Mercantile Bancorp Announces Second Quarter 2009 Results

QUINCY, IL--(Marketwire - August 14, 2009) - Mercantile Bancorp, Inc. (NYSE Amex: MBR)

-- Consistent Positive Operating Results Posted by Illinois, Missouri
Bank Holdings
-- Moderate Growth in Total Assets, Deposits and Loans Year-Over-Year
-- Net Loss Includes Non-cash Goodwill Impairment Charge of $44.6 Million

Mercantile Bancorp, Inc. (NYSE Amex: MBR) today reported an unaudited net
loss of $52.0 million or $(5.98) per share for the quarter ended June 30,
2009, compared with net income of $1.3 million or $0.15 per share for the
second quarter of 2008.

The second quarter 2009 net loss was significant due to a $44.6 million
non-cash charge to reflect the calculated impairment of its goodwill. The
reported loss also reflected a provision for loan losses of $10.0 million,
largely related to loans at the company's subsidiary banks in Florida and
Kansas, compared to a provision of $1.8 million in the second quarter of
2008. To address the asset quality issues at Royal Palm Bank in Naples,
Florida and Heartland Bank in Leawood, Kansas, the Company has implemented
operational and credit policy changes over the past several quarters, with
a goal of minimizing future losses in the loan portfolios. Other factors
contributing to the net loss in the second quarter 2009 were the non-cash
write-downs of equity investments in other financial institutions of $2.5
million, and an FDIC insurance fund special assessment of $812,000.

The Company reported $1.70 billion in assets at June 30, 2009 compared with
$1.69 billion at June 30, 2008 and $1.77 billion at year-end 2008. Total
loans were $1.31 billion at June 30, 2009, an increase of 3.8% compared
with $1.26 billion at June 30, 2008. Total deposits stood at $1.43 billion
at June 30, 2009, an increase of 2.1% over total deposits of $1.40 billion
at June 30, 2008.

Since 1988, the Company has grown significantly through acquisitions and
recorded goodwill related to these acquisitions. However, in consideration
of the severe economic downturn and current accounting rules, the Company
placed more weight on the lower peer valuations used in the estimate of the
fair value of its subsidiaries. As a result, the Company recorded a $44.6
million non-cash charge to reflect the impairment of its goodwill. This
charge had no effect on the Company's cash balances or liquidity. In
addition, because goodwill is not included in the calculation of regulatory
capital ratios, the Company's regulatory ratios are not adversely affected
by this impairment, with the exception of its Tier 1 leverage ratio, which
was reduced due to the limitation of trust preferred securities includible
in Tier 1 capital. As a result of this impairment charge, the Company has
no goodwill remaining on its balance sheet as of June 30, 2009.

"The accounting process to eliminate goodwill, an intangible asset
reflected on the balance sheets of the acquired subsidiary banks, can only
be done by expensing it through the income statements of those banks, and
the expenses are included in the consolidated income statement of the
Company," said Ted T. Awerkamp, President and CEO. "The majority of the
loss being recorded is not from operations, but elimination of the
intangible assets recorded over many years. Although our bottom line was
disappointing due to the significant non-cash charges and additional loan
loss reserves, our banks' underlying operational performances were
encouraging. Continuing stability in loans and deposits, combined with
strong cost of funds management and appropriate controls on
interest-bearing accounts contributed to a meaningful increase in the
company's net interest margin in second quarter 2009."

Awerkamp continued: "Our banks in Illinois and Missouri -- Mercantile Bank,
HNB Bank, Brown County State Bank and Marine Bank & Trust -- turned in
stable year-over-year performances, and each recorded increased net
interest income. Mercantile Bank posted 14.5% year-over-year net interest
income growth and a 7.4% increase in loans. Brown County State Bank and
Marine Bank & Trust received recognition from the American Bankers
Association as top community bank performers. HNB bank grew deposits by
10.2% since June 30, 2008. We also continued to make progress in returning
the Kansas and Florida banking operations to profitability. To demonstrate
year over year growth in loans, deposits and net revenue generation during
a difficult economy shows the fundamental earnings power our banks
possess."

