By EDWARD HUSAR
Herald-Whig Staff Writer
Mercantile Bank, one of Quincy's oldest and largest financial institutions, is being sold to United Community Bancorp of Chatham.
The sale agreement was signed Wednesday, but is subject to regulatory approval and may not be finalized until September or October. Bloomberg reports the sale price to be about $22.3 million.
The sale will have little, if any, impact on Mercantile's customers or employees, according to Blaine Strock, president and chief executive officer of Mercantile Bank.
"Our customers have nothing to worry about," Strock said. "Their deposits, their loans, are all fine, and we continue to move in a very good direction."
Todd Wise, president and CEO of United Community Bank, said the Mercantile Bank name will continue to be used even after the transaction is finalized. He said operations at Mercantile's four Quincy locations will continue as always, and there is no anticipated change in staffing. The bank employs around 120 people in Quincy, Wise said.
In addition, mortgage loans will continue to be administered locally as they have in the past.
"This is effectively the sale of a healthy bank institution," Wise said. "We are buying a healthy bank.
The FDIC is not involved in terms of closure. This is not a troubled institution. The bank is well capitalized today, and it will be after the transaction. All the deposits are insured. They were yesterday, they are today, they will be tomorrow."
The sale is complicated, however, because as part of the transaction, Mercantile Bancorp — the holding company that owns Mercantile Bank — filed for bankruptcy Thursday in the state of Delaware, where the corporation is chartered. If the petition is approved by the bankruptcy court, Mercantile Bancorp will cease to exist.
Mercantile Bancorp at one point owned multiple banks in multiple states after carrying out a series of acquisitions starting in 2005, including a bank in Florida that was bought to tap into that state's booming housing market. But when the real estate bubble burst as part of a national economic downturn in 2008, Mercantile Bancorp's financial picture turned bleak. The worst period came in 2009 and 2010. The holding company reported net losses of $58.5 million in 2009, followed by $44.6 million in losses in 2010.
Over the past few years the corporation has sold off most of its holdings to help ease the debt crisis it was facing. As part of that move, Mercantile Bancorp in 2010 sold two of its smallest banks — Brown County State Bank in Mount Sterling and Marine Bank and Trust in Carthage — to United Community Bancorp for $25.8 million.
About the only asset still owned by Mercantile Bancorp was Mercantile Bank, which has remained in strong financial shape throughout the holding company's crisis.
So now Mercantile Bancorp is divesting itself of Mercantile Bank, and the holding company will then cease to exist.
Mercantile employees in Quincy were informed of the sale through a series of staff meetings Thursday. Strock said employees applauded at the conclusion of each meeting, relieved that the dark cloud hanging over the Mercantile name is finally going away.
"This is a very exciting thing for the bank," Strock said.
"The bank and the holding company are two very different animals, two different corporations," Strock said. "The bank has been doing pretty darn well. We have good capital, and we're moving in a good direction. We get to join United Community Bank out of Chatham, another Illinois-based organization. We see this from our end of things as a great marriage. Our cultures are very similar. We're very focused on community banking."
Wise said Mercantile, with about $400 million in assets, will become the second-largest of four independent banks owned by United Community Bancorp. The largest bank in the mix is United Community Bank, which has about $950 million in assets.
UCB's roots go back to 1907 with the establishment of Farmer's State Bank of Greenfield, Ill., which was acquired by UCB in 1973. Over the years the holding company — United Community Bancorp — acquired about a dozen satellite banks along with the banks in Mount Sterling and Carthage. The corporation now is a $1.3 billion institution operating in eight counties.
UCB is in the process of buying several Heartland banks, including one in Quincy.
Wise said United Community Bancorp officials feel continued growth is in the corporation's best interest, but it only seeks out acquisitions that are a good fit for the company.
"We understand Central Illinois, and our Midwestern values match up well in all of the communities that we serve, and they match up well with the leadership of Mercantile Bank," Wise said.
He sees Quincy as a great place for the banking organization to invest.
"We like Quincy. It is everything good about the Midwest and Midwestern values — great people, great community, industry, commercial businesses, retail businesses, the university, college, the hospital system, the physician networks and groups here, the public schools, the private schools, the philanthropy, the recreation," he said. "It's a wonderful community, and we recognize that."
Philip Krupps, president and chief operating officer of the Brown County State Bank, applauded the sale of Mercantile Bank to UCB. He knows from several years of experience that UCB is a good partner for Central Illinois banks, and Quincy residents have nothing to fear.
"We were part of the Mercantile holding company at one time," Krupps said. "To our immediate dismay at that time, we had to leave that organization. But to our great joy we've been affiliated with United Community Bank since then, and we've been able to grow. We are the proof of everything Todd (Wise) is saying about their commitment to community banking and the strength that they bring and the dedication to community."
Editor's Note: This story has been updated since its original posting on Thursday, June 27.