included in other comprehensive income
    
    
    Purchases, issuances and settlements
    
    
    2,738Transfers in and/or out of Level 3
    
    
    (2,632
    )Balance, December 31, 2008
    
    $
    2,006Total gains or losses for the period included in net income (loss) attributable to the change in unrealized gains or losses related to assets and liabilities still held at the reporting
date
    
    $
    
 51




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  NoninterestIncomeTotal gains and losses
    
    $
    0Change in unrealized gains or losses relating to assets still held at the balance sheet date
    
    $
    0
  Mortgage Servicing Rights
  Impaired Loans
 Accounting by Creditors for
Impairment of a Loan
    52




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Cost Method Investments
   Fair Value Measurements UsingQuoted Pricesin Active
    
    SignificantMarkets for
    
    Other
    
    SignificantIdentical
    
    Observable
    
    UnobservableAssets
    
    Inputs
    
    InputsFair Value
    
    (Level 1)
    
    (Level 2)
    
    (Level 3)Impaired loans
    
    $
    30,966
    
    
    $
    
    
    
    $
    
    
    
    $
    30,966Mortgage servicing rights
    
    
    959
    
    
    
    
    
    
    
    
    
    
    
    959Cost method investments
    
    
    3,314
    
    
    
    
    
    
    
    
    
    
    
    3,314
 53




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  December 31, 2008
    
    
    December 31, 2007Carrying
    
    
    
    
    
    
    CarryingAmount
    
    
    Fair Value
    
    
    Amount
    
    
    Fair ValueFinancial assetsCash and cash equivalents
    
    $
    89,821
    
    
    $
    89,821
    
    
    $
    76,059
    
    
    $
    76,059Available-for-sale securities
    
    
    185,192
    
    
    
    185,192
    
    
    
    192,239
    
    
    
    192,239Held-to-maturity securities
    
    
    8,905
    
    
    
    9,101
    
    
    
    13,518
    
    
    
    13,624Loans held for sale
    
    
    4,366
    
    
    
    4,366
    
    
    
    3,338
    
    
    
    3,338Loans, net of allowance for loan losses
    
    
    1,315,907
    
    
    
    1,325,196
    
    
    
    1,199,257
    
    
    
    1,197,681Federal Home Loan Bank stock
    
    
    8,213
    
    
    
    8,213
    
    
    
    7,790
    
    
    
    7,790Cost method investments in common stock
    
    
    3,314
    
    
    
    3,314
    
    
    
    6,105
    
    
    
    6,105Interest receivable
    
    
    10,240
    
    
    
    10,240
    
    
    
    11,343
    
    
    
    11,343Financial liabilitiesDeposits
    
    
    1,462,276
    
    
    
    1,460,654
    
    
    
    1,319,459
    
    
    
    1,313,483Short-term borrowings
    
    
    49,227
    
    
    
    49,227
    
    
    
    45,589
    
    
    
    45,589Long-term debt and junior subordinated debentures
    
    
    146,519
    
    
    
    141,317
    
    
    
    143,358
    
    
    
    144,217Interest payable
    
    
    4,280
    
    
    
    4,280
    
    
    
    6,040
    
    
    
    6,040Unrecognized financial instruments 
(net of contract amount)Commitments to originate loans
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Letters of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Lines of credit
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
 54




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
  Cash and Cash Equivalents, Federal Home Loan Bank Stock, and Cost Method Investments in Common
Stock
  Securities
  Loans Held for Sale
  Loans
  Deposits
  Short-Term Borrowings and Interest Payable
  Long-Term Debt and Junior Subordinated Debentures
  55




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Commitments to Originate Loans, Letters of Credit, and Lines of Credit
  Note 21: Significant Estimates and Concentrations
  Concentration on Credit Risk
   56




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Foreclosed Assets Held for Sale, Net
  Investments
  Current Economic Conditions
   57




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Note 22: Operating and Liquidity Matters
    
    
    Non-performing assets of all subsidiary banks on a combined basis cannot exceed
thirty-five percent of the then primary capital of all subsidiary banks;
    
    The consolidated fixed charge ratio is required to be at least .50 to 1.00 for
each quarter ending after December 31, 2008; and
    
    Stockholders equity is required to be at least $90 million, less the amount of
any goodwill impairment charges, as of the last day of each calendar month.
   
    
    the occurrence of an event of default under any of the loan agreements;
    
    the Company should fail to perform any additional covenant;
    
    any changes in regulatory agreements;
    
    the Company, any subsidiary holding company or any subsidiary bank being
placed in receivership or being taken over by any regulatory agency;
 58




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 
 
    
    the note holder determines in its sole discretion that there has been any change in
the business operations or condition, financial or otherwise, of the Company, any
subsidiary holding company, any subsidiary bank or any consolidated subsidiary that
could have a material adverse effect;
    
    April 30, 2009, if the note holder and the Company have not executed an
amendment to, and restatement of, the current loan agreements between the Company
and the note holder satisfactory to the note holder in its sole discretion; or
    