Additional Second Quarter Details and First Half Results

Second quarter 2009 net interest income was $10.9 million, which was almost
identical to the prior year's second quarter. Provision for loan losses in
second quarter 2009 was $10.0 million, an increase of $8.1 million over
second quarter 2008. Total noninterest income, which includes the Company's
brokerage and asset management fees, decreased to $3.7 million in the
second quarter of 2009, compared with $4.2 million in the prior year's
quarter. Second quarter 2008 results included a $943,000 gain from the
sale of an equity investment.

Management noted that the Company held the line on operating costs,
including salaries and benefits, occupancy and equipment expense. Total
second quarter 2009 noninterest expense was $62.2 million, an increase of
$49.9 million from $12.3 million in second quarter 2008, reflecting the
2009 goodwill impairment charge of $44.6 million, a $1.4 million increase
in FDIC premiums (including the special assessment of $812,000) and an
increase of $2.3 million in non-cash other-than-temporary impairment
charges on the Company's equity investments in startup banks.

For the six months ended June 30, 2009, the Company reported a net loss of
$52.9 million or $(6.08) per share compared with a net loss of $414,000 or
$(0.05) per share in the first six months of 2008. Net interest income in
the first half of 2009 was $21.1 million, nearly identical to first half
2008, while provision for loan losses increased $6.5 million in the first
six months of 2009 to $13.1 million, compared to $6.6 million in first half
2008. Noninterest income for first half 2009 was $7.0 million, a decrease
of $599,000 compared with $7.6 million in first half 2008, which included a
$943,000 gain on sale of an equity investment. Noninterest expense
increased $50.7 million, to $74.6 million in the first six months of 2009,
compared to $24.0 million in the same period in 2008, due to the 2009
goodwill impairment charge and the increases in FDIC insurance premiums and
noncash other-than-temporary impairment charges on the Company's equity
investments in startup banks.

Net interest margin for the first half of 2009 was 2.60% compared with
2.65% a year ago; however, net interest margin for second quarter 2009
improved to 2.69% over 2.52% in first quarter 2009. The additional loan
loss provisions in 2009 increased the allowance for loan losses as a
percentage of total loans to 2.15% at June 30, 2009, compared with 1.31% at
June 30, 2008. Management noted that the June 30, 2009 average loan to
deposit ratio remained strong at 89% compared with 91% for the prior year.

Deferral of Interest Payments on Trust Preferred Securities

In June 2009 the Company deferred regularly scheduled interest payments on
its outstanding $61.9 million of junior subordinated notes relating to its
trust preferred securities. The terms of the junior subordinated notes and
the trust documents allow the Company to defer payments of interest for up
to 20 consecutive quarterly periods without default or penalty. During the
deferral period, the respective trusts will likewise suspend the
declaration and payment of dividends on the trust preferred securities.
Also during the deferral period, the Company may not, among other things
and with limited exceptions, pay cash dividends on or repurchase its common
stock nor make any payment on outstanding debt obligations that rank
equally with or junior to the junior subordinated notes. As previously
disclosed, the Company has suspended the payment of cash dividends on its
outstanding common stock.

The Company believes that the deferral of interest payments on the junior
subordinated notes and the suspension of cash dividend payments on its
common stock will generate approximately $5.6 million per year in
additional cash flow (compared with the continuing level of interest and
dividend payments in 2008) and serve to strengthen its capital ratios and
those of its subsidiary banks until those banks return to a sufficient
level of profitability.

"Maintaining strong capital ratios is essential for ensuring the health of
the Company and its subsidiaries during these difficult economic times and
is in the best long-term interest of all of our shareholders," said
Awerkamp. "We believe this is the most prudent course of action and will
improve our flexibility to consider other actions that may need to be taken
in order to achieve our targeted capital ratios. We would expect to resume
paying dividends when such payments would be consistent with our overall
financial performance and capital requirements."

