June 27 (Bloomberg) -- Mercantile Bancorp Inc., an Illinois bank holding company, sought bankruptcy protection with an agreement to sell virtually all its assets to United Community Bancorp Inc. for about $22.3 million.
The company, based in Quincy, Illinois, listed debt of more than $50 million and assets of less than $50 million in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.
Mercantile was forced to seek bankruptcy protection from creditors as a result of “the precipitous decline in the financial markets during 2007 and 2008, foreclosure rates, delinquency rates and default rates” at the six subsidiary banks causing them to suffer “tremendous losses,” Chief Executive Officer Lee Roy Keith said in an affidavit.
The company sold three of those bank subsidiaries in 2009 for $53.6 million, in an attempt to “right the ship.” The efforts were unsuccessful and its Heartland Bank and Royal Palm Bank were closed by state regulators in July 2012 and the Federal Deposit Insurance Corp. took over as receiver.
Mercantile said in court papers that it reached an agreement for “its ownership interest in Mercantile Bank and has determined that a sale” and “the liquidation of its remaining assets will maximize the value of MBI’s estate for the benefit of its creditors.” The offer from United Community Bancorp will be subject to court approval and competitive bidding at a proposed auction.
The company, founded in 1983, owes about $76 million in principal and interest on junior subordinated debentures underlying capital securities it issued through four trusts, according to court documents.
The case is: In re Mercantile Bancorp Inc., 13-11634, U.S. Bankruptcy Court, District of Delaware (Wilmington).
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