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Mercantile Bancorp Announces 1Q 2009 Results
Quincy, IL, May 12, 2009 - Mercantile Bancorp, Inc. (NYSE Amex: MBR) today reported an unaudited net loss of $876,000 or $(0.10) per share for the quarter ended March 31, 2009, compared with a net loss of $1.68 million or $(0.19) per share in first quarter 2008. Net interest income rose 0.27% to $10.23 million in first quarter 2009 compared with $10.20 million a year ago. Provision for loan losses was $3.18 million in first quarter 2009, a decrease of $1.59 million from 2008. Total noninterest income in first quarter 2009 was $3.25 million compared with $3.75 million the prior year's quarter. Total noninterest expense increased 3.1% to $12.46 million in first quarter 2009 compared with $12.09 million the prior year. Embedded in the noninterest expense increase is an FDIC deposit insurance premium increase of $727 thousand for the company, a 692.4% increase over the prior year's quarter.
Total assets at March 31, 2009 increased 8.7% to $1.80 billion, a record level for the company, compared with $1.66 billion in first quarter 2008. Total deposits were $1.51 billion in first quarter, compared with $1.35 billion a year ago, an increase of 11.3%. Total loans, including loans held for sale, were $1.32 billion, an increase of 8.7% from $1.21 billion a year ago. Compared to totals at year-end 2008, loans declined by 1.8%, while deposits were up by 3.0%.
"Our banks in the Illinois and Missouri markets turned in solid, consistent performances, especially in light of continuing economic malaise," said Ted T. Awerkamp, President and CEO. "Although the increase was small, we were encouraged by the year-over-year growth of net interest income in this environment. Focusing our funding efforts on core deposit growth created less reliance on wholesale deposits and long-term debt, enabling us to reduce interest expense by $3.39 million compared with first quarter 2008."
Awerkamp noted the company has initiated a centralized effort to redesign core deposit account products to match offerings to various demographics and market segments. The program's goal is to maximize core deposit growth and improve interest margins by targeting and capturing the maximum amount of lower-cost retail deposits at each bank, and to more effectively balance retail and wholesale funding.
"Except for FDIC deposit insurance premiums, which we cannot control and which rose significantly year-to-year, we are minimizing operating expenses while growing loans and deposits and broadening our liquidity base, and that process will continue," explained the chief executive. "2009 is going to be a challenging year. Our Florida operation will continue to struggle until that market stabilizes and the economy gets back on track. We anticipate continued increases in FDIC premiums and a large one-time special assessment later this year. These higher insurance charges will have an impact on every bank. However, they are a cost of doing business in this environment."
Focus on Operational Strength, Core Products
In addition to solid performances turned in by the Illinois and Missouri subsidiaries, Awerkamp said management has been very pleased with business lending activity at Mercantile Bank's Carmel, Indiana facility, which transitioned from a loan production office to a full-service branch of Mercantile Bank in April 2009.
He said holding company management has been working closely with the management of Heartland Bank in Kansas to address issues caused by isolated investment and loan participation decisions. Mercantile owns 56% of Heartland and has provided the bank with additional capital. Heartland's nonperforming loans comprised 28% of the company's total nonperforming loans as of March 31, 2009.
"We've addressed the problems, and are working 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," continued Awerkamp. "As we put these asset-related issues behind us, Heartland's management team can focus on building loans and deposits. We believe Heartland, which operates in a historically strong and growing market, can again be a strong operational performer and contributor to the company's performance, as it was prior to 2008."
He said all of the company's banks continue to seek opportunities to build new customer relationships and increase market share as poor service and restricted lending continue to cause customers of large regional and national banks to seek out community banks, and he believes low interest rates and continuing good liquidity in the secondary market for mortgages will continue to drive mortgage refinancing, which has been an active market in recent months.
"We're seeing people come to our banks to refinance, rather than shopping the Internet or fighting through the bureaucracy at large, impersonal lenders," he explained. "I believe the banking crisis has changed the mindset of many consumers and businesses. They want to be treated well, know their funds are secure, and are receiving good guidance. Our loan and deposit products are competitive, and a personalized banking relationship is more important to many people than it used to be."
