After four consecutive quarterly losses, the depleted Mercantile Bancorp Inc. in Quincy, Ill., is exploring ways to recapitalize itself.
The $1.7 billion-asset company — which reported a $52 million second-quarter loss late Friday — said that its board has appointed a committee and hired advisers to develop strategic alternatives, such as finding investors to make a cash infusion and selling assets and noncore businesses.
The loss was driven primarily by a $44.6 million goodwill impairment charge. However, continued credit problems at its Royal Palm Bank in Naples, Fla., and its Heartland Bank in Leawood, Kan., also stung.
The company, which owns six banks in all, set aside a $10 million provision for loan losses, up 455% from a year earlier. Nonperforming assets more than doubled, to $63.8 million, and nonperforming loans made up 4.88% of its total loans.
Mercantile was no longer well capitalized at the end of the second quarter. Its leverage ratio dropped to 3.46%, which is considered undercapitalized. Its risk-based capital ratios fell to adequately capitalized levels.
At June 30, Heartland and Royal Palm were in compliance with regulatory orders they received this spring. But Mercantile said that it does not expect Royal Palm to achieve the elevated capital levels that regulators require by a Sept. 30 deadline. The company also does not expect by then to get its own leverage ratio to the 4% level needed to be adequately capitalized.
Mercantile said that it has submitted a three-year strategic and capital plan to the Federal Reserve Bank of St. Louis. The plan calls for achieving those capital targets by Dec. 31.
The company said it expects to save about $5.6 million annually from its recent moves to suspend dividend payments and defer interest payments on $61.9 million of junior subordinated notes related to trust-preferred securities.
Mercantile earned $1.3 million in the second quarter of last year.