Capital Ratios and Three-Year Strategic Capital Plan

With the exception of the Company's Tier 1 leverage ratio, all capital
ratios of the Company and its subsidiaries exceed the levels to be
considered "adequately capitalized" under regulatory guidelines. At June
30, 2009, the Company had a Tier 1 leverage ratio of 3.46%, below the
regulatory minimum of 4.00%. The Tier 1 leverage ratio fell below the
"adequately capitalized" level due to the goodwill impairment charge of
$44.6 million in the second quarter of 2009, which reduced the amount of
trust preferred securities includible in Tier 1 capital. The Company's
Tier 1 risk-based capital ratio of 4.52% and total risk-based capital ratio
of 9.04% both exceeded the regulatory minimums of 4.00% and 8.00%,
respectively. The Board of Directors has approved and submitted to the
Federal Reserve Bank of St. Louis a three-year strategic and capital plan
designed to strengthen the Company's and its subsidiaries' operations and
capital position going forward. The company has not participated in any
private, public or government issuance of equity to date.

As previously disclosed, Heartland Bank and Royal Palm Bank are subject to
directives by bank regulatory agencies. On March 9, 2009, Heartland Bank
entered into an enforcement order with the Federal Deposit Insurance
Corporation ("FDIC"), and the Kansas Office of the State Bank Commissioner.
On May 30, 2009, Royal Palm Bank entered into an enforcement order with the
FDIC and the Florida Office of Financial Regulation. As of June 30, 2009,
Heartland Bank and Royal Palm Bank were in material compliance with these
directives. The Company currently anticipates that its Tier 1 leverage
ratio will not reach the adequately capitalized level, nor will Royal Palm
Bank meet the regulatory capital ratio targets set forth in its order, by
September 30, 2009. The Company's capital plan contemplates bringing the
Company and Royal Palm Bank into compliance with these targets by December
31, 2009.

Evaluation of Strategic Alternatives

The Board of Directors has initiated a process to identify and evaluate a
broad range of strategic alternatives to further strengthen the Company's
capital base and enhance shareholder value. These strategic alternatives
may include asset sales, rationalization of non-core business operations,
capital raising and other recapitalization transactions. As part of this
process, the Board has created a special committee (the "Special
Committee") of independent directors to develop, evaluate and oversee any
strategic alternatives that the Company may pursue. The Special Committee
has retained outside financial and legal advisors to assist with its
evaluation, oversight and execution.

Loan Agreement Waiver

As of June 30, 2009, the Company was current on its interest payments, but
in breach of three financial performance covenants under its loan agreement
with Great River Bancshares, Inc. ("Great River"). On August 10, 2009, the
Company and Great River entered into a waiver that, among other things,
waived the Company's breaches of the three financial covenants and extended
the maturity date of a principal payment under one of the term loans
subject to the loan agreement with Great River from June 30, 2009, to
September 30, 2009. As a result of this waiver, the Company is not
considered in breach of this loan agreement at this time. However, the
Company anticipates that it may need to seek further waivers from Great
River related to these financial covenants during the period ending
September 30, 2009.

Individual Bank Operating Highlights

Mercantile Bank, the Company's largest institution with facilities in
central Illinois, western Missouri and Carmel, Indiana, grew net interest
income 14.5% to $10.2 million for the first six months of 2009 from $8.9
million a year ago. Net interest margin for the first half of 2009 was
2.88%, down from 2.98% in the same period a year ago, but a significant
improvement from 2.67% in the first quarter of 2009. The bank's first half
earnings performance was adversely impacted by a $1.8 million loan loss
provision relating to a commercial real estate participation loan
originated by Royal Palm Bank.

"Both Royal Palm and Mercantile Bank took conservative positions in
reserving for this loan, and we believe there is a possibility both banks
could recover a significant amount once the foreclosure and sale process is
completed," said Awerkamp.

