Fresh from closing an acquisition that will increase Mercantile Bancorp.'s assets by $2 billion, officials at the St. Louis bank say they want the world to know they are hunters, not prey.

This week, Mercantile completed its purchase of Hawkeye Bancorp. of Des Moines, Iowa's largest independent bank, in a stock-swap valued at $368 million.

The transaction pushes Mercantile's total assets to $18 billion, and its assets in Iowa to $3 billion. It is now the second-largest bank in that state, behind Norwest Corp.

As part of its bulking-up strategy, Mercantile also recently completed the acquisition of $168 million-asset First Sterling Bancorp in Illinois. Sterling, which is about 45 miles northeast of the Quad Cities, was purchased for $24 million.

"We're staying in markets we know and understand," said John W. McClure, Mercantile's group president of community banking. "We will follow the operating model we follow with any other acquisition."

That model consists of keeping some local autonomy at each bank, while centralizing back-room operations. Mercantile has banks in Missouri, Arkansas, Illinois, Iowa, and Kansas. Hawkeye fits the Mercantile mold, blending small-town banks with some metropolitan-market offices. There are 23 Hawkeye banks, and only a few will be consolidated, Mr. McClure said.

Some savings will come from collapsing Hawkeye's holding company in Des Moines, he said. Mercantile also will fold Hawkeye's brokerage subsidiary into Mercantile Investment Services. The Hawkeye name, which closely identified the bank with Iowa, will be phased out by the second quarter, Mr. McClure added.

Kay C. Lister, an analyst with Keefe, Bruyette & Woods Inc., said Mercantile's strategy will be to maintain most of the present management at both of the acquired banks, and do very little branch closing. Mercantile, with 75 banks, still finds it beneficial to operate separate charters with individual bank presidents and boards of directors.

Mercantile is also not gun-shy about making acquisitions of small banks, even those under $100 million, to pick up market share.

But some analysts are not sure Mercantile's weight-lifting strategy will work to ward off acquisitive larger banks.

Selman Akyol, with Pauli & Co., believes the size of Mercantile's Iowa operations could make it harder for Norwest to buy the bank because of a deposit concentration law in that state. But he said many banks would pay a premium to buy the Missouri market share of either Mercantile or Boatmen's Bancshares.

James Weber of St. Louis-based A.G. Edwards & Sons Inc., said Mercantile will also be attractive to banks, such as BankAmerica Corp. and NationsBank Corp., that want to break into the Midwest market.

Mercantile officials bristle when asked about being a potential takeover target. "I think it's a safe assumption we're doing everything we can to create value for shareholders," said John H. Beirise, group president for emerging markets. "We believe we can do it by being an active participant in the consolidation of the industry."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.