Mercantile Bancorp Inc. has reported an unaudited net loss of $1.7 million, or 19 cents per share, for the first quarter.

That number is compared with a net income of $1.8 million for the same period last year.

Ted Awerkamp, president and CEO, said the earnings were negatively impacted by an increase in the company's loan provision to $4.8 million from $755,000 in the first quarter of 2007.

Increasing the loan loss provision, he said in a press release, was to provide for determined weakness in specific real estate loans on its books in various parts of the country, a situation the company deemed prudent to address aggressively.

Net interest income for the first quarter, led by increased real estate lending but offset by a greater cost of funds, was $10.2 million compared with $10.4 million in the same quarter a year ago.

Noninterest income increased to $3.8 million in the first quarter from $2.4 million in the same period last year. That was due to increases in fees from trust and brokerage services and a $300,000 gain on the sale of a vacant lot acquired in the September 2007 purchase of HNB Financial Services Inc.

Awerkamp said the company has positioned Mercantile for growth and increased efficiency with the Quincy move to the new facility, merging two Farmers State Bank of Northern Missouri locations into Mercantile Bank, investing in new technology, and opening a loan production office in Carmel, Ind.

The chief executive said the company has closely monitored loan quality and worked with customers to avert potential payment problems and bring loan payments more than 90 days outstanding into line whenever possible.

Lending secured by farmland continues to be a highlight for Mercantile, as an escalating agricultural market has driven farmland prices and demand upward, he noted. Home mortgage lending has slowed, but there are no material financial issues related to home loans, Awerkamp said.

"The company has never participated in a sub-prime lending program," he added.

Awerkamp expects a positive impact in the coming quarters.

"Tempering the positives, of course, is the state of the economy and uncertainty about the full impact of real estate-related issues. However, we believe we are doing a very good job identifying potential problem loans and reserving for them.

"This is a difficult period, but we continue to be disciplined in our loan review processes, balancing prudence and care with a willingness to continue to make loans to qualifying individuals and businesses."