As of June 30, 2009, total assets were $751.0 million, a 3.2% increase
compared with $728.0 million the year before, while loans increased 7.4% to
$559.6 million compared with $520.8 million as of June 30, 2008.
"Operationally, Mercantile Bank has performed well in finding lending
opportunities and growing deposits," said Awerkamp. "In 2008, we opened a
new main bank facility in Quincy, Illinois that has provided improved
access and convenience for our customers. In addition, the facility gives
us enhanced operational and technological capabilities at the bank and the
holding company, which has helped drive efficiency."

HNB Bank, headquartered in Hannibal, Missouri, reported net interest income
of $6.1 million in the first half of 2009 compared with $6.0 million a year
ago. The bank's net interest margin for the first six months of 2009 was
3.93% compared with 4.21% the previous year, but reflected an improvement
compared with the 3.78% net interest margin in the first quarter of 2009.
Noninterest income, reflecting significant growth in mortgage loan
refinancing revenues, increased to $1.9 million in the first half of 2009
compared with $1.5 million the prior year. Total loans increased 4.5% to
$271.1 million at June 30, 2009 compared with $259.3 million a year ago.

Brown County State Bank, operating in the Western Illinois communities of
Mt. Sterling and Golden, continued to perform solidly. The bank reported
net income of $702,000 for the first six months of 2009 compared with
$585,000 the prior year, reflecting growth in net interest income to $1.6
million from $1.3 million a year ago.

The bank expanded its net interest margin to 4.17% for the first six months
of 2009 compared with 3.64% in the prior year, primarily by dramatically
lowering its cost of funds to 1.95% for the first half of 2009 from 2.75%
for the same period in 2008. Total loans increased 5.5% to $64.9 million at
June 30, 2009 compared with $61.5 million a year ago. In June 2009, the
bank was ranked 12th by the American Bankers Association in the best return
on average equity among non-subchapter S community banks and thrifts under
$100 million in assets in the United States.

Marine Bank & Trust based in Carthage, Illinois, ranked 67th in highest
return on average equity among non-subchapter S banks between $100 million
and $3 billion in assets of US banks in the same ABA survey. At June 30,
2009, Marine Bank reported record loans and deposits and its best-ever net
interest income. Total loans increased 7.9% to $138.6 million at June 30,
2009 compared with $128.4 million a year ago, while deposits grew 14.1% to
$172.2 million from $150.9 million the prior year. First half 2009 net
interest income was $3.3 million compared with $3.0 million for the same
period in 2008.

"Brown County and Marine have turned in remarkably consistent, positive
performances, while demonstrating growth and improving margins in
less-than-optimal market conditions," said Awerkamp.

Heartland Bank, based in Leawood, Kansas, has in past quarters addressed
asset quality issues caused by isolated investment and loan participation
decisions, and was able to reduce its loan loss provision to $945,000 in
the first half of 2009, compared to $1.8 million in the first half of 2008.
However, the high levels of nonperforming assets remaining on its balance
sheet caused net interest income to decline from $2.5 million for the first
six months of 2008 to $1.1 million in 2009. Mercantile Bancorp owns 56% of
Mid-America Bancorp, Inc., which is the sole shareholder of Heartland Bank.
Mid-America reported a net loss of $2.1 million for the first half of 2009,
with $1.2 million of that loss included in Mercantile's consolidated
results.

"Working with Heartland's management team, and with relative confidence we
have reserved for most of the troubled loans, we are moving as quickly as
possible to liquidate assets securing these loans and return recovered cash
to a working status where it can be used for bank activities and lending,"
said Awerkamp. "Putting these asset-related issues behind us will enable
Heartland to focus on building loans and deposits and return to
profitability."

Royal Palm Bank, based in Naples, is working through loan and loan
participation issues, and contending with a depressed real estate market in
Florida. Awerkamp said the bank's management team, which was installed in
2008 to turn the institution around, has focused on identifying and
managing the problem loans, but has also been attentive to positioning the
bank for the future. Loans, deposits and assets are all up compared with
last year's second quarter.