Awerkamp said the company's successful asset management and brokerage business is on-schedule, although income and fees declined in the first quarter as a result of lower trading and account activities caused primarily by uncertainty about the equity markets. The response to these services has been very positive, and they should continue to generate additional business as individuals re-address their investment portfolios and seek professional guidance to rebuild their net worth and make long-term financial plans.
All of the company's affiliated banks exceed the well-capitalized definition by all regulatory standards, but it continues to examine alternatives for restructuring debt and raising additional capital at the company level to provide for restoration of its excess capital cushion and future growth. The company has not participated in any private, public or government issuance of equity to date. To facilitate possible future issuances of equity securities, the company received shareholder approval in February to create and issue one or more classes of preferred shares and to add to its common share base.
Mercantile's Board of Directors did elect to again suspend a quarterly common stock dividend. "As we continue to work through these challenging times, it is imperative we safeguard our available capital by maintaining this position," said Awerkamp. The Board is committed to return to payment of quarterly dividends as soon as it reasonable and responsible to do so.
Awerkamp concluded: "We see in many areas of our business the very initial signs of recovery. We expect 2009 to be challenging, but some of the economic indicators coming out have been more encouraging than anticipated. We'll continue to maximize every opportunity to build core deposits, make quality loans and operate efficiently, while working through the difficulties in our troubled markets."
About Mercantile Bancorp
Mercantile Bancorp, Inc. is a Quincy, Illinois-based bank holding company with majority-owned subsidiaries consisting of one bank each in Illinois, 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 Mercantile Bank branch offices in Indiana and three in Missouri. In addition, the Company has minority investments in eight community banks in Missouri, Georgia, Florida, Colorado, California and Tennessee.
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. Examples of forward-looking statements include, but are not limited to, estimates or projections with respect to our future financial condition, results of operations or business, such as: projections of revenues, income, earnings per share, capital expenditures, assets, liabilities, dividends, capital structure, or other financial items; descriptions of plans or objectives of management for future operations, products, or services, including pending acquisition transactions; forecasts of future economic performance; and descriptions of assumptions underlying or relating to any of the foregoing. These risks, uncertainties and other factors that may cause actual results to differ from expectations, are set forth in our most recent Annual Report on Form 10-K and Forms 10Q as on file with the Securities and Exchange Commission and include, without limitation: the effects of current and future business and economic conditions in the markets we serve change or are less favorable than we expected; deposit attrition, operating costs, customer loss and business disruption are greater than we expected; competitive factors, including product and pricing pressures among financial services organizations may increase; the effects of changes in interest rates on the level and composition of deposits, loan demand, the values of loan collateral, securities and interest sensitive assets and liabilities may lead to a reduction in our net interest margins; changes in market rates and prices may adversely impact our securities, loans, deposits, mortgage servicing rights, and other financial instruments; the legislative or regulatory developments, including changes in laws and regulations concerning taxes, banking, securities, insurance and other aspects of the financial securities industry, such as the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, and the extensive rule making it requires to be undertaken by various regulatory agencies may adversely affect our business, financial condition and results of operations; personal or commercial bankruptcies increase; our ability to expand and grow our business and operations, including the establishment of additional branches and acquisition of additional banks or branches of banks may be more difficult or costly than we expected; any future acquisitions may be more difficult to integrate than expected and we may be unable to realize any cost savings and revenue enhancements we may have projected in connection with such acquisitions; changes in accounting principles, policies or guidelines; credit risks, including credit risks resulting from the devaluation of collateral debt obligations and/or structured investment vehicles on the capital markets to which we currently have no direct exposure; the failure of assumptions underlying the establishment of our allowance for loan losses; construction and development loans are based upon estimates of costs and value associated with the complete project, which estimates may be inaccurate, and cause us to be exposed to more losses on these projects than on other loans; changes that occur in the securities markets; technology-related changes may be harder to make or more expensive than we anticipated; worldwide political and social unrest, including acts of war and terrorism; and changes in monetary and fiscal policies of the U.S. government, including policies of the U.S. Treasury and the Federal Reserve Board. 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.