    September 30, 2009
   59




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Note 23: Commitments and Credit Risk
  Commitments to Originate Loans
   Standby Letters of Credit
  60




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
  Lines of Credit
   General Litigation
  Note 24: Stock Split
  61




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Note 25: Accounting Pronouncements
 Fair Value Measurements
 Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting
Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or
Measurement Under Statement 13 Effective Date of FASB Statement No. 157
 Determining the Fair Value of a Financial Asset
When the Market for That Asset is Not Active Fair Value Measurements
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including Amendment of FASB Statement No. 115
 62




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Non-controlling Interest in
Consolidated Financial Statements  an amendment of ARB No. 51
 Disclosures about Derivative
Instruments and Hedging Activities  an Amendment of FASB Statement No. 133
 The Hierarchy of Generally Accepted
Accounting Principles
 Disclosures by Public
Entities (Enterprises) About Transfers of Financial Assets and Interests in Variable Interest
Entities
 63




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
 Amendments to the Impairment and Interest
Income Measurement Guidance of EITF Issue No. 99-20 Accounting for Certain Investments in Debt and Equity Securities
 Business
Combinations
 Note 26: Subsequent Events
   64




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##### Table of Contents



Mercantile Bancorp, Inc.  Notes to Consolidated Financial Statements  December 31, 2008, 2007 and 2006  (Table dollar amounts in thousands)
   Note 27: Condensed Financial Information (Parent Company Only)
  Condensed Balance Sheets
 December 31,2008
    
    
    2007AssetsCash
    
    $
    2,172
    
    
    $
    250Investment in common stock of subsidiaries
    
    
    175,701
    
    
    
    173,696Available-for-sale securities
    
    
    4,740
    
    
    
    11,521Note receivable
    
    
    1,325
    
    
    
    Cost method investments in common stock
    
    
    2,841
    
    
    
    4,412Core deposit intangibles
    
    
    712
    
    
    
    831Other
    
    
    5,313
    
    
    
    4,069Total assets
    
    $
    192,804
    
    
    $
    194,779LiabilitiesOther short-term borrowings
    
    $
    7,552
    
    
    $
    Long-term debt
    
    
    22,161
    
    
    
    22,000Junior subordinated debentures
    
    
    61,858
    
    
    
    61,858Deferred income taxes
    
    
    1,579
    
    
    
    1,944Other
    
    
    697
    
    
    
    695Total liabilities
    
    
    93,847
    
    
    
    86,497Stockholders Equity
    
    
    98,957
    
    
    
    108,282Total liabilities and stockholders equity
    
    $
    192,804
    
    
    $
    194,779
 65




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Condensed Statements of Operations
 Years Ended December 31,2008
    
    
    2007
    
    
    2006IncomeDividends from subsidiaries
    
    $
    5,000
    
    
    $
    15,679
    
    
    $
    4,840Income (loss) on equity
method investments
    
    
    
    
    
    
    (6
    )
    
    
    251Other-than-temporary loss
on available-for-sale
securities and cost method
investments
    
    
    (4,545
    )
    
    
    
    
    
    
    Net gains on sale of
equity and cost method
investments
    
    
    942
    
    
    
    2,775
    
    
    
    4,318Other income
    
    
    2,515
    
    
    
    449
    
    
    
    17Total income
    
    
    3,912
    
    
    
    18,897
    
    
    
    9,426ExpensesOther expenses
    
    
    9,984
    
    
    
    6,957
    
    
    
    4,331Total expenses
    
    
    9,984
    
    
    
    6,957
    
    
    
    4,331Income (Loss) Before Income Tax
and Equity in Undistributed
Income of Subsidiaries
    
    
    (6,072
    )
    
    
    11,940
    
    
    
    5,095Income Tax Expense (Benefit)
    
    
    (3,980
    )
    
    
    (1,510
    )
    
    
    316Income (Loss) Before Equity in
Undistributed Income of
Subsidiaries
    
    
    (2,092
    )
    
    
    13,450
    
    
    
    4,779Equity in Undistributed Income
(Loss) of Subsidiaries
    
    
    (6,729
    )
    
    
    (3,449
    )
    
    
    5,540Net Income (Loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319
 66




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##### Table of Contents



Mercantile Bancorp, Inc.
Notes to Consolidated Financial Statements
December 31, 2008, 2007 and 2006
(Table dollar amounts in thousands)
 Condensed Statements of Cash Flows
 Years Ended December 31,2008
    
    
    2007
    
    
    2006Operating ActivitiesNet income (loss)
    
    $
    (8,821
    )
    
    $
    10,001
    
    
    $
    10,319Items not requiring (providing) cash(Income) loss on equity method investment
    
    
    
    
    
    
    6
    
    
    
    (251
    )Amortization of core deposit intangibles
    
    
    118
    
    
    
    161
    
    
    
    230Depreciation expense
    
    
    6
    
    
    
    
    
    
    
    Equity in undistributed (income) loss of
subsidiaries
    
    
    6,729
    
    
    
    3,449
    
    
    
    (5,540
    )Deferred income taxes
    
    
    (2,989
    )
    