"The basic rationale for Mercantile acquiring Royal Palm hasn't changed,"
said Awerkamp. "The markets the bank serves are historically strong, with
above-average income levels and growth rates. The rapid decline in Florida
real estate values and abrupt cessation of many real estate development
projects had a profound impact on virtually every Florida-based bank. Once
the economy stabilizes, we believe the improvement will be more rapid in
the Naples and Marco Island markets than in other parts of Florida. In
addition, liquidating foreclosed assets in Florida is a slower process than
in many states, which has prolonged the recovery efforts, but we do
anticipate a return to profitability in the long run."

Royal Palm reported a net loss of $33.3 million for the first half of 2009,
compared to a net loss of $2.5 million the prior year. Included in the
2009 loss was a goodwill impairment charge of $26.6 million, representing
the carrying value of goodwill on Royal Palm's balance sheet. As of June
30, 2009, total loans were $127.8 million, a 5.6% increase compared with
$121.1 million the year before, while deposits increased 12.8% to $144.3
million compared with $127.9 million as of June 30, 2008.

Outlook

Awerkamp concluded: "Although difficulties at our Florida and Kansas
subsidiaries have placed a strain on the Company and have had a profound
negative impact on earnings during the past few quarters, we believe the
core fundamentals of all our banks are sound. We anticipate that additional
loan loss reserves may be required at Royal Palm until the southwest
Florida economy stabilizes, but we believe that loan loss issues at
Heartland are under control. We expect the remainder of the year to be
challenging; however, we continue to see signs of economic improvement in
most of our markets. Our banks have captured new business and have done
well in retaining customers and core deposits. Our management teams are
actively managing their balance sheets, monitoring non-performing assets
and improving net interest margins. We believe our problem loans have been
largely identified and we've reserved aggressively. We anticipate improved
bottom line performance in the second half of 2009 compared to the first
half."

About Mercantile Bancorp

Mercantile Bancorp, Inc. is a Quincy, Illinois-based bank holding company
with majority-owned subsidiaries consisting of three banks in Illinois and
one each in Missouri, Kansas, and Florida, where the Company conducts
full-service commercial and consumer banking business, engages in mortgage
banking, trust services and asset management, and provides other financial
services and products. The Company also operates a Mercantile Bank branch
office in Indiana. In addition, the Company has minority investments in
eight community banks in Missouri, Georgia, Florida, Colorado, California
and Tennessee. Further information is available on the company's website at
www.mercbanx.com.

Forward-Looking Statements

This press release may contain "forward-looking statements" which reflect
the Company's current views with respect to future events and financial
performance. The Private Securities Litigation Reform Act of 1995 ("the
Act") provides a safe harbor for forward-looking statements that are
identified as such and are accompanied by the identification of important
factors that could cause actual results to differ materially from the
forward-looking statements. For these statements, the Company, together
with its subsidiaries, claims the protection afforded by the safe harbor in
the Act. Forward-looking statements are not based on historical
information, but rather are related to future operations, strategies,
financial results or other developments. Forward-looking statements are
based on management's expectations as well as certain assumptions and
estimates made by, and information available to, management at the time the
statements are made. Those statements are based on general assumptions and
are subject to various risks, uncertainties and other factors that may
cause actual results to differ materially from the views, beliefs and
projections expressed in such statements. These risks, uncertainties and
other factors that may cause actual results to differ from expectations,
are set forth in our Annual Report on Form 10-K for the year ended December
31, 2008, and Form 10-Q for the quarter ended March 31, 2009, as on file
with the Securities and Exchange Commission, and include, among other
factors, the following: general business and economic conditions on both a
regional and national level; fluctuations in real estate values; the level
and volatility of the capital markets, interest rates, and other market
indices; changes in consumer and investor confidence in, and the related
impact on, financial markets and institutions; estimates of fair value of
certain Company assets and liabilities; federal and state legislative and
regulatory actions; various monetary and fiscal policies and governmental
regulations; changes in accounting standards, rules and interpretations and
their impact on the Company's financial statements. The words "believe,"
"expect," "anticipate," "project," and similar expressions often signify
forward-looking statements. You should not place undue reliance on any
forward-looking statements. Any forward-looking statements in this release
speak only as of the date of the release, and we do not assume any
obligation to update the forward-looking statements or to update the
reasons why actual results could differ from those contained in the
forward-looking statements.

