Mercantile Bancorp. seems not to be slowing down its acquisition strategy, despite lagging earnings in recent quarters.

The St. Louis company has already bought five banks this year and expects to buy two more by yearend, if approvals come through.

Its latest deal - to buy Alton, Ill. Regional Bancshares for $41 million in cash and stock - is expected to close next spring.

Regional, with $175 million of assets, is a typical target. Mercantile, $18 billion, it is not averse to doing bigger deals, but the fill-in acquisition would strengthen its presence in southern Illinois.

Mercantile has been an active acquirer, closing 25 deals since 1990. "Acquisitions are certainly significant," said John Beirise, group president of emerging markets. "We view them as a line of business."

But analysts say Mercantile's earnings have dragged this year. Acquisition charges, the writeoff of a large loan to a St. Louis retailer, and dismal results in its credit card business led to a 92% year-over-year earnings decline in the first quarter.

"Mercantile's numbers this year have not been up to their own standards," said Joseph Stieven, an analyst with Stifel, Nicolaus & Co. "It's not the acquisitions causing earnings to slow down, but spending time and money on acquisitions distracts from other things."

Mr. Stieven said Mercantile should be identifying businesses that will help it grow revenues. "We would like to see Mercantile get the total company on all eight cylinders before they start looking for big acquisitions," he said. "In general, companies that have shown the strongest earnings per share are typically not major acquirers."

Mr. Beirise said that as long as there are opportunities, his company, which operates in Missouri, Arkansas, Illinois, Iowa, and Kansas, will seek takeovers.

"We're looking to continue to grow our franchise," he said. "This is a very fragmented market here in the Midwest."

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