    
    (250
    )
    
    
    1,530Other-than-temporary loss on
available-for-sale and cost method
investments
    
    
    4,545
    
    
    
    
    
    
    
    Gain on sale of equity and cost method
investments
    
    
    (942
    )
    
    
    (2,775
    )
    
    
    (4,319
    )Net change inOther assets
    
    
    (261
    )
    
    
    (354
    )
    
    
    (1,407
    )Other liabilities
    
    
    142
    
    
    
    1,358
    
    
    
    (48
    )Net cash provided by (used in) operating
activities
    
    
    (1,473
    )
    
    
    11,596
    
    
    
    514Investing ActivitiesCash paid for additional shares of Mid-America
    
    
    
    
    
    
    (611
    )
    
    
    Purchase of property and equipment
    
    
    (38
    )
    
    
    
    
    
    
    Proceeds from sales of equity method
investments
    
    
    
    
    
    
    6,791
    
    
    
    1,347Proceeds from sales of available-for-sale
securities
    
    
    4,954
    
    
    
    
    
    
    
    Purchase of cost method investments in common
stock
    
    
    
    
    
    
    (2,217
    )
    
    
    (500
    )Payments for investments and advances to
subsidiaries
    
    
    (7,070
    )
    
    
    (1,750
    )
    
    
    (2,800
    )Purchase of available-for-sale securities
    
    
    
    
    
    
    (1,240
    )
    
    
    (1,959
    )Cash paid in acquisition of HNB
    
    
    
    
    
    
    (31,301
    )
    
    
    Cash paid in acquisition of Royal Palm
    
    
    
    
    
    
    
    
    
    
    (42,816
    )Net cash used in investing activities
    
    
    (2,154
    )
    
    
    (30,328
    )
    
    
    (46,728
    )Financing ActivitiesNet increase in demand deposits
    
    
    27
    
    
    
    
    
    
    
    Net increase in short-term borrowings
    
    
    7,552
    
    
    
    
    
    
    
    Proceeds from long-term debt
    
    
    22,161
    
    
    
    15,650
    
    
    
    17,250Repayment of long-term debt
    
    
    (22,000
    )
    
    
    (14,835
    )
    
    
    Proceeds from issuance of junior subordinated
debentures
    
    
    
    
    
    
    20,619
    
    
    
    30,929Purchase of treasury stock
    
    
    (102
    )
    
    
    (569
    )
    
    
    (367
    )Dividends paid
    
    
    (2,089
    )
    
    
    (2,097
    )
    
    
    (1,871
    )Net cash provided by financing activities
    
    
    5,549
    
    
    
    18,768
    
    
    
    45,941Net Change in Cash
    
    
    1,922
    
    
    
    36
    
    
    
    (273
    )Cash at Beginning of Year
    
    
    250
    
    
    
    214
    
    
    
    487Cash at End of Year
    
    $
    2,172
    
    
    $
    250
    
    
    $
    214
 67




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
           68




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##### Table of Contents



SIGNATURES
  MERCANTILE BANCORP, INC.
(Registrant)By:
Name:
    
    /s/ Michael P. McGrath

Michael P. McGrathTitle:
    
    Executive Vice President, Treasurer, 
Secretary and Chief Financial OfficerDated:
    
    March 24, 2009
 69




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description of Exhibit*3.1
    
    
    Certificate of Incorporation of Mercantile Bancorp, Inc., as amended, filed with the Registration Statement on Form 10 dated May 12, 2004 (File No. 000-50757)
(the Registration Statement), under the same exhibit number.3.2
    
    
    Bylaws of Mercantile Bancorp, Inc., as amended, filed as Exhibit 99.1 to a Current Report on Form 8-K filed November 21, 2007.3.3
    
    
    Certificate of Amendment to the Certificate of Incorporation of Mercantile Bancorp, Inc.**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.**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.10.13
    
    
    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.**
 70




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit*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.**10.22
    
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River Bancshares, Inc., dated
December 31, 2008.**10.23
    
    
    Secured Demand Promissory Note made by Mercantile Bancorp, Inc. to Great River Bancshares, Inc., dated
February 5, 2009.**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.**10.25
    
    
    Construction Agreement dated August 24, 2006 by and between Mercantile Trust & Savings Bank, Owner, and
Clayco, Inc., Contractor, filed as Exhibit 10.2 with the 2006 Third Quarter Form 10-Q.10.26
    
    
    General Conditions of the Contract for Construction by and between Mercantile Trust & Savings Bank, Owner,
and Clayco, Inc., Contractor, filed as Exhibit 10.3 with the 2006 Third Quarter Form 10-Q.14.1
    
    
    Code of Ethics, filed under same exhibit number with Annual Report on Form 10-K for fiscal year ended
December 31, 2004.21
    
    
    Subsidiaries of registrant.**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.
 
 *
    
    To the extent not filed herewith, the document is incorporated herein by reference from the filing listed in the index.**
    
    Filed on March 18, 2009, with the Annual Report on Form 10-K.
    
    Management contract or compensatory plan or arrangement. 71