FINANCIAL TABLES FOLLOW:

MERCANTILE BANCORP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, December 31,
2009 2008
------------ ------------
(In Thousands)
(Unaudited)
ASSETS

Cash and cash equivalents $ 100,993 $ 89,821
Securities 193,793 194,097
Loans held for sale 3,742 4,366
Loans, net of allowance for loan losses 1,277,454 1,315,907
Premises and equipment 39,573 40,616
Interest receivable 8,756 10,240
Cash surrender value of life insurance 26,792 25,278
Goodwill - 44,653
Other 48,473 50,005
------------ ------------

Total assets $ 1,699,576 $ 1,774,983
============ ============

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Deposits $ 1,426,779 $ 1,462,276
Short-term borrowings 85,020 49,227
Long-term debt 120,410 146,519
Interest payable 4,644 4,280
Other 10,937 7,989
------------ ------------
Total liabilities 1,647,790 1,670,291
------------ ------------

Total Mercantile Bancorp, Inc. stockholders’
equity 46,979 98,957
------------ ------------

Noncontrolling Interest 4,807 5,735
------------ ------------

Total equity 51,786 104,692
------------ ------------

Total liabilities and equity $ 1,699,576 $ 1,774,983
============ ============

MERCANTILE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Six Months Ended
------------------------
June 30, June 30,
2009 2008
----------- -----------
(In Thousands)
(Unaudited)
Interest Income:
Loans and fees on loans $ 37,896 $ 42,282
Securities:
Taxable 3,379 3,951
Tax exempt 839 1,013
Other 187 540
----------- -----------
Total interest income 42,301 47,786
----------- -----------

Interest Expense:
Deposits 16,877 21,877
Short-term borrowings 1,218 583
Long-term debt 3,118 4,227
----------- -----------
Total interest expense 21,213 26,687
----------- -----------

Net Interest Income 21,088 21,099

Provision for Loan Losses 13,145 6,603
----------- -----------

Net Interest Income After Provision for
Loan Losses 7,943 14,496
----------- -----------

Noninterest Income:
Fiduciary activities 1,301 1,380
Brokerage fees 558 917
Customer service fees 1,824 2,225
Other service charges and fees 592 434
Net gains on loan sales 1,441 643
Net gains on investments in common stock - 943
Other 1,294 803
----------- -----------

Total noninterest income 7,010 7,609
----------- -----------

Noninterest Expense:
Salaries and employee benefits 13,311 13,898
Net occupancy expense 1,760 1,750
Equipment expense 1,658 1,690
Deposit insurance premium 2,340 223
Professional fees 1,717 1,123
Postage and supplies 601 634
Net (gains) losses on sale of assets 14 (376)
Losses on foreclosed assets 1,613 493
Other than temporary losses on available-for-sale
and cost method investments 2,546 264
Goodwill Impairment Loss 44,650 -
Other 4,435 4,022
----------- -----------

Total noninterest expense 74,645 23,985
Income (Loss) Before Income Taxes and
Noncontrolling Interest (59,692) (1,880)
Income Tax Benefit (5,843) (1,074)
----------- -----------
Net Income (Loss) (53,849) (806)

Less: Net Income (Loss) attributable to
Noncontrolling Interest (927) (392)
----------- -----------
Net Income (Loss) attributable to Mercantile
Bancorp, Inc. $ (52,922) $ (414)
=========== ===========

MERCANTILE BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME

Three Months Ended
------------------------
June 30, June 30,
2009 2008
----------- -----------
(In Thousands)
(Unaudited)
Interest Income:
Loans and fees on loans $ 18,924 $ 20,572
Securities:
Taxable 1,666 1,982
Tax exempt 412 473
Other 96 195
----------- -----------
Total interest income 21,098 23,222
----------- -----------

Interest Expense:
Deposits 8,015 10,064
Short-term borrowings 641